Resignation Bars Pension, But Not Gratuity: Supreme Court Draws Sharp Line Between Voluntary Retirement and Resignation in DTC Employee Case

“If this Court were to reclassify his resignation as a case of voluntary retirement, this would obfuscate the distinction… and render Rule 26 nugatory”, In a significant ruling on service jurisprudence and labour rights, the Supreme Court drew a decisive line between resignation and voluntary retirement, holding that pensionary benefits stand forfeited upon resignation under Rule 26 of the Central Civil Services (Pension) Rules, 1972, but gratuity remains a statutory entitlement protected by the Payment of Gratuity Act, 1972.

The two-judge Bench of Justice Rajesh Bindal and Justice Manmohan delivered a partly-allowing verdict, granting the legal heirs of the deceased DTC employee gratuity and leave encashment with interest, while upholding the denial of pension.

“On resignation by the employee, his past service stood forfeited. Hence, he will not be entitled to any pension,” the Court ruled, rejecting attempts to interpret the resignation as voluntary retirement based on the employee’s long tenure.

Pension Cannot Be Claimed After Resignation: Rule 26 is Absolute

The deceased, Ashok Kumar Dabas, had joined Delhi Transport Corporation (DTC) in 1985 as a conductor and resigned on 7th August 2014 after almost 29 years of service, citing personal and family circumstances. Though a withdrawal of the resignation was later attempted, it was rejected by DTC. His legal heirs sought retiral benefits, including pension, gratuity, and leave encashment. DTC granted only provident fund, refusing pension and gratuity.

The Supreme Court examined Rule 26(1) of the CCS Pension Rules, 1972, which unequivocally states:

“Resignation from a service or a post, unless it is allowed to be withdrawn in the public interest by the Appointing Authority, entails forfeiture of past service.”

Despite the appellant’s plea to treat the resignation as voluntary retirement—which could entitle pension under Rules 48 or 48-A (on completion of 30 or 20 years of service respectively)—the Court refused to reinterpret the resignation. It relied on the precedent in BSES Yamuna Power Ltd. v. Ghanshyam Chand Sharma (2020) 3 SCC 346:

“Irrespective of whether the respondent had completed the requisite years of service… his was a decision to resign and not a decision to seek voluntary retirement. If this Court were to reclassify his resignation… this would obfuscate the distinction… and render Rule 26 nugatory.”

The Court concluded that since the resignation was voluntary, accepted, and not withdrawn, the employee’s past service stood forfeited, disentitling him to pension.

“Gratuity Is a Statutory Right, Even After Resignation” – Supreme Court Applies Section 4 of Gratuity Act

While denying pension, the Court took a different approach on gratuity, applying Section 4 of the Payment of Gratuity Act, 1972, which mandates gratuity payment after five years of continuous service, including in cases of resignation.

“A perusal of the section clearly shows that an employee who had rendered not less than five years of service will be entitled to payment of gratuity, regardless of the fact that he had retired or resigned from service,” the Court held.

It also emphasized that no exemption notification under Section 5 of the Gratuity Act was produced by DTC. In the absence of such exemption, statutory rights under the Gratuity Act override internal pension rules, even if service is forfeited under Rule 26.

“The claim of the appellant for release of gratuity cannot be denied even if he had resigned from service,” the Court declared, allowing gratuity with 6% interest per annum from the date of resignation.

Leave Encashment Also Allowed – DTC Concedes No Legal Bar

The Court also allowed the claim for leave encashment, noting that counsel for the Corporation fairly submitted that there was no bar to releasing the same. The Court directed DTC to release the dues within six weeks along with interest at 6% p.a..

Past Misconduct Not Relevant to Gratuity or Leave Encashment

DTC had cited the employee’s blemished record, which included multiple suspensions, stoppage of increments, and warnings. But the Court did not let this aspect influence gratuity entitlement, noting that gratuity is a statutory right and cannot be denied unless exempted under law or unless dismissal is for specific misconduct under the Gratuity Act, which was not the case here.

Supreme Court Upholds Legal Distinctions in Service Law

In a meticulously reasoned decision, the Supreme Court reaffirmed key principles:

1. Pension is forfeited upon resignation under Rule 26 unless withdrawal is permitted in public interest.
2. Resignation and voluntary retirement are legally distinct, and courts cannot blur that line.
3. Gratuity is governed by statute, not internal service rules, and applies even post-resignation.
4. Leave encashment, in the absence of specific denial, must be paid.

The Court ruled:

“The legal heirs of the deceased employee are held entitled to receive gratuity in terms of the 1972 Act. They are also held entitled to receive amount towards his leave encashment. As far as grant of family pension is concerned, the claim being not admissible… no relief on that account can be granted.”

Date of Decision: 09 December 2025