COMPUTATION OF INTEREST OVER DELAYED PAYMENTS OF RETIRED PERSONNAL

Nearly one-eighth of world's elderly population lives in India . The vast majority of this population is not covered by any formal pension scheme. Instead, they are dependent on their own earning and transfer from their children. These informal systems of old age income security are imperfect and are becoming increasingly strained. People above the age of 60 years have grown at an annual rate of growth of 3.8 per cent. (75.9 million in 2001 and 55.3 million in 1991) during the period 1991-2001, as against the annual growth of 1.8% for the general population. Only about 12 per cent. of the working population in India is covered by some form of retirement benefit scheme. Besides the problem of limited coverage, the existing mandatory and voluntary private pension system is characterised by limitations like fragmented regulatory framework, lack of individual choice and portability and lack of uniform standards. High incidence of administrative cost and low real rate of returns characterise the existing system, which has become unsustainable. These problems in our retirement benefit scheme are clearly evident from the cases of delayed pension being made to retired personnel. The existing system of pensions which leaves more than 88 per cent. of Indian workforce uncovered is unlikely to act as a social security umbrella for the ageing Indians. This article relates to the legal incidence of delayed payments being made to retired personnel. Criminal liability in case of retirement benefits only arises in case of dishonest misappropriation of property as mentioned in section 403 of the Indian Penal Code, 1860.

403. Dishonest misappropriation of property.—Whoever dishonestly misappropriates or converts to his own use any movable property, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.

In most of the cases of retirement benefits criminal liability is rarely possible as government can rarely misuse property. Further, the government is not a physical person and therefore misappropriation of property is only possible in case of misuse of property by a government officer. This situation, however, rarely arises in case of retirement benefits.

However, there arises a civil liability in case a delayed payment is made to retired personnel without reasonable explanation and after the reasonable lapse of time. Pension benefits are a legitimate right of the retired employees. It is the bounden duty of the government to provide retirement benefits in time. In such circumstances there arises a liability to pay the interest on overdue and delayed payments to retired personnel. If there is any unreasonable and inordinate delay in the payments then damages are required to be paid by the way of penal interest as a penalty. However, if there is a reasonable delay in the payment, interest is required to be paid at the usual rate. The reasons for reasonable delay in the payment can be of any type, and has to be judged in individual case. Thus, the amount of interest is proportional to the delay in payment. As much is the unreasonable and inordinate delay in the payments, so much is the penal interest as a penalty.

Legal Position

In the case of Dr. Uma Agrawal v. State of U.P. , 1999 (2) UPLBEC 1006, the Hon'ble Supreme Court expressed its anguish and displeasure over the delayed payment and disbursement of post retiral dues. It has been observed by the Court that necessary formalities should be completed by the department itself in advance for disbursement of retiral benefits. The authorities ought to initiate necessary formality two years before the date of retirement of the government servant and process should be completed well in advance before the date of his retirement.

The Supreme Court in State of Kerala v. M.Padmanabhan Nair, AIR 1985(1) SCC 429 ruled that the necessity for prompt payment of retiral dues to a government servant immediately after his/her retirement cannot be over emphasized and it would not be unreasonable to direct that the liability to pay penal interest on the dues at current market rate should commence at the expiry of two months from the date of retirement.

Ex.Capt. R.S. Dhull v. State of Haryana, 1998 (4) SCC 379, the Supreme Court on account of delayed payment of gratuity and provident fund had allowed 12% interest on the withheld amount of GPF, gratuity, etc., from the dates amount became payable after superannuation.

In Vijay L. Mehrotra v. State of U.P ., 2001 (9) SCC 687, Supreme Court again deprecated the delayed payment of post retiral dues and awarded simple interest at the rate of 18% from the date of retirement to the date of actual payment.

In H. Gangahanume Gowda v. Karnataka Agra Industries Corporation Limited , 2003 (3) SCC 40, Hon'ble Supreme Court had shown his displeasure on account of delayed payment of gratuity and employer was directed to pay interest at the rate of 10% on the amount of gratuity to which the employee was entitled from the date it became payable till the date of actual payment of amount of gratuity.

The Allahabad High Court in the case of Inderjeet Singh v. State of U.P., W.P.No.1133 of 2001 decided on 16-10-08, came to conclusion that in the present case neither any steps were taken by the respondents nor the petitioner was called on to complete some formality or deficiency, well in advance, as such, the petitioner does not seem to be at fault and seems to be entitled for payment of interest over the delayed payment of dues in question. The Court strongly directed to the State of U.P. that it shall be appropriate for the State Government and its local bodies to take Care of the retiring employees and initiatives should be taken for payment of post retiral dues along with interest @ 12 per cent. from the date of the actual payment of dues in question and to issue government order for future to all.

Conclusion

Pensionery benefits provide security to individuals even after the expiry of terms of their service. These retirement benefits are the brightest incentive for people to join public sector organizations. However, if this incentive suffers from so many drawbacks the common man is likely to lose the faith in the government offices and move towards private sectors. Thus, in order to eradicate such a problem pension reforms are the need of the hour in order to make timely payments to the officials and to make people regain their faith in the government offices. With such a step the Indian Government is also likely to give an answer to the criticism of lethargic compliance of law in India . Moreover, this would also serve as a verdict of judicial activism where the judiciary has set aside executive authorities by making them do their work within the framework of law.

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*University of Petroleum and Energy Studies, Dehradun