Interest on delayed gratuity must follow Rule 45(A), not judicially enhanced rates.

The first respondent sought interest at 18% per annum on delayed payment of DCRG, commuted pension, PF, GPF and other retirement benefits for the period from 1 September 2007 to 4 June 2012, relying on Rule 45-A(1-A)(i)(a) of the Tamil Nadu Pension Rules, 1978.

The writ court granted interest at 12% per annum.

The State appealed against that order.

1. Whether the writ court could award interest at a rate different from that prescribed under Rule 45-A of the Tamil Nadu Pension Rules, 1978

2. Whether the first respondent was entitled to interest on delayed retirement benefits at the rate prescribed by Rule 45-A

Rule 45-A of the Tamil Nadu Pension Rules, 1978 governs interest on delayed payment of death-cum-retirement gratuity.

It prescribes the applicable rate and the period after which interest becomes payable; from 1 April 2004, the rate is linked to the interest payable on the General Provident Fund during the year of retirement, compounded annually.

The Court held that where the Rules prescribe the rate, courts should not award a higher or lower rate by exercising discretion, as the pension scheme must be applied uniformly and consistently.

The Court treated Rule 45-A as prescribing the governing rate and relevant delay period for the payment at issue.

It held that departing from the Rule by granting a discretionary rate would risk inconsistent treatment of pensioners and government employees.

Accordingly, the writ court’s 12% award could not stand independently of the rate prescribed by the Rule; the interest was instead to be calculated in accordance with Rule 45-A.

The order dated 20 June 2023 was modified, and the appellants were directed to pay the first respondent interest at the rate contemplated by Rule 45-A of the Tamil Nadu Pension Rules, 1978, within twelve weeks of receiving a copy of the judgment.

No costs were awarded, and the connected miscellaneous petition was closed.