Employers must pay 6% interest on retirement benefits disbursed belatedly.

The petitioner, a Special Grade Driver, retired from the respondent Transport Corporation on 31 March 2024 after 31 years of service.

His terminal benefits were disbursed on 25 August 2025. After his representation seeking interest for the delay received no response, he filed a writ petition under Article 226 seeking interest at 6% per annum on the delayed payment of his retirement benefits.

The respondents reported that the benefits had been settled on 25 August 2025.

Whether the petitioner was entitled to interest on terminal benefits disbursed after his retirement.

If so, whether interest at 6% per annum should be paid, and for what period.

In S.K. Dua v. State of Haryana, (2008) 3 SCC 44, the Supreme Court held that an employee may claim interest on delayed retiral benefits under applicable statutory rules or administrative instructions and, even absent such provisions, may invoke Articles 14, 19 and 21 of the Constitution; retiral benefits are not a bounty.

The Court also relied on the Division Bench decision in W.A.(MD) No. 403 of 2010 and connected matters, which held that a Transport Corporation’s obligation to make prompt payment of retirement benefits entails payment of interest when settlement is delayed, and fixed the rate at 6% per annum.

The petitioner’s terminal benefits were paid nearly seventeen months after his retirement.

Applying S.K. Dua and the Division Bench ruling, the Court held that delayed settlement of retirement benefits warrants compensation by way of interest, notwithstanding the absence of a specific provision for interest in the relevant pension-fund rules. It therefore applied the 6% rate adopted by the Division Bench to the eligible benefits paid belatedly.

Payment was ordered within six months from receipt of a copy of the order; no costs were awarded.