Jogeswar Sahoo Vs The District Judge, Cuttack - It is not reflected in the record that such payment was made to the appellants on account of any fraud or misrepresentation by them. It seems, when the financial benefit was extended to the appellants by the District Judge, Cuttack, the same was subsequently not approved by the High Court which resulted in the subsequent order of recovery.

SCI (2025.04.04)  in Jogeswar Sahoo Vs The District Judge, Cuttack . [2025 INSC 449, 2025 SCO.LR 4(1)[5]] held that;-.

• 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.

• (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.”

• It is not reflected in the record that such payment was made to the appellants on account of any fraud or misrepresentation by them. It seems, when the financial benefit was extended to the appellants by the District Judge, Cuttack, the same was subsequently not approved by the High Court which resulted in the subsequent order of recovery.

Excerpts of the Order;

Leave granted.

# 2. This appeal is directed against the final judgment and order dated 09.11.2023 passed by the High Court of Orissa at Cuttack in WP (C) No. 33482 of 2023 whereunder the High Cout dismissed the appellants’ writ petition in which a challenge was made to the orders dated 12.09.2023 and 08.09.2023 passed by the Special Judge, Special Court, Cuttack and Registrar, Civil Courts, Cuttack, as the case may be, directing recovery of Rs 26,034/-, Rs.40713/-, Rs. 26539/-, Rs. 24683/- and Rs. 21,485/-.

# 3. At the relevant time, the appellants were working as Stenographer Grade-I and Personal Assistant in the establishment of District Judiciary, Cuttack, Orissa. They were granted financial benefit for a sum of Rs 26,034/-, Rs. 40713/-, Rs. 26539/-, Rs. 24683/- and Rs. 21,485/- by way of credit to their account vide Office Order No. 63 dated 10.05.2017 passed by the District Judge, Cuttack granting promotion/appointment retrospectively w.e.f 01.04.2003 consequent upon upgradation of the Stenographers in three grades such as Stenographer Grade-I, Stenographer Grade-II and Stenographer Grade-III by relying upon the recommendations of the respondent no. 1 in compliance towards the implementation of the report of the Shetty Commission.

# 4. After grant of such financial benefit, in the year 2017, the appellants have superannuated from their respective posts sometimes in the year 2020. After three years of their retirement and six years of granting the financial benefit, respondent no. 1 ordered for recovery of the said amount on the ground that extension of benefit of Shetty Commission’s recommendations to the appellants were on an erroneous interpretation of such recommendations, therefore, the financial benefit granted to them is liable to be recovered and under orders dated 12.09.2023 and 08.09.2023, the appellants were directed to deposit the excess drawn arrears. Since the orders were passed without affording any opportunity of hearing to the appellants, they preferred a writ petition before the High Court which came to be dismissed under the impugned judgment and order.

# 5. Learned counsel appearing for the appellants argued that the appellants were granted financial benefit without there being any fraud or misrepresentation by them, therefore, recovery of the amount after three years of their retirement is illegal and arbitrary. It is argued that the High Court has failed to consider the settled legal position in catena of decisions of this Court wherein such recovery from a low paid employee after retirement have been held bad in law.

# 6. Per contra, learned counsel appearing for the respondents would support the impugned judgment on submission that the appellants were not entitled to the financial benefit extended to them and the order passed by the District Judge, Cuttack was affirmed by the High Court of Orissa in exercise of an administrative power, therefore, the recovery is justified. It is also argued that such financial benefit upon retrospective promotion was granted with the condition that excess amount, if any, paid shall be refunded by the appellants and the appellants have furnished their respective undertakings to the said effect, therefore, they are estopped from challenging the recovery.

# 7. The issue falling for our consideration is not about the legality of the retrospective promotion and the financial benefit granted to the appellants on 10.05.2017. The issue for consideration is whether recovery of the amount extended to the appellants while they were in service is justified after their retirement and that too without affording any opportunity of hearing.

# 8. The law in this regard has been settled by this Court in catena of judgments rendered time and again; Sahib Ram vs. State of Haryana,1 Shyam Babu Verma vs. Union of India,2 Union of India vs. M. Bhaskar3 and V. Gangaram vs. Regional Jt. Director4 and in a recent decision in the matter of Thomas Daniel vs. State of Kerala & Ors.5

# 9. This Court has consistently taken the view that if the excess amount was not paid on account of any misrepresentation or fraud on the part 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 payments of emoluments or allowances are not recoverable. It is held that such relief against the recovery is not because of any right of the employee but in equity, exercising judicial discretion to provide relief to the employee from the hardship that will be caused if the recovery is ordered.

# 10. In Thomas Daniel (supra), this Court has held thus in paras 10, 11, 12 and 13:

• “10. In Sahib Ram v. State of Haryana 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 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 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 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 (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 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 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. 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 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 v. State of Bihar excess payment was sought to be recovered which was made 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 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:

• “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 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 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 v. Rafiq Masih (White Washer) 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 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.

• Xxxxxxxxx

• 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.

• (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.”

# 11. In the case at hand, the appellants were working on the post of Stenographers when the subject illegal payment was made to them. It is not reflected in the record that such payment was made to the appellants on account of any fraud or misrepresentation by them. It seems, when the financial benefit was extended to the appellants by the District Judge, Cuttack, the same was subsequently not approved by the High Court which resulted in the subsequent order of recovery. It is also not in dispute that the payment was made in the year 2017 whereas the recovery was directed in the year 2023. However, in the meanwhile, the appellants have retired in the year 2020. It is also an admitted position that the appellants were not afforded any opportunity of hearing before issuing the order of recovery. The appellants having superannuated on a ministerial post of Stenographer were admittedly not holding any gazetted post as such applying the principle enunciated by this Court in the above quoted judgment, the recovery is found unsustainable.

# 12. For the aforestated, we are of the considered view that the appeal deserves to be allowed. Accordingly, we allow the appeal and set aside the order of the High Court and in consequence the orders dated 12.09.2023 and 08.09.2023 by which the appellants were directed to deposit the excess drawn arrears are set aside.

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1. (1995) Supp (1) SCC 18 [↩]

2. (1994) 2 SCC 521 [↩]

3. (1996) 4 SCC 416 [↩]

4. (1997) 6 SCC 139 [↩]

5. (2022) SCC online SC 536 [↩]

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Vijay Kumar Vs. Central Bank of India & Ors - There is no cavil that pension is not a discretion of the employer but a valuable right to property and can be denied only through authority of law. When an authority is vested with the discretion to grant pension less than full pension admissible under the Pension Regulations, all procedural safeguards in favour of the employee including prior consultation must be strictly followed.

 Supreme Court (2025.07.15) in Vijay Kumar Vs. Central Bank of India & Ors [2025 INSC 848, Civil Appeal No. Of 2025 (Arising out of SLP (C) No.________of 2025 (@ D No. 39502/2024)] held that;

• # 17. There is no cavil that pension is not a discretion of the employer but a valuable right to property and can be denied only through authority of law. When an authority is vested with the discretion to grant pension less than full pension admissible under the Pension Regulations, all procedural safeguards in favour of the employee including prior consultation must be strictly followed.

Excerpts of the order;:.

# 1. Delay condoned. Leave granted.

# 2. Appeal is directed against judgment dated 22.04.2024 passed by the Patna High Court to the extent the Court upheld reduction of onethird of the pension payable to the appellant

under the Central Bank of India (Employees’) Pension Regulations, 1995 [Hereinafter, Pension Regulations.].

# 3. Appellant while working as Chief Manager, a scale IV officer in the respondent No.1bank was served with a Memorandum of   Charge alleging that, during his tenure as Branch Manager, Dhanbad Branch he sanctioned loans in respect of 12 accounts, inter alia, without proper appraisal of income, nonverification of KYC compliance, without postsanction inspection etc. exposing the bank to potential financial loss of huge amount.

# 4. A.K. Roy, Assistant General Manager (a scale V officer) was appointed as the Inquiry Authority (IA). During the inquiry, appellant attained superannuation on 30.11.2014 but the enquiry was continued under Regulation 20(3)(iii) of Central Bank of India (Officers’) Service Regulations, 1979. He submitted inquiry report holding the appellant failed to discharge his duties with utmost integrity and honesty which was unbecoming of a Bank officer and exposed the Bank to huge financial loss for his pecuniary gain. Inquiry report was served on the appellant, and he replied to it. After considering his reply disciplinary authority i.e., Deputy General Manager (a scale VI officer) upheld the findings of the inquiry officer and imposed major penalty of compulsory retirement under Rule 4 (h) of Central Bank of India Officer Employees’ (Discipline and  Appeal) Regulations, 1976 with effect from date of superannuation. Appellant submitted an appeal before appellate authority i.e., Field General Manager (a scale VII officer).

# 5. During pendency of the appeal, Regional Manager, Purnea, a scale IV officer, i.e., equivalent to scale of the appellant, on 05.08.2015 recommended minimum payable pension under compulsory retirement i.e., twothird pension to the appellant. Field General Manager by order dated 07.08.2015 concurred with the Regional Manager and recommended award of twothird compulsory retirement pension. Thereafter, on 30.12.2015 the said Field General Manager as the appellate authority dismissed the appellant’s appeal and upheld the penalty imposed on the latter.

# 6. The appellant initially approached the High Court challenging validity of Regulation 20(3)(iii) of Service Regulations which enabled the Bank to continue disciplinary proceedings even after superannuation and for setting aside the order of compulsory retirement including disbursal of full retiral  benefits but subsequently he restricted his challenge only to disbursal of full retiral benefits.

# 7. During hearing High Court was informed while the Bank had not passed any order forfeiting gratuity, it had taken decision to award twothirds of the pension payable to the appellant. In these circumstances, High Court while directing release of gratuity upheld the decision of the Bank to reduce one-third of the pension payable to the appellant.

# 8. Being aggrieved by the reduction of onethird pension, appellant has approached this Court. Bank has contested the appellant’s plea and produced additional documents, namely, recommendation letter of Regional Manager, Purnea for grant of minimum pension and the sanction letter of such pension by Field General Manager awarding twothird pension to the appellant.

# 9. Mr. Neeraj Shekhar contended pension is not a bounty and appellant’s right to pension is constitutionally protected under Article 300A. Such right could not be taken away save and except by a clear prescription of law. High Court erred in holding that a compulsorily retired employee is not entitled to pension at all unless an order under regulation 33(1) of the Pension Regulations is passed. Regulation 33 (1) and (2) must be harmoniously construed to mean in cases where penalty of compulsory retirement is imposed, such employee has a right to receive pension not less than twothird of the full pension and such deduction can be made only after prior consultation with the Board of Directors.

# 10. Per contra, Mr. Dhruv Mehta, learned Senior Counsel submitted a plain reading of regulation 33 (1) and (2) would show the clauses are mutually exclusive and operate in different circumstances which do not overlap each other. As per clause (1), an authority higher than the authority competent to impose compulsory retirement penalty may grant pension at a rate not less than twothird whereas clause (2) permits the competent authority awarding compulsory retirement to award less than full pension in exercise of its original, appellate or reviewing powers. Only in the latter case consultation with Board of Directors is necessary. As the pension was reduced by the Field General Manager, a scale VII officer who is an authority higher in rank than the disciplinary authority, a scale VI officer no prior consultation was necessary, and the impugned decision did not call for interference.

# 11. The controversy centres around interpretation of regulation 33 of the Pension Regulations which provides for compulsory retirement pension as follows: “

• 33. Compulsory Retirement Pension 

• 1. An employee compulsorily retired from service as a penalty on or after 1st day of November, 1993 in terms of Central Bank of India Officer Employees' (Discipline and Appeal) Regulations, 1976 or awards/settlements may be granted by the authority higher than the authority competent to impose such penalty, pension at a rate not less than twothirds and not more than full pension admissible to him on the date of his compulsory retirement if otherwise he was entitled to such pension on superannuation on that date.

• 2. Whenever in the case of a bank employee the Competent Authority passes an order (whether original, appellate or in exercise of power of review) awarding a pension less than the full compensation pension admissible under these regulations, the Board of Directors shall be consulted before such order is passed.

• 3. A pension granted or awarded under clause (1) or, as the case may be, under clause (2), shall not be less than the amount of rupees three hundred and seventyfive per mensem.”

# 12. Clause (1) provides for granting pension at a rate not less than twothird and not more than full pension by an authority higher than the authority competent to impose penalty of compulsory retirement. Clause (2) enjoins whenever a competent authority passes an order awarding pension less than full compensation pension in exercise of original, appellate or review powers, Board of Directors must be consulted before such order is passed. In no case the pension awarded shall be less than Rs.375/per mensem.

# 13. ‘Competent Authority’ is defined in both Discipline and Appeal Regulations and Pension Regulations as an authority appointed by the Board for the purpose of such regulations. In the Discipline and Appeal Regulations, it is further clarified Competent Authority must be superior to the delinquent and not an officer holding rank lower than scale IV officer. Clause 3(b) of Discipline and Appeal Regulations read with Schedule shows that an officer not below rank of Assistant General Manager and holding a rank higher than the disciplinary authority is the appellate authority under such regulation. A combined reading of the provisions in both the regulations would indicate a Field General Manager (holding a rank superior to disciplinary authority and higher than Assistant General Manager) is not only an authority superior to the disciplinary authority empowered to reduce pension under clause (1) but also the appellate authority under Discipline and Appeal Regulations who could exercise appellate powers to reduce pension under clause (2) of Pension Regulations.

# 14. The bank would argue as pension was reduced under regulation 33(1) by Field General Manager as an authority superior to disciplinary authority competent to impose penalty, no prior consultation with Board was necessary, unlike cases where Competent Authority i.e., disciplinary authority while awarding compulsory retirement directs pension less than full compensation pension. 

# 15. Such argument is fallacious for following reasons. Clause (2) permits the Competent Authority to award pension in exercise of not only original but also appellate or reviewing powers. If the expression ‘Competent Authority’ in clause (2) is restricted to disciplinary authority alone, reduction of pension in exercise of appellate or review power would become nugatory. Any interpretation which renders words or expressions in a statute otiose ought to be eschewed. [Rao Shiv Bahadur Singh v. State of Uttar Pradesh, (1953) 2 SCC 111.]

# 16. Given this situation to accept the bank’s interpretation that the two clauses ought to be read independent of one another would give rise to a piquant situation where the self  same authority, i.e., Field General Manager reducing pension under clause (1) would not require prior consultation with the Board which is mandatory while exercising similar power

under clause (2). To avoid this anomaly whenever a superior authority reducing pension under regulation 33(1) is also appellate authority or reviewing authority who is empowered to exercise power under clause (2), the requirement of prior consultation with the Board must be held to be mandatory, failing which requirement of such prior consultation may be circumvented by the bank to the prejudice of the employee.

# 17. There is no cavil that pension is not a discretion of the employer but a valuable right to property and can be denied only through authority of law. When an authority is vested with the discretion to grant pension less than full pension admissible under the Pension Regulations, all procedural safeguards in favour of the employee including prior consultation must be strictly followed.

# 18. High Court failed to read the regulation in its proper perspective and went a step ahead to hold that a compulsorily retired employee would not be entitled to any pension unless an order is passed under regulation 33 (1). A combined reading of the clauses in regulation 33 clearly indicates that the pension payable to an employee who has been compulsorily retired as a penalty shall not be less than twothird of his full pension or Rs. 375 per mensem, whichever is higher. The word ‘may’ occurring in clause (1) does not give discretion to superior authority to award pension less than twothird of the full pension. High

Court misinterpreted the word ‘may’ in the clause to hold that grant of pension is discretionary. The word ‘may’ must be read in its proper context, that is to say, it was used in the regulation not to vest discretion in the superior authority to grant pension less than twothird of full pension payable but to clarify that the aforesaid clause will not entitle a compulsorily retired employee to pension if he is not otherwise entitled to such pension on superannuation on that day. For example, if an employee is compulsorily retired without completing ‘qualifying service’ making him eligible to pension under the regulations. 19. In fine, we hold clause (1) and clause (2) of regulation 33 must be read conjointly and in all cases when the full pension admissible to a compulsorily retired employee under the regulations is reduced, a prior consultation with the Board is necessary.

# 20. It would be argued the Field General Manager’s order to reduce pension may be placed before the Board for expost facto approval. Whether ‘prior consultation’ is mandatory or a post facto approval would suffice would depend on various factors including nature of consultation, status of the authority consulted, and the rights affected by the decision.

# 21. A plain reading of regulation 33 would show award of pension less than full pension is to be done with prior consultation of the Board of Directors. Such prior consultation with the highest authority of the Bank i.e., Board of Directors must be understood as a valuable mandatory safeguard before an employee’s constitutional right to pension is curtailed. In these circumstances, a post facto approval cannot be a substitute of prior consultation with the Board before the decision is made. Reference may be made to Indian Administrative Service (S.C.S.) Association, U.P. & Ors. vs. Union of India & Ors. [ (1993) Supp (1) SCC 730.] wherein the parameters to decide whether prior consultation is mandatory or directory have been succinctly elucidated:

• “26. The result of the above discussion leads to the following conclusions:

• (1) Consultation is a process which requires meeting of minds between the parties involved in the process of consultation on the material facts and points involved to evolve a correct or at least satisfactory solution. There should be meeting of minds between the proposer and the persons to be consulted on the subject of consultation. There must be definite facts which constitute the foundation and source for final decision. The object of the consultation is to render consultation meaningful to serve the intended purpose. Prior consultation in that behalf is mandatory. 

• (2) When the offending action affects fundamental rights or to effectuate builtin insulation, as fair procedure, consultation is mandatory and nonconsultation renders the action ultra vires or invalid or void.

• (3) When the opinion or advice binds the proposer, consultation is mandatory and its infraction renders the action or order illegal.

• (4) When the opinion or advice or view does not bind the person or authority, any action or decision taken contrary to the advice is not illegal, nor becomes void.

• (5) When the object of the consultation is only to apprise of the proposed action and when the opinion or advice is not binding on the authorities or person and is not bound to be accepted, the prior consultation is only directory. The authority proposing to take action should make known the general scheme or outlines of the actions proposed to be taken be put to notice of the authority or the persons to be consulted; have the views or objections, take them into consideration, and thereafter, the authority or person would be entitled or has/have authority to pass appropriate orders or take decision thereon. In such circumstances it amounts to an action “after consultation”.

• (6) No hard and fast rule could be laid, no useful purpose would be served by formulating words or definitions nor would it be appropriate to lay down the manner in which consultation must take place. It is for the Court to determine in each case in the light of its facts and circumstances whether the action is “after consultation”; “was in fact consulted” or was it a “sufficient consultation”.

• (7) Where any action is legislative in character, the consultation envisages like one under Section 3(1) of the Act, that the Central Government is to intimate to the State Governments concerned of the proposed action in general outlines and on receiving the objections or suggestions, the Central Government or Legislature is free to evolve its policy decision, make appropriate legislation with necessary additions or modification or omit the proposed one in draft bill or rules. The revised draft bill or rules, amendments or additions in the altered or modified form need not again be communicated to all the concerned State Governments nor have prior fresh consultation. Rules or Regulations being legislative in character, would tacitly receive the approval of the State Governments through the people's representatives when laid on the floor of each House of Parliament. The Act or the Rule made at the final shape is not rendered void or ultra vires or invalid for nonconsultation.”

# 22. Mr. Mehta finally in a last bid endeavour requested us to invoke powers under Article 142 to do complete justice and endorse the decision of the reduction of pension in the present case. 

# 23. Though it is claimed that the delinquent acts of the appellant had caused an approximate loss to the tune of Rs. 3.26 crores to the bank, no evidence relating to the computation of such loss was either considered by the disciplinary authority or by the appellate authority. Further, no opportunity of hearing was given by the authorities prior to reducing his pension. No exceptional case to exercise our extraordinary powers under Article 142 is made out. 

# 24. Accordingly, we allow the appeal and set aside the order of the High Court and order of the Field General Manager dated 07.08.2015 reducing pension without prior consultation of the Board of Directors. It shall be open to the Bank to take appropriate decision regarding reduction of pension after giving an opportunity of hearing to the appellant and with prior consultation of the Board within two months from the date of this judgment failing which the appellant shall be entitled to full pension from the date of superannuation.

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State of Punjab and others etc. Vs. Rafiq Masih (White Washer) etc. - Recoveries by the employers, would be impermissible in law . . .(ii) Recovery from retired employees, or employees who are due to retire within one year, of the order of recovery.

 SCI (2025.10.01) in State of Punjab and others etc. Vs. Rafiq Masih (White Washer) etc.   [CIVIL APPEAL NO. 11527 OF 2014 (Arising out of SLP(C) No.11684 of 2012)] laid down guidelines for recovery of excess payments made to employees/retirees;

# 12. 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 herein above, we may, as a ready reference, summarise the following few situations, wherein recoveries by the employers, would be impermissible in law: 

• (i) Recovery from employees belonging to Class-III and Class-IV service (or Group ‘C’ and Group ‘D’ service).

• (ii) Recovery from retired employees, or employees who are due to retire within one year, of the order of recovery.

• (iii) Recovery from 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.

Excerpts of the Orders,

# 1. Leave granted.

# 2. All the private respondents in the present bunch of cases, were given monetary benefits, which were in excess of their entitlement. These benefits flowed to them, consequent upon a mistake committed by the concerned competent authority, in determining the emoluments payable to them. The mistake could have occurred on account of a variety of reasons; including the grant of a status, which the concerned employee was not entitled to; or payment of salary in a higher scale, than in consonance of the right of the concerned employee; or because of a wrongful fixation of salary of the employee, consequent upon the upward revision of pay scales; or for having been granted allowances, for which the concerned employee was not authorized. The long and short of the matter is, that all the private respondents were beneficiaries of a mistake committed by the employer, and on account of the said unintentional mistake, employees were in receipt of monetary benefits, beyond their due.

# 3. Another essential factual component in this bunch of cases is, that the respondent-employees were not guilty of furnishing any incorrect information, which had led the concerned competent authority, to commit the mistake of making the higher payment to the employees. The payment of higher dues to the private respondents, in all these cases, was not on account of any misrepresentation made by them, nor was it on account of any fraud committed by them. Any participation of the private respondents, in the mistake committed by the employer, in extending the undeserved monetary benefits to the respondent-employees, is totally ruled out. It would therefore not be incorrect to record, that the private respondents, were as innocent as their employers, in the wrongful determination of their inflated emoluments.

# 4. The issue that we have been required to adjudicate is, whether all the private respondents, against whom an order of recovery (of the excess amount) has been made, should be exempted in law, from the reimbursement of the same to the employer. For the applicability of the instant order, and the conclusions recorded by us hereinafter, the ingredients depicted in the foregoing two paragraphs are essentially indispensable.

# 5. Merely on account of the fact, that the release of these monetary benefits was based on a mistaken belief at the hands of the employer, and further, because the employees had no role in the determination of the employer, could it be legally feasible, for the private respondents to assert, that they should be exempted from refunding the excess amount received by them? Insofar as the above issue is concerned, it is necessary to keep in mind, that the following reference was made by a Division Bench of two Judges of this Court, for consideration by a larger Bench: 

• "In view of an apparent difference of views expressed on the one hand in Shyam Babu Verma and Ors. vs. Union of India & Ors. (1994) 2 SCC 521 and Sahib Ram Verma vs. State of Haryana (1995) Supp. 1 SCC 18; and on the other hand in Chandi Prasad Uniyal and Ors. vs. State of Uttarakhand & Ors. (2012) 8 SCC 417, we are of the view that the remaining special leave petitions should be placed before a Bench of Three Judges. The Registry is accordingly directed to place the file of the remaining special leave petitions before the Hon'ble the Chief Justice of India for taking instructions for the constitution of a Bench of three Judges, to adjudicate upon the present controversy." (emphasis is ours)

The aforesaid reference was answered by a Division Bench of three Judges on 8.7.2014. While disposing of the reference, the three-Judge Division Bench, recorded the following observations in paragraph 7:

• “7. In our considered view, the observations made by the Court not to recover the excess amount paid to the appellant-therein were in exercise of its extra-ordinary powers under Article 142 of the Constitution of India which vest the power in this Court to pass equitable orders in the ends of justice.” (emphasis is ours)

Having recorded the above observations, the reference was answered as under:

• “12. Therefore, in our opinion, the decisions of the Court based on different scales of Article 136 and Article 142 of the Constitution of India cannot be best weighed on the same grounds of reasoning and thus in view of the aforesaid discussion, there is no conflict in the views expressed in the first two judgments and the latter judgment.

• 13. In that view of the above, we are of the considered opinion that reference was unnecessary. Therefore, without answering the reference, we send back the matters to the Division Bench for its appropriate disposal.” (emphasis is ours)

# 6. In view of the conclusions extracted hereinabove, it will be our endeavour, to lay 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. In our considered view, the instant benefit cannot extend to an employee merely on account of the fact, that he was not an accessory to the mistake committed by the employer; or merely because the employee did not furnish any factually incorrect information, on the basis whereof the employer committed the mistake of paying the employee more than what

was rightfully due to him; or for that matter, merely because the excessive payment was made to the employee, in absence of any fraud or misrepresentation at the behest of the employee.

# 7. Having examined a number of judgments rendered by this Court, we are of the view, that orders passed by the employer seeking recovery of monetary benefits wrongly extended to employees, can only be interfered with, in cases where such recovery would result in a hardship of a nature, which would far outweigh, the equitable balance of the employer’s right to recover. In other words, interference would be called for, only in such cases where, it would be iniquitous to recover the payment made. In order to ascertain the parameters of the above consideration, and the test to be applied, reference needs to be made to situations when this Court exempted employees from such recovery, even in exercise of its jurisdiction under Article 142 of the Constitution of India. Repeated exercise of such power, “for doing complete justice in any cause” would establish that the recovery being effected was iniquitous, and therefore, arbitrary. And accordingly, the interference at the hands of this Court. 

# 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 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.

# 9. The doctrine of equality is a dynamic and evolving concept having many dimensions. The embodiment of the doctrine of equality, can be found in Articles 14 to 18, contained in Part III of the Constitution of India, dealing with “Fundamental Rights”. These Articles of the Constitution, besides assuring equality before the law and equal protection of the laws; also disallow, discrimination with the object of achieving equality, in matters of employment; abolish untouchability, to upgrade the social status of an ostracized section of the society; and extinguish titles, to scale down the status of a section of the society, with such appellations. The embodiment of the doctrine of equality, can also be found in Articles 38, 39, 39A, 43 and 46 contained in Part IV of the Constitution of India, dealing with the “Directive Principles of State Policy”. These Articles of the Constitution of India contain a mandate to the State requiring it to assure a social order providing justice – social, economic and political, by inter alia minimizing monetary inequalities, and by securing the right to adequate means of livelihood, and by providing for adequate wages so as to ensure, an appropriate standard of life, and by promoting economic interests of the weaker sections.

# 10. In view of the afore-stated constitutional mandate, equity and good conscience, in the matter of livelihood of the people of this country, has to be the basis of all governmental actions. An action of the State, ordering a recovery from an employee, would be in order, so long as it is not rendered iniquitous to the extent, that the action of recovery would be more unfair, more wrongful, more improper, and more unwarranted, than the corresponding right of the employer, to recover the amount. Or in other words, till such time as the recovery would have a harsh and arbitrary effect on the employee, it would be permissible in law. Orders passed in given situations repeatedly, even in exercise of the power vested in this Court under Article 142 of the Constitution of India, will disclose the parameters of the realm of an action of recovery (of an excess amount paid to an employee) which would breach the obligations of the State, to citizens of this country, and render the action arbitrary, and therefore, violative of the mandate contained in Article 14 of the Constitution of India.

# 11. For the above determination, we shall refer to some precedents of this Court wherein the question of recovery of the excess amount paid to employees, came up for consideration, and this Court disallowed the same. These are situations, in which High Courts all over the country, repeatedly and regularly set aside orders of recovery made on the expressed parameters.

(i). Reference may first of all be made to the decision in Syed Abdul Qadir v. State of Bihar, (2009) 3 SCC 475, wherein this Court recorded the following observation in paragraph 58:

• “58. The relief against recovery is granted by courts not because of any right in the employees, but in equity, exercising judicial discretion to relieve the employees from the hardship that will be caused if recovery is ordered. But, if in a given case, it is proved that the employee had knowledge that the payment received was in excess of what was due or wrongly paid, or in cases where the error is detected or corrected within a short time of wrong payment, the matter being in the realm of judicial discretion, courts may, on the facts and circumstances of any particular case, order for recovery of the amount paid in excess. See 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. Ganga Ram v. Director, (1997) 6 SCC 139, Col. B.J. Akkara (Retd.) v. Govt. of India, (2006) 11 SCC 709, Purshottam Lal Das v. State of Bihar, (2006) 11 SCC 492, Punjab National Bank v. Manjeet Singh, (2006) 8 SCC 647 and Bihar SEB v. Bijay Bahadur, (2000) 10 SCC 99.” (emphasis is ours)

First and foremost, it is pertinent to note, that this Court in its judgment in Syed Abdul Qadir’s case (supra) recognized, that the issue of recovery revolved on the action being iniquitous. Dealing with the subject of the action being iniquitous, it was sought to be concluded, that when the excess unauthorised payment is detected within a short period of time, it would be open for the employer to recover the same. Conversely, if the payment had been made for a long duration of time, it would be iniquitousto make any recovery. Interference because an action is iniquitous, must really be perceived as, interference because the action is arbitrary. All arbitrary actions are truly, actions in violation of Article 14 of the Constitution of India. The logic of the action in the instant situation, is iniquitous, or arbitrary, or violative of Article 14 of the Constitution of India, because it would be almost impossible for an employee to bear the financial burden, of a refund of payment received wrongfully for a long span of time. It is apparent, that a government employee is primarily dependent on his wages, and if a deduction is to be made from his/her wages, it should not be a deduction which would make it difficult for the employee to provide for the needs of his family. Besides food, clothing and shelter, an employee has to cater, not only to the education needs of those dependent upon him, but also their medical requirements, and a variety of sundry expenses. Based on the above consideration, we are of the view, that if the mistake of making a wrongful payment is detected within five years, it would be open to the employer to recover the same. However, if the payment is made for a period in excess of five years, even though it would be open to the employer to correct the mistake, it would be extremely iniquitous and arbitrary to seek a refund of the payments mistakenly made to the employee. In this context, reference may also be made to the decision rendered by this Court in Shyam Babu Verma v. Union of India (1994) 2 SCC 521, wherein this Court observed as under:

• “11. Although we have held that the petitioners were entitled only to the pay scale of Rs 330-480 in terms of the recommendations of the Third Pay Commission w.e.f. January 1, 1973 and only after the period of 10 years, they became entitled to the pay scale of Rs 330- 560 but as they have received the scale of Rs 330-560 since 1973 due to no fault of theirs and that scale is being reduced in the year 1984 with effect from January 1, 1973, it shall only be just and proper not to recover any excess amount which has already been paid to them. Accordingly, we direct that no steps should be taken to recover or to adjust any excess amount paid to the petitioners due to the fault of the respondents, the petitioners being in no way responsible for the same.” (emphasis is ours)

It is apparent, that in Shyam Babu Verma’s case (supra), the higher payscale commenced to be paid erroneously in 1973. The same was sought to be recovered in 1984, i.e., after a period of 11 years. In the aforesaid circumstances, this Court felt that the recovery after several years of the implementation of the pay-scale would not be just and proper. We therefore hereby hold, recovery of excess payments discovered after five years would be iniquitous and arbitrary, and as such, violative of Article 14 of the Constitution of India.

(ii). Examining a similar proposition, this Court in Col. B.J. Akkara v. Government of India, (2006) 11 SCC 709, observed as under:

• “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.” (emphasis is ours)

A perusal of the aforesaid observations made by this Court in Col. B.J. Akkara’s case (supra) reveals a reiteration of the legal position recorded in the earlier judgments rendered by this Court, inasmuch as, it was again affirmed, that the right to recover would be sustainable so long as the same was not iniquitous or arbitrary. In the observation extracted above, this Court also recorded, that recovery from employees in lower rung of service, would result in extreme hardship to them. The apparent explanation for the aforesaid conclusion is, that employees in lower rung of service would spend their entire earnings in the upkeep and welfare of their family, and if such excess payment is allowed to be recovered from them, it would cause them far more hardship, than the reciprocal gains to the employer. We are therefore satisfied in concluding, that such recovery from employees belonging to the lower rungs (i.e., Class-III and Class-IV - sometimes denoted as Group ‘C’ and Group ‘D’) of service, should not be subjected to the ordeal of any recovery, even though they were beneficiaries of receiving higher emoluments, than were due to them. Such recovery would be iniquitous and arbitrary and therefore would also breach the mandate contained in Article 14 of the Constitution of India.

(iii). This Court in Syed Abdul Qadir v. State of Bihar (supra) held as follows:

• “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 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 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.” (emphasis is ours)

Premised on the legal proposition considered above, namely, whether on the touchstone of equity and arbitrariness, the extract of the judgment reproduced above, culls out yet another consideration, which would make the process of recovery iniquitous and arbitrary. It is apparent from the conclusions drawn in Syed Abdul Qadir’s case (supra), that recovery of excess payments, made from employees who have retired from service, or are close to their retirement, would entail extremely harsh consequences outweighing the monetary gains by the employer. It cannot be forgotten, that a retired employee or an employee about to retire, is a class apart from those who have sufficient service to their credit, before their retirement. Needless to mention, that at retirement, an employee is past his youth, his needs are far in excess of what they were when he was younger. Despite that, his earnings have substantially dwindled (or would substantially be reduced on his retirement). Keeping the aforesaid circumstances in mind, we are satisfied that recovery would be iniquitous and arbitrary, if it is sought to be made after the date of retirement, or soon before retirement. A period within one year from the date of superannuation, in our considered view, should be accepted as the period during which the recovery should be treated as iniquitous. Therefore, it would be justified to treat an order of recovery, on account of wrongful payment made to an employee, as arbitrary, if the recovery is sought to be made after the employee’s retirement, or within one year of the date of his retirement on superannuation.

(iv). Last of all, reference may be made to the decision in Sahib Ram Verma v. Union of India, (1995) Supp. 1 SCC 18, wherein it was concluded as under:

• “4. Mr. Prem Malhotra, learned counsel for the appellant, contended that the previous scale of Rs 220-550 to which the appellant was entitled became Rs 700-1600 since the appellant had been granted that scale of pay in relaxation of the educational qualification. The High Court was, therefore, not right in dismissing the writ petition. We do not find any force in this contention. It is seen that the Government in consultation with the University Grants Commission had revised the pay scale of a Librarian working in the colleges to Rs 700-1600 but they insisted upon the minimum educational qualification of first or second class M.A., M.Sc., M.Com. plus a first or second class B.Lib. Science or a Diploma in Library Science. The relaxation given was only as regards obtaining first or second class in the prescribed educational qualification but not relaxation in the educational qualification itself. 

• 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 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.” (emphasis is ours)

It would be pertinent to mention, that Librarians were equated with Lecturers, for the grant of the pay scale of Rs.700-1600. The above pay parity would extend to Librarians, subject to the condition that they possessed the prescribed minimum educational qualification (first or second class M.A., M.Sc., M.Com. plus a first or second class B.Lib. Science or a Diploma in Library Science, the degree of M.Lib. Science being a preferential qualification). For those Librarians appointed prior to 3.12.1972, the educational qualifications were relaxed. In Sahib Ram Verma’s case (supra), a mistake was committed by wrongly extending to the appellants the revised pay scale, by relaxing the prescribed educational qualifications, even though the concerned appellants were ineligible for the same. The concerned appellants were held not eligible for the higher scale, by applying the principle of “equal pay for equal work”. This Court, in the above circumstances, did not allow the recovery of the excess payment. This was apparently done because this Court felt that the employees were entitled to wages, for the post against which they had discharged their duties. In the above view of the matter, we are of the opinion, that it would be iniquitous and arbitrary for an employer to require an employee to refund the wages of a higher post, against which he had wrongfully been permitted to work, though he should have rightfully been required to work against an inferior post.

# 12. 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 herein above, we may, as a ready reference, summarise the following few situations, wherein recoveries by the employers, would be impermissible in law: 

• (i) Recovery from employees belonging to Class-III and Class-IV service (or Group ‘C’ and Group ‘D’ service).

• (ii) Recovery from retired employees, or employees who are due to retire within one year, of the order of recovery.

• (iii) Recovery from 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.

# 13. We are informed by the learned counsel representing the appellant- State of Punjab, that all the cases in this bunch of appeals, would undisputedly fall within the first four categories delineated hereinabove. In the appeals referred to above, therefore, the impugned orders passed by the High Court of Punjab and Haryana (quashing the order of recovery), shall be deemed to have been upheld, for the reasons recorded above.

# 14. The appeals are disposed of in the above terms.

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