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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

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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.

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     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