Company Paid Ex-Employee by Mistake, Now Wants Repayment – What Legal Action Can Be Taken?

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User_debffbfa
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February 17, 2025 at 6:27 pm

My friend’s company mistakenly paid an ex-employee for 5 months after he left, due to a payroll error. The amount is between INR 80,000 and 1,00,000. The company is asking the ex-employee to return the money, but they are not asking for the PF, ESI, or other contributions. The ex-employee claims his father is in debt, so he is unable to repay the amount immediately.

The company has agreed to let him repay in 8 monthly installments, but they want him to sign an agreement and issue a post-dated cheque, which would only be cashed if he defaults on repayment. The agreement also mentions consequences under the Negotiable Instruments Act if the cheque bounces. The ex-employee is hesitant to sign this agreement, feeling it is too legal, but the company is willing to remove the fixed dates for payment, requiring only fixed monthly amounts.

The company is new, and i want to help my friend as much i can.

My questions are:

1) What legal actions can the company take if the ex-employee refuses to sign the agreement or defaults on repayment?

2) Is the ex-employee legally obligated to repay the amount, even though it was a payroll mistake?

3) Can the company still charge him legally or recover the money without a signed agreement from the ex-employee?

Any legal insights would be greatly appreciated. Thanks!

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