Financial Inability No Defence In Withholding Terminal Benefits Of Retired Employees: Andhra Pradesh High Court
The High Court held that once terminal benefits become payable, the employer is bound to release them and “mere financial incapacity or paucity of funds cannot be a valid defence for non-fulfilment of such statutory obligations.
The Andhra Pradesh High Court has ruled that an employer cannot withhold terminal benefits of retired employees on the grounds of financial incapacity, observing that pension and gratuity are not matters of charity but legally enforceable rights flowing from statutory and constitutional protections.
The Court was hearing four writ petitions filed by retired employees seeking release of their gratuity, leave encashment, and other terminal dues, which had remained unpaid for several years despite their retirement without any disciplinary or legal impediment.
A Bench comprising Justice Maheswara Rao Kuncheam held that the respondents, being “State” within the meaning of Article 12 of the Constitution, were bound by statutory obligations and could not evade liability on grounds of poor finances. The Court observed that “…a mere financial incapacity or paucity of funds cannot be a valid defence for non-fulfilment of such statutory obligations, more particularly, when the employees rendered their services, as such, they are entitled to terminal benefits under law.”
Advocate Peeta Raman represented the petitioners, while Advocate A Rajendra Babu represented the respondents.
Background
The petitioners had initially joined the Krishna District Cooperative Central Bank as Cadre Secretaries, later deputed to various PACS. Their designation subsequently changed to Secretary and later Special Category Assistants when they were reabsorbed into DCCB service in 2009 and 2010.
Upon superannuation between 2009 and 2013, all petitioners retired without any pending criminal or disciplinary proceedings. However, their gratuity and leave encashment remained unpaid because the PACS had not remitted their share of terminal benefit contributions as required under a Memorandum of Intent dated 11.01.2013.
Despite repeated directions from DCCB to PACS to deposit their share, no payment was made. The petitioners, all senior citizens, approached the High Court seeking the release of dues with interest.
Court’s Observation
The Andhra Pradesh High Court examined the Memorandum of Intent, which laid down a clear scheme for sharing gratuity and leave encashment liability between PACS, DCCB, and APCOB. The Court held that the petitioners had rendered unblemished service and were entitled to their statutory benefits under the Payment of Gratuity Act, 1972.
Referring to Section 4 and Section 7 of the Act, the Court held that the employer is bound to determine and release gratuity within 30 days, failing which statutory interest becomes payable. The Court further cited the Supreme Court’s rulings in H. Gangahanume Gowda v. Karnataka Agro Industries Corp, Gagan Bihari Pristy v. Paradeep Port Trust, Deokinandan Prasad, D.S. Nakara, and Sudhir Chandra Sarkar, reiterating that pension and gratuity are statutory rights and a form of “socio-economic justice.”
The bench emphasised that pension and terminal benefits are “property” under Article 300A and that the deprivation of such benefits violates Article 21. The Bench further noted that financial difficulty cannot override statutory obligations.
Relying on precedents, the Bench reiterated that the State acts in a fiduciary capacity and cannot deny dues to employees who have served through their working life. The Court quoted Kapila Hingorani v. State of Bihar, holding that the State cannot deny statutorily guaranteed amounts on account of financial distress.
The Court also noted the advanced age of the petitioners, “septuagenarians, octogenarians and nonagenarians”, and observed that withholding terminal benefits for more than 14 years amounted to a violation of dignity and right to livelihood, particularly when no legal impediment existed.
Conclusion
Holding the DCCB and PACS jointly and severally liable, the High Court directed the release of the entire terminal dues, including gratuity and leave encashment, within eight weeks. The Court further directed the payment of interest @ 10% per annum from the date the dues became payable till actual payment, with liberty to DCCB to recover the PACS share subsequently.
Cause Title: Chittiboyina Bharata Rao v. Krishna District Cooperative Central Bank Ltd & Others (Neutral Citation: APHC010243682016)
Appearances
Petitioners: Peeta Raman, Advocate
Respondents: A. Rajendra Babu, Advocate
