Retiral dues cannot be withheld pending inquiry or no-dues certificates without statutory authority.

The petitioner, who retired on 30 April 1997 from a non-pensionable post in the Cooperative Banks Centralised Service, received his provident fund in July 1997, but his other retiral dues were withheld while Section 68 proceedings and the process of obtaining no-dues certificates from District Cooperative Banks were pending.

He was exonerated in the Section 68 proceedings on 20 March 2002; the outstanding certificates were issued in 2003 and 2004. Gratuity was paid in May 2004 after a deduction of Rs.55,639, leave encashment was paid in November 2005, and group insurance in August 2006. A further Rs.3,930.25 in leave encashment remained unpaid.

The petitioner sought payment of the outstanding dues, restoration of the deduction, and interest for delayed payment; he died during the writ petition, which was continued by his substituted legal heir.

1. Whether pending proceedings under Section 68 of the Uttar Pradesh Cooperative Societies Act, 1965, or the non-receipt of no-dues certificates justified withholding the petitioner’s retiral dues

2. Whether the deduction of Rs.55,639 from the petitioner’s gratuity could be sustained

3. Whether interest was payable on the delayed or unpaid amounts and, if so, at what rate

Section 68(1)–(2) of the Uttar Pradesh Cooperative Societies Act, 1965 permits inquiry into specified misconduct and a surcharge order after a reasonable opportunity of hearing; it does not, without an applicable rule or other legal authority, itself authorise automatic withholding of retiral benefits during a pending inquiry.

Under State of Jharkhand v. Jitendra Kumar Srivastava, pension, gratuity and leave encashment cannot be withheld or taken away without authority of law.

Gorakhpur University v. Dr Shitla Prasad Nagendra and Dr A. Selvaraj v. C.B.M. College establish that terminal benefits cannot be retained to secure disputed claims or because responsible authorities dispute liability; delayed payment may attract interest, leaving the authorities to resolve contribution between themselves.

State of Kerala v. M. Padmanabhan Nair and State of U.P. v. Dhirendra Pal Singh support interest as compensation for culpable delay, with the applicable rate depending on the circumstances.

The Reserve Bank directive of 2 November 1987, governing interest on bank deposits, did not apply to these retiral dues.

The petitioner was exonerated, and no evidence showed that he caused the delay or withheld documents; moreover, the record did not explain the substantial delay in obtaining certificates or settling the dues after his exoneration.

Since no legal provision authorising withholding was identified, the pending Section 68 proceedings and internal no-dues process could not suspend his entitlement.

The respondent authorities’ objection that the District Cooperative Banks were not parties did not defeat the claim against the authorities that calculated and paid the benefits; any reimbursement dispute was internal.

The Rs.55,639 deduction was unsupported by a disclosed determination, statutory basis, or opportunity to be heard, and therefore could not stand.

Given the lengthy delay and the cited precedents, 8% simple interest was appropriate on each principal amount from the date it became payable until principal payment. Interest accrued up to each principal payment would itself carry simple interest at 6% from that payment date until actual payment, without further interest on that 6% component.

The respondents were directed to calculate and pay the amounts due—including applicable interest and the admitted unpaid balance—to the substituted petitioner within eight weeks of service of a certified copy of the judgment. No order as to costs was made.