THOMAS DANIELversusSTATE OF KERALA AND ORS.

606                      [2022]REPORTS
               SUPREME COURT    4 S.C.R. 606                 [2022] 4 S.C.R.


A                              THOMAS DANIEL
                                         v.
                        STATE OF KERALA AND ORS.
                         (Civil Appeal No. 7115 of 2010)
B                                 MAY 02, 2022
             [S. ABDUL NAZEER AND VIKRAM NATH, JJ.]
            Service Law: Retirement – Excess payment made to employees
      by error, recovery of – On facts, recovery of increments granted to
      the employee while in service almost ten years after his retirement
C
      on the ground that the said increments were granted on account of
      an error – Justification of – Held: If the excess amount was not
      paid on account of any misrepresentation or fraud of the employee
      or paid by applying wrong principle for calculating the pay/
      allowance or interpretation of rule/order which is subsequently
D     found to be erroneous, such excess payment made are not
      recoverable – 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 would
      caused if the recovery is ordered – However, if the error is detected
      or corrected in short time of wrong payment or the employee had
E
      the knowledge of excess payment, then the courts can order for
      recovery of amount paid in excess – On facts, excess payment made
      due to a mistake in interpreting the Kerela Service Rules – Thus,
      attempt to recover the said amount after ten years of retirement
      unjustified – Equity.
F
            Allowing the appeal, the Court
            HELD: 1.1 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
G     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
H     from the hardship that will be caused if the recovery is ordered.
                                       606
        THOMAS DANIEL v. STATE OF KERELA AND ORS.                       607


If in a given case, it is proved that an employee had knowledge         A
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
                                                                        B
paid in excess. [Para 9][610-A-D]
       1.2 It is not contended 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        C
was subsequently pointed out by the Accountant General. In view
thereof, an attempt to recover the said increments after passage
of ten years of his retirement is unjustified. [Paras 14 and 15][614-
E-F]
        Sahib Ram v. State of Haryana and Others (1995) 1               D
        Suppl. SCC 18; Col. B.J. Akkara (Retd.) v. Government
        of India and Others (2006) 11 SCC 709 : [2006] 7
        Suppl. SCR 58; Syed Abdul Qadir and Others v. State
        of Bihar and Others (2009) 3 SCC 475 : [2008] 17
        SCR 917; State of Punjab and Others v. Rafiq Masih              E
        (White Washer) and Others (2015) 4 SCC 334 : [2014]
        13 SCR 1343 – referred to
                       Case Law Reference
(1995) 1 Suppl. SCC 18               referred to       Para 10
                                                                        F
[2006] 7 Suppl. SCR 58               referred to       Para 11
[2008] 17 SCR 917                    referred to       Para 12
[2014] 13 SCR 1343                   referred to       Para 13
        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7115 of
2010.                                                                   G

      From the Judgment and Order dated 02.03.2009 of the High Court
of Kerala at Ernakulam in WA No. 404 of 2006.
       Raghenth Basant, Senthil Jagadeesan, Iqram Govind Singh, Advs.
for the Appellant.                                                      H
608            SUPREME COURT REPORTS                           [2022] 4 S.C.R.


A          Nishe Rajen Shonker, Mrs. Anu K. Joy, Alim Anvar, Advs. for the
      Respondents.
            The Judgment of the Court was delivered by
            S. ABDUL NAZEER, J.
B            (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:
C            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 post-graduation i.e., M.Sc. (Chemistry) Course.
D     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 accordingly.
             (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
E
      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
F     and since then he was neither paid pensionary benefits nor death-cum-
      retirement 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
G     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 herein- State of Kerala rejected the said
      complaint by order dated 26.06.2000 stating that post-graduation degree-
      M.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,
H
      THOMAS DANIEL v. STATE OF KERELA AND ORS.                              609
               [S. ABDUL NAZEER, J.]

leave without allowance cannot be counted for service benefits. In the       A
meantime, on an application filed by the appellant under Rule 116, Part
III of the Kerala Service Rules, the respondent no.3-Deputy 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 appellant.
                                                                             B
       (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 post-graduation cannot be counted for the purpose of grant       C
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     D
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
Judge.
                                                                             E
       (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      F
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
respondents-State of Kerala has supported the impugned judgment of           G
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.
                                                                             H
610               SUPREME COURT REPORTS                           [2022] 4 S.C.R.


A            (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
B
      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
C     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.
D            (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 :
E              “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 misrepresentation made by the appellant
F              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
G              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
      Others2 this Court considered an identical question as under:
      1
          1995 Supp (1) SCC 18
      2
H         (2006) 11 SCC 709
THOMAS DANIEL v. STATE OF KERELA AND ORS.                                611
         [S. ABDUL NAZEER, J.]

“27. The last question to be considered is whether relief should         A
be granted against the recovery of the excess payments made on
account of the wrong interpretation/understanding of the circular
dated 7-6-1999. This Court has consistently granted relief against
recovery of excess wrong payment of emoluments/allowances
from an employee, if the following conditions are fulfilled
                                                                         B
(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] ):                              C
   (a) The excess payment was not made on account of any
   misrepresentation or fraud on the part of the employee.
   (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 interpretation of rule/order, which   D
   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.        E
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          F
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            G
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
                                                                         H
612                SUPREME COURT REPORTS                         [2022] 4 S.C.R.


A              in a more disadvantageous position when compared to in-service
               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.
B
               We are therefore of the view that the respondents shall not recover
               any excess payments made towards pension in pursuance of the
               circular dated 7-6-1999 till the issue of the clarificatory circular
               dated 11-9-2001. Insofar as any excess payment made after the
               circular dated 11-9-2001, obviously the Union of India will be
C              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
      Others3 excess payment was sought to be recovered which was made
D     to the appellants-teachers 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
E     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
F     employee and when the excess payment has been made by applying a
      wrong interpretation/ understanding of a Rule or Order. It was held thus:
               “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
G              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 counter-affidavit, 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
      3
H         (2009) 3 SCC 475
         THOMAS DANIEL v. STATE OF KERELA AND ORS.                                613
                  [S. ABDUL NAZEER, J.]

         applicable to them, for which the appellants cannot be held              A
         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
                                                                                  B
         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                C
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 disallowed the same, exempting             D
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       E
         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              F
         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      G
         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
4
    (2015) 4 SCC 334                                                              H
614              SUPREME COURT REPORTS                         [2022] 4 S.C.R.


A            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
B            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 recovery.
                     (iii) Recovery from the employees, when the excess
             payment has been made for a period in excess of five years,
C            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
D
             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
E     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
F     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
G     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.

      Nidhi Jain                                                   Appeal allowed.
H     (Assisted by : Shashwat Jain, LCRA)