In a significant judgment, the Madras High Court has held that State transport corporations are liable to pay interest at the rate of 6% per annum for belated payment of terminal benefits to around 25,000 retired employees. The court directed the Transport department to spell out by April 27 the time frame within which the interest amount, which may run to over ₹500 crore, would be disbursed to the former staff.
Not wanting to wait for each of the 25,000 retired employees to approach the court for relief, the court invoked the doctrine of judgment in rem and ordered that all of them should be paid interest for the delay in settlement of retiral benefits.
The Bench also ordered that 481 former transport corporation staff who had filed contempt of court applications should be paid the interest amount by April 14.
Justices S. Manikumar and M. Govindaraj passed the order on a writ appeal preferred by the Managing Director of the Tamil Nadu State Transport Corporation (Salem).
The appellant had challenged an order passed by Justice M. Sathyanarayanan on February 2, 2017 for payment of terminal benefits of ₹24.55 lakh to a former employee along with interest at the rate of 6% from the date of his retirement on September 30, 2012.
Assailing the single judge’s order, the corporation, in its appeal, claimed that it would be liable to pay interest only if the terminal benefits had been paid in 12 instalments as ordered by the judge. Since the money was paid to former employee C.R. Rangaraju in lump sum, there was no necessity to pay interest. The court was also informed that the liability of State transport corporations to their former employees had accumulated to a whopping ₹1,138.66 crore over the years.
To assist the ailing corporations that were suffering from mounting debts, the State government provided ₹ 1,889 crore in the budget estimate for the year 2017-18 towards diesel subsidy, student concession and share capital/short-term loan. However, over and above the provision made in the budget estimate, the government released ₹2,656 crore, of which ₹1,132 crore was given as ways and means advance.
Of the ₹1,132 crore, an amount of ₹290.55 crore was released for settling compensation to motor accident victims and ₹621.84 crore was provided to settle gratuity, provident fund and such other terminal benefits. Another ₹219.64 crore was released for settling Deepavali bonus and ex-gratia to existing employees of the transport corporations. Even after all this, the corporations were yet to settle ₹379.55 crore to many retired employees.
Though about 25,000 employees were not paid their terminal benefits on time, only 1,495 of them had so far filed individual writ petitions in the Madras High Court as well as its Madurai Bench and obtained orders for payment in instalments with interest. Subsequently, 596 contempt of court applications were filed for non-payment of interest which worked out to ₹4.37 crore, and 115 of those applicants were paid interest of ₹43.25 lakh since their dues were settled in instalments.
Stating that the corporations were now committed to settle the terminal benefits at the earliest, the appellant sought exemption from payment of interest alone. Rejecting the plea, the Division Bench led by Justice Manikumar recalled the Supreme Court to have said that payment of terminal benefits was not a bounty but the right of a retired employee and that delay in settlement of such benefits must be avoided at all costs.