Recovery of excess payment was quashed where the employee had retired and recovery caused financial hardship.

The respondent, a Class-III/non-gazetted employee of the Central Industrial Security Force, challenged communications dated 12 October 2023, 30 November 2023 and 18 March 2024 by which the appellants sought recovery of ₹2,13,908 on account of alleged excess payment arising from incorrect pay fixation.

The learned Single Judge held that recovery could not be made from a Class-III employee where the excess payment resulted from departmental error and there was no misrepresentation or misappropriation by the employee. The communications were consequently quashed.

The appellants preferred the present Letters Patent Appeal, relying, inter alia, on the Supreme Court’s decision in High Court of Punjab and Haryana v. Jagdev Singh.

During the appeal, it was brought to the Court’s notice that the respondent had retired.

Whether recovery of ₹2,13,908 from the respondent, a retired Class-III employee, was permissible where the excess payment resulted from departmental error and not from his misrepresentation or misconduct.

Whether the undertaking allegedly furnished by the respondent in connection with pay fixation attracted the principle recognised in High Court of Punjab and Haryana v. Jagdev Singh, notwithstanding his status as a Class-III employee.

Whether the Single Judge’s order quashing the recovery communications required interference in appeal, considering the respondent’s retirement and the amount sought to be recovered.

The Court considered the principle in State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334, that recovery of excess payments caused by departmental error is generally impermissible in specified situations, particularly where recovery would cause hardship to employees in lower categories or to retired employees.

It also considered High Court of Punjab and Haryana v. Jagdev Singh, (2016) 14 SCC 267, which recognises that an employee who has furnished an undertaking to refund excess payments may be bound by that undertaking and recovery may accordingly be effected.

The Court ultimately determined the appeal on the facts, particularly the respondent’s retirement, the relatively small amount involved, and the hardship that recovery would cause.

The learned Single Judge applied the protective principle in Rafiq Masih and found that the respondent had neither misappropriated government funds nor made any misrepresentation; the excess payment was attributable to departmental error.

Although the appellants relied on Jagdev Singh and the undertaking furnished by the respondent, the Single Judge distinguished that decision and held that the undertaking could not justify recovery in the circumstances of a Class-III/non-gazetted employee whose pension had been reduced after retirement.

The Division Bench noted that the respondent had retired and that recovery of ₹2,13,908 would cause hardship.

Without undertaking a broader reconsideration of the competing precedents, it held that the Single Judge’s order did not warrant interference on the facts of the case.

The appeal was dismissed, and any pending applications were also disposed of.

Consequently, recovery of ₹2,13,908 from the retired respondent was not permitted in the circumstances of the case.