Recovery From Employees by Employer : Supreme Court Issues Directions Governing Recovery

Recovery From Employees by Employer : Supreme Court Issues Directions Governing Recovery

Hon'ble Supreme Court is a constitutional authority ; its Orders are binding not only on Parliament, Cabinet, Ministers, Election Commission but on all other institutions which are operating within Indian soil. The law laid down by Hon'ble Supreme Court is binding on all under A.141 of Constitution of India ; there is no requirement of acceptance of such Judgments ; Judgments of Supreme Court are binding because of sovereign authority vested in it.

In an important Judgment, Supreme Court has explained law where payments have mistakenly been made by the employer, in excess of their entitlement. It was held that (1) Recovery from retired employees, or employees who are due to retire within one year, of the order of recovery or (2) Recovery from employees, when the excess payment has been made for a period in excess of five years, before the order of recovery is issued cannot be held permissible. Case reference is State of Punjab v. Rafiq Masih [2014] GCtR 6496 (SC).

It is a matter of common knowledge that no Act/Regulation can override Constitution ; no circular/notification can override any Act/Regulation/ Constitution. Recently in Madras Bar Association v. Union of India [2025] GCtR 1709 (SC) it has emerged that when Supreme Court has laid down law on an issue, then even Parliament cannot override it by passing a law, unless certain conditions are satisfied.

The question arises is this : If a Company headquartered in Mumbai says that it will continue with their recovery because the Company will follow its own Circular even if they are contrary to Judgments of Supreme Court, can such action be treated legal ?

A Company operating on Indian soil is a subject of Indian laws and Constitution. A Company operating on Indian soil cannot create its own laws when law has already been laid down by Hon'ble Supreme Court. It is clear that when a Supreme Court judgment is operating on any issue, acting in contravention on it is an act of contempt punishable under CoC Act, 1971. This is premised on the theory that acceptance of Judgments of Courts are not dependent on the choice of its subjects. Permitting such Mumbai-headquartered Companies to ignore judgments of Supreme Court will lead to anarchy and destructive of Constitution.