One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.

Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.

Mr. X was employed with XYZ Tech Ltd in the IT sector and resigned in November to join ABC Solutions Pvt Ltd. Due to a system error, XYZ Tech Ltd continued Mr. X in their payroll system and mistakenly credited an additional month’s salary to his account after his last working day. Being honest, Mr. X immediately informed the HR team about this overpayment through email and received acknowledgment that they would investigate and resolve the matter. However, months passed and despite the overpayment being in their favor, the company refused to release his final settlement, including pending salary, leave encashment, and other statutory dues. The company claimed they would adjust the overpayment against his final settlement but failed to provide any written calculation or release the remaining amount. This created significant financial hardship for Mr. X as his new employer was awaiting the experience certificate and final settlement details.

Advice in Such Cases

Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation to come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Send a formal legal notice demanding immediate release of final settlement with detailed calculation. Document all communications through emails and maintain records of your employment tenure. File a complaint with the labor commissioner if the company continues to delay. Consider approaching the appropriate labor court for recovery of dues with interest and compensation for mental harassment.

Applicable Sections of Law

Under the Bharatiya Nyaya Sanhita (BNS), Section 316 deals with criminal breach of trust when an employer wrongfully withholds employee dues. Section 351 covers wrongful restraint of funds legally due to an individual. The Bharatiya Nagarik Suraksha Sanhita (BNSS) provides procedures for filing complaints in such matters. Additionally, the Payment of Wages Act, 1936, mandates employers to clear final settlements within prescribed time limits, and violation constitutes an offense under labor laws with penalties and interest liability.

If You Are the Complainant

• Gather all employment documents including appointment letter, salary slips, and resignation acceptance
• Maintain detailed records of the overpayment incident and your communication acknowledging the error
• Calculate exact dues including salary, leave encashment, bonus, and statutory deductions
• Send formal demand notice through registered post with acknowledgment due
• File complaint with labor commissioner within prescribed limitation period if settlement is not provided

If You Are the Victim

• Document your honest disclosure of the overpayment error as evidence of your integrity and good faith
• Prepare a detailed statement of your final settlement calculations and pending dues
• Collect evidence of financial hardship caused by delayed settlement including loan applications or financial constraints
• Secure witness statements from colleagues who can verify your employment tenure and the overpayment incident
• Maintain records of follow-up communications and the company’s failure to respond appropriately

How the Police Behave in Such Cases

Police typically treat employment disputes as civil matters initially and may refer you to labor authorities. However, if criminal breach of trust or fraud elements are established, they will register an FIR under relevant BNS sections. They usually require substantial documentation and evidence of deliberate withholding of dues with intent to cause wrongful loss. Police investigation may include verification of employment records, bank statements showing overpayment, and communication evidence between parties.

FAQs People Normally Have

Can I file a criminal case for withheld final settlement? Yes, if there’s evidence of deliberate withholding with fraudulent intent, it constitutes criminal breach of trust under BNS Section 316.

What if the company claims to adjust overpayment against final settlement? They must provide detailed written calculations and release any remaining balance immediately. Unilateral adjustment without consent is improper.

How long can a company legally hold final settlement? Under the Payment of Wages Act, final settlement should be released within 2 months of resignation or as per employment contract terms.

Can I claim interest on delayed settlement? Yes, labor courts typically award interest on delayed payments along with compensation for harassment and legal costs.

What Evidence Is Required?

• Employment contract, appointment letter, and resignation acceptance letter
• Salary slips, bank statements showing regular salary credits and the overpayment
• Email communications acknowledging the overpayment error and company’s response
• Detailed calculation of final settlement dues including leave encashment and bonus
• Follow-up correspondence and company’s failure to respond or release dues
• Bank account details showing financial transactions during employment period
• Witness statements from HR personnel or colleagues familiar with the situation

How Long Will the Investigation Take?

Labor commissioner proceedings typically take 3-6 months for resolution depending on case complexity and company cooperation. If the matter proceeds to labor court, it may extend to 1-2 years. Criminal proceedings under BNS, if filed, generally take 1-3 years for completion. However, interim relief for immediate settlement release can be sought during proceedings to address urgent financial needs.

Advocate Sudhir Rao, Supreme Court of India