/2022 INSC 0341/
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7115 OF 2010
THOMAS DANIEL … APPELLANT(S) 
VERSUS
STATE OF KERALA & ORS.         … RESPONDENT(S)
J U D G M E N T
S. ABDUL NAZEER, J.
(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

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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
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   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.

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(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   herein­
State   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
appellant.
(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

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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
Judge.
(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.

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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

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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   Others 1
  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

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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
Others 2
  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
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
2   (2006) 11 SCC 709

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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

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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
Others 3
  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

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“ 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 Others 4
  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

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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
recovery.

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( 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

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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.
…….……………………………J.
    (S. ABDUL NAZEER)
…….……………………………J.
    (VIKRAM NATH)
New Delhi;
May 2, 2022.