Recovery of mistaken excess payment from a retired Group C employee is impermissible absent misrepresentation.

The applicant, a retired Loco Pilot (Mail/Express) of North Central Railway and a Group ‘C’ employee, was appointed on 12 September 1988 and voluntarily retired on 2 February 2019.

A Grade Pay of ₹4,600 was granted to him under the MACP Scheme with effect from 1 September 2008.

The respondents later treated the grant as erroneous and recovered ₹1,00,981 from his retiral gratuity/settlement dues, allegedly without affording him an opportunity of hearing.

The applicant submitted representations dated 24 June 2019 and 1 August 2022 seeking refund, but the respondents maintained that the Grade Pay had been granted due to a misinterpretation of Railway Board rules and that the recovery was valid.

The applicant challenged the recovery, but did not challenge the withdrawal of the financial upgradation itself.

Whether recovery of the alleged excess payment of ₹1,00,981 from the retiral dues of a retired Group ‘C’ employee was legally permissible when there was no allegation of misrepresentation or fraud on his part?

Whether the applicant was entitled to refund of the recovered amount, and if so, what interest should be awarded?

The Tribunal primarily applied the Supreme Court’s judgment in State of Punjab v. Rafiq Masih (Whitewasher), (2015) 4 SCC 334, which holds that recovery of mistaken excess payments is generally impermissible in specified situations, including recovery from Group ‘C’ and Group ‘D’ employees, retired employees or employees nearing retirement, and cases where recovery would be harsh, arbitrary or inequitable.

The Tribunal also applied the principle that recovery cannot ordinarily be made from retiral benefits of a retired employee where the excess payment resulted from the employer’s own mistake and there was no misrepresentation or fraud by the employee.

The respondents admitted that the Grade Pay of ₹4,600 had been granted because of their own misinterpretation of the applicable Railway Board rules.

The applicant was a Group ‘C’ employee, had already retired, and the recovery was made from his retiral dues after retirement.

Since there was no allegation or finding that the applicant had made any misrepresentation or played any role in securing the erroneous financial upgradation, the recovery fell within the categories declared impermissible in Rafiq Masih.

The fact that the applicant did not challenge withdrawal of the Grade Pay did not validate recovery of the amounts already paid from his retiral benefits.

The Original Application was allowed, and the respondents were directed to refund the recovered amount with 6% simple interest per annum within three months from receipt of the certified copy of the order.

The claim for 18% compound interest was therefore not granted.

No order as to costs was made, and all connected miscellaneous applications were disposed of.