If An Employee Is Exonerated In Disciplinary Proceedings, Interest Ought To Be Provided On Delayed Payment Of Retirement Benefits: Bombay HC

Bombay High Court: A division bench consisting of Justices Ravindra Ghuge and Ashwin Bhobe allowed a writ petition that was filed by a widow asking for interest on the delayed payment of retirement benefits to her late husband. The court ruled that when an employee is acquitted or exonerated in disciplinary proceedings, the retirement benefits ought to be paid along with interest from the date of retirement. Further, the court rejected the argument that there was no liability to pay interest. The court held that even if the proceedings are abated, interest ought to be paid. Background Shanmugam Pillay was hired by the Pune Cantonment Board in 1970, and was promoted to Chief Revenue Superintendent in 2004. However, just 10 days before retirement, he was suspended from service. Four days after his retirement, the Board issued a charge memo and initiated an inquiry. The inquiry concluded in 2008, and resulted in a major penalty of removal from service. Additionally, this was applied retrospectively from 22 January 2007. Aggrieved, Pillay filed an appeal under the Cantonment Fund Servant Rules, 1937 (“1937 Rules”). However, his appeal was dismissed by the Appellate Authority. He then filed a revision application, but passed away in 2022 before the case was resolved. Post his death, on 9 May 2023, the Reviewing Authority set aside the order suspending Pillay "on account of procedural irregularities". Following this, the Cantonment Board made pension payments of Rs. 19,095 per month to Pillay's widow, Maheshwari Shanmugam Pillay. Mrs. Pillay then filed a writ petition seeking interest on these delayed payments. She argued that since her husband was ultimately exonerated, she must be paid interest on all due retirement benefits. Arguments Representing Mrs. Pillay, Mr. Bhaskar Reddy argued that since the suspension order was set aside due to procedural irregularities, and the proceedings were finally abated, Pillay must be given all retirement benefits from his date of superannuation. Thus, he argued, that Mrs. Pillay was entitled to claim interest for the delayed payment. Further, Mr. Reddy argued that since the suspension order was set aside and Mr. Pillay was finally exonerated, Mr. Pillay was entitled to full pay and related allowances even during his suspension period. Lastly, Mr. Reddy pointed out that the charge memo was served and proceedings were initiated after Mr. Pilay's retirement. He argued that the disciplinary proceedings were illegal and without jurisdiction, as the 1937 Rules do not allow disciplinary proceedings to commence after an employee's retirement. Representing the Cantonment Board, Mr. Tushad Kaklia argued that the penalty order was only set aside because of procedural reasons and not on merits. Thus, considering that the board had already released the requisite benefits after the 9 May 2023 order, Mrs. Pillay was not entitled to any interest or additional amounts. Court's Reasoning Firstly, the court noted that the previous suspension order was set aside "on account of procedural irregularities". The court explained that this meant Pillay would be treated as being retired on 31 January 2007 with a clean slate. Thus, the court held that he was entitled to all retirement benefits as from that date. Secondly, the court rejected the argument that there was no liability to pay interest since the proceedings were abated. The court noted that the final order that set aside the suspension order was decisive. It explained that merely pointing out that the earlier proceedings were abated, is not sufficient to deny interest on delayed payments. Thirdly, the court observed that the proceedings were initiated and the charge memo was served only after Mr. Pillay's retirement. Citing Union of India v. K.V. Jankiraman (Supreme Court, Civil Appeal Nos. 3019, 3020 of 1987 and 3016 of 1988), the court held that department proceedings are only considered initiated when a charge sheet is issued, and not when a show cause notice is issued. The court noted that no provision in the 1937 Rules allowed the Board to initiate and continue proceedings after the retirement of the employee. The court considered this another reason to hold that Mr. Pillay was wrongfully denied his retirement benefits when he retired. Fourthly, the court held that since Mr. Pillay was finally exonerated, the period of his suspension should be considered as duty time, thereby entitling him to full pay for that period. The court directed this amount to be paid within 2 weeks with 6% interest, until actual payment. Regarding gratuity, the court ordered the board to pay any outstanding amount within two weeks with 10% interest. Thus, the court allowed the writ petition, and directed the payment of interest at 6% per annum on the pension amount, and 10% interest on delayed gratuity payment. Decided on: 17-04-2025 Neutral Citation:...

If An Employee Is Exonerated In Disciplinary Proceedings, Interest Ought To Be Provided On Delayed Payment Of Retirement Benefits: Bombay HC

Pranav Kumar

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Pranav Kumar

If An Employee Is Exonerated In Disciplinary Proceedings, Interest Ought To Be Provided On Delayed Payment Of Retirement Benefits: Bombay HC

Pranav Kumar

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Pranav Kumar

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