The court ruled that interest is compensatory in nature and must follow when an employee is deprived of their rightful money. Delay in disbursement of retiral benefits due to pending inquiry entitles the exonerated employee to interest from the date immediately following the date of retirement.

The Bombay High Court held that the petitioner was entitled to interest on delayed payment of retiral benefits, as the payment was deemed due from the day following retirement (01.06.2017) and not from the date of exoneration. The court rejected the contention of a three-month interest-free period post-exoneration.

Final Direction: The court directed the respondent corporation to pay interest at the rate of 10% per annum on the delayed retirement benefits from 01.06.2017 until the actual date of payment in 2019, with compliance required within four weeks from the date of the judgment.

Acts and Sections Discussed:

1. Constitution of India, 1950 – Article 226 – Writ of Mandamus – Direction for Payment of Interest on Delayed Retiral Benefits

2. Payment of Gratuity Act, 1972 – Gratuity Payable on Termination of Employment After Continuous Service

3. Pension Rules, 1953 of the Municipal Corporation of Greater Mumbai – Rule 55A(1) – Interest on Delayed Payment of Gratuity – Rule 55A(7) – Payment of Gratuity on Exoneration Deemed Due on Day Following Retirement

Subjects: Interest – Delayed Payment – Retiral Benefits – Departmental Inquiry – Exoneration – Gratuity – Pension Rules – Constitutional Remedy – Mandamus – Administrative Lapse

Nature of Litigation: The petitioner filed a writ petition under Article 226 of the Constitution of India seeking a direction for payment of interest on delayed retiral benefits from the Municipal Corporation of Greater Mumbai.

Relief Sought: The petitioner sought a writ of mandamus directing the respondent corporation to pay interest on the delayed payment of retirement benefits in accordance with law.

Reason for Filing the Case: The retirement benefits of the petitioner were withheld due to a pending departmental inquiry, which later resulted in the petitioner’s exoneration.

Previous Decisions: The National Commission for Scheduled Castes recommended setting aside the departmental inquiry and immediate payment of pending dues on 24.09.2019. The respondent exonerated the petitioner by order dated 03.10.2019.

Issues:

1. Whether the petitioner was entitled to interest on delayed payment of retiral benefits after exoneration from the departmental inquiry?

2. What should be the quantum of interest on such delayed payments?

Submissions/Arguments:

1. Petitioner’s Counsel: a. Argued that retirement benefits became due immediately following the date of retirement, and delay due to pending inquiry justified interest. b. Cited Rule 55A(7) of the Pension Rules, 1953, deeming payment due from the day following retirement in case of exoneration. c. Demanded interest at the rate of 18% per annum.

2. Respondent’s Counsel: a. Contended that interest-free period of three months should be calculated from the date of exoneration. b. Cited Rule 55A(1) of the Pension Rules, allowing three months’ time for payment without interest.