In a pivotal judgment reaffirming the principles of equity and fairness in service law, the Supreme Court of India has held that excess payments made to government employees without any misrepresentation or fraud on their part are not recoverable, especially when the recovery is initiated after retirement and without affording an opportunity of hearing.
The ruling came in Civil Appeal No. ___ of 2025, arising out of SLP (C) No. 5918 of 2024, titled Jogeswar Sahoo & Others vs. The District Judge, Cuttack & Others. The verdict was delivered on April 4, 2025 by a division bench comprising Justice Pamidighantam Sri Narasimha and Justice Prashant Kumar Mishra.
Background of the Case
The appellants, including Jogeswar Sahoo, were serving as Stenographer Grade-I and Personal Assistants in the District Judiciary, Cuttack, Odisha. In compliance with the Shetty Commission’s recommendations, they were granted retrospective promotions and corresponding financial benefits via Office Order No. 63 dated May 10, 2017, effective from April 1, 2003. The order upgraded their posts under a revised three-tier structure for stenographers.
Following this, the appellants continued in service and later retired around 2020. However, in September 2023, more than three years post-retirement, the District Judge and Registrar, Civil Courts, Cuttack issued orders seeking recovery of the financial benefits previously granted—amounts ranging from ₹21,485 to ₹40,713.
The reason cited for the recovery was an alleged erroneous interpretation of the Shetty Commission recommendations. The appellants challenged these recovery orders before the Orissa High Court in W.P. (C) No. 33482 of 2023, but their plea was dismissed on November 9, 2023, leading to the present appeal before the Supreme Court.
Legal Issues Considered
The Court examined the following critical issues:
- Whether recovery of excess payments made without any fault, fraud, or misrepresentation by the employee is legally sustainable?
- Whether such recovery can be initiated after retirement and without affording the employee a hearing?
- Whether an undertaking to refund excess amounts, if any, precludes the employee from challenging recovery later?
Arguments by the Parties
For the Appellants:
The appellants’ counsel contended that the financial benefits were granted by a competent authority in good faith and without any wrongdoing on the part of the appellants. They argued that:
- There was no misrepresentation or fraud committed by the employees.
- The benefits were granted pursuant to official restructuring recommendations.
- The High Court erred by ignoring the binding precedents of the Supreme Court, which bar recovery from retired or Class III employees under such circumstances.
- The recovery orders were passed without any prior notice or opportunity of hearing, violating the principles of natural justice.
For the Respondents:
The respondent authorities argued that:
- The appellants were not legally entitled to the benefits and had signed undertakings agreeing to refund any excess amounts.
- Since the High Court had not approved the retrospective promotions later, the benefits became invalid.
- Recovery is justified based on administrative correction and the terms of the undertaking.
Supreme Court’s Observations
The Supreme Court reversed the High Court’s decision and quashed the recovery orders, holding them illegal and unjust. The Court drew extensively from its previous rulings in:
- Sahib Ram v. State of Haryana (1995 Supp (1) SCC 18)
- Shyam Babu Verma v. Union of India (1994) 2 SCC 521
- Thomas Daniel v. State of Kerala (2022 SCC OnLine SC 536)
- State of Punjab v. Rafiq Masih (2015) 4 SCC 334
Citing the Rafiq Masih principles, the Court reiterated that:
“Recovery from the employees belonging to Class III and Class IV service (or Group C and Group D service)… or retired employees, is impermissible in law when the excess payment was made without their fault.”
On the issue of natural justice, the Court emphasized:
“The appellants were not afforded any opportunity of hearing before issuing the order of recovery… the recovery is found unsustainable.”
The bench observed that when employees receive financial benefits in good faith and rely on them, especially over several years, and later retire, it is inequitable to burden them with recovery:
“A government servant, particularly one in the lower rungs of service, would spend whatever emoluments he receives for the upkeep of his family… subsequent action to recover the excess payment will cause undue hardship.”
The Court held that undertakings taken from employees cannot override the principles of equity and fairness, particularly where the payment was not obtained fraudulently.
Final Decision
The Supreme Court allowed the appeal and passed the following directions:
- The High Court’s judgment dated November 9, 2023, in W.P. (C) No. 33482 of 2023 is set aside.
- The recovery orders dated September 8 and 12, 2023, passed by the Special Judge and Registrar, Civil Courts, Cuttack, are quashed.
- The appellants are not liable to refund the financial benefits granted to them in 2017.
Key Takeaway:
“Relief against recovery is not because of any legal right but in equity, exercising judicial discretion to protect employees from hardship.” — Supreme Court
