The Chhattisgarh High Court has affirmed that public employers may recover excess pay granted to serving employees due to non-compliance with mandatory service conditions, even after a prolonged period of payment, provided the employee is not nearing retirement and procedural fairness is maintained.
Background & Facts
The Dispute
The appellant, T.P. Gupta, was appointed as a Peon in 1985 and later promoted to Office Assistant Grade-III in 1990. In 1999, he received the first higher pay scale under a 1997 notification. In 2008, he was granted the second higher pay scale after the Departmental Promotion Committee approved his application, despite his disclosure that he had not completed mandatory accounts training. The governing circulars - dated 30.01.1989, 29.12.2003, and 11.01.1997 - explicitly required completion of accounts training and passing the associate examination as a precondition for higher pay scales. The 19.07.2005 circular further reinforced this condition.
Procedural History
- 2008: Appellant granted second higher pay scale without completing accounts training
- 2010: Promoted to Office Assistant Grade-II
- 2017: Applied for next higher pay scale; no decision issued
- 2023: Completed accounts training on third attempt after litigation delay
- 2024: Respondents initiated recovery of excess pay granted since 2008
- 2024: Writ petition filed challenging recovery; dismissed by Single Judge on 02.01.2026
- 2026: Writ appeal filed before Division Bench
Relief Sought
The appellant sought quashing of the recovery order, claiming estoppel, laches, and violation of Articles 14 and 16. He relied on State of Punjab v. Rafiq Masih to argue that recovery after 16 years was inequitable and barred by law.
The Legal Issue
The central question was whether recovery of excess pay granted due to non-compliance with mandatory service conditions is permissible after a delay of sixteen years when the employee is a serving officer not nearing retirement, and whether subsequent completion of the training condition can validate the earlier illegal grant.
Arguments Presented
For the Appellant
The appellant contended that recovery was barred by the Supreme Court’s ruling in State of Punjab v. Rafiq Masih, which prohibits recovery from employees where benefits have been paid for over five years and the employee is not at fault. He argued that he disclosed his incomplete training in 2008, yet the employer voluntarily granted the benefit, thereby creating an estoppel. He further asserted that the delay was due to external factors - health issues and pending litigation - and that his eventual completion of training in 2023 cured the defect. He also claimed discriminatory treatment, as similarly placed employees were not subjected to recovery.
For the Respondent
The respondents countered that the grant of higher pay scale in 2008 was in direct violation of binding circulars, and the appellant was fully aware of his ineligibility. They relied on Union of India v. N.M. Raut to argue that recovery is permissible from serving employees not retiring within one year, provided due process is followed. They emphasized that mere passage of time does not legalize an illegal benefit, and that the appellant’s concealment of material facts vitiated his claim to equity.
The Court's Analysis
The Court examined the interplay between Rafiq Masih and the more recent Union of India v. N.M. Raut. While Rafiq Masih prohibits recovery from retirees or those retiring within one year, N.M. Raut clarifies that recovery from serving employees is lawful if conducted with procedural fairness and proportionality. The Court held that the appellant, being a serving officer with a superannuation age of 62 and not due to retire within one year, fell squarely within the scope of N.M. Raut.
"The effect of concealment of fact is that it vitiates everything and equity is always granted to the person who comes to the court of law with clean hands."
The Court rejected the appellant’s argument that subsequent completion of training validated the earlier grant. It emphasized that service rules are not subject to retrospective validation and that no vested right arises from an illegal benefit. The Court also dismissed the claim of estoppel, noting that the employer’s error did not absolve the employee of his duty to comply with mandatory conditions. The appellant’s disclosure in 2008 did not negate his awareness of ineligibility; rather, it confirmed his knowledge of the rule violation.
The Court further upheld the Single Judge’s direction that recovery be made in proportionate monthly installments, finding this a balanced exercise of equitable discretion that protected both the public exchequer and the employee’s financial stability.
The Verdict
The appellant’s writ appeal was dismissed. The Court held that recovery of excess pay is permissible from serving employees after long delays if procedural fairness is observed, and that subsequent compliance with training requirements cannot retrospectively validate an illegal grant.
What This Means For Similar Cases
Recovery Is Not Barred by Delay Alone
- Practitioners must distinguish between retirees and serving employees when invoking Rafiq Masih
- Delay alone does not create a right to retain illegal benefits; the key is the employee’s status at the time of recovery
- Employers may initiate recovery even after 10 - 15 years if the employee is still in service and not near retirement
Disclosure Does Not Equal Consent
- Employees who disclose non-compliance but continue to draw benefits cannot claim estoppel or good faith
- The burden remains on the employee to fulfill mandatory conditions; employer’s oversight does not override statutory rules
- Any claim of ‘mistake’ by the employer must be weighed against the employee’s knowledge of the rule
Proportionality Is Mandatory
- Recovery orders must specify reasonable monthly installments to avoid undue hardship
- Interest cannot be charged unless explicitly permitted by rule
- Courts will intervene if recovery threatens basic livelihood, even if legally permissible
