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Judgment
ORDER
Hon’ble Mr. Rajveer Singh Verma, Member (J) :
MA No.4861/2024
This Application has been filed by the applicants seeking permission of this Tribunal to file a Single OA.
For the reasons mentioned therein, the MA is allowed.
OA No.4987/2024
Central Administrative Tribunal3. The present OA has been filed by the retired employees of the New Delhi Municipal Council (NDMC) belonging to the Ministerial Cadre, who had retired on different dates after 01.01.2016 and initially received their retiral benefits on the basis of the then prevailing 6th DTL pay scales. The NDMC (Conditions of Service of Municipal Officers) Regulations, 2016 were notified on 07.04.2016 under the NDMC Act, 1994 with the approval of the Central Government. According to the applicants, the Regulations contemplated the application of the Central Civil Services (Revised Pay) Rules and the transition from the DTL scales to the 7th CPC scales. The applicants relied upon the fact that the respondent itself subsequently issued Office Order No. SO(E)/5084/SA-III dated 05.09.2016, recording that after notification of the 2016 Regulations the salary of NDMC employees was to be governed by the CCS (Revised Pay) Rules. A further Office Order dated 27.12.2017 reiterated that the DTL scales would operate only up to 06.04.2016 and that the salary of NDMC employees would thereafter be governed by the CCS (Revised Pay) Rules. The applicants had earlier approached the Tribunal by filing O.A. No. 1878/2022 concerning non-implementation of the revised pay scales and consequential arrears and retiral benefits. By order dated 25.07.2022, the Tribunal disposed of the O.A. without entering into the merits and directed the respondent to consider the applicants’ grievances and take a final decision by passing an appropriate order, preferably within twelve weeks. Since the directions of the Tribunal were not complied with, the applicants preferred CP No.416/2022 alleging disobedience. The respondent Council subsequently filed a compliance affidavit enclosing an order dated 14.02.2023 stating that the transition from DTL scales to CPC scales was a policy matter and that the applicants’ request would be considered upon a decision by NDMC. Pursuant to Council Resolution No. 08 (Personnel) dated 23.08.2023, NDMC issued Office Order No. A-42011/612/2020-Secy.-Estt.-Part (3) dated 25.09.2023 implementing the 7th CPC pay scales, with reference to the Gazette Notification dated 07.04.2016, for serving as well as retired NDMC employees drawing salary or pension under the 6th DTL scales, with effect from 01.01.2016. The Office Order specifically directed that pay fixation of pensioners who had retired on or after 01.01.2016 should be undertaken in the first instance. Recording substantial compliance on the part of respondent Council, the CP was closed on 19.10.2023.
Consequent upon the aforesaid decision and administrative order, the differential amounts of retiral and terminal benefits were ultimately paid to the applicants on various dates during 2024. However, the differential amounts were paid long after their respective retirements and without interest. The applicants contended that the entitlement to the differential retiral benefits related back to the respective dates of retirement and, in any event, to the retrospective date of 01.01.2016.
The applicants further contended that the respondent - NDMC had revised salary and pension by applying the multiplying factor of 2.57 but continued, in the case of retired employees, to calculate leave encashment and gratuity on the unrevised 6th DTL salary. Since gratuity is linked to the last drawn emoluments and qualifying service, the applicants contended that there could not legitimately be two different bases, one for pension and another for gratuity and leave encashment. According to the applicants, gratuity had initially been restricted to Rs.10 lakh on the basis of the earlier ceiling and the balance was released only in 2024, thereby giving rise to the claim for interest on the delayed payment. The legal basis of the claim is founded principally upon Rule 68 of the CCS (Pension) Rules, 1972, which provides for interest on delayed payment of gratuity where the delay is attributable to administrative reasons or lapses. The applicants also relied upon the principle that pension and retiral benefits are not a bounty but constitute a legally protected right. In Deokinandan Prasad v. State of Bihar, (1971) 2 SCC 330, the Supreme Court recognised pension as a right in property. The applicants further relied upon State of Jharkhand v. Jitendra Kumar Srivastava, (2013) 12 SCC 210, and State of West Bengal v. Haresh C. Banerjee, (2006) 7 SCC 651, in support of the legal character of pensionary benefits.
The applicants have also relied upon the judgment in the case of S.K. Dua v. State of Haryana, 2008 (3) SCC 44, wherein the Hon’ble Supreme Court held that even in the absence of statutory rules or administrative instructions an employee may claim interest on retiral benefits under Articles 14, 19 and 21 of the Constitution. The applicants further relied upon the decisions of the Principal Bench of the Tribunal in Dr. Satya Prakash Vs. Union of India and Ors., OA No.4131/2010, decided on 04.08.2011; Urmila Sharma v. Chief Secretary, GNCT of Delhi, O.A. No.3355/2010, decided on 16.08.2011, Brijendra Singh v. Union of India, O.A. No.1611/2011, decided on 20.09.2011; Jagdish Kumar v. Union of India, O.A. No.948/2011, decided on 30.11.2011; Vijay Kumar Sharma Vs. Union of India, O.A. No.3689/2011, decided by the Principal Bench on 02.02.2012 and the decision in Satya Prakash v. Chairman-cum-Managing Director, BSNL, W.P.(C) No.3308/2017, decided by the Delhi High Court on 09.04.2019.
The contention of the applicants is that since the entire differential leave encashment was ultimately paid in 2024, there was no lawful basis for the prolonged withholding. The claim is founded for the delayed disbursement of benefits which, according to the applicants, stood retrospectively recognized by the respondent itself and were ultimately paid without any accompanying interest.
Pursuant to notice, the respondent - NDMC, has filed the counter reply opposing the OA. Learned counsel for the respondents submitted that the enhanced benefits claimed by the applicants arose only after a subsequent policy decision of the NDMC Council and these were not the benefits which had accrued on the respective dates of retirement. The respondent accepted that NDMC had notified the New DMC (Conditions of Service of Municipal Officers) Regulations, 2016 and that the transition to the 7th CPC scales was eventually implemented with retrospective effect from 01.01.2016. It nevertheless maintained that adoption and implementation of the Pay Commission scales was a matter within the policy-making jurisdiction of the NDMC Council. The respondent Council Resolution No.08 (Personnel) dated 25.09.2023 was passed for implementation of the 7th CPC pay scales for serving and retired employees drawing salary or pension under the 6th DTL scales with effect from 01.01.2016.
The respondent relied upon the earlier proceedings in O.A. No.1878/2022 to contend that the Tribunal had not adjudicated the applicants’ substantive entitlement but had merely directed NDMC to consider the grievance and take a final decision. In C.P. No.416/2022, the Tribunal, after considering the Office Order dated 25.09.2023, recorded substantial compliance and closed the Contempt Petition, leaving the applicants at liberty to avail remedies in accordance with law. It is contended that the revised benefits were sanctioned only pursuant to the policy decision of 2023 and that there could be no administrative delay in relation to an amount which had not previously been sanctioned or quantified as payable. It is submitted that the applicants were paid the differential amounts during 2024 promptly after the policy decision and implementation process and that there was consequently no culpable delay warranting interest from the dates of retirement.
In support of this position, the learned counsel for respondent relied upon the Office Memorandum dated 22.01.1991, as referred to in its counter, under which, in cases where gratuity already paid is enhanced because of revision of emoluments or liberalisation of gratuity provisions, interest may be allowed only where payment of the arrears of gratuity is delayed beyond three months from the date of the order revising the emoluments or liberalizing the rules. He further relied upon the matter of Jagdish Kumar v. Union of India, 2011 SCC OnLine CAT 2245, for the proposition that where the entitlement to differential gratuity arises on account of a later revision, interest from the date of retirement does not automatically follow. He also relied upon the matter of Anjali Vaid v. Adarsh World School, 2023 SCC OnLine Del 7423, wherein, the Delhi High Court did not grant the interest claimed in the circumstances of that case.
Learned counsel for the respondent further contended that courts should ordinarily refrain from interfering with policy decisions unless such decisions are shown to be unreasonable, arbitrary or beyond statutory or constitutional authority. In support, he relied upon the judgment of Param Singh & Others v. State of U.P. & Others, Special Appeal No.1163/2018, decided on 19.11.2018, and C.L. Devgun v. NDMC, 2008 SCC OnLine Del 1270.
With respect to gratuity, learned counsel for the respondent distinguished the authorities relied upon by the applicants, including Deokinandan Prasad, D.S. Nakara, State of Jharkhand v. Jitendra Kumar Srivastava, State of West Bengal v. Haresh C. Banerjee, Jagdish Kumar and Urmila Sharma, on the ground that those cases concerned withholding or delay in payment of existing pensionary entitlements, including circumstances involving departmental or judicial proceedings, whereas in the present case the enhanced benefits resulted from the later policy decision are involved. Learned counsel for the respondent separately contested the claim for interest on leave encashment. He relied upon the Department of Pension and Pensioners’ Welfare Office Memorandum No.38/64/98-P&PW(F) dated 05.10.1999, which, according to him, clarified that leave encashment is a benefit under the leave rules and not a pensionary benefit and that there is no provision under the CCS (Leave) Rules for payment of interest on delayed leave encashment. He also relied upon the updated DoPT FAQs dated 30.08.2022, which state that there is no provision under the CCS (Leave) Rules, 1972 for payment of interest on leave encashment.
Learned counsel for the respondents submitted that the claim for interest from the dates of retirement, or from 01.01.2016, would effectively penalise NDMC for giving retrospective benefits pursuant to a subsequent policy decision and would create an undesirable precedent for autonomous bodies implementing Pay Commission recommendations at a later stage.
In rejoinder, the applicants specifically relied upon the respondent’s own Office Order No. SO(E)/5084/SA-III dated 05.09.2016 and Office Order No.19(1) Secy. Estt./816/2406/2516/6574 dated 27.12.2017. According to the applicants, these orders demonstrate that the respondent had itself recognized, long before the Council Resolution of 2023, that after notification of the 2016 Regulations the salary of NDMC employees was to be governed by the CCS (Revised Pay) Rules and that the DTL scales would operate only up to 06.04.2016. They, therefore, disputed the respondent’s attempt to treat the entitlement as having originated only on 25.09.2023.
The applicants further relied upon Office Order No.D-233/PA/Dir.(P)/2017 dated 05.09.2017, which recorded that the salary would be re-fixed in CPC scales with effect from 07.04.2016 and that arrears w.e.f. 01.01.2016 would be calculated accordingly. They pointed out that interim lump-sum payments had been made to serving employees and pensioners in 2016 and that additional lump-sum amounts were sanctioned for regular employees, whereas the retired employees were deprived of the corresponding benefit. The applicants also referred to O.A. No.4057/2016 concerning similarly placed Engineering Staff of NDMC. In that matter, the Tribunal directed revision of pension by granting the benefits pertaining to pay fixation and revised pension along with similarly placed employees according to the chronology of retirement and the said order is stated to have been complied with.
The applicants further pointed out that the maximum retirement/death gratuity was enhanced to Rs.20 lakh with effect from 01.01.2016, whereas the applicants had initially received gratuity subject to the earlier Rs.10 lakh ceiling. The balance amount was paid only in 2024. The applicants consequently contended that the respondent cannot simultaneously accept retrospective application of the 7th CPC for pension and salary and deny its consequences for gratuity and leave encashment. According to the rejoinder, the belated payment of the balance gratuity and leave encashment establishes the financial delay.
We have heard learned counsel for the parties and perused the record.
On the rival contentions, the questions that arise for determination are: (i) whether the applicants are entitled to interest on the delayed payment of the differential death-cum-retirement gratuity; (ii) whether they are entitled to interest on the delayed payment of the differential leave encashment; and (iii) if so, the date from which, and the rate at which, such interest is payable.
The character of the benefits in question is no longer open to debate. The law is well settled that pension and gratuity are not a bounty but a right earned by service and the same has been held by the Hon’ble Supreme Court in Deokinandan Prasad v. State of Bihar, (1971) 2 SCC, and reaffirmed by the Constitution Bench in D.S. Nakara v. Union of India, (1983) 1 SCC 305. The principle was restated in State of Jharkhand v. Jitendra Kumar Srivastava, (2013) 12 SCC 210, where the Supreme Court held as under:-
“7.It is an accepted position that gratuity and pension are not bounties. An employee earns these benefits by dint of his long, continuous, faithful and unblemished service. Conceptually it is so lucidly described in D.S Nakara v. Union of India (1983) 1 SCC 305 by D.A Desai, J. who spoke for the Bench, in his inimitable style, in the following words:
18.The approach of the respondents raises a vital and none too easy of answer, question as to why pension is paid. And why was it required to be liberalised? Is the employer, which expression will include even the State, bound to pay pension? Is there any obligation on the employer to provide for the erstwhile employee even after the contract of employment has come to an end and the employee has ceased to render service?
19.What is a pension? What are the goals of pension? What public interest or purpose, if any, it seeks to serve? If it does seek to serve some public purpose, is it thwarted by such artificial division of retirement pre and post a certain Central Administrative Tribunaldate? We need seek answer to these and incidental questions so as to render just justice between parties to this petition.
20.The antiquated notion of pension being a bounty a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through court has been swept under the carpet by the decision of the Constitution Bench in Deokinandan Prasad v. State of Bihar (1971) 2 SCC 330, 1971 Supp SCR 634 wherein this Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a government servant coming within those rules is entitled to claim pension. It was further held that the grant of pension does not depend upon anyone's discretion. It is only for the purpose of quantifying the amount having regard to service and other allied matters that it may be necessary for the authority to pass an order to that effect but the right to receive pension flows to the officer not because of any such order but by virtue of the rules. This view was reaffirmed in State of Punjab v. Iqbal Singh (1976) 2 SCC 1, (1976) 2 LLJ 377.”
8.It is thus a hard earned benefit which accrues to an employee and is in the nature of “property”. This right to property cannot be taken away without the due process of law as per the provisions of Article 300-A of the Constitution of India.” The Court further held, in paragraph 14, that :
“14.The fact remains that there is an imprimatur to the legal principle that the right to receive pension is recognised as a right in “property”. Article 300-A of the Constitution of India reads as under:
“300-A. Persons not to be deprived of property save by authority of law.—No person shall be deprived of his property save by authority of law.” Once we proceed on that premise, the answer to the question posed by us in the beginning of this judgment becomes too obvious. A person cannot be deprived of this pension without the authority of law, which is the constitutional mandate enshrined in Article 300-A of the Constitution. It follows that attempt of the appellant to take away a part of pension or gratuity or even leave encashment without any statutory provision and under the umbrage of administrative instruction cannot be countenanced.
15.It hardly needs to be emphasised that the executive instructions are not having statutory character and, therefore, cannot be termed as “law” within the meaning of the aforesaid Article 300-A. On the basis of such a circular, which is not having force of law, the appellant cannot withhold even a part of pension or gratuity.”
The legal character of pensionary benefits was similarly recognised in State of West Bengal v. Haresh C. Banerjee, (2006) 7 SCC 651. These authorities establish that a retiral benefit, once it has accrued, is the retiree's property, and its payment can neither be withheld nor deferred except in accordance with law. It is equally settled that where payment of an accrued retiral benefit is delayed for reasons attributable to the employer, the retiree is entitled to interest by way of compensation for the deprivation, and that the absence of a specific rule providing for interest is not, by itself, an answer to the claim. In S.K. Dua v. State of Haryana, (2008) 3 SCC 44, the Supreme Court held, in paragraph 11,
“11.…If there are Statutory Rules occupying the field, the appellant could claim payment of interest relying on such Rules. If there are Administrative Instructions, Guidelines or Norms prescribed for the purpose, the appellant may claim benefit of interest on that basis. But even in absence Statutory Rules, Administrative Instructions or Guidelines, an employee can claim interest under Part III of the Constitution relying on Articles 14, 19 and 21 of the Constitution. The submission of the learned counsel for the appellant, that retiral benefits are not in the nature of bounty is, in our opinion, well-founded and needs no authority in support thereof…”
We are, therefore, unable to accept, as a threshold bar, the respondent's contention that interest cannot be granted merely because the CCS (Leave) Rules contain no provision for interest on delayed leave encashment. The power to award interest for unjustified delay in disbursing a retiree's dues does not depend solely on an enabling rule; it is traceable to the constitutional guarantee against arbitrary State action.
The respondent's principal defence is one of characterisation: that the enhanced benefits were not entitlements accrued on the dates of retirement but a fresh benefit brought into existence only by the policy decision reflected in Council Resolution No. 08 (Personnel) and the Office Order dated 25.09.2023, so that there was no pre-existing sum that could be said to have been "withheld", and no administrative delay. We are unable to accept this characterization on the facts of this case. The respondent's own record shows that the transition from the DTL scales to the CCS (Revised Pay) Rules was recognized by the respondent long before 2023. Office Order No. SO(E)/5084/SA-III dated 05.09.2016 recorded that, after notification of the 2016 Regulations, the salary of NDMC employees was to be governed by the CCS (Revised Pay) Rules; the Office Order dated 27.12.2017 reiterated that the DTL scales would operate only up to 06.04.2016; and Office Order No. D-233/PA/Dir.(P)/2017 dated 05.09.2017 recorded that salary would be re-fixed in the CPC scales with effect from 07.04.2016 and that arrears with effect from 01.01.2016 would be calculated accordingly. The substantive entitlement to the revised scales, and to the consequential re-fixation of retiral benefits, thus stood recognized from 01.01.2016; what remained was its quantification and disbursement, which the respondent deferred by its own indecision until 2023-2024. A recognized, retrospective entitlement does not cease to be such, nor does delay in its payment cease to be delay, merely because the formal sanction was issued at a later date. To that extent, the reliance placed by the respondent on Param Singh v. State of U.P., Special Appeal No. 1163/2018, decided on 19.11.2018, and C.L. Devgun v. NDMC, 2008 SCC OnLine Del 1270, on the principle of judicial restraint in matters of policy is misplaced. The applicants do not assail the policy decision to migrate to the 7th CPC scales; on the contrary, they accept and rely upon it. Their grievance is confined to the consequence of the respondent having implemented that policy retrospectively while withholding the monetary benefit long after it had become due. That is not an invitation to review policy; it is a claim for interest on delayed payment, which lies squarely within the Tribunal's jurisdiction.
So far as the differential gratuity is concerned, the measure of the applicants' entitlement to interest is, in our view, furnished by the very instrument on which the respondent relies. The Office Memorandum dated 22.01.1991, referred to in the counter, provides that where gratuity already paid is enhanced on account of revision of emoluments or liberalization of the gratuity provisions, interest is payable where the arrears of gratuity are delayed beyond three months from the date of the order revising the emoluments or liberalizing the rules. The respondent cannot invoke that Office Memorandum to resist the claim and simultaneously ignore the liability it fixes. We accept, in agreement with the respondent's reliance on Jagdish Kumar v. Union of India, 2011 SCC OnLine CAT 2245, and consistently with the Office Memorandum dated 22.01.1991, that where differential gratuity arises on account of a later revision, interest does not run automatically from the date of retirement, because the differential could not be ascertained until the revision took effect, but it does not follow that no interest is payable at all. Under the Office Memorandum, and under the principle that interest on delayed gratuity is not a matter of grace, the Supreme Court in H. Gangahanume Gowda v. Karnataka Agro Industries Corpn. Ltd., 2003 (3) SCC 40, held as under :-
“7.…Payment of gratuity with or without interest, as the case may be, does not lie in the domain of discretion but it is a statutory compulsion. Specific benefits expressly given in a social beneficial legislation cannot be ordinarily denied. Employees on retirement have valuable rights to get gratuity and any culpable delay in payment of gratuity must be visited with the penalty of payment of interest was the view taken in State of Kerala v. M. Padmanabhan Nair (1985) 1 SCC 429, (1985) 50 FLR 145…” That case arose under Section 7 of the Payment of Gratuity Act, 1972 and we are relying upon it by analogy on the question of delay, the liability to pay interest crystallized once the arrears remained unpaid beyond three months from the date of the order sanctioning the retrospective revision. We hold accordingly.
So far as leave encashment is concerned, we have already held in paragraph 21 that the absence of a provision in the CCS (Leave) Rules is not a complete answer to a claim for interest founded on unjustified delay. The Department of Pension and Pensioners' Welfare Office Memorandum No. 38/64/98-P&PW(F) dated 05.10.1999 and the updated DoPT FAQs dated 30.08.2022, relied on by the respondent, establish no more than that the leave rules do not themselves provide for interest; they do not, and cannot, oust the constitutional power recognised in S. K. Dua (supra) to compensate for arbitrary delay. Further, the applicants have demonstrated an internal inconsistency in the respondent's own action: while pension was revised by application of the multiplying factor of 2.57, leave encashment and gratuity in the case of retired employees continued for a considerable period to be computed on the unrevised 6th DTL salary, with the balance released only in 2024. Leave encashment being linked to the emoluments admissible on retirement, there was no justification for computing it on a basis that the respondent had itself abandoned for pension. The delay in paying the correctly computed leave encashment is, therefore, established and is attributable to the respondent.
In the light of the above, our conclusion on the correct legal position is as follows. First, the differential gratuity and leave encashment paid to the applicants in 2024 represent the delayed disbursement of benefits that flowed from an entitlement recognised with retrospective effect from 01.01.2016, and not a fresh benefit created for the first time in 2023. Secondly, the applicants are not entitled to interest computed from their respective dates of retirement or from 01.01.2016, because the differential could not be quantified before the retrospective revision took effect. Thirdly, applying the Office Memorandum dated 22.01.1991 and the principles noticed above, the applicants are entitled to simple interest on the differential gratuity and on the differential leave encashment for the period commencing on the expiry of three months from the date of the Office Order dated 25.09.2023 (by which the retrospective revision was sanctioned and the differential became payable) and ending on the respective dates of actual payment. We consider it appropriate to fix the rate of such interest at simple interest at rate applicable to General Provident Fund balances for the relevant period.
The Original Application is accordingly allowed in part. The respondent - NDMC is directed to compute the interest payable to each applicant in terms of paragraph 25 above and to disburse the same within a period of 12 weeks from the date of receipt of a certified copy of this order. In the event the amount is not paid within the period so fixed, it shall carry further simple interest at 10 % per annum from the date of default until realization.
All pending MAs, if any, shall stand disposed of. There shall be no order as to costs.