2012 (10) TMI 805 - HC - Indian Laws

Interest on accumulated amount of arrears - promotion of assessee employee - period from August 1987 to March 2006 - Held that - Since the amount, paid to the plaintiff was not a charity, but it was his right to claim the same as a consequence of his promotion in service from time to time, therefore, he is entitled to get interest on the delayed payment, as awarded by the first Appellate Court. Since the arrears of salary were not given to the employee within time, therefore, he was entitled to interest at the rate of 12% per annum.

Summary

Issues:
1. Entitlement to interest on arrears of salary.
2. Calculation of interest rate and period for payment of arrears.
3. Delay in promotion and its impact on payment of arrears.
4. Legal precedent regarding the award of interest on delayed payments.

Analysis:
The plaintiff, a former employee of the Income Tax Department, filed a suit claiming interest at 12% on arrears of Rs.95,051 paid from August 1987 to March 2006. The trial court dismissed the suit, but the appellate court allowed it, granting interest at 9% per annum until arrears payment in 2006, with a provision for further interest if not paid promptly. The defendant, the Deputy Director of Income Tax, appealed this decision.

The plaintiff's reinstatement after challenging his termination led to promotions with retrospective salary adjustments. The delayed arrears payment was the basis for the interest claim. The defendant argued that the payment was made promptly after sanction, but the plaintiff's entitlement to interest hinged on the delay not caused by him. The court found the delay unjustified, violating the plaintiff's rights under Article 16 of the Constitution.

Legal precedents were cited to support awarding interest on delayed payments. Cases like Lt. Colonel Surjit Singh v. General Officer Commanding and Surinder Singh v. Union of India established the entitlement to interest on delayed salary payments. The court in Chanan Singh v. Punjab State Electricity Board upheld interest payment for illegally withheld wages. The principle of awarding 12% interest per annum was also affirmed in State of Haryana v. Vidyawanti.

The court emphasized that the arrears were not a charity but a rightful claim due to promotions, justifying the interest awarded by the appellate court. No substantial legal question was found for further consideration, leading to the dismissal of the appeal.

In conclusion, the judgment upheld the plaintiff's entitlement to interest on delayed arrears payment, citing legal precedents and principles of fairness in employment matters.