Delayed Retiral Benefits: Punjab & Haryana High Court Upholds 18% Interest; Dismisses State’s Challenge and Employee’s Claim for Refund of Penal Rent

Case Name: State of Haryana and Ors. v. Satwant Singh and Anr.; Satwant Singh v. State of Haryana and Ors.

Date of Judgment: 24 February 2026

Citation: RSA-4228-2006 and RSA-869-2007

Bench: Hon’ble Ms. Justice Sudeepti Sharma

Held: The Punjab and Haryana High Court held that a retired government employee is entitled to compensation in the form of interest for delayed payment of retiral benefits. The Court upheld the grant of 18% interest per annum on delayed retiral dues to Satwant Singh and dismissed the State’s appeal challenging the rate of interest. The Court also dismissed the employee’s appeal seeking refund of ₹81,628 deducted as penal rent, holding that he had illegally retained government accommodation and did not dispute the recovery earlier.

Summary: Satwant Singh, a Sub-Inspector in Haryana Police, retired on 31 August 1998. His retiral benefits were released after a considerable delay, prompting him to file a civil suit seeking interest on delayed payment and refund of ₹81,628 deducted from his retiral dues as penal rent for retaining government accommodation.

The Civil Judge (Junior Division), Hisar partly allowed the suit and granted interest on delayed retiral benefits. The District Judge, Hisar, while partly allowing the appeal, enhanced the relief by granting interest at 18% per annum on the delayed payment but rejected the claim for refund of the penal rent amount.

Both parties approached the High Court. The State of Haryana challenged the grant of interest at 18%, contending that the rate was excessive and relying on Supreme Court precedents suggesting lower rates of interest in similar cases. Satwant Singh, on the other hand, challenged the dismissal of his claim for refund of ₹81,628 deducted as penal rent.

The High Court noted that the employee had admitted during cross-examination that he had retained the official accommodation at Hisar while posted at Sirsa and had not vacated it for nearly two years. The record also showed that the department had issued notices requiring him to vacate the premises and that part of the penal rent had already been recovered during his service. He had not challenged the legality or quantum of the penal rent earlier. Consequently, the Court held that the recovery was valid and the claim for refund was rightly rejected by the courts below.

With respect to interest on delayed retiral benefits, the Court observed that pension and retiral dues become payable immediately upon retirement and undue delay entitles the employee to compensation. Referring to precedents including Vijay L. Malhotra v. State of U.P. and the Full Bench decision in A.S. Randhawa v. State of Punjab, the Court held that interest may ordinarily be 12% but can extend up to 18% depending on the circumstances. Considering the prolonged delay in release of benefits, the Court found no infirmity in the grant of 18% interest by the appellate court.

Decision: The High Court dismissed both Regular Second Appeals. It upheld the judgment of the District Judge granting 18% interest per annum on delayed retiral benefits to Satwant Singh. The Court further directed the State of Haryana to pay the remaining 6% interest (beyond the 12% earlier paid under interim orders) within one month, noting that the employee had already waited nearly nineteen years for the final outcome of the litigation.