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2018 Supreme(MP) 476
IN THE HIGH COURT OF MADHYA PRADESH, JABALPUR
Hemant Gupta, CJ, Atul Sreedharan, J.
State of Madhya Pradesh & Others – Appellants
Versus
Ramlal Mahobia – Respondent – Respondent
Writ Appeal No. 1052 of 2017
Decided On : 30-10-2018
For the Appellants :Shri. Vishal Dhagat, Government Advocate
For the Respondent:Shri. A.K. Pare, Advocate, Shri. Ashish Shroti, Advocate
Employees are entitled to interest for delayed payment of salary, but the entitlement is subject to the presence of a reasonable cause for the delay and the determination of a reasonable rate of interest based on relevant legal provisions.
Headnote:
Interest on Delayed Payment of Salary - Labour Law - Interest Act, 1978, Section 3; Code of Civil Procedure, 1908, Section 34
Fact of the Case:
The writ-petitioner claimed interest on delayed payment of salary for a period of 13 months, which was allowed by the Single Bench. The appellant argued that the petitioner, who had remained absent from duty, was not entitled to interest.
Finding of the Court:
The Court found that the petitioner, who had not worked for the period in question, was not entitled to interest on the salary granted as a concession without working. However, it recognized the general entitlement of employees to interest for delayed payment of salary without fault.
Issues: The main issue was whether delay in payment of arrears of salary entitles an employee to interest and, if so, at what rate.
Ratio Decidendi: The Court held that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, and therefore, is entitled to interest. It also considered the provisions of the Interest Act, 1978 and the Code of Civil Procedure, 1908 in determining the reasonable rate of interest that can be awarded.
Final Decision: The Court dismissed the writ petition for claiming interest, as the petitioner was not entitled to interest on the delayed payment of salary due to absence from duty and the presence of a sufficient cause for the delay.
Based on the provided legal document, the key points are as follows:
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Employees are generally entitled to interest for delayed salary payments, but this entitlement depends on the presence of a reasonable cause for the delay and an appropriate rate of interest determined by relevant legal provisions (!) (!) .
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The relevant statutes, such as the Interest Act, 1978, and the Civil Procedure Code, 1908, provide the legal framework for awarding interest, including the definition of the current rate of interest and the court’s discretion to grant interest at a reasonable rate (!) (!) (!) .
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In cases where salary is delayed without fault of the employee, and the delay is due to reasons attributable to the employer, the employee may be entitled to interest, provided there is no unreasonable cause for withholding payment (!) (!) .
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However, if the employee has not worked during the period of delay and the salary was paid as a concession, the employee may not be entitled to interest for that period, especially if there was a sufficient cause for the delay or if the payment was made without the employee’s active duty (!) (!) (!) .
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The court emphasizes that the rate of interest should not exceed the current rate of interest specified by the relevant statutes or banking regulations, which fluctuates based on the prevailing economic conditions. An interest rate higher than this, such as 12%, may not be justified in the absence of contractual or statutory support (!) (!) .
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The authority to award interest is also influenced by the order of the competent authority, and courts will generally not substitute their judgment for that of the authority unless there is a clear reason to do so. In this case, the court upheld the decision not to grant interest due to the reasons discussed (!) .
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Ultimately, the court dismissed the claim for interest, holding that the delay was justified and that the employee’s absence and the circumstances surrounding the payment did not warrant an award of interest. The order granting interest at a high rate was found to be unsustainable under the legal framework (!) (!) .
In summary, the legal principles highlight that interest on delayed salary payments is permissible under specific conditions, but the rate and entitlement depend on the facts of each case, including the employee’s conduct, the reasons for delay, and the authority’s discretion.
Hemant Gupta, CJ.
The challenge in the present appeal is to an order passed by the learned Single Bench on 06.01.2017 in W.P. No.18392/2013 (Ramlal Mahobia v. State of M.P. & others) whereby the writ petition filed by the writ-petitioner (respondent herein) claiming interest @12% per annum on the delayed payment of salary for a period of 13 months i.e. from 01.09.1997 to 10.09.1998, paid after seven years and four months, was allowed.
2. The learned Single Bench referred to a judgment of the Supreme Court rendered in Union of India etc. v. Justice S.S. Sandhawalia (Retd.) & others etc. (1994) 2 SCC 240 to hold that when reason for delayed payment is attributable to the department, therefore, an employee cannot be deprived of the benefit of interest.
3. Learned counsel for the appellants refers to an order dated 29.06.2013 passed by the Chief Conservator of Forest, officiating Conservator of Forest, Central Forest Circle, Jabalpur in pursuance of a direction of this Court to consider the grant of interest on delayed payment of salary. In the order passed, it is mentioned that the writ-petitioner was sent on deputation to Panchayat and Rural Development Department for a period of two years in the year 1996. He was reverted back to the parent department on 30.07.1997 inter alia on the ground that he is not taking interest, putting political pressure and remaining absent from duty and misbehaving with the officials. He was posted on 11.09.1997 against his original post as Deputy Forest Ranger in Production Forest Division, Dindori but he abstained from duty. It was on 11.08.1998, he was posted as Forest Ranger in Forest Range, Dindori by recalling of earlier order dated 11.09.1997. Since he has not worked for the period 11.09.1997 to 10.09.1998, vide order dated 16.09.2004 a decision was taken to pay him wages for the said period on compassionate basis and accordingly payment was made to him in the month of December, 2004. However, it was held that he is not entitled to interest on the salary for the period he remained absent from duty.
4. During the course of hearing on 10.11.2017, this Court framed the following question for consideration:-
“Whether delay in payment of arrears of salary entitles an employee to interest and if yes, at what rate?
5. Learned counsel for the appellants-State pointed out that since the writ-petitioner has remained absent from duty and he has been paid salary as a concession, therefore, he is not entitled to interest on account of delayed payment of salary.
6. We find that in the context in which the writ-petitioner was reverted to the parent department and the fact that he has not joined the place of posting to which he was posted, disentitles the writ-petitioner to claim interest on the salary, which was granted as a concession without working on the post.
7. However, the larger question: as to whether delay in payment of arrears of salary without any fault of the employee entitles him to interest, is required to be examined.
8. Shri. Shroti, learned Amicus Curiae, referred to the Interest Act, 1978 (for short “the Act”) to contend that salary is a debt on which interest would be payable in terms of Section 3 of the Act and the interest at a rate not exceeding the current rate of interest for whole or part of the period can be awarded. Shri Shroti also referred to a judgment of the Supreme Court in Secretary, Irrigation Department, Government of Orissa and others etc. v. G.C. Roy etc., AIR 1992 SC 732, to contend that a person deprived of the use of money to which he is legitimately entitled, is entitled to be compensated for the deprivation, call it by any name. The relevant extract from the said judgment, reads as under:-
“43. The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In
