2025 (4) TMI 507 - SC - Indian Laws

Recovery of financial benefits - Principles of natural justice - whether recovery of the amount extended to the appellants while they were in service is justified after their retirement and that too without affording any opportunity of hearing? - HELD THAT - The law in this regard has been settled by this Court in catena of judgments rendered time and again; Sahib Ram vs. State of Haryana 1994 (9) TMI 373 - SUPREME COURT Shyam Babu Verma vs. Union of India 1994 (2) TMI 329 - SUPREME COURT Union of India vs. M. Bhaskar 1996 (5) TMI 450 - SUPREME COURT and V. Gangaram vs. Regional Jt. Director 1997 (4) TMI 550 - SUPREME COURT and in a recent decision in the matter of Thomas Daniel vs. State of Kerala Ors. 2022 (5) TMI 1674 - SUPREME COURT . This Court has consistently taken the view that if the excess amount was not paid on account of any misrepresentation or fraud on the part of the employee or if such excess payment was made by the employer by applying a wrong principle for calculating the pay/allowance or on the basis of a particular interpretation of rule/order which is subsequently found to be erroneous such excess payments of emoluments or allowances are not recoverable. It is held that such relief against the recovery is not because of any right of the employee but in equity exercising judicial discretion to provide relief to the employee from the hardship that will be caused if the recovery is ordered. In the case at hand the appellants were working on the post of Stenographers when the subject illegal payment was made to them. It is not reflected in the record that such payment was made to the appellants on account of any fraud or misrepresentation by them. It seems when the financial benefit was extended to the appellants by the District Judge Cuttack the same was subsequently not approved by the High Court which resulted in the subsequent order of recovery. It is also not in dispute that the payment was made in the year 2017 whereas the recovery was directed in the year 2023. However in the meanwhile the appellants have retired in the year 2020. It is also an admitted position that the appellants were not afforded any opportunity of hearing before issuing the order of recovery. The appellants having superannuated on a ministerial post of Stenographer were admittedly not holding any gazetted post as such applying the principle enunciated by this Court in the above quoted judgment the recovery is found unsustainable. Conclusion - The recovery of excess payments from retired employees particularly without a hearing is unsustainable. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core issue considered by the Court was whether the recovery of financial benefits extended to the appellants while they were in service is justified after their retirement, particularly when such recovery was ordered without affording any opportunity of hearing to the appellants.

2. ISSUE-WISE DETAILED ANALYSIS

The Court examined the legal framework and precedents concerning the recovery of excess payments made to employees. The relevant legal framework includes established principles from previous judgments, such as Sahib Ram vs. State of Haryana, Shyam Babu Verma vs. Union of India, Union of India vs. M. Bhaskar, V. Gangaram vs. Regional Jt. Director, and Thomas Daniel vs. State of Kerala & Ors.

In these cases, the Court consistently held that recovery of excess payments is not permissible if the payment was not due to any misrepresentation or fraud by the employee and was made due to an erroneous interpretation of rules by the employer. The Court emphasized that relief against such recovery is granted not because of any inherent right of the employee but as an exercise of judicial discretion to alleviate hardship.

Key evidence and findings in the present case indicated that the financial benefits were granted to the appellants without any fraud or misrepresentation on their part. The benefits were extended based on the recommendations of the Shetty Commission and were later deemed erroneous by the respondents. The appellants had retired by the time the recovery was ordered, and no opportunity for a hearing was provided to them before the recovery orders were issued.

The Court applied the established legal principles to the facts of the case, noting that the appellants were low-paid employees who had retired and that the recovery would cause undue hardship. The Court also considered that the appellants were not given a chance to present their case before the recovery orders were made.

Competing arguments were addressed by noting that the respondents argued the appellants were not entitled to the financial benefits and had agreed to refund any excess payments. However, the Court found that the lack of opportunity for a hearing and the principles established in prior judgments outweighed these arguments.

3. SIGNIFICANT HOLDINGS

The Court held that the recovery of excess payments from retired employees, particularly without a hearing, is unsustainable. The Court quoted significant legal reasoning from past judgments, emphasizing that recovery is impermissible when there is no misrepresentation or fraud, and the payment was made due to an erroneous interpretation by the employer.

Core principles established include the prohibition of recovery from retired employees or those nearing retirement, particularly when the excess payment was made over a long period and without the employee's fault. The Court reiterated that such recovery is inequitable and causes undue hardship.

The final determination was to allow the appeal, setting aside the High Court's order and the subsequent orders directing the appellants to deposit the excess drawn arrears.