Can an Employer Withhold Pension Without Inquiry?

Jitendra Kumar Srivastava joined the Department of Animal Husbandry and Fisheries in the Government of Bihar on November 2, 1966. He later served as an Artificial Insemination Officer in Ranchi. On April 16, 1996, two criminal cases were registered against him under the Indian Penal Code and the Prevention of Corruption Act. They alleged serious financial irregularities in 1990-1991 and 1991-1992.

Jharkhand came into existence under the Bihar Reorganisation Act, 2000, and Srivastava became an employee of the new State. The criminal prosecution remained pending. On January 30, 2002, the State also ordered disciplinary action. He retired on superannuation on August 31, 2002. His General Provident Fund payment was sanctioned on May 25, 2003.

The State then sanctioned 90 per cent provisional pension on March 18, 2004. It withheld the remaining 10 per cent and his salary for the suspension period, January 30, 2002 to August 30, 2002. It also did not pay leave encashment or gratuity. All of this was held back pending the outcome of the criminal cases and the departmental inquiry.

Srivastava moved the High Court of Jharkhand by writ petition. The High Court sent the matter back to the department to decide his claim for provisional pension, gratuity and other dues under Resolution No. 3014 dated July 31, 1980. The department rejected his representation on March 16, 2006. A second writ petition was dismissed by a Single Judge. The Division Bench allowed his Intra Court Appeal on October 31, 2007. It relied on the Jharkhand High Court's full-bench ruling in Dr. Dudh Nath Pandey v. State of Jharkhand. The State then appealed to the Supreme Court.

The State's argument was narrow but important. Its senior counsel accepted that the Pension Rules had no provision for withholding part of a pension or gratuity. He argued that administrative instructions could fill that gap, relying on the 1968 Constitution Bench ruling in Sant Ram Sharma v. Union of India.

The Supreme Court did not accept that argument here. Sant Ram Sharma says administrative instructions can supplement statutory rules where the rules are silent, but they cannot supplant the rules. The question in this case was different. Pension is property, and an instruction without statutory character is not "law" within Article 300A.

The Court then read Rule 43(b) closely. The rule lets the State withhold or withdraw a pension, or recover pecuniary loss, if the pensioner "is found in departmental or judicial proceeding" guilty of grave misconduct or of causing pecuniary loss. The Court read this as a power that arises only once proceedings conclude with a finding of guilt, not while they are pending. The rule also gives no power to withhold leave encashment, whatever the result of the proceedings.

The two-judge Bench dismissed the appeals and upheld the High Court. This reasoning is also relevant to anyone searching for the Supreme Court's latest word on pensionary benefits. The Court explained the nature of these dues in plain terms:

• The Court closed the loophole that let a government treat a pending case, by itself, as a reason to hold back a retired employee's dues.
• It also held that executive instructions and circulars cannot be treated as "law" under Article 300A to take away even a part of pension or gratuity.

The Court relied on Deokinandan Prasad v. State of Bihar, D.S. Nakara v. Union of India and State of West Bengal v. Haresh C. Banerjee. It held Sant Ram Sharma inapplicable. The Court added that if the rules had contained a provision for withholding in this situation, the position would have been different.

• Gather the appointment and service papers, the retirement order, the provisional pension sanction letter, and any order withholding pension, gratuity or leave encashment. Keep proof of the current status of the departmental and criminal proceedings, and a copy of any rejected representation.
• The route followed in this case was a writ petition before the High Court of Jharkhand. That court sent the claim back to the department, and the department's rejection was challenged in a second writ petition. The judgment does not lay down any other forum.
• Check the exact pension rule that governs you. Here the Court found no provision in the Bihar Pension Rules for withholding pension or gratuity while proceedings were pending, and no power at all over leave encashment.
• The biggest mistake is treating a pending departmental case, a pending criminal case, or an administrative circular as a substitute for a concluded finding of grave misconduct or pecuniary loss.