State cannot recover its dues from poor employees: Supreme Court

The Supreme Court has held that the government, which inadvertently pays more to its employees than the due amount, cannot recover the excess money if it causes hardships to certain classes.A bench of justices J S Khehar and Arun Mishra devised various categories of employees from whom the state cannot recover the excess amount as it would “result in a hardship of a nature, which would far outweigh, the equitable balance of the  employer’s right to recover.”“The right to recover being pursued by the employer, will have to be compared, with the effect of the recovery on the concerned employee. If the effect of the recovery from the concerned employee 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,” it said.

Referring to various judgements, it laid down the parameters of “fact situations, wherein employees, who are beneficiaries of wrongful monetary gains at the hands of the employer, may not be compelled to refund the same”.

It also said that the court can interfere the recovery proceedings if it causes hardship to the employees.  “The right to recover being pursued by the employer, will have to be compared, with the effect of the recovery on the concerned employee.  If the effect of the recovery from the concerned employee 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,” it said.

The bench said that recoveries cannot be made against employees belonging to Class-III and Class-IV service and from “retired employees, or employees who are due to retire within one year, of the order of recovery.”

The state can not recover its dues from “employees, when the excess payment has been made for a period in excess of five years, before the order of recovery is issued.”
The court also said that the state cannot start the recovery proceedings 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.

“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,” it said while rejecting the appeal of Punjab government filed against the order of the high court.

The Punjab and Haryana High Court had said that the state cannot seek benefits of its own wrong and recover the dues from poor employees who did not commit any mistake.