THOMAS DANIEL VS STATE OF KERALA & ORS. - Supreme Court Case Decision 2022

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

(1) This appeal raises an issue as to whether increments granted
to the appellant, while he was in service, can be recovered from him
almost 10 years after his retirement on the ground that the said
increments were granted on account of an error? 
(2) The brief facts of the case, in nutshell, are as under:
In the year 1966, the appellant herein joined services as a
High   School   Assistant/Teacher   at   Craven   High   School,   Kollam
which   is   an   aided   school.   During   his   tenure,   he   availed   leave
without   allowance   starting   from   20.10.1972   to   31.03.1973   and
again from 02.07.1973 to 28.03.1974, for pursuing post­graduation
i.e.,   M.Sc.   (Chemistry)   Course.   Thereafter   on   1.06.1989,   the
appellant was promoted as Headmaster of the school and he was
granted   senior   grade   promotion   and   his   pay   scale   was   revised
(3) In the year 1997, a notice dated 09.10.1997 accompanied with
an audit report of the respondent no.5­ Account General of Kerala
was   served   on   the   appellant   by   the   respondent   no.4­   District
Educational Officer, Kollam with an objection that the period of
leave obtained by the appellant for undergoing higher education
should   not   be   included   while   determining   his   total   qualifying
service. Therefore, the pay and subsequent increments granted to
the   appellant   should   be   recovered   from   him.   Meanwhile,   the
appellant had retired from service on 31.03.1999 and since then he
was   neither   paid   pensionary   benefits   nor   death­cum­retirement
gratuity (D.C.R.G.). The appellant filed various representations but
he received no response.
(4) Ultimately   on   25.05.2000,   the   appellant   challenged   the
proposal to initiate recovery proceedings against him by way of
filing a complaint before the Public Redressal Complaint Cell, Chief
Minister of Kerala, for recovering the increments granted to the
appellant during the year 1989 and 1991. The respondent hereinState   of   Kerala   rejected   the   said   complaint   by   order   dated
26.06.2000 stating that post­graduation degree­M.Sc. (Chemistry)
was not useful as per the Rule 91A Part I of the Kerala Service
Rules in any manner to the public service, therefore, leave without
allowance cannot be counted for service benefits. In the meantime,
on an application filed by the appellant under Rule 116, Part III of
the   Kerala   Service   Rules,   the   respondent   no.3­Deputy   Director
Education, Kollam on 6.10.2000 sanctioned the release of 90% of
the D.C.R.G. amount after withholding 10% of the said amount and
subsequently   on   15.01.2001   the   amount   was   released   to   the
(5) Being aggrieved, the appellant filed a writ petition before the
High Court. During the pendency of the writ petition, the remaining
amount of D.C.R.G was also released to the appellant. However, the
respondent­ State of Kerala in their counter affidavit took a stand
that the period during which the appellant was on leave without
allowance for undertaking post­graduation cannot be counted for
the purpose of grant of increments and, therefore, the demand for
recovery made by them was justified. The learned Single Judge vide
order dated 05.01.2006 upheld the reasoning given by the State of
Kerala and dismissed the writ petition holding that the mistake
committed by the department concerned while granting the service
benefits can be rectified subsequently by way of proposed recovery
to be effected from appellant’s D.C.R.G. amount. Thereagainst, the
appellant filed a writ appeal before the High Court. The Division
Bench of the High Court vide impugned order dated 02.03.2009
dismissed   the   appeal,  affirming   the   order   of   the   learned  Single
(6) Learned   counsel   for   the   appellant   would   contend   that   the
excess payment made to the appellant was not on account of any
misrepresentation or fraud on his part.  The excess payment was
made due to a mistake in interpreting the Kerala Service Rules.  It
is further submitted that the appellant has retired on 31.03.1999.
The appellant had to undergo a bypass surgery and he is in huge
debts.  After repeated request, D.C.R.G. benefit was released in his
favour.  He prays for setting aside the impugned judgment and also
the   order   dated   26.06.2000   passed   by   the   Public   Redressal
Complaint Cell, Chief Minister of Kerala.
(7) On   the   other   hand,   learned   counsel   appearing   for   the
respondents­State of Kerala has supported the impugned judgment
of the High Court. 
(8) We have carefully considered the submission made at the Bar
by learned counsel for the parties and perused the materials placed
on the record.
(9) This Court in a catena of decisions has consistently held that
if   the   excess   amount   was   not   paid   on   account   of   any
misrepresentation   or   fraud   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 payment of emoluments or allowances are
not recoverable.   This relief against the recovery is granted not
because of any right of the employees but in equity, exercising
judicial   discretion   to   provide   relief   to   the   employees   from   the
hardship that will be caused if the recovery is ordered.  This Court
has   further   held   that   if   in   a   given   case,   it   is   proved   that   an
employee had knowledge that the payment received was in excess of
what was due or wrongly paid, or in cases where error is detected or
corrected within a short time of wrong payment, the matter being in
the realm of judicial discretion, the courts may on the facts and
circumstances of any particular case order for recovery of amount
paid in excess.
(10) In  Sahib  Ram  v.  State  of Haryana  and  Others1
this Court
restrained   recovery   of   payment   which   was   given   under   the
upgraded pay scale on account of wrong construction of relevant
order by the authority concerned, without any misrepresentation on
part of the employees.  It was held thus :
“5. Admittedly the appellant does not possess the
required   educational   qualifications.   Under   the
circumstances the appellant would not be entitled
to the relaxation. The Principal erred in granting
him the relaxation. Since the date of relaxation, the
appellant had been paid his salary on the revised
scale.   However,   it   is   not   on   account   of   any
1 1995 Supp (1) SCC 18
misrepresentation made by the appellant that the
benefit of the higher pay scale was given to him but
by wrong construction made by the Principal for
which the appellant cannot be held to be at fault.
Under the circumstances the amount paid till date
may   not   be   recovered   from   the   appellant.   The
principle   of   equal   pay   for   equal   work   would   not
apply   to   the   scales   prescribed   by   the   University
Grants Commission. The appeal is allowed partly
without any order as to costs.”
(11) In  Col.   B.J.   Akkara   (Retd.)   v.   Government   of   India   and
this Court considered an identical question as under:
“27. The last question to be considered is whether relief
should be granted against the recovery of the excess
payments   made   on   account   of   the   wrong
interpretation/understanding of the circular dated 7­6­
1999. This Court has consistently granted relief against
recovery   of   excess   wrong   payment   of
emoluments/allowances   from   an   employee,   if   the
following conditions are fulfilled (vide Sahib Ram v. State
of Haryana [1995 Supp (1) SCC 18 : 1995 SCC (L&S)
248], Shyam Babu Verma v. Union of India [(1994) 2 SCC
521 : 1994 SCC (L&S) 683 : (1994) 27 ATC 121] , Union
of India v. M. Bhaskar [(1996) 4 SCC 416 : 1996 SCC
(L&S)   967]   and V.   Gangaram v. Regional   Jt.
Director [(1997) 6 SCC 139 : 1997 SCC (L&S) 1652] ):
(a) The excess payment was not made on account of
any misrepresentation or fraud on the part of the
(b) 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
2 (2006) 11 SCC 709
interpretation of rule/order, which is subsequently
found to be erroneous.
28.    Such   relief,   restraining   back   recovery   of   excess
payment, is granted by courts not because of any right
in the employees, but in equity, in exercise of judicial
discretion to relieve the employees from the hardship
that   will   be   caused   if   recovery   is   implemented.   A
government servant, particularly one in the lower rungs
of service would spend whatever emoluments he receives
for the upkeep of his family. If he receives an excess
payment for a long period, he would spend it, genuinely
believing that he is entitled to it. As any subsequent
action to recover the excess payment will cause undue
hardship to him, relief is granted in that behalf. But
where the employee had knowledge that the payment
received was in excess of what was due or wrongly paid,
or where the error is detected or corrected within a short
time   of   wrong   payment,   courts   will   not   grant   relief
against   recovery.   The   matter   being   in   the   realm   of
judicial   discretion,   courts   may   on   the   facts   and
circumstances   of   any   particular   case   refuse   to   grant
such relief against recovery.
29. On the same principle, pensioners can also seek a
direction that wrong payments should not be recovered,
as pensioners are in a more disadvantageous position
when compared to in­service employees. Any attempt to
recover   excess   wrong   payment   would   cause   undue
hardship to them. The petitioners are not guilty of any
misrepresentation   or   fraud   in   regard   to   the   excess
payment. NPA was added to minimum pay, for purposes
of stepping up, due to a wrong understanding by the
implementing departments. We are therefore of the view
that   the   respondents   shall   not   recover   any   excess
payments made towards pension in pursuance of the
circular dated 7­6­1999 till the issue of the clarificatory
circular dated 11­9­2001. Insofar as any excess payment
made after the circular dated 11­9­2001, obviously the
Union of India will be entitled to recover the excess as
the validity of the said circular has been upheld and as
pensioners have been put on notice in regard to the
wrong calculations earlier made.”
(12) In  Syed   Abdul   Qadir   and   Others   v.   State   of   Bihar   and
excess payment was sought to be recovered which was
made to the appellants­teachers on account of mistake and wrong
interpretation   of   prevailing   Bihar   Nationalised   Secondary   School
(Service Conditions) Rules, 1983. The appellants therein contended
that even if it were to be held that the appellants were not entitled to
the benefit of additional increment on promotion, the excess amount
should not be recovered from them, it having been paid without any
misrepresentation or fraud on their part. The Court held that the
appellants   cannot   be   held   responsible   in   such   a   situation   and
recovery of the excess payment should not be ordered, especially
when the employee has subsequently retired.   The court observed
that in general parlance, recovery is prohibited by courts where
there   exists   no   misrepresentation   or   fraud   on   the   part   of   the
employee and when the excess payment has been made by applying
a wrong interpretation/ understanding of a Rule or Order.  It was
held thus:
3 (2009) 3 SCC 475
“59. Undoubtedly, the excess amount that has been paid
to   the   appellant   teachers   was   not   because   of   any
misrepresentation   or   fraud   on   their   part   and   the
appellants also had no knowledge that the amount that
was being paid to them was more than what they were
entitled to. It would not be out of place to mention here
that the Finance Department had, in its counter­affidavit,
admitted that it was a bona fide mistake on their part.
The   excess   payment   made   was   the   result   of   wrong
interpretation of the Rule that was applicable to them, for
which the appellants cannot be held responsible. Rather,
the whole confusion was because of inaction, negligence
and   carelessness   of   the   officials   concerned   of   the
Government   of   Bihar.   Learned   counsel   appearing   on
behalf of the appellant teachers submitted that majority
of the beneficiaries have either retired or are on the verge
of   it.   Keeping   in   view   the   peculiar   facts   and
circumstances   of   the   case   at   hand   and   to   avoid   any
hardship to the appellant teachers, we are of the view
that no recovery of the amount that has been paid in
excess to the appellant teachers should be made.”
(13) In  State   of   Punjab   and   Others   v.   Rafiq   Masih   (White
Washer) and Others4 wherein this court examined the validity of an
order passed by the State to recover the monetary gains wrongly
extended to the beneficiary employees in excess of their entitlements
without any fault or misrepresentation at the behest of the recipient.
This   Court   considered   situations   of   hardship   caused   to   an
employee, if recovery is directed to reimburse the employer and
4 (2015) 4 SCC 334
disallowed   the   same,   exempting   the   beneficiary   employees   from
such recovery.  It was held thus:
“8. As between two parties, if a determination is rendered in
favour of the party, which is the weaker of the two, without
any serious detriment to the other (which is truly a welfare
State), the issue resolved would be in consonance with the
concept of justice, which is assured to the citizens of India,
even in the Preamble of the Constitution of India. The right to
recover   being   pursued   by   the   employer,   will   have   to   be
compared, with the effect of the recovery on the employee
concerned. If the effect of the recovery from the employee
concerned   would   be,   more   unfair,   more   wrongful,   more
improper,   and   more   unwarranted,   than   the   corresponding
right of the employer to recover the amount, then it would be
iniquitous and arbitrary, to effect the recovery. In such a
situation,   the   employee's   right   would   outbalance,   and
therefore eclipse, the right of the employer to recover.
xxx xxx xxx
18. It is not possible to postulate all situations of hardship
which   would   govern   employees   on   the   issue   of   recovery,
where   payments   have   mistakenly   been   made   by   the
employer, in excess of their entitlement. Be that as it may,
based on the decisions referred to hereinabove, we may, as a
ready   reference,   summarise   the   following   few   situations,
wherein recoveries by the employers, would be impermissible
in law:
(i) Recovery from the employees belonging to Class III and
Class IV service (or Group C and Group D service).
(ii) Recovery from the retired employees, or the employees
who   are   due   to   retire   within   one   year,   of   the   order   of
(iii)   Recovery   from   the   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.”
(14) Coming to the facts of the present case, it is not contended
before us that on account of the misrepresentation or fraud played
by the appellant, the excess amounts have been paid.  The appellant
has retired on 31.03.1999.  In fact, the case of the respondents is
that excess payment was made due to a mistake in interpreting
Kerala Service Rules which was subsequently pointed out by the
Accountant General.  
(15) Having regard to the above, we are of the view that an attempt
to recover the said increments after passage of ten years of his
retirement is unjustified.  
(16) In the result, the appeal succeeds and is accordingly allowed.
The Judgment and order of the Division Bench dated 02.03.2009
and   also   of   the   learned   Single   Judge   of   the   High   Court   dated
05.01.2006   impugned   herein,   and   the   order   dated   26.06.2000
passed by the Public Redressal Complaint Cell of the Chief Minister
of Kerala and the recovery Notice dated 09.10.1997 are hereby set
aside.  There shall be no order as to costs.
New Delhi;
May 2, 2022.


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