The Patna High Court has reaffirmed a foundational principle in public employment law: an employer cannot recover excess salary paid to an employee over a period exceeding five years, even where the error originated from administrative misinterpretation of pay rules. This judgment reinforces the constitutional imperative of equity and protection against arbitrary state action in wage disputes.
Background & Facts
The Dispute
The respondent, Anil Kumar Sinha, was promoted to the post of Chief Loco Inspector-cum-Safety Counsellor with effect from 01.04.2004, and his pay was fixed at a higher scale incorporating Dearness Allowance (DA). He drew increments and benefits on this revised pay until September 2020, when his basic pay was unilaterally reduced from Rs. 99,800 to Rs. 86,100 without any prior adverse order. The employer later claimed that DA was not admissible upon promotion and that his pay had been incorrectly fixed since 2004, leading to an overpayment of Rs. 17,65,430.
Procedural History
The case progressed through multiple forums:
- 2020: Respondent discovered pay reduction and filed a representation.
- 2021: First Original Application (O.A.) dismissed as not pressed; second O.A. filed challenging recovery.
- 2021: CAT stayed recovery pending decision on representation.
- 2022: Employer issued a speaking order (18.02.2022) rejecting respondent’s objections and resuming recovery.
- 2023: Contempt petition filed for non-compliance with CAT’s stay order.
- 2025: CAT quashed all recovery orders (30.11.2018, 23.09.2021, 18.02.2022) and directed reasoned re-fixation within three months.
Relief Sought
The respondent sought restoration of his original pay scale of Rs. 99,800 with effect from October 2020 and refund of all amounts illegally recovered. He relied on the Supreme Court’s judgment in Rafiq Masih v. State of Punjab and Railway Board Circulars to argue that recovery after five years is impermissible.
The Legal Issue
The central question was whether recovery of excess salary paid over a period exceeding five years is lawful under Article 14 of the Constitution and the precedent in Rafiq Masih v. State of Punjab, even when the employee committed no fraud and the employer’s error was administrative.
Arguments Presented
For the Petitioner
The Union of India and Railway authorities argued that:
- The pay fixation was legally incorrect under Railway Rules, and correction is mandatory.
- Recovery is permitted under Rule 15(1)(2) & 4(i)(b) of the Railway Services (Pension) Rules, 1993.
- The respondent had over 5 years of service remaining at the time of recovery, so no hardship existed.
- Relied on Raj Kumar Batra v. State of Haryana and G. Srinivas v. Govt. of Andhra Pradesh to assert that errors in pay fixation can be rectified.
- Contended that Rafiq Masih does not apply because hardship was absent.
For the Respondent
The respondent argued that:
- The overpayment resulted from administrative error, not misrepresentation.
- The excess payment spanned 17 years (2004 - 2020), squarely falling within the five-year limit established in Rafiq Masih.
- The Railway Board’s own circular (RBE No. 72/2016) adopted the Rafiq Masih principle.
- Recovery would violate Article 14 by being arbitrary and disproportionate.
- Relied on Thomas Daniel v. State of Kerala and Syed Abdul Qadir v. State of Bihar to show that long-term reliance on erroneous pay is protected.
The Court's Analysis
The Court undertook a comprehensive review of the Supreme Court’s jurisprudence on excess payment recovery, emphasizing that the issue is not merely about statutory authority but about constitutional equity. It held that the doctrine of arbitrariness under Article 14 governs such recoveries, not merely procedural rules.
"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."
The Court found that the employer’s own circulars - RBE No. 72/2016 and the DoPT OM dated 02.03.2016 - explicitly adopted the Rafiq Masih framework, which prohibits recovery when excess payment has been made for more than five years. The respondent’s pay was erroneously fixed in 2004, and the recovery order was issued in 2021 - 17 years later. This placed the case squarely within paragraph 18(iii) of Rafiq Masih.
The Court rejected the petitioner’s argument that the respondent’s remaining service tenure negated hardship. It held that the five-year threshold is a bright-line rule designed to protect employees from financial shock due to long-standing administrative errors. The fact that the employee spent the excess amount in good faith, as confirmed by the absence of fraud or knowledge of error, further strengthened the equity-based protection.
The Court distinguished Jagdev Singh on the ground that the officer in that case had expressly agreed to refund excess payments - a condition absent here. It also noted that Chandi Prasad Uniyal, cited by the petitioner, had been expressly overruled by Rafiq Masih.
The Verdict
The respondent won. The Court upheld the CAT’s order quashing the recovery directives and held that recovery of excess salary paid for more than five years is impermissible under Article 14, even if the error was administrative and the employee had substantial service left. The Court dismissed the writ petition, affirming that the employer’s right to correct errors cannot override the constitutional protection against arbitrary financial hardship.
What This Means For Similar Cases
Recovery Is Time-Barred After Five Years
- Practitioners must now argue that any recovery initiated more than five years after the erroneous payment is void, regardless of the employee’s remaining service.
- Employers cannot circumvent this by delaying detection or issuing multiple notices.
- The five-year period runs from the date of the first erroneous payment, not from the date of discovery.
Circulars Adopting Supreme Court Rulings Are Binding
- Government circulars (like RBE No. 72/2016) that incorporate Supreme Court judgments become part of the legal framework.
- Employers cannot selectively apply such circulars; they must honor the full scope of the precedent.
- Violation of such circulars may constitute a breach of natural justice and Article 14.
No Recovery Against Lower-Rung Employees or Those Near Retirement
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Although not directly raised here, the judgment reaffirms the Rafiq Masih categories: recovery is impermissible for:
- Class III/IV employees
- Employees within one year of retirement
- Those who relied on erroneous pay for over five years
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Practitioners should raise these as cumulative grounds in any recovery challenge.
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Recovery orders issued without a speaking order or after prolonged delay are vulnerable to quashing.
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Employers must issue reasoned orders before recovery begins, and failure to do so renders the action procedurally defective.
