The Karnataka High Court has ruled in favour of a retired employee in a dispute over salary paid in excess because of an error by the employer, holding that such an amount cannot ordinarily be recovered from the employee when there is no fraud or misrepresentation involved.
The case concerned ₹2,81,887 that Bangalore Electricity Supply Company Limited (Bescom) had recovered from the pension of a retired assistant lineman.
Dispute Arose Over an Old Pay-Scale Error
The matter was brought before the court by Manjunath N, who retired from service on April 30, 2025. The disputed amount related to an increment that had been granted around 15 years earlier.
Manjunath challenged the recovery, arguing that the additional payment had resulted from an error on the employer's side rather than from any misleading information or wrongdoing on his part.
The case was heard by Justice M Nagaprasanna.
Court Examines Employee's Role in the Excess Payment
The High Court noted that an employee should not be made responsible for an excess payment merely because the employer later discovers an error in calculating salary or allowances.
The court's reasoning focused on whether the employee had obtained the additional amount through fraud or deliberate misrepresentation. In the present case, there was no such allegation against Manjunath.
Bescom also acknowledged that recovery from a retired employee would not be justified in circumstances where the excess payment was not caused by fraud or misrepresentation.
Supreme Court Precedent Considered
While deciding the matter, the Karnataka High Court referred to a 2025 Supreme Court decision in Jogeswar Sahoo vs District Judge, Cuttack.
The principle considered by the High Court covers situations where an employer applies an incorrect method while determining an employee's pay or allowances, or relies on an interpretation of a rule that is subsequently found to be incorrect.
Where the employee has not contributed to the mistake through fraud or misrepresentation, recovery of the excess amount can face legal restrictions.
Bescom Directed to Return ₹2.81 Lakh With Interest
The High Court found no allegation that Manjunath had secured the additional payment through fraudulent conduct or by providing false information.
Consequently, the court held that the amount taken from his pension could not be retained by Bescom. The company was directed to return ₹2,81,887 along with applicable interest within eight weeks.
The decision highlights an important distinction in service-related disputes: an excess payment resulting from an employer's administrative or calculation error is different from an overpayment obtained because of an employee's intentional wrongdoing.
For organisations handling employee compensation and financial records, accurate Internal Audit Services can help identify discrepancies and strengthen financial controls before such issues develop into larger disputes.