Administrative delay cannot defeat a retired employee’s entitlement to interest on lawful retiral dues.

The petitioner, an Assistant Engineer in the Water Resources Department, retired on 30 June 2017.

Following notification of the Madhya Pradesh Pay Revision Rules, 2017 with retrospective effect from 1 January 2016, he became entitled to revised-pay arrears of ₹2,02,397.

The amount was paid only in December 2018, without interest, after a delay of approximately 17 months.

The respondents attributed the delay to the petitioner’s late exercise of option, Treasury and Accounts Department processing, and non-reflection of the option in the IFMIS system; the petitioner disputed these explanations and asserted that the delay was administrative.

The respondents also deducted ₹1,500 from his retiral dues towards ten months’ special pay of ₹150 per month, alleging that the special pay had been wrongly granted and relying upon an undertaking furnished by the petitioner.

The petitioner contended that the special pay had been validly granted under the 1983 Pay Revision Rules and continued under subsequent rules, and that the deduction was made without notice or hearing.

Whether the petitioner was entitled to interest on the delayed payment of ₹2,02,397 towards revised-pay arrears, when the respondents attributed the delay to administrative processing and the petitioner’s alleged belated exercise of option.

Whether the respondents were legally justified in deducting ₹1,500 towards special pay from the petitioner’s retiral dues without establishing that the payment was contrary to the applicable rules and without prior notice or hearing.

Whether the petitioner was entitled to interest on any other retiral dues delayed for reasons attributable to the respondents.

Retiral dues and other amounts lawfully payable to a retired employee cannot be withheld for an unreasonable period, and interest may be awarded where the delay is attributable to the employer, as recognised in State of Kerala v. M. Padmanabhan Nair, (1985) 1 SCC 429, Vijay L. Mehrotra v. State of U.P., (2001) 9 SCC 687, and S.K. Dua v. State of Haryana, (2008) 3 SCC 44.

The Court also relied on Lakhanlal Borasi v. State of M.P., W.A. No. 1869 of 2018, for the principle that departmental delay in payment of retiral dues warrants interest.

Although the State may recover amounts paid without authority of law under Chandi Prasad Uniyal v. State of Uttarakhand, (2012) 8 SCC 417, recovery of excess payment may be impermissible in appropriate cases, particularly involving retired employees, under State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334.

An undertaking is a relevant consideration but does not, by itself, establish that the payment was legally recoverable; High Court of Punjab & Haryana v. Jagdev Singh, (2016) 14 SCC 267.

Where there is no fraud, misrepresentation, or concealment by the employee, recovery from retiral dues requires a clear legal basis and fair procedure.

The Court found that the petitioner was ultimately entitled to the revised-pay arrears and that the respondents had failed to establish that he was responsible for the delay.

Internal processing through the Treasury, Accounts Department, and IFMIS could not justify withholding money lawfully payable to a retired employee, particularly where the department had not shown any fault on the petitioner’s part.

The Court therefore held that the petitioner was entitled to 9% annual interest on ₹2,02,397 from the date on which the amount became payable until actual payment.

Regarding the ₹1,500 deduction, the respondents did not identify any specific rule discontinuing the special pay or establishing that the payment was contrary to law.

The petitioner had not obtained the benefit through fraud or misrepresentation, and the undertaking relied upon by the respondents could not independently convert a lawful payment into a recoverable excess payment.

The deduction from retiral dues was therefore unjustified.

The Court further held that any other retiral dues delayed without fault on the petitioner’s part would attract interest if the delay was attributable to the respondents.

The respondents were directed to pay 9% annual interest on ₹2,02,397 from the date it became payable under the Madhya Pradesh Pay Revision Rules, 2017 until actual payment; refund ₹1,500 deducted towards special pay, with 6% annual interest from the date of deduction until refund; and pay 6% annual interest on any other retiral dues delayed due to departmental fault.

The exercise was to be completed within eight weeks of production of a certified copy of the order.

Failure to comply within that period would attract further interest at 9% per annum on the outstanding amount from expiry of the eight-week period until actual payment.

No order as to costs.