2014 (12) TMI 1415 - SC - Indian Laws

Monetary benefits in excess of the entitlement - whether all the private Respondents against whom an order of recovery (of the excess amount) has been made should be exempted in law from the reimbursement of the same to the employer? - HELD THAT - The instant benefit cannot extend to an employee merely on account of the fact that he was not an accessory to the mistake committed by the employer; or merely because the employee did not furnish any factually incorrect information on the basis whereof the employer committed the mistake of paying the employee more than what was rightfully due to him; or for that matter merely because the excessive payment was made to the employee in absence of any fraud or misrepresentation at the behest of the employee. The orders passed by the employer seeking recovery of monetary benefits wrongly extended to employees can only be interfered with in cases where such recovery would result in a hardship of a nature which would far outweigh the equitable balance of the employer s right to recover. In other words interference would be called for only in such cases where it would be iniquitous to recover the payment made. In order to ascertain the parameters of the above consideration and the test to be applied reference needs to be made to situations when this Court exempted employees from such recovery even in exercise of its jurisdiction Under Article 142 of the Constitution of India. Repeated exercise of such power for doing complete justice in any cause would establish that the recovery being effected was iniquitous and therefore arbitrary. And accordingly the interference at the hands of this Court. It would be pertinent to mention that Librarians were equated with Lecturers for the grant of the pay scale of Rs. 700-1600. The above pay parity would extend to Librarians subject to the condition that they possessed the prescribed minimum educational qualification (first or second class M.A. M. Sc. M. Com. plus a first or second class B. Lib. Science or a Diploma in Library Science the degree of M. Lib. Science being a preferential qualification). For those Librarians appointed prior to 3.12.1972 the educational qualifications were relaxed - This Court did not allow the recovery of the excess payment. This was apparently done because this Court felt that the employees were entitled to wages for the post against which they had discharged their duties. Following few situations summarised wherein recoveries by the employers would be impermissible in law (i) Recovery from employees belonging to Class-III and Class-IV service (or Group C and Group D service). (ii) Recovery from retired employees or employees who are due to retire within one year of the order of recovery. (iii) Recovery from employees when the excess payment has been made for a period in excess of five years before the order of recovery is issued. (iv) Recovery in cases where an employee has wrongfully been required to discharge duties of a higher post and has been paid accordingly even though he should have rightfully been required to work against an inferior post. (v) In any other case where the Court arrives at the conclusion that recovery if made from the employee would be iniquitous or harsh or arbitrary to such an extent as would far outweigh the equitable balance of the employer s right to recover.

Summary

Issues Involved:
1. Recovery of excess monetary benefits from employees due to employer's mistake.
2. Exemption from recovery based on employee's innocence and lack of misrepresentation.
3. Hardship and equity considerations in recovery cases.
4. Legal precedents and principles governing recovery of excess payments.

Issue-wise Detailed Analysis:

1. Recovery of Excess Monetary Benefits from Employees Due to Employer's Mistake:
All the private respondents in this case received monetary benefits exceeding their entitlement due to a mistake by the competent authority. The errors included granting unauthorized status, wrongful salary fixation, and unauthorized allowances. The court recognized that the employees were innocent beneficiaries of these mistakes, having neither misrepresented information nor committed fraud.

2. Exemption from Recovery Based on Employee's Innocence and Lack of Misrepresentation:
The court considered whether the employees should be exempted from reimbursing the excess amounts received. It emphasized that the employees did not contribute to the mistake and were as innocent as their employers. The court noted that the issue of recovery revolves around the action being iniquitous or arbitrary, and not merely the absence of misrepresentation or fraud by the employees.

3. Hardship and Equity Considerations in Recovery Cases:
The court examined several precedents to determine when recovery would be iniquitous and arbitrary. It highlighted that recovery should be interfered with only when it results in hardship outweighing the employer's right to recover. The court identified specific situations where recovery would be impermissible:
- Recovery from employees in lower rungs of service (Class-III and Class-IV).
- Recovery from retired employees or those nearing retirement (within one year).
- Recovery after a long duration of excess payment (more than five years).
- Recovery from employees wrongfully required to discharge duties of a higher post.

4. Legal Precedents and Principles Governing Recovery of Excess Payments:
The court referred to several precedents, including:
- Syed Abdul Qadir v. State of Bihar (2009) 3 SCC 475: Recovery was deemed iniquitous if detected after a long period.
- Shyam Babu Verma v. Union of India (1994) 2 SCC 521: Recovery after 11 years was considered unjust.
- Col. B.J. Akkara v. Government of India (2006) 11 SCC 709: Recovery from lower rung employees was deemed harsh.
- Sahib Ram Verma v. Union of India (1995) Supp. 1 SCC 18: Recovery from employees wrongfully granted higher pay scales was disallowed.

The court concluded that recovery would be arbitrary and violative of Article 14 of the Constitution if it results in undue hardship to employees. It established that recovery should be avoided in the specified situations to ensure equity and justice.

Conclusion:
The court upheld the High Court's orders quashing the recovery orders in all the appeals, as they fell within the identified impermissible categories. The appeals were disposed of accordingly.