Bombay High Court Directs Municipal Corporation to Pay Interest on Delayed Retirement Benefits
The Bombay High Court recently ruled in favor of a retired employee of the Municipal Corporation of Greater Mumbai (MCGM) and directed the corporation to pay interest on delayed retirement benefits. A Division Bench of Justices Ravindra V. Ghuge and Ashwin D. Bhobe made this decision, clarifying that when retirement benefits are delayed due to a pending departmental inquiry, and the employee is later exonerated, interest must be paid from the day after the retirement date. This is based on the legal principle called the “doctrine of restitution,” which ensures that someone who has suffered financial loss due to unfair withholding of money is compensated.
Background of the Case
The case involved Narayan Pundalik Pathade, who joined the MCGM as a clerk and was later promoted to Municipal Secretary in 2012. He was supposed to retire in 2017. However, just before his retirement, MCGM started a departmental inquiry against him, accusing him of irregularities in the recruitment of clerks in 2013. Despite the inquiry, Pathade officially retired on May 31, 2017, after reaching the retirement age.
Because the inquiry was ongoing, MCGM withheld Pathade’s retirement benefits, though he did receive his provident fund and provisional pension. Unhappy with this, Pathade approached the National Commission for Scheduled Castes in November 2018. The Commission recommended that the inquiry be dropped and that his pending dues be paid without further delay.
Exoneration and Payment Delays
While MCGM initially resisted the Commission’s involvement, it eventually dropped the inquiry and cleared Pathade of all charges. However, this decision came much later, and his full retirement benefits were only paid between November and December 2019.
- November 22, 2019: Gratuity and pension commutation were paid.
- December 18, 2019: Payments for earned leave, half-pay leave, leave travel allowance (LTA), and ex-gratia were made.
Request for Interest Payment
After receiving his dues, Pathade requested interest on the delayed payments. He argued that his benefits should have been paid immediately after his retirement in 2017. In May and September 2020, he wrote to MCGM about this, but when he got no response, he filed a writ petition in the High Court.
Key Arguments in Court
- Pathade’s Lawyer’s Argument
Pathade’s lawyer, Mr. C.K. Bhangoji, argued that since Pathade was exonerated, his benefits should have been due from June 1, 2017 (the day after his retirement). He cited Rule 55A(7) of the MCGM Pension Rules, 1953, which states that benefits withheld due to pending inquiries should be treated as payable from the retirement date if the employee is later cleared of charges. He also asked for an 18% interest rate on the delayed payments. - MCGM’s Counterargument
MCGM’s lawyer, Mr. Shivprasad D. Barade, argued that no interest was due because the benefits had been paid within three months after Pathade’s exoneration. He referred to Rule 55A(1) of the Pension Rules, which allows employers three months after an inquiry ends to make payments without interest. He claimed that since the payments were made within this window, no additional compensation was necessary.
Court’s Findings and Ruling
After examining the Pension Rules, the High Court ruled in favor of Pathade. The court found that Rule 55A(7) clearly applies in cases where retirement benefits are withheld due to an inquiry. The rule states that once the employee is exonerated, the benefits should be considered payable from the retirement date, not from the date of exoneration.
The court rejected MCGM’s argument that the three-month interest-free period should apply here. It noted that allowing such a period would unfairly encourage employers to delay paying dues after an inquiry, depriving retired employees of their rightful money.
Importance of Interest on Delayed Payments
The court emphasized that retirement benefits are a form of welfare meant to support employees after their service ends. If these payments are delayed, the affected person must be compensated with interest. The court referred to previous Supreme Court rulings, including State of Kerala v. Padmanabhan Nair (1984) and D.D. Tewari v. Uttar Haryana Bijli (2014), which established that interest should be paid when someone is deprived of their money without a valid reason.
The High Court concluded that Pathade had been wrongfully deprived of his money for over two years and was entitled to interest at the rate of 10% per year. It directed MCGM to pay the interest within four weeks.
Conclusion
This case highlights the importance of timely payment of retirement benefits and the legal protections available to retired employees. The ruling serves as a reminder to employers that they cannot delay such payments without facing financial consequences. By enforcing interest on delayed dues, the court upheld the rights of retired employees to be compensated fairly for any financial loss caused by unnecessary delays.
