No Recovery of Excess Salary or allowances at the time of retirement or after Retirement: Madhya Pradesh Full Bench Clarifies the Law on Undertakings, Pension and Pay Refixation
Recovery of excess salary paid to a Government employee has been a recurring source of litigation. The controversy becomes particularly serious when the mistake is entirely that of the Government, the employee has not committed fraud or misrepresentation, the excess payment has continued for several years, and recovery is initiated only when the employee is about to retire or has already retired.
The Full Bench of the Madhya Pradesh High Court has now provided an important framework on this issue in State of Madhya Pradesh & Others v. Jagdish Prasad Dubey & Another, Writ Appeal No. 815 of 2017 and connected matters, decided on 6 March 2024.
The Bench comprised Chief Justice Ravi Malimath, Justice Vishal Mishra and Justice Pramod Kumar Agrawal. The judgment arose because different Division Benches of the Madhya Pradesh High Court had taken different views regarding recovery of excess pay where an employee had furnished an undertaking or indemnity bond.
The judgment is particularly relevant to retired Government employees, pensioners, Class III/ministerial employees and employees whose pay was refixed several years before retirement.
The Santosh Kawde connection
Among the connected matters was Santosh Kawde v. State of Madhya Pradesh & Others, W.P. No.16967/2019.
Santosh Kawde was a retired LDC/Sahayak Upnirikshak. His case was specifically included among the connected writ petitions before the Full Bench.
His individual case subsequently received a separate order from the Madhya Pradesh High Court on 26 July 2024. The authorities had ordered recovery of approximately ₹22,70,485 along with interest after his retirement. The High Court directed him to make a representation, required the authorities to decide it in light of the Full Bench judgment, and quashed the earlier recovery/pay-revision orders. It further directed that if the petitioner was ultimately found not liable for recovery, the recovered amount should be refunded with 6% interest.
Thus, Santosh Kawde’s case is significant because it demonstrates how the Full Bench principles were subsequently applied to an actual post-retirement recovery dispute.
Why was the Full Bench constituted?
The controversy arose because two lines of decisions had developed.
On one side was the Supreme Court’s decision in High Court of Punjab & Haryana v. Jagdev Singh, AIR 2016 SC 3523, where recovery was permitted because the employee had furnished an undertaking while opting for the revised pay scale.
On the other side were decisions of Division Benches of the Madhya Pradesh High Court, particularly State of M.P. v. Madan Lal Bardele and State of M.P. v. Chandrashwar Prasad Singh, where recovery was disallowed in circumstances involving excess payment and undertakings.
The Division Bench therefore referred the matter to a larger Bench. The questions included whether recovery could be made from salary or pension on the basis of an undertaking, whether Rule 65 of the M.P. Civil Services (Pension) Rules, 1976 authorised such recovery, and whether an undertaking imposed as a condition for obtaining the benefit of pay revision was actually voluntary.
The basic facts behind the reference
The original reference concerned a retired Upper Division Teacher.
His pay had been refixed and he was subsequently found to have received an excess payment of ₹62,501. The Government sought to recover the amount along with interest, making the total recovery approximately ₹1,80,142. Importantly, the employee had furnished an indemnity bond stating that any excess payment could be recovered from his retiral dues.
The Single Judge had nevertheless quashed the recovery by relying upon State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334.
The State appealed, This produced the conflict between Rafiq Masih and Jagdev Singh, ultimately resulting in the Full Bench reference.
What exactly did the Full Bench decide?
The Full Bench answered three principal questions.
1. Can recovery be made on the basis of an undertaking or indemnity bond?
Yes, but only in appropriate circumstances.
The Full Bench held that recovery can be made from salary or pensionary benefits where the employee had given an undertaking or indemnity bond before the benefit of pay refixation was granted. But this is not an unrestricted power. The Court specifically held that the question of hardship must be considered and that the principles in Rafiq Masih regarding the permissible time period must also be followed. Most importantly, the Court drew a distinction between:
(i) An undertaking given at the time of obtaining the pay benefit
and (ii) An undertaking obtained at the time of retirement merely to release retiral benefits.
The first can, in appropriate circumstances, support recovery. The second cannot be used to revive a recovery claim relating to a pay refixation made decades earlier. This distinction is extremely important for pension cases.
2. Does Rule 65 of the M.P. Pension Rules permit recovery after retirement? The answer is not automatically. Similarly para 93, 95 and 96 Army Pension Regulations, Part II (2008) and Navy (Pension) Regulations and Air Force Pension Regulations. In para military forces like BSF, CRPF, CISF, ITBP, SSB, Coast Guard and Assam Rifles, the CCS (Pension) Rules, 2021 are relevant.
Rule 65 deals with recovery and adjustment of Government dues from a retiring Government servant. The Court emphasised the difference between: a retiring Government servant, and a retired Government servant.
The language of Rule 65 refers to a retiring employee. The Court relied upon the earlier decision in Vijay Shankar Trivedi v. State of Madhya Pradesh, 2018 (3) MPLJ 453, which had held that Rule 65 did not contemplate recovery proceedings against an already retired employee merely by treating him as a continuing “retiring Government servant.” The Full Bench therefore held that Rules 65 and 66 must be followed strictly.
It concluded that recovery may be made under Rules 65 and 66 only where the procedure prescribed under Chapter VIII of the Rules has been followed.
However, Rule 65 cannot be used to recover an amount relating to a pay revision that had been granted much earlier merely because the employee has reached retirement.
3. Is an undertaking given by an employee really voluntary?
This is perhaps the most interesting part of the judgment. The State argued that an employee who signs an undertaking should be bound by it. The Full Bench rejected the proposition that every undertaking is necessarily voluntary. The Court examined the Finance Department Circular dated 22 July 2017. According to the judgment, the circular made the furnishing of an undertaking a condition for receiving the benefit of pay refixation.
In simple words:
If the employee had no real choice, give the undertaking or lose the financial benefit, he undertaking cannot automatically be treated as a voluntary contractual promise.
The Court therefore applied the principle laid down in Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, (1986) 3 SCC 156. The Full Bench held that a compulsory undertaking cannot be used as the foundation for recovery. However, where an employee genuinely and voluntarily gives an undertaking at the time of receiving the benefit, the legal position can be different.
Rafiq Masih remains important
The judgment did not discard State of Punjab v. Rafiq Masih (White Washer). Instead, the Full Bench harmonised Rafiq Masih with Jagdev Singh. The Supreme Court in Rafiq Masih identified situations where recovery would be inequitable or excessively harsh, including cases involving retired employees, employees close to retirement and other situations where recovery would cause undue hardship. The Full Bench noted that Jagdev Singh did not completely destroy the principles of Rafiq Masih.
Jagdev Singh dealt with a situation where the employee had been clearly placed on notice at the time of receiving the revised benefit and had furnished an undertaking. The Full Bench therefore treated the undertaking in Jagdev Singh as an important factual distinction rather than as a blanket rule permitting every recovery.
What about Chandi Prasad Uniyal?
The State relied heavily upon Chandi Prasad Uniyal v. State of Uttarakhand, (2012) 8 SCC 417. That judgment contains the general principle that excess public money paid without authority of law cannot ordinarily be retained merely because the employee was not responsible for the mistake. But the Full Bench examined this principle alongside the later decisions dealing with hardship and equitable relief.
The judgment referred to Col. B.J. Akkara, Syed Abdul Qadir, Rafiq Masih and other cases, recognising that courts have restrained recovery where recovery would cause serious hardship even though the employee technically received excess payment.
Therefore, the correct legal position cannot be reduced to: “Government money was wrongly paid, therefore recovery must always follow.” The surrounding circumstances matter.
Disclaimer: This article is a general overview of the statutory framework as it stands in August 2026 and does not constitute legal advice.
Authored by Ajit Kakkar, Advocate, Ajit Kakkar & Associates, New Delhi, practising in service law and military law before the Supreme Court, various High courts, the Central Administrative Tribunal and Armed Forces Tribunal.