The High Court of Judicature at Allahabad, Lucknow Bench, has ruled that the legal heirs of a deceased government employee are entitled to interest on the delayed payment of gratuity, and that the State cannot deny this benefit by re-agitating a claim of outstanding house rent dues that has already been rejected in previous judicial proceedings.
Justice Karunesh Singh Pawar quashed the impugned order dated January 1, 2026, which had rejected the petitioners’ representation for interest. The Court directed the State-respondents to pay simple interest at the rate of 10% per annum on the delayed gratuity amount, spanning nearly 19 years—from the date of the employee’s retirement in 2005 until the actual payment was credited in 2024.
Background of the Case
The petitioners—Mr. Saleem Anwar Khan and two others—are the children and legal heirs of Late Dr. Anwarullah Khan. Dr. Khan was appointed as a Medical Officer in the Provincial Medical Services (P.M.S.) on June 22, 1970. After rendering more than 35 years of unblemished service, he retired upon reaching the age of superannuation on July 31, 2005.
During Dr. Khan’s lifetime, a punishment order dated January 28, 2003, had been passed against him in disciplinary proceedings. He challenged this order in Claim Petition No. 1544 of 2007, which was allowed, and the punishment order was quashed with all consequential service benefits. Consequently, the State Government issued directions, and on October 5, 2009, a decision was taken to release his retiral dues.
Despite this decision, the gratuity amount was not released. Dr. Khan subsequently filed Writ Petition No. 1061 of 2014 (Dr. Anwarullah Khan Vs. State of U.P. and Others), which was disposed of on July 17, 2017, directing the respondents to pay the gratuity within two months, or pass a reasoned order specifying the grounds for withholding it.
Dr. Khan passed away on December 3, 2014, and his wife passed away on June 11, 2022, without receiving the gratuity. The petitioners thereafter instituted Contempt Petition (Civil) No. 2901 of 2018 to seek compliance with the 2017 order.
In the contempt proceedings, the respondents filed a compliance affidavit claiming that the gratuity was withheld on account of alleged outstanding house rent dues amounting to Rs. 18,50,975/-. The Contempt Court rejected this compliance affidavit on May 29, 2024. On July 16, 2024, the Contempt Court observed that no proceedings had ever been initiated against the deceased employee during his lifetime regarding unauthorized occupation or recovery of house rent.
Following these proceedings, the Chief Medical Officer, Rampur, sanctioned the gratuity amount of Rs. 3,50,000/- on July 24, 2024, and the money was credited to the petitioners’ accounts on July 30, 2024. The contempt petition was subsequently dismissed on July 31, 2024, after recording compliance. In making the payment, the respondents considered paragraph nos. 31 and 32 of the Supreme Court judgment in S. D. Bandi Vs. Divisional Traffic Officer, KSRTC & Ors. [AIR 2013 SC 2507].
The petitioners then submitted a representation seeking interest on the delayed payment, which was rejected by the respondents through an order dated January 1, 2026. This rejection prompted the petitioners to approach the High Court.
Arguments of the Parties
Petitioners’ Submissions:
- Sri Sheikh Wali Uz Zaman, counsel for the petitioners, argued that the gratuity amount, which became payable immediately upon retirement on July 31, 2005, was paid only on July 30, 2024, after an inordinate delay of almost 19 years.
- He contended that since the plea regarding outstanding house rent had already been rejected during the contempt proceedings and had attained finality, the respondents could not reopen or re-agitate the same issue to reject the petitioners’ representation for interest.
- The petitioners placed reliance on the Supreme Court judgments in Neelima Srivastava Vs. State of Uttar Pradesh and Others [AIR 2021 SC 3884 (Paras 32 to 36)] and Securities and Exchange Board of India Vs. Ram Kishori Gupta and Others [MANU/SC/0461/2025 (Paras 28 to 31)], arguing that once an issue has attained finality, it cannot be permitted to be reopened.
- They also relied upon the Division Bench judgment of the High Court in Indrajeet Singh Vs. State of U.P. [Writ Petition No. 1133(S/B) of 2001, Neutral Citation- 2008:AHC-LKO:3718-DB], where interest at the rate of 12% per annum was awarded on delayed gratuity.
- Rebutting the State’s reliance on a Government Order dated July 28, 1989, the petitioners submitted that this new plea was an attempt to mislead the Court, which is impermissible under the Supreme Court’s ruling in Commissioner of Customs, Mumbai Vs. M/s Toyo Engineering India Limited [(2006) 7 SCC 592].
Respondents’ Submissions:
- Sri Amarnath Singh, the learned Standing Counsel for the State-respondents, opposed the writ petition and justified the delay by asserting that Rs. 18,50,975/- was recoverable from the deceased employee as house rent.
- He also referred to a Government Order dated July 28, 1989, to support the State’s action, though the Court observed that the order was neither brought on record nor substantiated.
Court’s Analysis
The High Court rejected the State’s defense, observing that the same house rent issue had already been rejected by the Contempt Court on May 29, 2024. The Court noted:
“Admittedly, no proceedings under Section 11 of the Uttar Pradesh Public Premises (Eviction of Unauthorised Occupants) Act, 1972 were ever initiated against the deceased employee during his lifetime.”
The Court ruled that since the respondents had already released the gratuity in compliance with judicial orders, and the recovery plea was rejected during contempt proceedings:
“…it was not open for the respondents to reagitate the same issue while considering the petitioners’ claim for interest. Such conduct is clearly impermissible in view of the law laid down by the Hon’ble Supreme Court in Neelima Srivastava (Supra).”
Regarding the statutory entitlement to interest on delayed retiral dues, the Court cited several provisions and precedents:
- Ministry of Labour Notification (01.10.1987): Issued under Sub-Section (3A) of Section 7 of the Payment of Gratuity Act, 1972, which mandates simple interest at 10% per annum if gratuity is not paid within the prescribed period.
- R. Kapur Vs. Director of Inspection (Painting and Publication) Income Tax and Another: The Supreme Court, quoting M. Padmanabhan Nair, observed:
“Pension and gratuity are no longer any bounty to be distributed by the Government to its employees on their retirement but have become, under the decisions of this Court, valuable rights and property in their hands and any culpable delay in settlement and disbursement thereof must be visited with the penalty of payment of interest at the current market rate till actual payment.” In R. Kapur, the Supreme Court awarded 18% interest. - Uma Agrawal Vs. State of U.P. and Ors. (Writ Petition (Civil) No. 771 of 1995): The Full Bench of the Supreme Court observed that the State had been directed to pay 12% interest for delayed retiral dues in multiple decided cases.
- Indrajeet Singh Vs. State of U.P. (Writ Petition No. 1133(S/B) of 2001): The Division Bench of the High Court directed the payment of interest at the rate of 12% per annum from the date of retirement to the actual payment.
- Laxman Singh Bhadauriya Vs. Controlling Authority and Others (Writ-C No. 18684 of 2010): The Single Judge modified the order to direct 10% interest.
- Gagan Bihari Prusty Vs. Paradip Port Trust and Others (Special Leave to Appeal (C) No. 4468 of 2022): The Supreme Court, via order dated March 3, 2025, awarded 10% simple interest per annum on delayed gratuity.
The Court concluded that Dr. Khan’s gratuity remained withheld without any valid justification for nearly two decades and was only released after prolonged litigation. It held that the petitioners were fully entitled to interest on the delayed payment.
Decision of the Court
The High Court allowed the writ petition and quashed the impugned order dated January 1, 2026. The Court directed the respondents to pay simple interest at the rate of 10% per annum on the gratuity amount for the period commencing from July 31, 2005, until July 30, 2024.
The respondents are directed to calculate and release this interest amount to the petitioners within three months from the date a certified copy of the order is produced before the competent authority.
Case Details
- Case Title: Mr. Saleem Anwar Khan and 2 Others Versus State of U.P. Thru. Prin. Secy. (Medical Health) Lko, And 3 Others
- Case No.: WRIT-A No. 2468 of 2026
- Bench: Justice Karunesh Singh Pawar
- Date: May 14, 2026
