Recovery of mistaken excess payments is impermissible from retired Group C employees absent fraud.

The applicant, a retired Group ‘C’ railway employee, had been appointed in 1986 and was promoted to the post of Loco Pilot in the pay scale of Rs. 5,000–8,000, corresponding to Grade Pay of Rs. 4,200 under the Sixth Central Pay Commission.

The respondents had granted him the benefit of MACP from 28 November 2009, but subsequently determined that the benefit was actually due only from 22 May 2016.

On that basis, they treated the earlier payments as overpayments and recovered Rs. 89,970 from the applicant’s retirement benefits, including commutation and DCRG, at the time of his retirement.

The applicant challenged the recovery, contending that it resulted from departmental error, that he had neither misrepresented facts nor committed fraud, and that no opportunity of hearing had been granted to him before recovery.

The respondents defended the recovery as a correction of an erroneous MACP payment made after scrutiny of the service records.

Whether recovery of Rs. 89,970 from the applicant’s retirement benefits, representing alleged excess MACP payments caused by departmental error, was legally permissible when the applicant had made no misrepresentation or fraud.

Whether recovery from a retired Group ‘C’ employee, particularly without granting him an opportunity of hearing, was impermissible under the principles laid down in State of Punjab v. Rafiq Masih.

Whether the amount already recovered was liable to be refunded, with interest in case of delay.

The Tribunal applied the principles governing recovery of mistaken excess payments from public employees, particularly the Supreme Court’s decision in State of Punjab v. Rafiq Masih, (2015) 2 SCC (L&S) 33.

Under that decision, recovery is generally impermissible where it is made from Group ‘C’ or Group ‘D’ employees, retired employees or employees nearing retirement, where the excess payment relates to a period exceeding five years before the recovery order, or where recovery would otherwise be inequitable, harsh or arbitrary.

The Tribunal also relied on the principle that recovery cannot ordinarily be imposed where the excess payment resulted from the employer’s mistake and the employee neither misrepresented facts nor committed fraud.

The applicant also relied upon Railway Board Establishment Circular/R.B.E. No. 72 of 2016 concerning protection against such recovery.

The Tribunal found that the applicant was a Group ‘C’ employee and had retired by the time the recovery was enforced; the alleged overpayment also covered the period from 28 November 2009 to 30 November 2017, substantially exceeding five years.

The respondents themselves attributed the excess payment to a departmental mistake in fixing the date of the MACP benefit, rather than to any misrepresentation or fraud by the applicant.

Applying State of Punjab v. Rafiq Masih, the Tribunal held that recovery from the applicant’s commutation and DCRG would be inequitable and unduly harsh.

It further noted that the respondents had neither afforded the applicant an opportunity of hearing nor called for his explanation before enforcing the recovery, thereby aggravating the illegality of the action.

Since the applicant fell within multiple categories in which recovery is ordinarily impermissible, the respondents’ right to recover was held to be outweighed by the hardship caused to the retired employee.

The respondents were directed not to make any further recovery and to refund the Rs. 89,970 already recovered within three months from receipt of the certified copy of the order.

In default, the refunded amount would carry simple interest at the applicable GPF rate from the due date.

All associated miscellaneous applications were disposed of, with no order as to costs.