Terminal benefits of retired employees cannot be withheld by employers on grounds of financial incapacity

Andhra Pradesh High Court Orders Immediate Payment of Withheld Terminal Benefits to Retired Employees. Court Mandates Krishna District Cooperative Central Bank and PACS to Release Terminal Benefits with 10% Interest, Upholding Employees' Rights Under Articles 21 and 300-A

In a significant judgment, the Andhra Pradesh High Court has directed the Krishna District Cooperative Central Bank Ltd. (DCCB) and the Primary Agricultural Cooperative Society (PACS) to immediately release terminal benefits, including gratuity and leave encashment, to retired employees. The court ordered the payment of these benefits with an interest rate of 10% per annum from the date they became due, emphasizing that financial incapacity is not a valid defense for withholding statutory obligations.

Justice Maheswara Rao Kuncheam, in his ruling, highlighted the statutory nature of employees' rights to receive gratuity and other terminal benefits under the Payment of Gratuity Act, 1972, and the constitutional protection of these rights under Articles 21 and 300-A of the Constitution of India. The judgment was delivered in response to writ petitions filed by Chittiboyina Bharata Rao and others, who had been deprived of their terminal benefits since their retirement due to the financial non-cooperation between DCCB and PACS.

The court made it clear that both DCCB and PACS are jointly and severally liable for the payment, rejecting the argument of financial incapacity as a defense. The judgment draws on a range of precedents, including landmark Supreme Court rulings affirming that pension and terminal benefits are not mere bounties but rights protected by the Constitution.

Justice Kuncheam's order mandates the respondents to complete the payment process within eight weeks and authorizes DCCB to recover the appropriate amounts from PACS if necessary. Additionally, the court imposed costs of Rs. 10,000 on the respondents for each writ petition, underscoring the seriousness of the lapse in fulfilling their statutory obligations.

The judgment serves as a strong reminder to state entities and employers about their unwavering duty to honor statutory and constitutional rights of employees, particularly senior citizens, whose right to livelihood must be protected.

Bottom Line:

Terminal benefits of retired employees cannot be withheld by employers on grounds of financial incapacity or non-payment of shared liabilities by other entities. Employees' right to gratuity and other benefits is statutory and forms an integral part of their right to livelihood under Article 21 of the Constitution of India.

Statutory provision(s): Article 21, Article 300-A, Payment of Gratuity Act, 1972 Sections 4 and 7, Article 12 of the Constitution of India.

Chittiboyina Bharata Rao v. Krishna District Cooperative Central Bank Ltd., (Andhra Pradesh) : Law Finder Doc Id # 2802809