Interest on retiral benefits – Doctrine of restitution from due date when Employee exonerated in disciplinary inquiry
On 18.5.2017, the departmental inquiry was initiated against the Petitioner prior to his retirement on 31.5.2017 as Municipal Secretary.
On 3.10.2019, the Mumbai Municipal Corporation exonerated the petitioner.
The retiral benefits of gratuity, commutation of pension, earned leave, half pay leave, LTA and Ex-gratia were paid in November and December, 2019.
The petitioner claimed interest on retiral benefits from due date(s) and not from the date of exoneration in inquiry.
HELD that Rule 55A(7) of the Pension Rules of MCGM is in furtherance of the concept that money retained without right carries with it a right to interest. The intention of the said rule appears to compensate the employee for the retention of gratuity considering the uncertainty in the time of disposal.
Interest is not a penalty but it is the normal accretion on capital. When the retiral benefits are withheld or retained pending inquiry, the employee is entitled to interest from the due date of retirement and not from the date of exoneration in the inquiry.
This judgment sets a significant precedent, underscoring that employers cannot indefinitely withhold retirement benefits without repercussions. It reinforces the principle that employees, once exonerated, should not suffer financial losses due to administrative delays. The decision also highlights the importance of timely and fair resolution of disciplinary proceedings to prevent undue hardship to employees
Judgment dated 11.3.2025 of the Division Bench of the High Court of Bombay Writ Petition NO.1105 of 2025 of Narayan Pundlik Pathade Vs. Municipal Corporation of Greater Mumbai and others
