The Supreme Court of India has held that an employee who resigns from service forfeits their past service and is consequently not entitled to pension under the Central Civil Services (Pension) Rules, 1972. However, the Court clarified that such resignation does not debar the employee from claiming gratuity under the Payment of Gratuity Act, 1972, provided they have rendered continuous service of not less than five years.
The Division Bench comprising Justice Rajesh Bindal and Justice Manmohan delivered the judgment in the case of Ashok Kumar Dabas (Dead Through Legal Heirs) v. Delhi Transport Corporation (2025 INSC 1404). The Court partly allowed the appeal, granting gratuity and leave encashment to the legal heirs of the deceased employee while upholding the denial of pension.
Legal Issue and Outcome
The primary legal issue before the Court was whether a Delhi Transport Corporation (DTC) employee who resigned after approximately 30 years of service is entitled to retiral benefits, specifically pension, gratuity, and leave encashment. The Court ruled that under Rule 26 of the 1972 Rules, resignation results in the forfeiture of past service, thereby extinguishing the claim for pension. Conversely, the Court held that Section 4 of the Payment of Gratuity Act, 1972, mandates the payment of gratuity upon termination of employment, including by resignation.
Background of the Case
The deceased appellant, Ashok Kumar Dabas, was appointed as a conductor with the DTC in 1985. In 1992, he opted for the new pension scheme introduced by the Corporation. On August 7, 2014, citing family circumstances, he tendered his resignation, which was accepted by the competent authority on September 19, 2014.
Subsequently, on April 13, 2015, Dabas sought to withdraw his resignation, but the request was declined by the Corporation. When he requested the release of retiral benefits on October 15, 2015, the Corporation informed him that, due to his resignation, he was entitled only to the Provident Fund.
Dabas challenged this decision before the Central Administrative Tribunal (CAT) and later the High Court of Delhi. Both the Tribunal and the High Court dismissed his claims, leading to the present appeal before the Supreme Court.
Arguments of the Parties
The Appellant’s Contentions: Counsel for the appellant argued that the resignation letter, written by an employee not conversant with legal language, should not be construed strictly to deny retiral benefits. It was submitted that pension is “not a bounty” but earned after long service. The counsel contended that since the employee had put in more than 20 years of service, he was entitled to pension under Rule 48-A of the Pension Rules, and his resignation should be treated as voluntary retirement.
Regarding gratuity, the appellant relied on Section 4 of the Payment of Gratuity Act, 1972, arguing that gratuity is payable even in cases of resignation if the employee has served for at least five years.
The Respondent’s Contentions: The counsel for the DTC argued that Rule 26(1) of the 1972 Rules is explicit in stating that resignation entails forfeiture of past service. It was submitted that a resignation cannot be reclassified as voluntary retirement after acceptance. The respondent relied on the Supreme Court’s judgment in BSES Yamuna Power Limited v. Ghanshyam Chand Sharma and another (2020) to support the forfeiture of service.
The respondent also highlighted the deceased employee’s service record, noting multiple suspensions and punishments during his tenure. Regarding leave encashment, the counsel fairly conceded that the amount due should be released to the family members.
Court’s Analysis
On Pension: The Court examined Rule 26(1) of the Central Civil Services (Pension) Rules, 1972, which states:
“Resignation from a service or a post, unless it is allowed to be withdrawn in the public interest by the Appointing Authority, entails forfeiture of past service.”
The Bench observed that the deceased employee’s resignation was accepted and the request for withdrawal was declined. Citing the precedent in BSES Yamuna Power Limited, the Court reiterated that treating resignation as voluntary retirement would “obfuscate the distinction between the concepts of resignation and voluntary retirement and render the operation of Rule 26 nugatory.”
The Court held:
“From our aforesaid discussion, the only inescapable conclusion is that on resignation by the employee, his past service stood forfeited. Hence, he will not be entitled to any pension.”
On Gratuity: The Court referred to Section 4 of the Payment of Gratuity Act, 1972, which provides that gratuity shall be payable to an employee on the termination of his employment after rendering continuous service for not less than five years, including on “retirement or resignation.”
The Bench noted that the respondent failed to establish any exemption from the 1972 Act under Section 5. The Court observed:
“Once it could not be established by the respondent that the 1972 Act is not applicable to the Corporation, the claim of the appellant for release of gratuity cannot be denied even if he had resigned from service.”
Decision
The Supreme Court partly allowed the appeal. The Bench directed the DTC to pay the gratuity amount and leave encashment to the legal heirs of the deceased appellant.
- Pension: Claim declined due to forfeiture of service under Rule 26.
- Gratuity & Leave Encashment: Allowed.
- Interest: The Court ordered the amount due to be paid within six weeks along with interest at 6% per annum from the date of resignation till payment.
