PETITIONER:
STATE OF KERALA AND ORS.
Vs.
RESPONDENT:
M. PADMANABHAN NAIR
DATE OF JUDGMENT17/12/1984
BENCH:
TULZAPURKAR, V.D.
BENCH:
TULZAPURKAR, V.D.
ERADI, V. BALAKRISHNA (J)
CITATION:
1985 AIR 356 1985 SCR (2) 476
1985 SCC (1) 429 1984 SCALE (2)959
ACT:
Service law–Liquidated damages by way of penal
interest for delay in payment of pension and gratuity due-
State Government is vicariausly liable to pay interest at
the current market rate till actual payment for the culpable
neglect of the Treasury Officer to discharge his duty of
issuing the Last Pay Certificate under Rule 186 of the
Treasury Code-Supreme Court cannot interfere and grant
enhanced rate of interest in the absence of a cross
objection against lower rate of interest allowed by the
trial Court than claimed and there by acquiesing in the
decree.
HEADNOTE:
The respondent retired from the service of the
appellant State on 19.5.1973. His pension and gratuity were
ultimately paid to him on 14.8.75 i e. after a delay of more
than two years and three months. A suit for the recovery of
interest at the rate of 12% per annum by way of liquidated
damages for the delayed payment was decreed by the District
Court allowing interest at 6% only. In appeal by the State
(there being no cross appeal) the High Court confirmed the
decree. Hence the special leave petition.
Dismissing the petition, the Court,
^
HELD: 1:1 Pension and gratuity are no longer any
bounty to be distributed by the government to its employees
on their retirement but have become under the decisions of
the Supreme Court, valuable rights and property in their
hands and any culpable delay in settlement and disbursement
thereof must be visited with the penalty of payment of
interest at the current market rate till actual payment
[477C-D]
1.2 In the instant case, though the respondent claimed
12% interest and unfortunately District Court allowed only
6% per annum, since the respondent acquiesced in his claim
being decreed at 6% by not preferring any cross objections
in the High Court, it would be improper for the Supreme
Court to enhance the rate to 12% per annum. [478C-D]
1.3 Under Rule 186 of the Treasury Code a duty is cast
on the Treasury officer to grant to every retiring
Government servant the last pay certificate which, in this
case had been delayed by the concerned officer for which
neither any justification or explanation had been given. The
claim
477
for interest is therefore in order and the State Government
has rightly been saddled with a liability for the culpable
neglect in the discharge of his duty by the District
Treasury Officer who delayed the issuance of the LPC.
[478A-B,D]
JUDGMENT:
CIVIL APPELLATE JURISDICTlON: Special Leave
Petition Civil No. 9425 of 1984.
From the Judgment and Order dated 1.11.83 of the
Kerala High Court in A.S. No. 10 of 1979.
P.K. Pillai for the petitioners.
The Order of the Court was delivered by
TULZAPURKAR, J. Pension and gratuity are no longer any
bounty to be distributed by the Government to its employees
on their retirement but have become, under the decisions of
this Court, valuable rights and property in their hands and
any culpable delay in settlement and disbursement thereof
must be visited with the penalty of payment of interest at
the current market rate till actual payment .
Usually the delay occurs by reason of non-production
of the L.P.C. (Last Pay Certificate) and the N.L.C. (No
Liability Certificate) from the concerned Departments but
both these documents pertain to matters, records whereof
would be with the concerned Government Departments. Since
the date of retirement of every Government servant is very
much known in advance we fail to appreciate why the process
of collecting the requisite information and issuance of
these two documents should not be completed atleast a week
before the date of retirement so that the payment of
gratuity amount could be made to the Government servant on
the date he retires or on the following day and pension at
the expiry of the following month. The necessity for prompt
payment of the retirement dues to a Government servant
immediately after his retirement cannot be over-emphasised
and it would not be unreasonable to diriect that the
liability to pay penal interest on these dues at the current
market rate should commence at the expiry of two months from
the date of retirement.
The instant case is a glaring instance of such
culpable delay in the settlement of pension and gratuity
claims due to the respondent who retired on 19.5.1973. His
pension and gratuity were ultimately paid to him on
14.8.1975, i e., more than two years and 3 months after his
retirement and hence after serving lawyer’s notice
478
he filed a suit mainly to recover interest by way of
liquidated damages for delayed payment. The appellants put
the blame on the respondent for delayed payment on the
ground that he had not produced the requisite L.P.C. (last
pay certificate) from the Treasury Office under Rule 186 of
the Treasury Code. But on a plain reading of Rule 1 86, the
High Court held-and in our view rightly-that a duty was cast
on the treasury Officer to grant to every retiring
Government servant the last pay certificate which in this
case had been delayed by the concerned officer for which
neither any justification nor explanation had been given The
claim for interest was, therefore, rightly, decreed in
respondent’s favour.
Unfortunately such claim for interest that was allowed
in respondent’s favour by the District Court and confirmed
by the High Court was at the rate of 6 per cent per annum
though interest at 12 per cent had been claimed by the
respondent in his suit. However, since the respondent
acquiesced in his claim being decreed at 6 per cent by not
preferring any cross objections in the High Court it could
not be proper for us to enhance the rate to 12 per cent per
annum which we were otherwise inclined to grant.
We are also of the view that the State Government is
being rightly saddled with a liability for the culpable
neglect in the discharge of his duty by the District
Treasury Officer who delayed the issuance of the L.P.C. but
since the concerned officer had not been impleaded as a
party defendant to the suit the Court is unable to hold him
liable for the decretal amount. It will, however, be for the
State Government to consider whether the erring official
should or should not be directed to compensate the
Government the loss sustained by it by his culpable lapses.
Such action if taken would help generate in the officials of
the State Government a sense of duty towards the Government
under whom they serve as also a sense of accountability to
members of the public.
S.R. Petition dismissed,
479