Recovery of excess salary payments is impermissible absent employee fraud or misrepresentation where departmental error caused fixation.

The applicant, a Postal Assistant presently working as HSG-II in Patna GPO, was granted financial upgradations under the MACP Scheme, including the second MACP in Pay Level-6 with effect from 03.05.2016.

Following implementation of the Seventh Central Pay Commission, his pay was fixed under the CCS (Revised Pay) Rules, 2016.

The respondents subsequently alleged that his pay had been erroneously re-fixed because he had not exercised the prescribed option within the period contemplated by the Ministry of Finance order dated 12.12.2018.

On that basis, the respondents reduced his basic pay and directed recovery of ₹4,06,662, including monthly deductions of ₹25,000, without issuing a prior show-cause notice.

The applicant challenged the recovery, reduction in pay, and consequential action under Section 19 of the Administrative Tribunals Act, 1985, relying principally on State of Punjab v. Rafiq Masih.

1. Whether the respondents were entitled to correct or re-fix the applicant’s pay upon finding that the earlier fixation was contrary to the applicable rules.

2. Whether, even if the earlier pay fixation was erroneous, the respondents were entitled to recover ₹4,06,662 already paid to the applicant.

The Tribunal applied the CCS (Revised Pay) Rules, 2016, particularly Rules 5 and 6 concerning the option to retain the existing pay structure or switch over to the revised pay structure, together with the relevant Ministry of Finance and Department of Posts clarifications governing re-exercise of that option.

It held that the employer may correct an erroneous pay fixation in accordance with the governing rules, but that such power does not automatically authorise recovery of all amounts previously paid.

On recovery, the Tribunal relied on State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334, and the DoPT Office Memorandum dated 02.03.2016, under which recovery may be impermissible where it is inequitable, harsh, or arbitrary, particularly in the absence of fraud, misrepresentation, or concealment by the employee.

The principles of natural justice were also applicable because reduction of pay and recovery had civil consequences.

The Tribunal found that the record was insufficient to conclusively determine whether the applicant was entitled to a basic pay of ₹60,400 or whether the reduced figure was correct.

The applicant had not produced the complete chain of pay-fixation orders, while the respondents’ pleadings were internally inconsistent: they asserted that no timely option had been exercised but also relied on an option dated 05.08.2016.

Accordingly, the Tribunal declined to finally adjudicate the correct pay fixation and directed the competent authority to reconsider it under the applicable rules and the option actually exercised.

However, the recovery was treated separately.

There was no finding or evidence that the applicant had obtained the excess payment through fraud, misrepresentation, or deliberate concealment; rather, the alleged error originated in departmental pay fixation and had remained operative for a considerable period.

Since the applicant had not determined or sanctioned his own pay, and no specific undertaking authorising recovery had been shown, recovery of ₹4,06,662 was held to be harsh and inequitable under the principles in Rafiq Masih.

The Tribunal further held that any adverse decision on pay fixation should be preceded by a reasonable opportunity to represent, given the disputed factual and legal basis of the re-fixation.

The order dated 24.02.2024 was quashed insofar as it directed recovery of ₹4,06,662 from the applicant.

Any amount already recovered was directed to be refunded within eight weeks.

The respondents were directed to re-examine the applicant’s pay fixation in accordance with the CCS (Revised Pay) Rules, 2016, the option actually exercised, applicable clarifications, and the relevant records; if an adverse decision was proposed, the applicant was to be given a reasonable opportunity to submit a representation.

A reasoned and speaking order on pay fixation was directed to be passed within twelve weeks.

The Tribunal clarified that quashing the recovery did not amount to a declaration that the applicant was entitled to a basic pay of ₹60,400.

No interest or costs were awarded.