Recovery of excess pay is impermissible absent employee misrepresentation where it causes undue hardship.

The petitioner, appointed as an Examiner on 5 July 1993, was due to retire on 30 June 2026. Following an internal audit objection, the respondents revised his pay fixation and, by order dated 17 April 2026, sought to recover ₹3,24,688 as excess salary and allowances.

The petitioner deposited that amount by e-challan on 7 May 2026, stating that the recovery was required for release of his terminal and pensionary benefits. He challenged the recovery, maintaining that the incorrect fixation resulted from an establishment error and involved no misrepresentation on his part.

The petition sought to set aside the recovery order and obtain reimbursement of the amount paid.

1. Whether the respondents could recover excess salary paid due to an erroneous pay fixation where the error was attributable to the establishment and there was no misrepresentation by the petitioner.

2. Whether the pay revision made pursuant to the audit objection should be set aside along with the recovery.

Under the principles stated in State of Punjab v. Rafiq Masih, (2015) 4 SCC 334, recovery of mistaken excess payments may be impermissible in specified situations, including recovery from retired employees or those due to retire within one year, and where recovery would be iniquitous, harsh or arbitrary and outweigh the employer’s equitable right to recover.

The Court also recognised that competent authorities may correct erroneous pay fixation and grant the pay properly applicable under the relevant Pay Rules and Government Orders; correction of pay fixation is distinct from recovery of amounts already paid.

The Court found that the respondents had not established any misrepresentation by the petitioner and that the erroneous fixation was an establishment error which had persisted for many years.

In those circumstances, recovery would cause undue hardship, particularly given the petitioner’s impending retirement. Applying the principles in Rafiq Masih, the Court held that the recovery was impermissible, while distinguishing it from the correction of the underlying pay fixation, which remained justified.

The respondents were directed to repay the recovered amount to the petitioner within 12 weeks of receiving a copy of the order.