Excess payment made is not recoverable
The excess payment of emoluments or allowances made to an employee based on a then-interpretation of a service rule is not recoverable when it was subsequently found to be an erroneous one, the Supreme Court (SC) says in its judgement in Thomas Daniel v State of Kerala.
The issue raised in the appeal was whether increments granted to the appellant – teacher, while he was in service, can be recovered from him almost ten years after his retirement on the ground that the said increments were granted on account of an error pointed out by the audit wing later.
High Court rejected the petition
Earlier, the High Court of Kerala in this issue held that the mistake committed by the department concerned while granting the service benefits can be rectified subsequently by way of proposed recovery to be made from the employee’s DCRG amount, when the teacher challenged the recovery proceedings initiated by the State against him.
Payment was not due to any fraud by the payee
In appeal before the SC, the appellant contended that the excess payment made to the appellant was not on account of any misrepresentation or fraud on his part, but due to a mistake in interpreting the Kerala Service Rules (KSR).
SC focused on whether it was recoverable or not
The issue therefore considered by the apex court was 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 erroneous interpretation of rule.
Precedents do not permit recovery
Referring to various judgments on this aspect, the SC points out that in a catena of decisions the SC 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.
Relief is in equity and not as per any right
The SC adds that the 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.
Recoverable if there is fraud by the recipient
The SC also 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.
Appellant played no fraud in this case
In this case the government has no case that the excess payment was paid is on account of the misrepresentation or fraud played by the appellant, the excess amounts have been paid.
In fact, the case of the government is that excess payment was made due to a mistake in interpreting KSR which was subsequently pointed out by the Accountant General as erroneous.
Relevant judgements
- Sahib Ram v State of Haryana : 1995 Supp (1) SCC 18
- Shyam Babu Verma v Union of India :(1994) 2 SCC 521
- Union of India v M. Bhaskar :(1996) 4 SCC 416
- V. Gangaram v Regional Jt. Director : (1997) 6 SCC 139
