Salaries & Pensions Are Rightful Entitlements Of Government Employees; Appropriate Interest Must Be Paid For Delayed Payment: Supreme Court

The Supreme Court observed that salaries and pensions are rightful entitlements of Government employees and the Government which has delayed the payment of salaries and pensions should be directed to pay interest at an appropriate rate.

The Andhra Pradesh High Court had allowed a Public Interest Litigation filed by a former District and Sessions Judge and directed the (i) payment of the deferred salary for the months of March-April 2020 together with interest at the rate of 12% per annum and (ii) payment of deferred pension for the month of March 2020 with a similar rate of interest.

In appeal before the Apex Court, the State Government restricted its challenge against the High Court judgment only to the component of interest. The state contended 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 bench comprising Justices DY Chandrachud and MR Shah, taking note of the contentions raised by both sides, observed:

"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. Salaries in other words constitute the rightful entitlement of the employees and are payable in accordance with 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 recognised by the applicable rules and regulations which govern the service of the employees of the State.

The court noted that the State Government has complied with the directions of the Court for the payment of the outstanding dues in two tranches. The court observed  that the rate of 12% per annum which has been fixed by the High Court should be suitably scaled down.

"While learned counsel for the respondents submits that the award of interest was on account of the action of the Government which was contrary to law, we are of the view that the payment of interest cannot be used as a means to penalize the State Government. 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 court said.

Disposing the appeal, the bench directed that in substitution of the interest rate of 12% per annum which has been awarded by the High Court, the Government of Andhra Pradesh shall pay simple interest computed at the rate of 6% per annum on account of deferred salaries and pensions within a period of thirty days.

CASE: State of Andhra Pradesh  vs.Dinavahi Lakshmi Kameswari [Civil Appeal No 399 of 2021]

CORAM: Justices DY Chandrachud and MR Shah

COUNSEL: Sr. Adv Shekhar Naphade, Adv Mahfooz Ahsan Nazk, Adv Yelamanchili Shiva Santosh Kumar

CITATION: LL 2021 SC 113

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