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

The petitioner, an Upper Division Teacher and Class III employee, retired from service on 30 June 2024. On 10 January 2025, approximately six months after his retirement, the Assistant Commissioner issued a recovery order for ₹3,04,669 on the basis of alleged erroneous pay fixation made between 27 November 1998 and 1 March 2024.

The petitioner contended that the excess payment, if any, resulted solely from the employer’s error and was not procured through fraud, misrepresentation, or concealment on his part. He further alleged that no show-cause notice or opportunity of hearing was provided before re-fixation of pay and recovery.

The respondents maintained that the petitioner’s pay had been incorrectly fixed, resulting in excess salary payments, and that recovery of the recalculated amount was legally justified.

The petitioner consequently sought quashing of the recovery order, refund of the recovered amount, and release of withheld retiral dues.

Whether recovery of alleged excess salary payments from a retired Class III employee, where the alleged excess payment related to a period commencing in 1998 and was not attributable to fraud or misrepresentation, was permissible in law.

Whether the respondents could revise the petitioner’s pay fixation and order recovery without issuing a show-cause notice or affording an effective opportunity of hearing.

Whether the petitioner was entitled to refund of any amount recovered or withheld and release of his remaining admissible retiral dues.

The Court applied the principles laid down by the Supreme Court in State of Punjab & Others v. Rafiq Masih (White Washer), (2015) 4 SCC 334, under which recovery of excess payments is generally impermissible where it is made from Class III or Class IV employees, retired employees or employees due to retire within one year, or where the excess payment relates to a period exceeding five years before the recovery order.

Recovery is also impermissible where it would be inequitable, harsh, or arbitrary, subject to the qualification that an employee who gave an undertaking to refund excess payment may remain bound by it.

The Court also applied the principles of natural justice, requiring prior notice and an effective opportunity of hearing before an adverse order affecting pay fixation and recovery is passed.

The petitioner satisfied multiple categories identified in Rafiq Masih: he was a retired Class III employee, the recovery order was issued after his retirement, and the alleged excess payment related to pay fixation dating back to 1998, well beyond five years before the recovery order.

There was also no material indicating fraud, misrepresentation, or suppression by the petitioner; the excess payment appeared attributable to the employer’s erroneous pay fixation. Accordingly, recovery of ₹3,04,669 was legally unsustainable.

Independently, the absence of a show-cause notice and hearing rendered the pay re-fixation and consequential recovery order procedurally defective for violation of natural justice.

The Court clarified, however, that setting aside the recovery did not prevent the respondents from examining the correctness of the pay fixation afresh, provided that the petitioner was given adequate hearing and a reasoned order was passed.

The respondents were directed to refund any amount recovered or withheld pursuant to that order and to release all remaining admissible retiral dues payable to the petitioner.

The exercise was required to be completed within 50 days from receipt of a certified copy of the order.

The respondents were granted liberty to undertake a fresh pay-fixation exercise in accordance with law after affording the petitioner an adequate opportunity of hearing, but any future recovery would remain subject to Rafiq Masih.

The petition was disposed of without an order as to costs.