No Employee, Including Retirees, Has Vested Right To Perpetually Reap Benefits Of Employer's Mistake Of Erroneous Payments: J&K HC

Background Facts

The respondents were Class-IV employees (equivalent to Central Government Class C & D employees) in the Jal Shakti Department of Jammu & Kashmir. They were granted the benefit of a higher pay scale during their service careers. This benefit was extended under SRO 59 of 1990. However, the SRO had already been withdrawn by the government with effect from 15.01.1996. Therefore, grant of the higher pay scale to the employees was an erroneous action by the petitioners.

The petitioners issued orders to recover the amounts overpaid and to correct the pay fixation upon discovery of mistake. The recovery was sought to be made from the respondents' pay. In cases of retired employees, from their pensionary benefits. Aggrieved, the respondents filed an Original Application before the Central Administrative Tribunal (CAT), Jammu Bench. The Tribunal allowed the employees' application. It quashed the recovery orders and directed the restoration of their original pay and pension. The Tribunal ordered the refund of any amounts already recovered.

Aggrieved by the same, the UT of J&K filed the writ petition before the High Court.

It was submitted by the petitioners that no employee is entitled to retain a benefit that was wrongfully extended to them during their service career. It was contended that the employer possesses the inherent right to correct such bona fide mistakes.

On the other hand, it was submitted by the respondents that it would be excessively harsh and inequitable for the petitioners to effect recoveries from their pay or pensionary benefits, after they had retired from service. It was further submitted by the respondents that since the mistake of granting higher pay scale was committed by the petitioners and not by the respondents and therefore, the benefit of such mistake should be allowed to be availed by the respondents.

Findings of the Court

It was observed by the court that the Tribunal was right in holding that effecting recoveries from retired Class-IV employees was impermissible in light of the law in State of Punjab vs. Rafiq Masih. It was further observed by the court that the Tribunal erred in directing the petitioners to restore the erroneously fixed pay and to calculate pension on that basis. It was observed that no employee, including one who has superannuated, possesses a vested right to perpetually reap the benefits of a mistake committed by the employer.

It was emphasized by the court that the recovery of past payments may be barred on equitable grounds, but this does not sanctify the initial error or entitle the employee to future benefits based on that incorrect premise. It was further held that an employer is fully entitled to correct a bona fide mistake in pay fixation. It was found by the court that the respondents' claim to continue availing the mistaken benefit was legally misconceived. Consequently, the relief against recovery was upheld. The petitioners were allowed to re-fix the pension based on the correct pay scale.

With the aforesaid observations, the writ petition filed by the petitioners was partially allowed. Further the order passed by the Tribunal was set aside to the extent of direction to restore the higher pay and compute pension thereon. It was directed that the amount already received by the respondents under the mistake shall not be recovered.

Case Name : Union Territory of J&K & Ors. vs. Abdul Rashid Malik & Ors.

Case No. : WP(C) No. 1201/2025

Counsel for the Appellants : Monika Kohli, Sr. AAG

Counsel for the Respondents : Navyug Sethi, Advocate