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Friday, November 25, 2016

In State of Kerala and others v. M. Padmanabhan Nair[1], this Court has held that pension and gratuity are no longer any bounty to be distributed by the Government to its employees on the retirement but are valuable rights in their hands, and any culpable delay in disbursement thereof must be visited with the penalty of payment of interest. at the rate of 8 % per annum -STATE OF UTTAR PRADESH AND 2 ORS. Vs. DHIRENDRA PAL SINGH - 2016 Nov.

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO. 10866 OF 2016
                (Arising out of S.L.P. (C) No. 33582 of 2016
                               (CC 18447/2016)

State of Uttar Pradesh and others               … Appellants


Dhirendra Pal Singh                                  …Respondent

                                  O R D E R

      Leave granted.

This appeal is directed against order dated 31.05.2016, passed by  the  High
Court of Judicature at Allahabad, in Special Appeal  Defective  No.  408  of
2016, whereby the intra-court  appeal  was  dismissed  affirming  the  order
dated 10.12.2015 passed by the learned single Judge in Writ-A No.  49921  of

Brief facts of  the  case  are  that  respondent  Dhirendra  Pal  Singh  was
Assistant Store Superintendent with the Irrigation Department of  the  State
of Uttar Pradesh.  He stood retired on 30.06.2009 on attaining  the  age  of
superannuation.  At the time of his retirement  GPF,  leave  encashment  and
70% of gratuity and pension were cleared, but rest of the  30%  of  gratuity
and computation of pension were held up.  The stand  of  the  appellants  is
that there were some  discrepancies  in  the  stock  in  the  store  of  the
department and some enquiries were going on as to loss caused to the  public
exchequer.  After  making  representations  when  the  remaining  amount  of
gratuity and pension was not cleared, the respondent filed  Civil  Suit  No.
338  of  2012.   However,  the  same  was  dismissed  as  withdrawn  as  the
appellants/State authorities, vide order dated 23.07.2015  finally,  on  the
basis of alleged discrepancies withheld the remaining part of  gratuity  and
pension of  the  respondent  and,  vide  order  dated  06.08.2015,  directed
recovery of Rs.7,26,589/-, from the retiral dues payable to the  respondent,
which was challenged in the writ petition.

There was no departmental  enquiry  initiated  against  the  respondent  and
after about  more  than  six  years  order  as  to  finally  withholding  of
remaining pension on the ground of alleged misconduct and the  recovery  was
directed to be made from the respondent  after  serving  a  notice  on  him.
Learned single Judge of the High Court found that the orders  challenged  in
the writ petition cannot be sustained in law as neither recourse of  Article
351-A of UP Civil Service Regulations was resorted to, nor any  departmental
enquiry was held.  Learned single Judge further directed that the  remaining
amount of gratuity and pension of the  respondent  shall  be  released  with
interest at the  rate  of  10%  p.a.  on  the  sum  withheld  by  the  State
authorities.  The Division Bench, in special  appeal  filed  by  the  State,
found no illegality in the order passed by the learned single Judge.

We have heard learned counsel for the appellants and the respondent.

Article 351-A of UP Civil Service Regulations reads as under: -

“351-A.     The Governor reserves to himself the  right  of  withholding  or
withdrawing a pension or any part  of  it,  whether  permanently  or  for  a
specified period and the right of ordering the recovery from  a  pension  of
the whole or part of  any  pecuniary  loss  caused  to  Government,  if  the
pensioner is found in departmental or  judicial  proceedings  to  have  been
guilty of grave misconduct, or to have caused pecuniary loss  to  Government
by misconduct or negligence, during his service, including service  rendered
on re-employment after retirement.

Provided that:

such departmental proceedings, if not instituted while the  officer  was  on
duty either before retirement or during re-employment –

Shall not be instituted with the sanction of the Governor,

shall be in respect of event which took  place  not  more  than  four  years
before the institution of such proceedings, and

shall be conducted by such authority and in such  place  or  places  as  the
Governor may direct and in  accordance  with  the  procedure  applicable  to
proceedings on which an order of dismissal from service may be made.

Judicial proceedings, if not  instituted  while  the  officer  was  on  duty
either  before  retirement  or  during  re-employment,   shall   have   been
instituted in accordance with sub-clause (ii) of clause (a), and

the Public Service Commission, U.P., shall be consulted before final  orders
are passed.

Explanation – For the purposes of this article –

departmental proceedings shall be deemed to have been  instituted  when  the
charges framed against the pensioner are issued to him, or, if  the  officer
has been placed under suspension from an earlier date, on such date; and

judicial proceedings shall be deemed to have been instituted:

in the case of criminal proceedings, on  the  date  on  which  complaint  is
made, or a charge-sheet is submitted, to a criminal court; and

in the case of civil proceedings,  on  the  date  on  which  the  plaint  is
presented or, as the case may be, an application is made to a civil court.”

Admittedly, no departmental  enquiry  was  initiated  in  the  present  case
against the respondent for the  misconduct,  if  any,  nor  any  proceedings
drawn as  provided  in  Article  351-A  of  UP  Civil  Service  Regulations.
Learned single Judge of the High Court has observed that the document  which
is the basis of enquiry and relied upon by the State  authorities,  copy  of
which was Annexure C.A.1 to counter affidavit filed in  the  writ  petition,
itself reflected that the document showing  discrepancy  in  the  stock  was
dated 26.12.2009, i.e. after about more than five months  of  retirement  of
the respondent.  In the circumstances, keeping in view Article 351-A  of  UP
Civil Service Regulations, we agree with the  High  Court  that  the  orders
dated 23.07.2015 and 06.08.2015 were liable  to  be  quashed  and,  to  that
extent, we decline to interfere with the impugned order.

Learned counsel for the appellants argued that the High Court has  erred  in
awarding interest at the rate of 10%  per  annum  on  the  sum  due  to  the
respondent.  In this connection, it is submitted that the suit was filed  by
the respondent only in 2012 and that too was withdrawn.

We have considered the submissions of learned  counsel  for  the  appellants
and reply given by learned counsel for the respondent.

In State of Kerala and others v. M.  Padmanabhan  Nair[1],  this  Court  has
held that pension and gratuity are no longer any bounty  to  be  distributed
by the Government to its  employees  on  the  retirement  but  are  valuable
rights in their hands, and any culpable delay in disbursement  thereof  must
be visited with the penalty of payment of interest.  In said case the  Court
approved 6% per annum interest on the  amount  of  pension  decreed  by  the
trial court and affirmed by the High Court.  As to the rate of  interest  on
amount of gratuity Section 7(3-A) of Payment of Gratuity Act,  1972,  it  is
provided that if the amount of gratuity payable is not paid by the  employer
within the period specified in sub-section  (3),  the  employer  shall  pay,
from the date on which gratuity becomes payable to the date on which  it  is
paid, simple interest at such rate, not exceeding the rate notified  by  the
Central Government from time to time for repayment of  long  term  deposits,
as that Government may by notification specify.  It  further  provides  that
no such interest shall be payable if the delay in  payment  is  due  to  the
fault of the employee, and the employer has obtained permission  in  writing
from the controlling authority for the delayed payment on this  ground.   In
the present case, there is no plea before us that the appellants had  sought
any permission in writing from the controlling authority.  As to  the  delay
on  the  part  of  employee,  it  has  come  on  the  record  that  he  made
representations, whereafter he filed a suit in respect  of  withheld  amount
of gratuity and pension.   In  Y.K.  Singla  v.  Punjab  National  Bank  and
others[2], this Court, after  discussing  the  issue  relating  to  interest
payable on the amount of  gratuity  not  paid  within  time,  directed  that
interest at the rate of 8%  per  annum  shall  be  paid  on  the  amount  of

In the light of  law  laid  down  by  this  Court,  as  above,  and  further
considering the facts and circumstances of the case, we modify the  impugned
order passed by the High Court in respect of interest directed  to  be  paid
on the amount  of  withheld  gratuity  and  pension.   We  direct  that  the
appellants shall pay interest at the rate of 6%  per  annum  on  the  unpaid
amount of pension from the date it had fallen due and interest at  the  rate
of 8% per  annum  on  the  unpaid  amount  of  gratuity  from  the  date  of
retirement of the employee.

With the modification, as above, in the impugned order passed  by  the  High
Court, this appeal stands disposed of.  No order as to costs.

                                                            [J. Chelameswar]


                                                          [Prafulla C. Pant]

New Delhi;

November 15, 2016.

[1]    (1985) 1 SCC 429

[2]    (2013) 3 SCC 472

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