Resignation Does Not Forfeit Earned Pension: Calcutta High Court Declares Company Superannuation Benefit as ‘Wages’ Under Law

“Pension Has Been Treated as an Earned Remuneration — Once Eligibility Is Crystallized, It Becomes a Legal Right”, In a powerful affirmation of employee rights, the Calcutta High Court on 16 February 2026 ruled that pension payable under a company’s non-contributory superannuation trust scheme constitutes “wages” within the meaning of Section 2(vi) of the Payment of Wages Act, 1936, and is enforceable before the statutory authority under the West Bengal Shops and Establishments Act, 1963.

At the heart of the controversy lay a crucial legal question — whether resignation after completion of qualifying service defeats pension entitlement and whether such pension can be treated as “wages” recoverable under statutory machinery.

The Court answered both firmly in favour of the employees.

The private respondents were employees of the appellant company who resigned from service and were released on 02.09.2022. They accepted gratuity and other terminal dues. Several months later, they invoked statutory Form-N under Rule 31 of the West Bengal Shops and Establishments Rules, 1964 seeking determination and payment of pension under the company’s non-contributory superannuation trust scheme.

The competent authority held that the pension under the company scheme formed part of the conditions of employment and squarely fell within the definition of “wages” under Section 2(vi) of the Payment of Wages Act, 1936. The employer’s objections on jurisdiction were overruled.

The Single Judge declined to interfere. The company then carried the matter in appeal before the Division Bench.

“Whatever Is Payable Upon Fulfilment of Service Conditions Tantamounts to Wages”

The Division Bench undertook a detailed examination of the statutory definition of “wages” and the judicial precedents interpreting it.

The Court observed that the law is “absolutely unambiguous and clear” that any definite amount payable upon fulfilment of employment conditions would qualify as wages. The Bench reaffirmed the long-standing judicial principle that the definition of wages extends beyond sums expressly mentioned in the employment contract.

Quoting established jurisprudence, the Court emphasized that what is necessary is a definite sum payable upon fulfilment of contractual obligations. Once the employee discharges his part of the service contract, the employer’s liability crystallizes.

The employer had relied heavily on Section 2(vi)(3), which excludes employer’s contribution to a pension fund from the definition of wages. Rejecting the argument, the Court drew a sharp distinction between contribution to a fund and payment of pension from that fund.

“The employee’s contribution to the pension fund and actual remittance of pension to the beneficiary employees, are two separate and distinct phenomena.”

The exclusion clause applies to the contribution stage, not to the pension payable after eligibility conditions are satisfied.

“Resignation Should Not Defeat Eligibility”

One of the most critical aspects of the case concerned whether resignation interrupts pension eligibility.

The trust deed provided pension benefits based on completion of 5, 10, 15, or 20 years of continuous service. The company argued that only superannuated employees were eligible.

The Court found no such restrictive clause in the trust deed. It specifically recorded that there was no forfeiture clause and no express condition limiting pension to employees retiring upon attaining superannuation age.

In unequivocal terms, the Bench held:

“Resignation should not defeat eligibility. The Scheme vested entitlement based on completed year of service without providing for any forfeiture clause.”

Further clarifying the legal character of pension, the Court declared:

“Pension has been treated as an earned remuneration and once eligibility is crystallized, it becomes a legal right.”

The Bench emphasized that termination by resignation or superannuation is immaterial once entitlement has accrued.

Special Statutory Forum Has Jurisdiction — Civil Court Bar Implied

The employer contended that the claim amounted to a simple money dispute triable by a Civil Court and that the authority under the Shops and Establishments Act lacked jurisdiction.

The Court disagreed.

It reiterated that the Payment of Wages Act creates a special and speedy remedy for recovery of wages. Where the subject matter falls within the statutory definition of wages, the authority has jurisdiction and civil court jurisdiction stands impliedly barred to that extent.

The Court observed that a statute creating special jurisdiction must be strictly construed — but not so narrowly as to defeat its purpose.

Since pension in the present case fell within the inclusive definition of wages, the statutory authority was the proper forum.

“Non-Contributory Pension Fund Is Not a Discretionary Favour”

In a notable pronouncement on employer accountability, the Bench addressed the nature of a non-contributory pension trust.

The Court held that once such a scheme is framed, it cannot be administered arbitrarily. Even though fully funded by the employer, it becomes a legally enforceable obligation.

The Bench cautioned that the employer cannot treat the trust fund as its own property, as that would amount to unjust enrichment. Non-contribution by employees affects only the funding mechanism, not enforceability.

“Once the employees fulfil eligibility conditions, pension thereafter becomes a legal right governed by principles of law and fairness — not by any discretion or whim of the employer.”

Finding no jurisdictional error or perversity in the order of the competent authority or the judgment of the Single Judge, the Division Bench dismissed all four appeals.

The Court conclusively held that the pension payable under the company’s trust scheme “duly falls within the definition of ‘wages’ as per statute” and that the Form-N applications were maintainable.

The impugned judgment dated 11.04.2025 was affirmed and the order dated 18.11.2024 upheld.

This ruling significantly expands the protective scope of the Payment of Wages Act, 1936 in the context of private superannuation schemes and reinforces the principle that earned pension rights cannot be defeated by resignation in the absence of an express forfeiture clause

Date of Decision: 16 February 2026