Recovery of excess payments made over five years from Class III employees is impermissible absent fraud.

The petitioner, a retired Inspector holding a Class-III post, challenged the order dated 10 June 2026 passed by the Senior Superintendent of Police, Mungeli, directing recovery of ₹7,19,193 from his leave-encashment benefits on the ground of excess payment arising from erroneous pay fixation.

The petitioner contended that the excess payment had resulted from departmental pay fixation between 2007 and 2026 and was not caused by fraud, misrepresentation, or suppression on his part; he also alleged that the recovery order was issued without notice or an opportunity of hearing.

The respondents maintained that the petitioner’s pay had been incorrectly fixed due to a clerical error, resulting in excess salary payments during service.

Whether the respondents could revise the petitioner’s pay fixation and recover ₹7,19,193 on account of alleged excess payment, where the petitioner was a Class-III employee and there was no allegation of fraud or misrepresentation.

Whether the recovery order was legally sustainable when it was passed without affording the petitioner an opportunity of hearing.

Whether the proposed recovery was barred by the principles laid down in State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334, particularly where the excess payment related to a period exceeding five years and the petitioner had retired.

The Court applied the principles of natural justice, requiring that an affected employee be given an adequate opportunity of hearing before an adverse order concerning pay fixation and recovery is passed.

It principally relied on State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334, which holds that recovery of mistaken excess payments is ordinarily impermissible where it is made from Class-III or Class-IV employees, retired employees or employees nearing retirement, where the excess payment relates to a period exceeding five years, or where recovery would be inequitable, harsh, or arbitrary.

The judgment also recognised the qualification that recovery may be permissible where the employee had furnished an undertaking agreeing to refund any excess payment.

The Court found that the petitioner was a Class-III employee and that the alleged excess payment related to a period extending from 2007 to 2026, substantially exceeding five years.

There was no material suggesting fraud, misrepresentation, or suppression by the petitioner; the excess payment appeared to have resulted from an error attributable to the department.

Accordingly, the proposed recovery fell within the impermissible categories identified in Rafiq Masih.

The Court further held that the respondents could not pass the impugned order without first affording the petitioner an adequate opportunity of hearing, and therefore permitted only a fresh exercise concerning pay fixation in accordance with law.

The respondents were granted liberty to undertake a fresh pay-fixation exercise after providing the petitioner an adequate opportunity of hearing; however, any recovery of alleged excess payment was directed to remain subject to Rafiq Masih.

The respondents were directed to release and refund any amount recovered or withheld pursuant to the impugned order, and to complete the exercise within six months from receipt of a certified copy of the order.