Pension Is Rule-Bound, Gratuity Is Statutory: SC Clarifies Post-Resignation Rights

The Supreme Court’s ruling in Ashok Kumar Dabas (Dead) v. Delhi Transport Corporation presents a careful delineation of the legal consequences of resignation in public service, while simultaneously reaffirming statutory entitlements that survive severance of employment.

The judgment draws a firm line between pensionary rights governed by service rules and terminal benefits protected by welfare legislation, resisting both over-expansive equity and rigid administrative denial.

What's The Matter?

The dispute arose from the resignation of a Delhi Transport Corporation conductor after nearly three decades of service. Having opted into the pension scheme introduced in 1992, the employee resigned in 2014 citing family circumstances.

His resignation was accepted, and his subsequent attempt to withdraw it was rejected.

What followed was a prolonged legal contest by his legal heirs, asserting entitlement to pension, gratuity, and leave encashment.

Both the Tribunal and the Delhi High Court denied relief in entirety, treating resignation as a complete forfeiture of post-service benefits.

What Court Said?

Before the Supreme Court, the principal contention was that pension is not a bounty but a deferred wage earned through long service, and that the resignation letter, drafted without legal sophistication, ought not to extinguish decades of contribution.

Reliance was placed on earlier decisions that had adopted a pragmatic reading of resignation in service jurisprudence.

The Court, however, declined to blur the doctrinal distinction between resignation and voluntary retirement, emphasising that legal consequences flow from the act chosen, not from the length of service alone.

Interpreting Rule 26 of the Central Civil Service1s (Pension) Rules, 1972, the Court reiterated that resignation, once accepted, results in forfeiture of past service unless withdrawn in public interest. Rules enabling pension after 20 or 30 years of qualifying service operate only in cases of retirement, not resignation.

Drawing from its earlier decision in BSES Yamuna Power Limited v. Ghanshyam Chand Sharma, the Court rejected the attempt to retrospectively recharacterise resignation as voluntary retirement, warning that such an approach would render Rule 26 otiose and collapse a carefully maintained statutory distinction.

Significantly, the Court clarified that service length, however substantial, cannot override the legal consequences expressly attached to resignation.

Even where an employee has crossed the qualifying service threshold for pension, resignation acts as a statutory severance of accrued service benefits under the pension rules.

At the same time, the Court decisively parted ways with the Corporation’s blanket denial of all terminal benefits. Turning to gratuity, it held that the Payment of Gratuity Act, 1972 operates independently of pension rules and applies even in cases of resignation, provided the employee has completed five years of continuous service.

In the absence of any exemption notification shielding the Corporation from the Act, gratuity could not be denied merely because pension stood forfeited.

This reaffirmation anchors gratuity firmly within the domain of social welfare, immune from administrative interpretation that seeks to conflate resignation with misconduct.

The Court also accepted the Corporation’s concession regarding leave encashment, recognising that there exists no statutory bar to payment of accumulated leave benefits upon resignation.

Ultimately, Ashok Kumar Dabas reinforces that while pension depends on the manner of exit from service, gratuity and leave encashment flow from statutory command. Courts, the judgment makes clear, must enforce both with equal fidelity.