The Supreme Court of India has ruled that an employer cannot withhold an employee’s pension, gratuity, and other retiral dues on the grounds that the employee has not vacated their government-allotted residence upon superannuation. A bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra dismissed an appeal filed by the Panchayat & Rural Development Department, Government of Madhya Pradesh, upholding the Madhya Pradesh High Court’s decision which had directed the department to release the withheld dues and pay interest for the delay.
Case Background
The case concerns Santosh Kumar Shrivastava, who was recruited into the services of the State of Madhya Pradesh in 1980 and superannuated on June 30, 2013. Following his retirement, his pension and other retiral dues were not sanctioned or paid.
The dispute began when the department, by an order dated January 23, 2014, amended a previous pay revision order from December 14, 2011, and relegated Shrivastava’s salary to a lower scale. This action was challenged by Shrivastava in Writ Petition No. 5201 of 2014. Subsequently, the department withdrew the re-fixation order on July 23, 2014, leading to the withdrawal of the writ petition.
Despite the withdrawal of the pay re-fixation order, the retiral dues were still not paid. The department contended that the non-payment was due to Shrivastava’s failure to vacate his official residence, which he eventually did on August 31, 2015.
On February 10, 2016, the department finally paid the gratuity and pension amount but deducted a sum of ₹1,56,187 for penal house rent and ₹1,46,466 for alleged excess payment of salary.
This led Shrivastava to file a new writ petition (No. 16351 of 2017) before the Madhya Pradesh High Court, seeking to quash the recovery and demanding interest on the delayed payment of his pension and gratuity. A learned Single Judge allowed the petition, holding the recovery illegal and directing the department to refund the deducted amount with 6% interest, as well as pay 6% interest on the delayed pension and gratuity. The decision was subsequently upheld by a Division Bench of the High Court in a writ appeal. The department then appealed to the Supreme Court.
Arguments of the Parties
The appellant, Panchayat & Rural Development Department, argued before the High Court that Shrivastava himself was responsible for the delay in receiving his pension. In its counter affidavit, the department stated: “the petitioner has been directed to vacate the government residential house… so that the Department may issue a certificate of vacancy… but petitioner is not we getting the government residential house and is maintaining his possession unauthorizedly… hence the petitioner himself is responsible for not getting the pension.”
Court’s Analysis and Observations
The Supreme Court, in its judgment authored by Justice Sanjay Karol, addressed the “short question” of whether the failure to vacate government residence upon superannuation is a valid justification for withholding retiral dues.
The Court unequivocally held that pension and retiral dues are not a “bounty” but a right of an employee. It observed, “It has long been held that the payment of retiral dues/gratuity/pension is not a matter of bounty but in fact a matter of right of every employee, should there be some rule or statute from where the right may originate.”
Regarding the recovery of excess salary, the Court found no justification for the department’s action of re-fixing pay after the employee’s retirement. It cited the precedent set by a three-judge bench in Syed Abdul Qadir v. State of Bihar, which held that relief against recovery of excess payment is granted if “the excess amount was not paid on account of any misrepresentation or fraud on the part of the employee” and if the employer made the payment based on a wrong principle or interpretation of a rule. The Court noted that Shrivastava had not engaged in any misrepresentation or fraud.
The bench found no nexus between the failure to vacate the residence and the non-payment of retiral dues. Criticizing the department’s stance, the judgment stated, “In essence, what the Appellants did before the High Court was to blame the Respondent for the delay in him receiving benefits rightly owed to him. We cannot accept this position.”
Drawing a clear distinction between the two aspects, the Court observed: “Pension and other retiral dues are benefits that have been earned by an employee due to the service rendered to the institution paying the pension/other retirement benefits. The grant of a residence corresponds to the position held at the time by such employee. The width of these two aspects is separate and distinct… The latter cannot obstruct or defeat the former. The Appellant cannot be allowed to withhold a duly accrued right on this count.”
The Court concluded that the delay was entirely attributable to the appellant, describing their action as an “attempt to hold back pensionary benefits as a sword on the Respondent’s head for not having vacated his government allotted accommodation.”
Decision
Finding no error in the High Court’s order, the Supreme Court dismissed the appeal filed by the Panchayat & Rural Development Department. The Court affirmed the direction to refund the recovered amounts and to pay interest on both the refunded amount and the delayed payment of pension and gratuity to Santosh Kumar Shrivastava. No costs were imposed.
