Recovery of excess payments from retirees without fraud or misrepresentation is impermissible in law.

The applicant was appointed as an Inspector on 22 June 1982 and promoted as Superintendent in March 1998. He received the second financial upgradation under the ACP Scheme and, upon completion of 30 years of service, was granted the third MACP in Pay Band-3 with Grade Pay of ₹6,600 with effect from 22 June 2012. He was promoted as Assistant Commissioner on 22 October 2014 and retired on 31 October 2018.

While processing his pensionary benefits, the respondents treated the third MACP benefit as erroneously granted and ordered recovery of ₹6,13,469 from his retiral dues. The amount was deducted from his gratuity at the time of retirement.

The respondents stated that the applicant had been granted NFSG with effect from 1 January 2006 and that a proposal for waiver of recovery had been forwarded to the competent authority, but no final decision had been taken.

The applicant challenged the recovery under Section 19 of the Administrative Tribunals Act, 1985, contending that the excess payment resulted from departmental pay-fixation errors, without fraud or misrepresentation on his part, and that recovery from his retiral dues violated the principles laid down in *State of Punjab v. Rafiq Masih* and *Thomas Daniel v. State of Kerala*.

1. Whether recovery of ₹6,13,469 from the applicant’s gratuity, representing alleged excess payment arising from departmental pay fixation, was legally permissible in the absence of fraud or misrepresentation by the applicant?

2. Whether recovery from the retiral dues of a retired employee, without prior notice or opportunity of hearing, violated the principles of natural justice?

3. Whether the respondents could retain the recovered amount while the applicant’s request for waiver remained pending before the competent authority?

The Tribunal applied Section 19 of the Administrative Tribunals Act, 1985, governing applications before the Tribunal.

It relied principally on *State of Punjab & Ors. v. Rafiq Masih (White Washer) & Ors.*, (2015) 4 SCC 334, which prohibits recovery of excess payments from retired employees or employees due to retire within one year, particularly where the excess payment was not caused by fraud or misrepresentation.

It also relied on *Thomas Daniel v. State of Kerala & Others*, (2022) 5 SCC 545, reaffirming the impermissibility of such recovery in appropriate circumstances.

The Tribunal further relied on the Department of Personnel and Training Office Memorandum dated 2 March 2016, which implemented the relevant Supreme Court principles and restricted recovery from retired employees.

In addition, the Tribunal applied the principles of natural justice, holding that recovery of a substantial amount from retiral benefits without affording an opportunity of hearing could not be sustained.

Administrative directions of the Pay and Accounts Office could not override binding Supreme Court precedent under Article 141 of the Constitution.

The Tribunal found that the applicant’s financial upgradation and pay fixation had been granted by the competent departmental authorities and that the respondents neither alleged nor established fraud, misrepresentation, or suppression of material facts by the applicant.

Since the applicant had retired on 31 October 2018 and the recovery was made from his gratuity at retirement, the case fell within the category of recoveries treated as impermissible under *Rafiq Masih*, *Thomas Daniel*, and the DOPT Office Memorandum dated 2 March 2016.

The respondents’ assertion that recovery was made on the directions of the Pay and Accounts Office did not cure the legal invalidity of the recovery.

The Tribunal also noted that no material showed that the applicant had been given notice or an opportunity of hearing before the deduction was made.

Further, the respondents’ own admission that the waiver proposal remained pending demonstrated that the recovery issue was under consideration; retaining the amount indefinitely without a final decision was therefore arbitrary.

The Original Application was allowed, and the impugned order dated 13 September 2018, insofar as it directed recovery, was quashed and set aside.

The respondents were directed to refund ₹6,13,469 within three months from receipt of a certified copy of the order. The applicant was also awarded simple interest at 6% per annum from the date of recovery until payment; if the refund was not made within three months, the amount would carry interest at 9% per annum thereafter until actual payment.

No order as to costs was made.