Notional interest on terminal benefits and family pension cannot be used to deny compassionate appointment, Delhi High Court rules

The appellant’s husband, Ashok Kumar, was employed as a Peon with Punjab and Sind Bank from 18 September 1995 until his death on 23 September 2022.

The appellant, his widow and sole surviving family member, received family pension of approximately ₹22,583 per month and ₹3,000 per month from the All India Punjab and Sind Bank Employees Welfare Society.

She applied for compassionate appointment on 15 February 2023; the application was rejected on 10 December 2023. She submitted a revised application on 30 December 2023 and surrendered her Welfare Society pension, refunding ₹42,000 received over fourteen months.

Pursuant to directions in an earlier writ petition, the Bank reconsidered her claim under the “PSB Jeevan Sahara” Scheme and rejected it on 10 September 2024.

It calculated her monthly family income at ₹33,422.37 by including family pension, Welfare Society pension, income from investments, and notional interest of ₹8,337.26 per month on terminal benefits of ₹15,04,468.05.

The computation exceeded 60% of the deceased employee’s last drawn net salary, namely ₹32,371.86. The learned Single Judge dismissed her challenge, leading to the present intra-court appeal.

Whether the Bank was justified in treating notional interest on the appellant’s terminal benefits as part of her monthly family income under Clause 5.1 of the Scheme?

Whether family pension and the pension received from the Welfare Society could be included as components of family income so as to disqualify the appellant from compassionate appointment?

Whether the appellant satisfied the indigence and income requirements under Clause 5.1(c) of the Scheme and was entitled to compassionate appointment?

Compassionate appointment is not a matter of right; it is an exception to the general rule of recruitment and must ordinarily be granted strictly in accordance with the employer’s governing scheme.

Under Clause 5.1(c) of the PSB Jeevan Sahara Scheme, a family of a deceased subordinate-cadre employee is considered indigent where its income, including notional income, is below 60% of the deceased employee’s last drawn net salary, or, where it exceeds 60%, is below ₹20,000 per month.

The expression “notional income” must be construed consistently with the humanitarian object of the scheme and may include income actually received or capable of being generated from assets actually held, but cannot include income notionally attributed to terminal-benefit funds which the family is not required to retain in an income-generating form.

Relying on Govind Prakash Verma v. Life Insurance Corporation of India, (2005) 10 SCC 289, and Canara Bank v. M. Mahesh Kumar, (2015) 7 SCC 412, the Court held that family pension and terminal benefits are not substitutes for compassionate employment and cannot, merely because they were received, constitute an automatic bar to such employment.

The principle that compassionate appointment must be assessed under the applicable scheme, relied upon by the Bank from Bank of Baroda v. Baljit Singh, AIR 2023 SC 3214, did not justify an unsupported computation of notional income.

The Court found that the Bank’s computation of ₹8,337.26 per month as notional interest was based on the assumption that the appellant had invested the entire net terminal-benefit corpus at an annual rate of 6.65%.

There was no evidence that she had made such an investment, nor did the Scheme require her to invest or preserve the terminal benefits throughout her lifetime.

Since the appellant was entitled to use the terminal benefits for her living needs, attributing hypothetical income to the entire corpus would effectively convert receipt of terminal benefits into a disqualification for compassionate appointment.

Excluding the notional interest reduced the computed income to ₹25,780.11, below 60% of the deceased employee’s last drawn net salary of ₹53,953.10, namely ₹32,371.86.

The Court further held that family pension and the Welfare Society pension were death-related service benefits and could not, merely by their receipt, operate as a substitute for or bar to compassionate appointment.

Consequently, the appellant fell within Clause 5.1(c)(i) of the Scheme.

The Court considered it unnecessary to decide whether surrender of the Welfare Society pension after the appointment application could establish eligibility.

The appeal was allowed; the Single Judge’s order dated 13 February 2025 and the Bank’s rejection order dated 10 September 2024 were quashed and set aside.

The Bank was directed to grant the appellant compassionate appointment within two months from the date of judgment.

All pending applications were disposed of, with no order as to costs.