Sunday, 28 February 2021

Whether the state is liable to pay interest to government servant for delayed payment of salaries and pension?

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 State

Government has complied with the directions of this Court for the payment

of the outstanding dues in two tranches. Insofar as the interest is concerned,

we are of the view 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.

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal No 399 of 2021


The State of Andhra Pradesh Vs Smt Dinavahi Lakshmi Kameswari 

Dated: February 8, 2021

1 Leave granted.

2 This appeal arises from a judgment and order of the Andhra Pradesh High

Court dated 11 August 2020. The State of Andhra Pradesh issued GOMs No.

26 on 31 March 2020 and GOMs No. 37 on 26 April 2020. The backdrop for

the orders was the outbreak of Covid-19 and the financial crises which had

resulted as a consequence. The revenues of the State of Andhra Pradesh

were impacted by the onset of the pandemic. The financial position of the

State finds reference in the judgment of the High Court, which has been

extracted below:

“The States’ own revenue consisting of tax revenue and nontax

revenue have shown a precipitous decline of 52% i.e. Rs

7593 crores in first quarter of 2020-21 as compared to 2019-

20. The receipts were only Rs 7089 crores against Rs 14,682

crores of 2019-20. The States’ own revenue have not shown

any appreciable improvement in the month of July, 2020 also

as the decline is to an extent of 49% amounting to Rs 2,129

crores for the first 20 days of the month of July, 2019.”

The above extract in the judgment of the High Court is based on the

submissions of the State.

3 By GOMs No. 26 of 31 March 2020, the State Government determined that it

was necessary, as an urgent measure, to provide for a deferment of the

salaries and pensions which it was obligated to pay. Consequently, paragraph

5 stipulated as follows:

“5. Government, after careful consideration of the situation

arising due to the COVID-19 outbreak, the economic

consequences of the lock down, the cessation of the revenue

inflows and extra burden imposed on the State’s resources to

contain the epidemic & to provide relief to the people

affected/likely to be affected, hereby orders for the deferment

of Salaries/Wages/Remuneration/Honorarium/Pensions on gross

basis, as per the following pattern:

(i) There shall be (100)% deferment in respect of

Hon’ble C.M./Hon’ble Ministers/Hon’ble M.L.As/

Hon’ble M.L.Cs, Chairperson & Members of all

Corporations, elected representatives of all Local

Bodies & people holding equivalent posts, as per the

orders issued from time to time.

(ii) There shall be (60)% deferment in respect of All India

Service Officers viz., IAS, IPS and IFS;

(iii) There shall be (50)% deferment in respect of all

other Government employees, including workcharged

employees & persons engaged under the

category of direct individuals professions & through

3rd party, except Class-IV Employees;

(iv) There shall be (10)% deferment in respect of Class-

IV, Out-sourcing, Contract and the Village & Ward

Secretariat employees;

(v) The deferment mentioned in respect of Para 5(i), (ii),

(iii) & (iv) supra shall be made applicable mutatismutandis

in respect of the retired employees in the

respective categories.


(vi) The above deferment shall be equally applicable to

the serving & retired employees of all

PSUs/Government aided Institutes/Organizations/

Universities/Societies/Autonomous bodies/Semi

autonomous bodies, etc. in respect of their Salaries/

Wages / Honorarium / Pensions.”

4 It is also provided that the above orders would come into force in respect of

the salary, wages, remuneration and pensions for the month of March 2020,

payable in April 2020 and would continue to remain in force until further

orders.

5 On 4 April 2020, there was a modification by the State Government in terms

of GOMs No.27 which provided for the payment of full salary to the

employees of three departments, namely, (i) medical and health department;

(ii) police department; and (iii) sanitation workers working in rural local

bodies or urban local bodies, such as Nagar Panchayats, Municipalities and

Municipal Corporations.

6 On 26 April 2020, GOMs No.37 provided for a further modification under

which the Government, having noticed the hardships which were being faced

by the pensioners, directed the payment of full pension to all categories of

pensioners.

7 A writ petition under Article 226 of the Constitution was filed before the High

Court by a former District and Sessions Judge. The gravamen of the

grievance was that salaries and pensions are due as a matter of right to

employees and, as the case may be, to former employees who have served the State. Consequently, a direction was sought in the petition to the State

Government to pay the outstanding salaries and pensions which had

remained due.

8 The High Court by its judgment and order dated 11 August 2020 held that:

(i) The PIL at the behest of a public spirited citizen was maintainable, the

petitioner before the High Court having instituted the proceedings pro

bono without any personal interest;

(ii) Pension is payable to the retired employees for the past services

rendered by them to the State;

(iii) Under Rule 9 of the Andhra Pradesh Revised Pension Rules 1980,

pension can only be withheld or deferred under specific circumstances

such as if the pensioner is found guilty of grave misconduct or

negligence during employment in a departmental or judicial

proceeding. These circumstances had not been established;

(iv) Article 72 of the Andhra Pradesh Financial Code deals with the payment

of salary to employees of the State, and provides that salary is payable

on the last day of every month;

(v) The entitlement to the payment of salary is intrinsic to the right to life

under Article 21 and to the right to property which is recognized by

Article 300A of the Constitution;


(vi) The State could not by means of a government order have provided for

the deferment of salaries and pensions without following recourse to

law.

(vii) Although the GOMs make reference to the state plan under Section 23

of the Disaster Management Act, 2005, none of the provisions of the

said Act provide for deferred payment of salaries or pensions.

9 On the above premises, the High Court directed (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.

10 Aggrieved by the judgment of the High Court, the Government of Andhra

Pradesh moved these proceedings under Article 136 of the Constitution. The

State Government clarified in its Special Leave Petition that it was restricting

its challenge only to the component of interest which had been imposed by

the judgment and order of the High Court. On 18 November 2020, while

considering the Special Leave Petition at the preliminary hearing, the Court

issued a direction to the effect that the deferred portion of the payments on

account of salaries, pensions and honoraria due to the employees or, as the

case may be, to former employees be paid in two equal tranches. The first

was directed to be paid on or before 15 December 2020, while the second

was directed to be paid on or before 15 January 2021. The direction in regard

to the payment of interest was stayed by this Court.


11 In pursuance of the above directions, the Government of Andhra Pradesh has

disbursed the full amount of salary and pensions which came to be deferred

by the GOMs which have been noted earlier. The only issue which now

survives for determination is the liability to pay interest.

12 Mr Shekhar Naphade, learned senior counsel appearing on behalf of the

appellants with Mr Mahfooz Ahsan Nazki, learned counsel, submits 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. Mr Naphade submitted that immediately after the issuance

of first GOMs, a relaxation was provided for front-line workers such as those

in the police, health and sanitation departments. Moreover, by a subsequent

relaxation a direction was issued for payment of pensions to the pensioners.

Hence, it has been submitted that the State had acted bona fide and there

would be no reason to saddle it with the liability to pay interest. Alternately,

it has been submitted that if interest is directed to be paid, the payment

should be confined only in regard to the employees of the State falling in

categories 3, 4 and 5 of the GOMs dated 31 March 2020.

13 Opposing the submissions of Mr Naphade and Mr Nazki, Mr Yelamanchili

Shiva Santosh Kumar, learned counsel appearing on behalf of the

respondents, urged that the intervention of the High Court must be

understood in the perspective of the background facts, namely, that the

State had intervened by issuing an administrative order in exercise of its

powers under Article 162 of the Constitution without enacting a proper

legislation for the deferment of salary or, as the case may be, pensions.


Learned counsel highlighted the serious hardships which would have been

caused to pensioners as a result of the order of deferment and hence

submitted that the High Court is fully justified in entertaining the PIL and in

directing payment of interest at the rate of 12% per annum.

14 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 State

Government has complied with the directions of this Court for the payment

of the outstanding dues in two tranches. Insofar as the interest is concerned,

we are of the view 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.

15 We accordingly order and direct 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 from today. This direction shall, however in the facts and circumstances,

be confined to categories 3, 4, 5 and 6 of GOMs No 26 dated 31 March 2020.

We clarify that interest shall be paid to all pensioners of the State at the rate

of 6% per annum on the deferred portion, for the period of delay. Having

regard to the prevailing bank interest, the rate of 12% per annum which has

been fixed by the High Court, would need to be and is accordingly reduced.

16 The appeal is accordingly disposed of in terms of the above directions. There

shall be no order as to costs.

17 Pending applications, if any, stand disposed of.

….....…...….......………………........J.

[Dr Dhananjaya Y Chandrachud]

..…....…........……………….…........J.

[M R Shah]

New Delhi;

February 8, 2021


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