Suspended Employee Cleared After Retirement Date Gets 6% Interest On Delayed Earned, Unearned Leave And Commutation Benefits: Madras HC

In brief

The question

Whether an employee whose disciplinary proceedings conclude with the charges dropped is entitled to interest on delayed terminal benefits from the date of superannuation, notwithstanding that permission to retire was granted later.

The court held

The Court allowed the writ petition, set aside the impugned letter dated 18 June 2024, and directed the first respondent to pay interest at 6% per annum on the delayed Earned Leave, Unearned Leave for Private Affairs, and commutation, from the date of retirement until actual payment.

It also directed

Payment was directed within 12 weeks of receipt of the order; no costs were awarded.

01Facts

The petitioner was due to superannuate on 31 July 2018 but remained under suspension and was not permitted to retire while disciplinary proceedings were pending.

pp. 2–3 · ¶ 3

On 9 January 2023, the charge was dropped and she was permitted to retire retrospectively from 31 July 2018. Although her terminal benefits were subsequently settled, interest was paid only on gratuity and not on Earned Leave, Unearned Leave for Private Affairs, or commutation. The petitioner challenged the State’s letter dated 18 June 2024 declining interest on those benefits.

pp. 2–3 · ¶ 3

02Issues

i.Whether an employee whose disciplinary proceedings conclude with the charges dropped is entitled to interest on delayed terminal benefits from the date of superannuation, notwithstanding that permission to retire was granted later.

pp. 4, 7–8 · ¶ 6, 8

ii.Whether interest may be awarded on delayed leave-related benefits and commutation when statutory provisions provide for interest only on gratuity.

pp. 3–4 · ¶ 4, 6

03Law Applied

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

p. 4 · ¶ 6

The Division Bench in Government of Tamil Nadu v. M. Deivasigamani, W.A. No. 886 of 2007, dated 17 December 2008, applied that principle to allow interest on delayed retiral benefits where disciplinary proceedings ended in the employee’s favour, despite retirement being permitted later.

pp. 5–7 · ¶ 7–8

The judgment also referred to Dr. Uma Agarwal v. State of U.P., (1999) 3 SCC 438, for the principle that pension is a right and that delay in settling retiral benefits should be avoided.

p. 6 · ¶ 7

04Reasoning

The Court found that the petitioner’s disciplinary proceedings had concluded with the charge dropped and that she was permitted to retire retrospectively from her superannuation date.

pp. 7–8 · ¶ 8

Applying S.K. Dua and M. Deivasigamani, it held that the later formal permission to retire did not defeat her entitlement to interest for the delay in settling the other terminal benefits. The absence of a specific statutory provision requiring interest on those benefits was not, by itself, a bar to relief.

pp. 7–8 · ¶ 8