Recovery of excess salary payments from retired employees is impermissible in the absence of fraud or misrepresentation.

The Food Corporation of India (FCI) appealed a Single Judge judgment dated 25.02.2026 concerning the migration of employees from the Central Dearness Allowance (CDA) pattern to the Industrial Dearness Allowance (IDA) pattern.

Following the Supreme Court’s directions in Jute Corporation of India Officers Association v. Jute Corporation of India Ltd. (1990), FCI issued a circular on 30.09.2011 retrospectively converting pay scales for employees promoted after 01.01.1989.

This led to two sets of litigations: (1) retired employees challenging retrospective recoveries/withholdings from their retiral dues; and (2) employees demanding the payment of arrears resulting from the conversion, which FCI had withheld via internal circulars dated 24.05.2013 and 05.01.2015 to safeguard potential future recoveries.

1. Whether the FCI was legally permitted to effect retrospective recoveries from the retiral benefits of senior-grade employees based on a change in pay-scale policy decades later.

2. Whether the FCI could validly withhold "payment cases" (arrears due to employees) while simultaneously pursuing "recovery cases" under the same refixation regime.

The Court primarily applied the principle from State of Punjab & Ors. v. Rafiq Masih (White Washer), which prohibits recoveries from retired employees or where payments were made over a long period without fraud/misrepresentation by the employee.

It distinguished Chandi Prasad Uniyal v. State of Uttarakhand, noting that while excess public money is generally recoverable, equitable exceptions apply in cases of extreme hardship.

The Court also relied on Article 14 of the Constitution of India, requiring State instrumentalities to act fairly and non-discriminatorily.

It further considered the Supreme Court's directions in Jute Corporation of India Officers Association v. Jute Corporation of India Ltd. regarding the voluntary nature of switching patterns for pre-1989 appointees.

The Court reasoned that the FCI’s attempt to equate "promotion" with "appointment" to justify retrospective conversion for pre-1989 employees contravened the spirit of the Jute Corporation judgment, which sought to preserve the options of existing staff.

Regarding recoveries, the Court found that since the Respondents (Category I and II officers) had retired and the alleged excess payments were due to FCI’s internal administrative lapses rather than fraud by the employees, recovery after several years would be "harsh, inequitable, and legally unsustainable" under the Rafiq Masih doctrine.

Concerning the withholding of arrears, the Court held that FCI’s "selective and inconsistent" application of policy—pursuing recoveries while staying payments of dues—was a violation of Article 14.

The Court emphasized that a State instrumentality cannot unilaterally defer benefits sanctioned by the Central Government based on internal cautionary circulars.

The Court held that: (i) No recovery shall be made from the Respondents’ retiral dues based on the retrospective CDA-to-IDA refixation; (ii) All amounts already recovered must be refunded with 6% interest per annum.

(iii) FCI cannot withhold payments due to employees under the refixation exercise based on internal circulars dated 24.05.2013 and 05.01.2015; and (iv) All arrears and consequential dues must be released within a defined timeline with 6% interest.