No recovery of excess payment made due to wrong application of rules: SC

The Supreme Court emphasised on Monday that an employer cannot be held responsible for any excess wages or benefits given to an employee as a result of incorrect calculation or regulation interpretation.

A bench of Justices S Abdul Nazeer and Vikram Nath stated, "This relief against the recovery is granted not because of any right of the employees but in equity, using judicial discretion to afford relief to the employees from the hardship that will be created if the recovery is ordered.

The Kerala High Court's single and division bench rulings for the recovery of excess payment provided to him due to incorrect interpretation of the service regulations were appealed by retired teacher Thomas Daniel from Kerala, who filed the appeal.

The bench emphasised that this court has consistently held that excess payments of emoluments or allowances are not recoverable if they were made by the employer using the incorrect principles for calculating pay or allowances or on the basis of an interpretation of a rule or order that was later determined to be incorrect. The excess payments were not made due to any misrepresentation or fraud on the part of the employee.

However, if it is demonstrated 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 courts may, using their discretion, order for recovery of any amount paid in excess, the bench continued.

In this instance, the court ruled that it was not reasonable to try to collect the excess increments that had been mistakenly given to the appellant and that too ten years after his retirement. The recovery notice from 1997 against the appellant as well as the order made by the Kerala Chief Minister's Public Redressal Complaint Cell in 2000 were both overturned.