The Supreme Court has ruled that excess salary paid by mistake can be recovered from employees if they had given a written undertaking to refund such payments. This decision came in a case involving teachers of the National Institute of Technology (NIT), Calicut, who had received Academic Grade Pay benefits in 2009 but later had them withdrawn in 2010 after it was found they did not meet the required service conditions.
Initially, a Single Judge of the Kerala High Court supported the teachers, but a Division Bench reversed that ruling in 2015. The teachers then approached the Supreme Court, arguing that recovery was unfair since they had not misrepresented or committed fraud. They relied on earlier judgments that protected employees from recovery in cases where it would be harsh or inequitable.
The Supreme Court, however, referred to precedents that established recovery is valid even without misrepresentation, as long as the payment was made without legal authority. The Court highlighted the principle of unjust enrichment under Section 72 of the Indian Contract Act, which requires repayment of money received by mistake. It also noted that the teachers had signed undertakings agreeing to refund excess payments if errors were found in pay fixation.
The bench concluded that the benefits were wrongly extended, corrected promptly, and recovery was justified. The Court dismissed the teachers’ plea and upheld the Kerala High Court Division Bench’s order.
For HR leaders, this ruling reinforces the importance of clear undertakings in pay and benefits administration. If employees have agreed in writing to refund excess payments, organisations are legally entitled to recover them. It underscores the need for accurate pay fixation and transparent communication to avoid disputes.