Union Of INDIA vs. Sri B S Chandramohan
Original PDF →Facts
The Union of India, represented by the Ministry of Finance and various Central Tax Commissioners, filed a writ petition challenging an order dated 21.08.2023 by the Central Administrative Tribunal (CAT), Bangalore. The CAT had allowed an original application filed by Sri. B.S. Chandramohan, directing the petitioners to pay prevailing GPF interest on amounts of Rs. 8,87,436/- (Gratuity) and Rs. 5,28,876/- (EL encashment) paid belatedly. The CAT ordered interest to be paid from 04.03.2015 until the date of payment, 26.05.2023. The petitioners argued that the Tribunal erred in granting interest from 04.03.2015, as proceedings were pending until 29.09.2022 when the Ministry of Finance exonerated the respondent.
Held
The High Court upheld the order of the Central Administrative Tribunal. The Court found no reason to interfere with the Tribunal's decision to grant interest from 04.03.2015. The reasoning was based on the fact that the Disciplinary Authority's note of disagreement was dated 03.03.2015, and this was not given effect to immediately. Furthermore, the Ministry of Finance itself had subsequently set aside or absolved the respondent of the charges. The Court reasoned that when the respondent was absolved of all charges, he should not suffer a financial loss due to the delayed release of his Gratuity and EL encashment. The ratio decidendi is that if an employee is absolved of charges and benefits are released belatedly due to departmental inaction, interest is payable from the date when the benefits should have reasonably been released, particularly when a disagreement order exists or the employee is ultimately exonerated.
Key Issues
1. Whether the Central Administrative Tribunal erred in directing the payment of interest on belatedly paid terminal benefits (Gratuity and EL encashment) from 04.03.2015, when departmental proceedings continued until 29.09.2022. Petitioner's Contention: The petitioners argued that the Tribunal erred in granting interest from 04.03.2015. They contended that the proceedings were pending until 29.09.2022, when the Ministry of Finance passed an order exonerating the respondent. Therefore, interest should not have been granted from the earlier date. Respondent's Contention: The respondent, through the CAT's order, argued that the Disciplinary Authority's note of disagreement was dated 03.03.2015, and this order ought to have been considered for releasing the withheld terminal benefits immediately. The CAT noted that proceedings were delayed, including the initiation of second stage advice in 2017 and its subsequent advice in 2018, despite a six-month timeframe granted by the High Court for inquiry. The respondent was made to suffer due to the inaction of the respondents, warranting compensation through interest.
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Cause title — parties, addresses and appearances
ORAL ORDER (PER: HON'BLE MR JUSTICE V KAMESWAR RAO) This petition has been filed challenging the order dated 21.08.2023 of the Central Administrative Tribunal in O.A.No.170/00224/2024, whereby the Tribunal has allowed the original application filed by the respondent by stating as under: "ORDER 1) The respondents are directed to pay the prevailing rate of GPF interest to the applicant on the amount of Rs.8,87,436/-towards Gratuity and Rs.5,28,876/- towards EL encashment paid belatedly, from 04.03.2015 till the date of payment i.e. 26.05.2023. NC: 2024:KHC:29783-DB
2) Compliance shall be made in an expedite manner, in any event, not later than twelve weeks from the date of receipt of the certified copy of this order. 3) With the aforesaid observations and directions, OA stands disposed of. 4) No order as to costs."
The submission of the learned counsel for the petitioners is that the Tribunal has erred in granting the interest on the monetary benefits with effect from 04.03.2015, as according to him, the proceedings continued/pending till 29.09.2022, when the Ministry of Finance passed order exonerating the respondent herein and as such, the Tribunal could not have granted the interest. We are unable to accept the submission of the learned counsel for the petitioners for the reason that, the Tribunal, while granting the interest has in paragraphs 8 and 9, stated as under:
"
In the background of the aforesaid factual matrix of the case, now the controversy rests upon the entitlement of the applicant for interest on the belated payment of terminal benefits.
It is true that subsequent to quashing of the charge memo by this Tribunal, the Hon'ble High Court of Karnataka vide order dated 04.03.2014 was pleased to reverse the said decision, reserved liberty to the respondents to proceed with the inquiry in pursuant to the charge memo dated 16.06.2006. Six months' time was granted to proceed with the inquiry and take action in accordance with law. Though the Inquiry Officer submitted the report, that only one charge among the NC: 2024:KHC:29783-DB three charges were sustainable, the Disciplinary Authority disagreeing with the findings of the Inquiry Officer reversed the findings recorded by the Inquiry Officer relating to charge No.2, in which the Inquiry Officer had held the applicant to be guilty. The said disagreement order dated 03.03.2015 passed by the Disciplinary Authority ought to have been considered for releasing the withheld terminal benefits of the applicant. Even if any second stage advice was required, the same would have been taken well within a reasonable period of time. For the reasons best known to the respondents, proceedings were initiated for taking second stage advice only on 04.10.2017 and such an advice was given on 16.02.2018 by the concerned authority. The gist of the second stage advice for dropping of the major penalty proceedings initiated against the applicant were also not properly considered within a reasonable time. Despite the time frame of six months fixed by the Hon'ble High Court of Karnataka for conducting the inquiry proceedings and to take action against the applicant in terms of charge memo dated 16.06.2006, the Inquiry Report was submitted on 12.02.2015. The disagreement order of the Disciplinary Authority dated 03.03.2015 also has not been given effect, immediately. The withheld amount has been released to the applicant in terms of the order dated 26.05.2023. The applicant's withheld terminal benefits, at least immediately after the order of the Disciplinary Authority dated 03.03.2015, would have been released. The applicant has been made to suffer by the inaction of the respondents for which he has to be compensated by awarding interest. Hence, we pass the following: "1) The respondent are directed to pay the prevailing rate of GPF interest to the applicant on the amount of Rs.8,87,436/- towards Gratuity and Rs.5,28,876/- towards EL encashment paid belatedly, from 04.03.2015 till the date of payment i.e. 26.05.2023. 2) Compliance shall be made in an expedite manner, in any event, not later than twelve weeks from the date of receipt of the certified coy of this order. 3) With the aforesaid observations and directions, OA stands disposed of. 4) No order as to costs." NC: 2024:KHC:29783-DB
The basis for the Tribunal to grant interest with effect from 04.03.2015 is primarily because the note of disagreement of the Disciplinary Authority is dated 03.03.2015 and the same was not given effect to immediately. Even otherwise, the Ministry of Finance itself has set aside/absolved the respondent of the charges. In the facts of this case, when the respondent has been absolved of all the charges, the respondent cannot be put to loss because of late release of Gratuity and EL encashment. As the only challenge is to the grant of interest by the Tribunal, we see no reason to interfere with the impugned order. The petition is dismissed. (V KAMESWAR RAO) JUDGE (RAJESH RAI K) JUDGE KTY List No.: 1 Sl No.: 30
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.