Recovery of excess salary from Group C employee is impermissible absent fraud, misrepresentation, or concealment.

The applicant, a Railway employee, was appointed as Office Clerk-cum-Typist on 28 December 1999 and was subsequently promoted as Senior Clerk. He was promoted as Office Superintendent with effect from 5 February 2018. At the time of promotion, his existing basic pay was ₹45,400, whereas the basic pay attached to the promotional post was ₹35,400. The respondents initially fixed his pay at ₹35,400 by order dated 1 March 2018, without protecting his existing pay. The applicant objected to the fixation on 16 March 2018 and thereafter continued to draw salary on the basis of the higher basic pay.

By a subsequent pay-fixation order dated 25 May 2022, the respondents reduced his basic pay retrospectively from ₹45,400 to ₹35,400 with effect from 2 May 2018. An order dated 10 October 2022 directed recovery of ₹93,729 from his salary. The applicant challenged both orders, contending that his pay was required to be protected and that the recovery was impermissible in the absence of fraud, misrepresentation, notice, or hearing.

The respondents maintained that the fixation and recovery were in accordance with Paras 8 and 11.03 of Master Circular No. 56 and that the applicant had no vested right to retain an allegedly excess payment.

Whether the respondents were justified in retrospectively reducing the applicant’s basic pay from ₹45,400 to ₹35,400 despite his claim to pay protection upon promotion and his prior objection to the initial fixation?

Whether recovery of ₹93,729 from the applicant’s salary was legally permissible when the excess payment was not attributable to fraud, misrepresentation, or concealment by him?

Whether the recovery order was vitiated by violation of the principles of natural justice for want of prior notice and an opportunity of hearing?

The Tribunal proceeded under Section 19 of the Administrative Tribunals Act, 1985, which permits an aggrieved government employee to challenge service-related orders before the Tribunal.

It considered Paras 8 and 11.03 of Master Circular No. 56 concerning pay fixation and protection upon promotion.

Applying State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334, the Tribunal held that recovery of excess payment is ordinarily impermissible from Group ‘C’ and Group ‘D’ employees and where recovery would be inequitable, harsh, or arbitrary.

It also relied on Thomas Daniel v. State of Kerala, (2022) 5 SCC 470, which affirms that recovery is generally not permissible where excess payment resulted from the employer’s mistake or wrong interpretation of rules and was not caused by fraud or misrepresentation of the employee.

The principles of natural justice require notice and a reasonable opportunity of hearing before an adverse retrospective pay reduction and consequential recovery are imposed, particularly where the employee has already disputed the fixation.

The Tribunal found that the applicant had promptly objected to the original pay fixation and had not secured or retained the higher salary through fraud, misrepresentation, or concealment.

The respondents relied on Master Circular No. 56 but failed to explain why the applicant’s existing pay was reduced when their own case acknowledged that pay protection was relevant under the Circular.

The retrospective reduction was imposed after a substantial delay and was followed by recovery of ₹93,729, without deciding the applicant’s objection dated 16 March 2018 or his subsequent representation dated 13 October 2022.

Since the applicant was a Group ‘C’ employee, the excess payment resulted from the respondents’ own pay-fixation error, and recovery would cause undue hardship, the Tribunal applied the equitable restrictions in Rafiq Masih and Thomas Daniel.

It further held that the absence of notice and hearing aggravated the illegality of the recovery process.

The orders dated 10 October 2022 and 22 May 2022 were quashed, and the respondents were restrained from recovering the amount from the applicant’s salary.

If any amount had already been recovered, the respondents were directed to refund it within three months. Failure to refund within that period would attract simple interest at 6% per annum from expiry of the three-month period until payment.

The respondents were, however, left at liberty to rectify any genuine clerical error in accordance with law after giving due notice and an opportunity of hearing to the applicant.

No order as to costs was made.