The Madras High Court has reaffirmed that terminal benefits such as leave encashment and provident fund constitute property under Article 300-A of the Constitution, and cannot be withheld without following due process of law. This judgment underscores the legal protection afforded to government employees' accrued benefits, even during suspension or pending disciplinary proceedings.
Background & Facts
The Dispute
The petitioner, A. Venugopal, a former Executive Engineer in the Agriculture Engineering Department, was placed under suspension on 28 November 2017, one day before his scheduled superannuation on 29 November 2017. The respondents withheld his terminal benefits, including encashment of earned leave, unearned leave, and special provident fund, citing pending disciplinary proceedings. Despite representations, the third respondent rejected his claim, insisting on a court order for disbursement.
Procedural History
The petitioner's grievance progressed through the following stages:
- 2017: Placed under suspension; superannuation withheld
- 2020: Representation submitted to the second respondent for terminal benefits
- 2021: Third respondent rejected the claim, demanding a court order
- 2021: Writ petition filed under Article 226 seeking quashing of the impugned order and disbursement of benefits
Relief Sought
The petitioner sought:
- Quashing of the third respondent's order dated 16 February 2021
- Directions to disburse encashment of leave salary, unearned leave, and special provident fund as per earlier court orders in similar cases
- Costs for forcing litigation despite settled law
The Legal Issue
The central question was whether the respondents could withhold terminal benefits such as leave encashment and provident fund without following due process of law, particularly when such benefits have been held to constitute property under Article 300-A of the Constitution.
Arguments Presented
For the Petitioner
The petitioner contended that:
- Terminal benefits are property under Article 300-A, as held in State of Jharkhand v. Jitendra Kumar Srivastava
- Withholding such benefits without due process violates constitutional protections
- The third respondent's insistence on a court order was arbitrary and contrary to settled law
- Earlier judgments of the Madras High Court in W.P.No.16098 of 2015 and W.P.(MD).No.1484 of 2016 had directed disbursement of similar benefits
For the Respondents
The respondents argued that:
- The third respondent's order was justified as it required court directions for disbursement
- The government had issued instructions to sanction benefits, but authorization from the third respondent was pending
- The petitioner's case was distinguishable as no court order had been obtained prior to the claim
The Court's Analysis
The Court examined the legal framework governing terminal benefits and their constitutional protection. Relying on the Supreme Court's decision in State of Jharkhand v. Jitendra Kumar Srivastava, the Court reiterated that pension and gratuity are not bounty but property, and their withholding requires due process of law under Article 300-A.
"It is thus hard earned benefit which accrues to an employee and is in the nature of 'property'. This right to property cannot be taken away without the due process of law as per the provisions of Article 300 A of the Constitution of India."
The Court also referred to its own precedents, including W.P.No.18392 of 2020 and W.A.No.1285 of 2019, which held that the government lacks authority to withhold accrued benefits in the absence of enabling statutory provisions. The impugned order was criticized for its dereliction of duty and irresponsible approach, as it compelled employees to approach the court despite settled law.
The Court emphasized that the third respondent's insistence on a court order was highly reprehensible, as it forced former employees to litigate for benefits that were rightfully theirs. This approach was deemed contrary to the principles of natural justice and constitutional protection of property.
The Verdict
The writ petition was allowed. The Court:
- Quashed the third respondent's impugned order dated 16 February 2021
- Directed the third respondent to disburse the petitioner's general provident fund, special provident fund, encashment of earned leave, and unearned leave within four weeks
- Imposed costs of Rs. 10,000 on the third respondent, payable to the High Court Legal Services Committee
What This Means For Similar Cases
Terminal Benefits Cannot Be Withheld Arbitrarily
Practitioners should note that:
- Terminal benefits such as leave encashment and provident fund are property under Article 300-A
- Withholding such benefits without due process of law is unconstitutional
- Government authorities cannot insist on court orders for disbursement where the law is settled
Precedents Must Be Followed
- Courts have consistently held that accrued benefits cannot be withheld without statutory authority
- Authorities must act in accordance with judicial precedents, failing which they may be liable for costs
- Employees under suspension or facing disciplinary proceedings retain their right to terminal benefits
Actionable Takeaways for Practitioners
- For employees: Terminal benefits cannot be denied without due process; representations should cite State of Jharkhand v. Jitendra Kumar Srivastava and W.P.No.18392 of 2020
- For authorities: Withholding benefits without legal basis may lead to adverse orders and costs
- For courts: Arbitrary withholding of benefits warrants strict scrutiny and potential imposition of costs on errant authorities
