Kiran Raj

The Bombay High Court, Division Bench comprising Justice Ravindra V. Ghuge and Justice Ashwin D. Bhobe, stated in favor of a retired municipal employee seeking interest on delayed retirement benefits. The court directed the Municipal Corporation of Greater Mumbai (MCGM) to compensate the petitioner with 10% interest per annum for the period of delay in disbursing his retiral benefits. The court held that since the petitioner was ultimately exonerated from the departmental inquiry, his retirement benefits should have been deemed payable immediately upon retirement.

The petitioner, Narayan Pundalik Pathade, joined MCGM on June 9, 1986, as a clerk and was later promoted to the post of Municipal Secretary in 2012. Just before his retirement on May 31, 2017, the corporation initiated a departmental inquiry against him for alleged irregularities in the recruitment process for clerks in 2013. The departmental inquiry was initiated on May 18, 2017, a few days before his superannuation.

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The inquiry accused the petitioner of lapses in recruitment procedures, raising allegations of procedural violations in appointments. The petitioner denied all charges and challenged the inquiry, arguing that it was maliciously timed and lacked substantive grounds. Despite his objections, the inquiry remained pending at the time of his retirement.

Upon retirement, the petitioner was entitled to various retirement benefits, including gratuity, commutation of pension, earned leave encashment, and ex-gratia payments. However, these payments were withheld due to the pending departmental inquiry. The petitioner received his provident fund payment on October 26, 2017, and provisional pension on December 2, 2017. However, other major retirement benefits remained unpaid.

On November 17, 2018, the petitioner approached the National Commission for Scheduled Castes (NCSC) in New Delhi, seeking intervention in the matter. On September 24, 2019, the NCSC issued a recommendation stating: "The Commission recommends that the inquiry set up against Shri Narayan Pathade may be set aside and consider his case favourably. The pending dues of the petitioner may also be paid immediately."

MCGM contested NCSC’s authority to issue directions on service-related disputes and filed a writ petition before the Bombay High Court in Writ Petition (L) No. 3111 of 2019, questioning NCSC’s jurisdiction. However, by order dated October 3, 2019, MCGM exonerated the petitioner, concluding that none of the four charges against him were proven.

Despite the exoneration, the petitioner’s retirement benefits were released in a staggered manner:

• Gratuity: ₹10,00,000 (Paid on November 22, 2019)

• Commutation of Pension: ₹7,78,954 (Paid on November 22, 2019)

• Earned Leave Encashment: ₹10,20,244 (Paid on December 18, 2019)

• Half Pay Leave Encashment: ₹8,95,736 (Paid on December 18, 2019)

• Leave Travel Allowance (LTA): ₹10,500 (Paid on December 18, 2019)

• Ex Gratia: ₹14,500 (Paid on December 18, 2019)

After receiving his dues, the petitioner submitted representations on May 22, 2020, and September 7, 2020, requesting payment of interest on the delayed retirement benefits. The corporation denied liability, asserting that since payments were made within three months of exoneration, no interest was payable under Rule 55A(1) of the Pension Rules, 1953.

The court examined Rule 55A(1) and Rule 55A(7) of the Pension Rules, 1953, and observed that the latter provision explicitly states that in cases of exoneration, retirement benefits should be considered due immediately after retirement. The judgment stated:

“On completion of departmental/judicial inquiry, if the municipal servant is acquitted of the charges levelled against him and if the competent authority sanctions the payment of gratuity, the payment will be deemed to have become due and payable on the date immediately following the date of retirement.”

The court rejected MCGM’s argument that it had an interest-free period of three months from exoneration. The judgement clarified that interest accrues from the original due date (i.e., retirement date), not the exoneration date, as withholding retirement benefits without legal justification amounts to wrongful deprivation of the employee’s entitlements.

The court further cited Supreme Court judgements on delayed retirement payments, particularly State of Kerala v. Padmanabhan Nair (1985) and D.D. Tewari v. Uttar Haryana Bijli (2014), which held that pension and retirement benefits are not a matter of employer discretion but a rightful claim of the employee. The judgment observed:

“Interest is not a penalty or punishment at all but is the normal accretion on capital. A person has a right to be compensated when he is deprived of the use of his money.”

The court also invoked the doctrine of restitution, stating that an employer who retains money due to an employee without justification is obligated to compensate for the loss. The judgement stated that pensionary benefits are meant to ensure financial security for retired employees and should not be withheld arbitrarily.

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Citing precedents from Dr. Poornima Advani v. Government of N.C.T. (2025) and Commissioner of Income Tax v. Dr. Sham Lal Narula (1963), the court held that delay in payment of legitimate dues constitutes financial loss to the employee. The court further observed:

“Restitution in its etymological sense means restoring to a party on the modification, variation, or reversal of a decree or order what has been lost to him in execution of decree or order of the Court.”

In its final order, the Bombay High Court directed MCGM to:

• Pay interest at the rate of 10% per annum to the petitioner on the delayed retiral benefits.

• Calculate the interest from June 1, 2017 (immediately after his retirement), until the actual dates of payment in 2019.

• Complete the payment process within four weeks.

• Allow the petitioner to submit his calculations to MCGM for review.

Advocates Representing the Parties

For the Petitioner: Mr. C.K. Bhangoji, Ms. Lata Bhangoji, Advocates

For the Respondents: Mr. Shivprasad D. Barade, AGP

Case Title: Narayan Pundalik Pathade v. Municipal Corporation of Greater Mumbai & Anr.

Neutral Citation: 2025: BHC-OS:3975-DB

Case Number: Writ Petition (L) No. 36169 of 2024

Bench: Justice Ravindra V. Ghuge, Justice Ashwin D. Bhobe

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