Recovery of long-standing excess payments from retired Group C employees is impermissible absent fraud or misrepresentation.

The applicant, a Railway Technician Grade-I, superannuated on 30.09.2020.

His pension payment order initially assessed gratuity at ₹7,10,892.

Shortly before retirement, the respondents revised his entitlement to the 2nd MACP by excluding part of his temporary-status service and withdrew the 3rd MACP, alleging that the earlier pay fixation was erroneous.

Consequently, ₹1,72,940 was deducted from his gratuity towards alleged excess payment made during service, including in 2008.

The respondents relied on Rule 15(2) of the Railway Services (Pension) Rules, 1993, and contended that the recovery was permissible because the error had been communicated to the applicant before retirement.

The applicant challenged the recovery, relying principally on State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334.

Whether the respondents were entitled to correct the applicant’s erroneous pay fixation and revise the dates of grant of the 2nd and 3rd MACP benefits?

Whether recovery of ₹1,72,940 from the applicant’s gratuity/DCRG towards alleged excess payment was legally permissible, when the applicant was a retired Group-C employee and the excess payment had allegedly continued for several years?

Whether the applicant was entitled to interest and costs on the amount recovered?

The Tribunal applied Section 19 of the Administrative Tribunals Act, 1985, under which the Original Application was filed.

It considered Rule 15(2) of the Railway Services (Pension) Rules, 1993, which permits adjustment of ascertained and assessed Railway or Government dues outstanding at retirement against retirement gratuity.

However, it held that the power to correct an erroneous pay fixation does not automatically authorise recovery of excess payments.

Relying on State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334, as reflected in the DoPT Office Memorandum dated 02.03.2016 and Railway Board’s RBE No. 72/2016, the Tribunal applied the principle that recovery is ordinarily impermissible where it would be inequitable, harsh or arbitrary, particularly when made from retired employees, employees due to retire within one year, Group-C or Group-D employees, or in respect of payments made more than five years earlier.

The Tribunal also recognised the general principle that an employer may correct an erroneous fixation, but recovery must satisfy considerations of equity and proportionality.

The Tribunal distinguished between rectification of the applicant’s pay and recovery of the resulting excess payment.

It held that the respondents were entitled to correct the erroneous grant of the 2nd and 3rd MACP benefits after scrutiny of the service record; such correction could not be perpetuated merely because it had earlier been made.

Nevertheless, the recovery was impermissible under the principles in Rafiq Masih.

The applicant was a retired Group-C employee, the recovery was effected from his DCRG upon retirement, and the alleged excess payment related to a period substantially earlier than the recovery.

There was also no allegation or proof of fraud, misrepresentation or deliberate concealment by the applicant.

Accordingly, although the respondents could revise the pay fixation prospectively or for pensionary computation, deducting the alleged excess from the applicant’s gratuity was considered inequitable and contrary to the protective principles governing recovery from retired employees.

The Tribunal held that the respondents could correct the applicant’s erroneous pay fixation and MACP entitlement, but could not recover ₹1,72,940 from his gratuity/DCRG in the circumstances of the case.

The respondents were directed to refund ₹1,72,940 to the applicant within two months from receipt or production of the order before the competent authority.

The claim for interest and costs was rejected, and there was no order as to interest or costs.