Recovery of Excess Payments From Class-III Employees Prohibited Absent Any Misrepresentation or Suppression of Facts

The petitioner was appointed as a Salesman on a contingency basis in 1993.

His services were regularized as an Excise Constable (Class-III post) in 2008.

On 20.09.2018, the respondent authorities issued an order counting the petitioner’s service from his initial 1993 appointment for pay fixation purposes.

On 19.01.2021, the respondents issued an impugned order (Annexure P/1) canceling the 2018 pay fixation and ordering recovery of the alleged excess payment, claiming the previous order was a mistake and contrary to service rules.

The petitioner challenged this recovery on the grounds that it was issued without a notice or hearing and violated established judicial precedents regarding recoveries from low-tier employees.

1. Whether the respondent authorities can recovery excess payments made to a Class-III employee due to a mistaken pay fixation without any misrepresentation by the employee?

2. Whether the impugned order dated 19.01.2021 suffers from a violation of the principles of natural justice?

The Court primarily applied the legal principles established by the Hon’ble Supreme Court in State of Punjab and Others v. Rafiq Masih (White Washer) (2015) 4 SCC 334.

This precedent stipulates that recoveries by employers are impermissible in law when: (i) made from Class-III and Class-IV employees; (ii) the payment was made for a period in excess of five years before the recovery order; or (iii) such recovery would be iniquitous, harsh, or arbitrary.

The Court observed that the petitioner is a Class-III employee and had been receiving the benefits of the 20.09.2018 pay fixation order for a considerable period without objection.

The Court noted that the petitioner did not misrepresent any facts or suppress material information to obtain the higher pay; rather, the benefit was granted through a formal order by a competent authority.

Applying the Rafiq Masih criteria, the Court reasoned that since the petitioner belongs to Class-III service, any recovery resulting from a unilateral mistake by the State is legally impermissible.

The Court found the impugned order procedurally flawed as it was passed without providing the petitioner an opportunity of hearing, thereby violating the principles of natural justice.

The High Court quashed the impugned order dated 19.01.2021 (Annexure P/1) and directed the respondents to refund any amount already recovered from the petitioner. The writ petition was allowed with no order as to costs.