AP High Court Orders DCCB to Release Gratuity; Citing Financial Inability to Withhold Retirees’ Benefits Violates Article 21
Safiya Malik
The High Court of Andhra Pradesh, Single Bench of Justice Maheswara Rao Kuncheam directed the Krishna District Cooperative Central Bank Ltd. to release all terminal benefits, including gratuity and leave encashment, to retired employees or their families with 10% interest within eight weeks. The Court held that financial incapacity cannot be invoked by State institutions as a defence for failing to discharge their statutory duty to pay such dues, observing that withholding terminal benefits infringes the right to life under Article 21 of the Constitution. The case concerned former Special Category Assistants who had not received their retirement benefits for over a decade, and the Court found both the District Cooperative Central Bank and the Primary Agricultural Cooperative Society jointly responsible for payment, while allowing recovery between them later.
The petitioners, who had served as Cadre Secretaries under the administrative control of the Krishna District Cooperative Central Bank Ltd. (DCCB), were later allotted to various Primary Agricultural Cooperative Societies (PACS) where their posts were redesignated as Secretaries. Following policy changes in line with NABARD guidelines, their services were taken back by the DCCB in 2009. They continued in service without any adverse remarks until their respective retirements between 2009 and 2013. After retirement, the petitioners did not receive their terminal benefits, including gratuity and leave encashment, as the DCCB cited non-release of the corresponding share by the concerned PACS.
The petitioners, all senior citizens, claimed that the withholding of their terminal benefits despite unblemished service was unlawful and caused them financial hardship. They sought payment with interest, invoking their rights under the Payment of Gratuity Act, 1972, and constitutional protections. The DCCB argued that payment could not be made until PACS remitted its share, referring to a Memorandum of Intent dated January 11, 2013, which prescribed a uniform procedure for settlement of terminal benefits of Special Category Assistants. The Memorandum, approved by the DCCB and APCOB, outlined the division of liability between DCCB, PACS, and APCOB.
Written instructions from the DCCB confirmed that PACS had not paid its share due to financial incapacity. The case thus centered on whether the respondents could lawfully withhold benefits owed to retired employees based on another entity’s financial default. The statutory framework relied upon included Sections 4 and 7 of the Payment of Gratuity Act, 1972, governing entitlement and timelines for payment.
The Court recorded that the central issue was “the non-payment of gratuity, leave encashment and other terminal benefits of the retired employees, without there being any legal impediment.” It noted that all petitioners “extended their unblemished service… and attained the age of superannuation without any stigma or legal impediment.”
The Court stated: “once an employee has rendered continuous services for not less than five years on his superannuation or retirement, he/she shall be entitled to get gratuity.” It further observed that the grounds under Section 6 of the Act allowing forfeiture were not attracted: “the action of the respondents' withholding of gratuity is not permissible under any circumstances.”
The Court examined Section 7 of the Act and recorded: “if the employer fails to pay the gratuity amount within thirty days from the date it becomes payable…the interest from that date would also become payable.” It added that the petitioners’ right to interest was “statutory in nature and not subject to the discretion of the respondent authorities.”
The Court quoted the Supreme Court’s view that pension is a property right: “the right of the petitioner to receive pension is property… and by a mere executive order the State had no power to withhold the same.” It reproduced the dicta that pension is “a measure of socio-economic justice which inheres economic security in the fall of life.”
The Court relied on Kapila Hingorani: “A mere financial incapacity or paucity of funds cannot be a valid defence for non-fulfilment of such statutory obligations.” The Court added that the respondents are “bound to release the terminal benefits… more particularly, when the employees rendered their services.”
The Court described the petitioners as “septuagenarians, octogenarians, and nonagenarians” and recorded that delay in paying their dues “amounts to violation of the petitioners’ statutory and constitutional rights under the vistas of Article 21.” It noted that terminal benefits are “a property under Article 300-A… and form an integral part of right to livelihood.”
The Court found the respondents’ justification untenable: “the contention… that the 3rd respondent did not pay its share… is legally untenable.” It held that both DCCB and PACS were “jointly and severally liable” to release the dues.
The Court directed that “The respondent Nos.1 & 4 release the total terminal benefits such as gratuity amount, leave encashment and other entitlements due to the petitioners or to their family members, with an interest @ 10% from the date on which said amount became payable till the date of actual payment.” It stated that payment must be made “within a period of eight (8) weeks, from the date of receipt of copy of this Order. It is open to the respondent Nos.1 & 4 DCCB recover appropriate amounts towards terminal benefits… from respondent No.3 PACS, if so advised. The respondents 1, 3 and 4 are also directed to pay costs of Rs.10,000/- each to the petitioners towards the cost of writ petitions.”
Advocates Representing the Parties
For the Petitioners: Sri Peeta Raman, Advocate
For the Respondents: Sri A. Rajendra Babu, Advocate
Case Title: Chittiboyina Bharata Rao & Others v. Krishna District Cooperative Central Bank Ltd & Others
Neutral Citation: APHC010243682016
Case Number: Writ Petition Nos. 8465, 8675, 8878 & 9772 of 2016
Bench: Justice Maheswara Rao Kuncheam
