State’s Financial Constraints Not A Reason To Withhold Retirees’ Gratuity, Says Andhra Pradesh HC

The Andhra Pradesh High Court has provided relief to four retired employees, now septuagenarians, octogenarians, and even nonagenarians, in a decade-long legal battle by directing the state government and the authorities to release these retirees’ terminal benefits. 

The elderly petitioners retired between 2009 and 2013, but their employer denied them gratuity and leave encashment, despite their unblemished service tenure. This happened due to the internal row between two government bodies, including the Krishna District Cooperative Central Bank (DCCB) and a Primary Agricultural Cooperative Society (PACS). While hearing four writ petitions of the same nature together, Justice Maheswara Rao Kuncheam passed a common order and declared that withholding retirees’ terminal benefits by the employer was a violation of the petitioners’ constitutional rights.

Case Brief

The four petitioners (Chittiboyina Bharata Rao, P. Chandramouleswara Rao, Banda Siva Rama Krishna Prasad, and A. Sai Babu) joined DCCB as Cadre Secretaries. They were later allotted to PACS to the post of Secretary, where they worked until March 1, 2009, under PACS administrative control. However, due to administration needs and policy changes, they were called back to DCCB on March 2, 2009. All four employees worked with the DCCB until their retirement between June 2009 and November 2013.

Despite their unblemished service, they were denied terminal benefits because PACS didn’t release its share of benefits for the period they worked under it. In January 2024, DCCB issued a circular directing PACS to deposit its share based on the memorandum of intent regarding the matter, but PACS didn’t make the payment, orally citing financial incapacity as the reason.

Arguments

The petitioners’ counsel argued that withholding gratuity and leave encashment for the senior citizens had caused them “multifarious problems”. 

The non-payment has adversely affected retirees and their families physically, psychologically, and fiscally, and put their right to life in peril. He also submitted that the case was filed in 2016, and some of the petitioners may have already passed away.

The respondents’ counsel informed the court that DCCB has approved payment, but because PACS had not paid its part to them, they could not release the funds to these retirees.

Court Observation

The court analysed the arguments, referred to the previous similar cases, and noted non-payment of terminal benefits as a violation of the statutory mandate of the Payment of Gratuity Act, 1972.

The court said, “The respondents are liable to pay the statutory and mandatory entitlement i.e., terminal benefits, gratuity, etc., of the employee in terms of the provisions of Payment of Gratuity Act,1972., (hereinafter referred to as ‘Act’), which is a legislation enacted with a laudable object of ensuring social security to the working class.”

It further said: “The pension and terminal benefits payable to the employees upon superannuation age is a property under Article 300-A of the Constitution of India and it forms an integral part of right to livelihood guaranteed under Article 21 of the Constitution of India. Any deprivation, even of a portion of such an amount, cannot be countenanced, except in accordance with law.”

“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, the court held.

Court Judgement

The court held the Krishna District Cooperative Central Bank and PACS “jointly and severally” liable for the delay. It directed all the respondents, including the state government, to release the total terminal benefits to the petitioners or their family members. Further, it ordered them to pay interest at the rate of 10 per cent per annum from the date the amount became payable and to the actual date of payment. According to the order, the payment must be released to the retirees within eight weeks from the date of receiving a copy of the order. It also directed DCCB and PACS to pay Rs 10,000 to each of the petitioners towards the cost of the petition, while disposing of the case.