Corporation is liable to pay interest for delayed payment of retiral dues

Nabhagan Rout & Ors. v. Orissa Lift Irrigation Corporation & Ors.

The petitioners are pump drivers with the respondent- Corporation and seek interest on the delayed payment of their retiral dues, after their acceptance of VRS launched by the management. In the background that the VRS provided that retiral dues would be paid within sixty days of acceptance of the VRS applications, but the petitioners, in fact, received their dues more than a year after the acceptances of their offers. Consequently, the petitioners have filed the present Writ Petition and claimed interest of 18% p.a. on the delayed payment. The Court allowed the petition and ordered in the favor of the petitioners, allowing an interest of 9% p.a. to be paid by the Corporation.


  1. The Petitioners were working as pump drivers in the respondent Corporation. In December 2002, opposite parties 1 and 2 promulgated a Scheme for Voluntary Retirement/Voluntary Separation Scheme. The last date for submission of the application for voluntary retirement was 15.01.2003. The said Scheme provides, inter alia, that retiral dues like ex-gratia, gratuity leave encashment and all other statutory dues would be paid to the employees within 60 days of acceptance of the application for voluntary retirement. However, opposite party no.2 issued a letter dated 02.01.2003 clarifying that the amount payable towards ex-gratia, gratuity, leave encashment along with all other statutory dues, such as, Provident Fund, Employees State Insurance Fund shall be released in one installment to ensure disbursement to the employees on the date of separation.
  2. Further, the petitioners retired from service with effect from 30.04.2003 as per the order of the opposite parties 3 and 4. But, the retiral dues were not paid to them. They submitted representations to the opposite party no.2 on 11.11.2004. However, the retiral dues of the petitioner no.1 were paid by way of cheque on 03.07.2004. So far as petitioner nos.2 and 3 are concerned, the same were paid on 21.08.2004. Since there was a delay in payment of retiral dues, they filed representations to opposite party no.2 for payment of interest at the rate of 18%.
  3. Pursuant to the issuance of notice, the respondents filed a counter affidavit. They submitted that the calculation for voluntary retirement has been audited by the Auditors of Public Enterprises Department. The account payee cheques were received from the said department in the name of the concerned employees, who had applied for voluntary retirement. The cheques were immediately handed over to the concerned employees after the same was received from the Government. It was further stated that after transfer of L.I Points to Pani Panchayats, the work of the Corporation was reduced considerably. The State Government decided to dispense with 7431 employees of the Corporation. The same was conveyed by the Govt. to the Corporation on 26.10.2002. In the above process, the Govt. had decided to dispense with 6067 regular employees and 1274 NMR /DLR employees of the Corporation. To facilitate the process of restructure, the employees were offered to avail the benefit of voluntary retirement scheme. It was further stated that the VRS due of petitioner no.1 amounting to Rs.2,43,552/- was received from the Govt. in Public Enterprises Department by way of cheque bearing no.50302 dated 11.06.2004, Similarly, the VRS dues of petitioner nos.2 and 3 amounting to Rs.2,34,416/- and Rs.2,01,986/- respectively were received by way of cheque bearing nos.517411 dated 21.8.2004 and 517412 dated 21.08.2004 respectively. Further, the Corporation stated that there is no provision for payment of interest against the delayed payment of the VRS dues.


On a conspectus of the clause 6.2 of the VRS, it was crystal clear that the Corporation shall pay the ex-gratia, gratuity, leave encashment and other statutory dues under the scheme to the employees within 60 days of acceptance of the application by the Managing Director subject to the employee clearing of all dues of the Corporation. They retired from service with effect from 30.04.2003. Admittedly, there was delay of more than one year in payment of retiral dues of the petitioners. The Judge relied on the SC judgement in the case of D.S. Nakara and others v. Union of India, AIR 1983 SC 130, held that the pension is not a bounty. The grant of pension does not depend upon any discretion. Further, relying on State of Kerala & others v. M. Padmanabhan Nair, (1985) 1 SCC 429, the apex Court held that the pension and gratuity were no longer any bounty to be distributed by the Government to its employees on their retirement but have become valuable rights and property in the hands of the employees. In view of the same, the culpable delay in settlement and disbursement thereof must be dealt with the penalty of payment of interest at the current market rate till actual payment to the employees. The aforesaid view of the apex Court was echoed again in D.D. Tewari
Thr. L.Rs v. Uttar Haryana Bijli Vitran Nigam Ltd., and others, AIR 2014 SC2861. In D.D. Tewari (supra) for delayed payment of pension and gratuity, the apex Court awarded interest at the rate of 9% per annum from the date of entitlement till the date of actual payment. The ratio of the said case applies with full force in the facts and circumstances of the case. In view of the same, the authorities of the Corporation, in its wisdom, thought it proper, to pay the retiral dues of the employees within 60 days from the date of acceptance of the application as per Clause 6.2 of the Voluntary Separation Scheme. Non receipt of the amount from the Government of Orissa is not a ground to withhold the retiral benefits of the employees.
Applying the principles laid down in D.D. Tewari (supra), this Court directs the opposite parties to pay interest at the rate of 9% per annum to the petitioners for delayed payment of retiral dues from 01.07.2003 till the date of disbursement of their retiral dues.


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