“Service Recovery Paradox” is a remarkable phenomenon that exists in customer service, whereby a customer’s loyalty and satisfaction towards the organization offering the service increases after the customer has faced a problem. The purpose of this research paper is threefold, first to analyze such situations and contexts which may lead to the formation and strengthening of a service recovery paradox. Secondly to identify the factors which are necessary for the existence of the not-so-evident service recovery paradox and thirdly to present a theoretical framework of factors and their interrelations. The study draws significantly from the relevant available literature and case-based experiences. Being descriptive in nature, the study proceeds by making use of qualitative inputs in identifying independent variables that may have an impact on the phenomena of the service recovery paradox (the dependent variable). The paper is targeted at both academia and industry. The academic intelligentsia may pick-up tenets for further insights into the less trodden path of service recovery. Industry practitioners may need to revisit the myth that a dissatisfied customer is a lost customer. He/she may be recovered and subsequently delighted, but a lot depends on the initial service encounter.