Supreme Court: Salaries & Pensions Are Rightful Entitlement of Govt. Employees Appropriate Interest Be Given On Delayed Payment

Supreme Court: Salaries & Pensions Are Rightful Entitlement of Govt. Employees Appropriate Interest Be Given On Delayed Payment

The Supreme Court (SC) bench comprising of Justices DY Chandrachud and MR Shah, observed in the case titled State of Andhra Pradesh [Appellants] v. Dinavahi Lakshmi Kameswari [Respondents], that salaries and pensions are rightful entitlements of Government employees.

The SC bench stated that the Government which has delayed the payment of salaries and pensions should be directed to pay interest at an appropriate rate. It added, "There can be no gainsaying the fact that the Government which has delayed the payment of salaries and pensions should be directed to pay interest at an appropriate rate."

The litigation background of the case is that the Andhra Pradesh High Court (HC) had allowed a Public Interest Litigation (PIL) filed by a former District and Sessions Judge. It directed the payment of the deferred salary for the months of March-April 2020 together with interest at the rate of 12 percent p.a. and payment of deferred pension for March 2020 with a similar rate of interest.

The Andhra Pradesh Government (State Government) approached the Apex Court challenging the interest sanctioned by the HC.

On behalf of appellants, it was submitted that the decision to defer the payment of salaries and pensions was taken due to the precarious financial position in which the State found itself as a consequence of the pandemic. It submitted that the State had acted bona fide and there would be no reason to saddle it with the liability to pay interest.

The respondents urged that the intervention of the HC must be understood in the perspective of the background facts.

The State had intervened by issuing an administrative order in exercise of its powers under Article 162 of the Constitution without enacting proper legislation for the deferment of salary or, as the case may be, pensions.

The appeal was filed before the SC and it heard the submissions of the parties at length and stated, "The direction for the payment of the deferred portions of the salaries and pensions is unexceptionable. Salaries are due to the employees of the State for services rendered."

The Top Court added, "Salaries in other words constitute the rightful entitlement of the employees and are payable by law. Likewise, it is well settled that the payment of pension is for years of past service rendered by the pensioners to the State. Pensions are hence a matter of a rightful entitlement recognized by the applicable rules and regulations which govern the service of the employees of the State."

The Court further observed that the State Government has complied with the directions of the HC for the payment of the outstanding dues in two tranches. It added that the rate of 12 percent p.a. that has been fixed by the HC should be suitably scaled down.

The bench while disposing off the petition, directed that in substitution of the interest rate of 12 percent p.a. that has been awarded by the HC. It directed that the State Government shall also pay simple interest computed at the rate of 6 percent p.a. on account of deferred salaries and pensions within 30 days.