STATE OF KERALA AND ORS. versus M. PADMANABHAN NAIR

Citation: [1985] 2 S.C.R. 476 · Decided: 17-12-1984 · Supreme Court of India · Bench: V.D. TULZAPURKAR · Disposal: Dismissed

Judgment (excerpt)

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476 
STATE OF KERALA AND ORS. 
• 
v. 
M. PADMANABHAN NAIR 
17th December, 1984 
[V.D. TULZAPURKAR AND V. BALAKRISHNA ERADI, JJ.j 
Se1vice Law-Liquidated damages by way of penal interest for delay in 
payment of pension and gratuity due-State Government is vicariously liable to 
pay interest at the current market rate till actual payment for the culpable 
neglect of the Treasury Officer to discharge his duty fJ/ issuing the Last Pay 
Certificate under Rule 186 of the TreaJury Code-Supreme Cf!Urt cannot Inter-
fere and grant enhanced rate of Interest in the absence of a cross objection 
against lower rate of interest allowed by the trial Court thtlll claimed and there· 
by acquiesing in the decre'!. 
The respondent retired from the ·service of the appellant 
~tate on 
19.S.1973. 
His pension and gratuity were ultimately paid to hin1 on 
14.8.75 i.e. after a delay t'f more than twO years and three months. A suit 
for the recovery of interest at the rate of 12% per annum by way' of 
Jiquidated damages for the delayed paymeut 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 spa ciaI 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 disburse-
ment thereof must b~ visite<J with the penalty of payment of interest at the 
current market rate till actual payment. [477C-D] 
1.2 
In the instant case 1 though the respondent claimed 12% interest 
and unfortunately Disirict Court aliowed 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 case bad bec.1 de!ay!!d by the concerned officer for 
•H 
wbitb neither any justification or explanatioQ had been given. 
The claim 
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KBRALA v. M.P. NAIR (Tulzapurkar, J.) 
477 
for interest is therefore, in order and the State Government has rightly been 
saddled with a liability for the culp:i.ble neglect in the discharge of his duty 
by the District Treasury Officer who delayed the issuance of the LPC. 
(478A-B, D] 
CIVIL APPBLLATE JURBDICTION : Special Leave Petition Civil 
No. 9425 of 1984. 
A 
From the Judgment and Order dated 1.11 .83 of the Kerala 
B 
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 Govenment 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 Certi-
ficate) from the concerned Departments but both these docu-
ments 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 lhe process of collecting the requisite infor-
mation 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 followmg day and pension 
at the expiry of the following month. The necoss,ty 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 t ese 
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 snch culpable delay 
in the settlement of pension and gro

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