Safiya Malik

The Chhattisgarh High Court has held that gratuity of retired Class III employees cannot be withheld in the absence of judicial or departmental proceedings initiated before their retirement. The division bench of Chief Justice Ramesh Sinha and Justice Ravindra Kumar Agrawal dismissed an appeal filed by the state against a Single Judge’s decision favoring retired Revenue Sub-Inspector B.P. Tiwari, directing the release of the withheld gratuity amount with interest.

The case involved B.P. Tiwari, who retired on March 31, 2019, as Revenue Sub-Inspector and Incharge Chief Municipal Officer, Nagar Panchayat, Chhuriya. Allegations of financial misappropriation emerged from an audit conducted in 2008-09, attributing ₹4,68,194 of a total ₹10,14,170 misappropriation to Tiwari. Despite these allegations, no departmental inquiry or show-cause notice was issued before his retirement.

Following his retirement, Tiwari received partial payment of ₹2,21,341 as gratuity, while ₹4,68,194 was withheld due to the alleged misappropriation. Aggrieved by this, Tiwari filed a writ petition seeking the release of the remaining gratuity amount. The Single Judge allowed the petition, directing the state to release the full amount with 8% interest. The state appealed this decision, asserting its right to recover the withheld amount based on the audit findings.

The state, represented by Additional Advocate General Yashwant Singh Thakur, argued that the recovery was justified due to objections raised in the audit report. It claimed that the withheld gratuity was essential to protect public funds and cited a letter dated July 16, 2020, attributing liability to Tiwari.

Conversely, Tiwari’s counsel, Hamida Siddiqui, argued that no inquiry or show-cause notice had been initiated prior to retirement, rendering the recovery illegal. Citing the Supreme Court’s decision in State of Punjab v. Rafiq Masih (White Washer) (2015), she contended that recovery from retired Class III employees was impermissible unless initiated before superannuation.

The High Court observed that Tiwari was a Class III employee and noted the applicability of the principles laid down in Rafiq Masih. The bench stated that recovery from retired Class III employees is not permissible unless judicial or departmental proceedings are initiated before retirement.

Referring to Rule 9(6)(b)(i) of the Pension Rules, 1976, the court recorded: "Judicial or departmental proceedings must be instituted prior to retirement to justify withholding gratuity. In the absence of such actions, the recovery is impermissible under law."

The court also addressed the state’s argument regarding pending departmental inquiries, stating that no evidence was presented to show that proceedings were initiated prior to Tiwari’s retirement. The bench further observed that allegations of financial misappropriation dating back to 2008-09 could not justify withholding gratuity without adherence to due process.

The High Court upheld the Single Judge’s decision and issued the following directives:

• Release the withheld gratuity amount of ₹4,68,194 to Tiwari within three months.

• Pay 8% simple interest on the gratuity amount from the date of retirement until payment, which would increase to 10% if the payment was delayed beyond three months.

The court stated that its decision would not prevent the state from initiating appropriate legal action regarding the audit objections, as long s due process was followed

Case Title: State of Chhattisgarh v. B.P. Tiwari

Case Number: WA No. 899 of 2024

Bench: Chief Justice Ramesh Sinha and Justice Ravindra Kumar Agrawal

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