Departmental Inquiry is No Ground to Deny Pension or Subsistence Allowance to Employee

Introduction

Departmental proceedings against government employees often raise critical questions about the balance between administrative discipline and employee rights. Among the most contentious issues is whether an employee facing departmental inquiry can be denied pension or subsistence allowance during the pendency of such proceedings. Indian jurisprudence has consistently held that mere initiation or pendency of departmental inquiry cannot justify withholding these financial entitlements, as such denial violates fundamental principles of natural justice and impedes the employee’s ability to defend themselves effectively.

The landmark judgment in UCO Bank v. Rajendra Shankar Shukla [1] established unequivocally that denying financial resources to a delinquent employee amounts to depriving them of a fair opportunity to defend themselves in departmental proceedings. This principle reflects the judiciary’s recognition that access to justice cannot be conditioned upon an employee’s financial capacity, even in administrative matters.

The Legal Framework Governing Pension and Subsistence Allowance

Central Civil Services (Pension) Rules, 1972

The Central Civil Services (Pension) Rules, 1972 govern pension entitlements for central government employees in India. These rules establish that pension is not a bounty or gratuitous payment but a right earned through years of service. Even when disciplinary proceedings are initiated against a retired employee, the continuation of pension remains protected unless specific conditions under the rules are satisfied.

Rule 9 of the CCS (Pension) Rules, 1972 provides the framework for instituting or continuing departmental proceedings against retired government servants. The rule stipulates that such proceedings automatically become Presidential proceedings after retirement, and the disciplinary authority must submit its findings to the President. However, this procedural requirement does not automatically authorize the withholding of pension during the pendency of the inquiry. The withholding or withdrawal of pension can only be effected after following the prescribed procedure and establishing grave misconduct or negligence.

The Department of Personnel and Training has clarified through various office memoranda that even in cases where minor penalty proceedings are initiated while the employee is in service and continued after retirement, the power to withhold or withdraw pension exists only when grave misconduct or negligence is established, not merely alleged. This safeguard ensures that employees are not subjected to financial hardship based on unproven charges.

Central Civil Services (Classification, Control and Appeal) Rules, 1965

The CCS (CCA) Rules, 1965 govern disciplinary proceedings and suspension of government employees. Rule 10 of these rules specifically addresses suspension and the payment of subsistence allowance. When a government servant is placed under suspension, they are entitled to subsistence allowance as a matter of right, not as a discretionary benefit.

Under Rule 10, a suspended government employee is entitled to subsistence allowance equivalent to leave salary on half pay for the first three months of suspension. This amount may be increased to seventy-five percent if the delay in proceedings is not attributable to the employee, or reduced to twenty-five percent if the employee is responsible for the delay. Additionally, the suspended employee receives appropriate dearness allowance and compensatory allowances based on the subsistence allowance.

The rationale behind providing subsistence allowance is straightforward: an employee under suspension, though temporarily relieved of duties, still has financial obligations and dependents to support. Denying this allowance places the employee in an impossible position, unable to sustain themselves or their families, let alone engage legal representation or prepare an adequate defense. The Supreme Court has repeatedly emphasized that non-payment of subsistence allowance constitutes a breach of natural justice principles.

Landmark Judicial Pronouncements

UCO Bank v. Rajendra Shankar Shukla (2018) 14 SCC 92

The case of UCO Bank v. Rajendra Shankar Shukla [1] stands as the most authoritative pronouncement on the issue of denial of pension and subsistence allowance during departmental proceedings. In this case, the respondent employee faced allegations that he had issued a cheque for three lakh rupees when his account contained only approximately one thousand rupees. The charge sheet was issued in May 1998, remarkably seven years after the alleged incident occurred.

The employee was due to superannuate on January 31, 1999. Shortly before his retirement, the competent authority invoked Regulation 20(3)(iii) of the UCO Bank (Officers’) Service Regulations, 1979, which provided that disciplinary proceedings would continue even after superannuation but the officer would not receive any pay, allowance, or retirement benefits until the proceedings concluded.

The Supreme Court, in a judgment delivered by Justice M.B. Lokur and Justice Deepak Gupta, identified two fundamental flaws in the bank’s approach. First, the Court noted the enormous and unexplained delay of approximately seven years in issuing the charge sheet. Such inordinate delay, without any justification, rendered the charge sheet liable to be set aside. The Court observed that while internal discussions within the bank might have been ongoing, taking seven years to reach a decision was totally unreasonable and unacceptable.

Second, and more significantly for present purposes, the Court examined the complete denial of financial resources to the employee. After his superannuation on January 31, 1999, the employee was paid nothing during the pendency of the disciplinary inquiry. He did not receive his salary because he had superannuated, his pension was withheld presumably because a departmental inquiry was pending, and he was not paid any subsistence allowance during the period the disciplinary inquiry was pending and even thereafter until June 30, 1999.

The Supreme Court held that this financial deprivation violated the employee’s right to access justice. In powerful language, the Court stated: “An employee is entitled to subsistence allowance during an inquiry pending against him or her but if that employee is starved of finances by zero payment, it would be unreasonable to expect the employee to meaningfully participate in a departmental inquiry. Access to justice is a valuable right available to every person, even to a criminal, and indeed free legal representation is provided even to a criminal. In the case of a departmental inquiry, the delinquent is at best guilty of a misconduct but that is no ground to deny access to pension (wherever applicable) or subsistence allowance (wherever applicable).”

The Court emphasized that denying pension and subsistence allowance prevented the employee from effectively participating in the disciplinary inquiry. Unable to engage legal counsel or even meet basic survival needs, the employee faced a manifestly unfair proceeding. On this ground alone, the proceedings against the employee were vitiated. Recognizing the hardship imposed on the employee and the frivolous nature of the bank’s appeal, the Supreme Court imposed costs of one lakh rupees on the bank, to be paid to the employee within four weeks towards his legal expenses.

Ram Nath Singh v. State of U.P. and Others (2002)

The Allahabad High Court in Ram Nath Singh v. State of U.P. and Others [2] dealt with a situation where an employee, in reply to a show cause notice, specifically stated that even if he were to appear in the inquiry against medical advice, he was unable to appear due to want of funds on account of non-payment of subsistence allowance. The High Court held this to be a clear case of breach of principles of natural justice on account of denial of reasonable opportunity to the appellant to defend himself in the departmental inquiry.

The Court relied on the Supreme Court’s decision in Captain M. Paul Anthony v. Bharat Gold Mines Ltd. [3], where it was held that suspension notwithstanding non-payment of subsistence allowance is an inhuman act which has an unpropitious effect on the life of an employee. The High Court quashed the departmental inquiry and the consequent order of removal from service, emphasizing that the inquiry conducted in the absence of the employee who could not attend due to financial constraints was fundamentally flawed.

This case established the principle that when an employee specifically pleads inability to attend inquiry proceedings due to non-payment of subsistence allowance, conducting the inquiry ex parte would violate Article 311(2) of the Constitution, which guarantees reasonable opportunity of defense. The right to defend oneself presupposes the practical ability to exercise that right, and financial incapacity directly impedes this ability.

Jagdamba Prasad Shukla v. State of U.P. and Others (2000) 7 SCC 90

The Supreme Court in this case [4] explicitly held that payment of subsistence allowance to an employee under suspension is not a bounty but a right. An employee is entitled to be paid subsistence allowance, and no justifiable ground exists for non-payment throughout the period of suspension. The Court noted that one of the reasons cited by the employee for not appearing in the inquiry was the financial crunch resulting from non-payment of subsistence allowance, along with illness. This combined effect of financial distress and health issues rendered the inquiry fundamentally unfair.

The judgment reinforced the settled legal position that subsistence allowance is an entitlement arising from the employee’s status and cannot be arbitrarily withheld. The Rules prescribing subsistence allowance create a statutory right, and authorities must comply with these provisions scrupulously.

Regulatory Framework and Compliance Requirements

Payment of Subsistence Allowance: Timeline and Procedure

The payment of subsistence allowance is automatic upon suspension and requires no separate order for the first three months. The suspended employee must furnish a monthly certificate stating they were not engaged in any other employment, business, or profession during the period to which the claim relates. This requirement ensures that subsistence allowance serves its intended purpose of supporting the employee during unemployment rather than supplementing other income.

From the subsistence allowance, certain deductions are obligatory, including repayment of loans and advances taken from the government, contribution to Central Government Health Scheme and Group Insurance, house rent and allied charges, and income tax. Other deductions, such as premiums for Postal Life Insurance and General Provident Fund advances, can be made only with the employee’s written consent. However, deductions for General Provident Fund subscription, court attachment dues, and recovery of loss to government cannot be enforced from subsistence allowance.

Review of Suspension

The CCS (CCA) Rules mandate that every case of suspension must be reviewed within ninety days of the suspension order. The reviewing authority must consider whether continued suspension remains necessary, taking into account the facts and circumstances of each case. Unduly long suspension puts the employee under undue hardship while simultaneously requiring the government to pay subsistence allowance without the employee performing any useful service.

The Department of Personnel and Training has repeatedly issued instructions emphasizing that authorities must scrupulously observe time limits and review suspension cases to determine whether continued suspension is genuinely necessary. Superior authorities must exercise strict oversight over cases where delays have occurred and provide appropriate directions to disciplinary authorities. Recent guidelines suggest that suspension should ideally not exceed one year unless formal proceedings are in progress and reviewed every ninety days.

Post-Retirement Proceedings Under Rule 9

When departmental proceedings initiated before retirement are to be continued after superannuation, specific procedures must be followed. The proceedings automatically become Presidential proceedings, requiring sanction from the President. The disciplinary authority must conduct the proceedings in accordance with the procedure laid down in Rules 14 and 15 of the CCS (CCA) Rules, 1965, and submit findings to the President for final orders.

Importantly, the continuation of proceedings after retirement does not automatically justify withholding all pension. The Full Bench of the Central Administrative Tribunal in Amarjit Singh v. Union of India held that institution or continuance of proceedings is not dependent upon any pecuniary loss being occasioned to the government. Even in the absence of pecuniary loss, pension may be withheld or withdrawn in whole or part, but only after following the prescribed procedure and establishing grave misconduct or negligence, not merely initiating proceedings.

Constitutional and Natural Justice Considerations

Article 311 of the Constitution

Article 311(2) of the Constitution provides that no person who is a member of a civil service or holds a civil post shall be dismissed or removed by an authority subordinate to that by which they were appointed, nor shall they be dismissed, removed, or reduced in rank except after an inquiry in which they have been informed of the charges against them and given a reasonable opportunity of being heard in respect of those charges.

The Supreme Court has consistently interpreted “reasonable opportunity” to mean real and effective opportunity, not merely formal compliance. When an employee is denied financial resources through non-payment of subsistence allowance, their ability to engage legal counsel, gather evidence, cross-examine witnesses, and present their defense is severely compromised. This renders the opportunity to defend oneself illusory rather than real, violating the constitutional mandate.

Principles of Natural Justice: Audi Alteram Partem

The principle of audi alteram partem (hear the other side) is fundamental to natural justice. It requires that no person should be condemned unheard and that parties affected by administrative action should have a fair opportunity to present their case. Financial deprivation directly undermines this principle by preventing the affected person from effectively presenting their defense.

Courts have recognized that access to justice encompasses not merely the right to be heard but the practical ability to exercise that right. When an employee lacks the financial means to engage counsel, travel to inquiry venues, or even sustain themselves and their dependents during prolonged proceedings, their right to be heard becomes meaningless. The state, having placed the employee under suspension or initiated proceedings, cannot simultaneously deprive them of the means to defend themselves and claim that a fair hearing was provided.

Impact on Employee Rights and Administrative Justice

Financial Hardship and Mental Stress

Departmental proceedings, particularly those extending over prolonged periods, impose severe financial and psychological strain on employees. Suspension from duty, combined with denial or withholding of pension and subsistence allowance, can push employees and their families into desperate circumstances. Unable to meet basic living expenses, educational costs for children, or medical expenses, employees face mounting debts and social stigma.

The mental stress resulting from such financial insecurity is compounded by the uncertainty of the inquiry’s outcome and the potential loss of livelihood and reputation. Courts have noted that such hardship is not merely incidental but can be so severe as to constitute punishment before guilt is established, contradicting the fundamental principle that an employee is presumed innocent until proven guilty of misconduct.

Ensuring Effective Participation in Proceedings

The ability to defend oneself effectively requires certain minimum resources. Legal representation, though not mandatory in departmental proceedings, is often necessary to navigate complex procedural rules, present evidence effectively, and cross-examine witnesses. Employees facing serious charges may need to engage expert witnesses, obtain documents through legal processes, or travel to gather evidence and attend hearings.

When subsistence allowance is denied or pension withheld, employees lack the financial means to secure these necessities. They may be forced to represent themselves inadequately, accept unfavorable settlement terms under financial duress, or abandon their defense entirely. This undermines the integrity of the entire disciplinary process, as the outcome may reflect financial coercion rather than a fair assessment of the facts.

Recent Developments and Future Directions

Department of Personnel and Training Guidelines (2025)

Recent guidelines issued by the Department of Personnel and Training have reinforced the importance of timely payment of subsistence allowance and review of suspension cases. The 2025 guidelines emphasize that suspension should not extend beyond one year unless a chargesheet has been filed and an inquiry is actively progressing. Indefinite suspension without progress in the case may be deemed arbitrary.

The guidelines stress the timely payment of subsistence allowance, noting that failure to pay can be challenged in court as a violation of natural justice. Departments are now required to report all suspension cases to the Central Vigilance Commission or equivalent monitoring body if the suspension is linked to corruption or serious misconduct. Every suspension order must be accompanied by a written statement of reasons, with vague or template-based orders being discouraged.

For Group A and B officers, suspension must be approved by a competent authority not below the level of Joint Secretary or equivalent. These measures aim to prevent arbitrary or prolonged suspension and ensure that subsistence allowance is paid promptly and regularly.

Emerging Jurisprudence on Pensionary Rights

Recent judgments have continued to expand protections for pensionary rights. Courts have held that even provisional pension cannot be withheld arbitrarily and must be paid pending completion of proceedings. In cases where proceedings are ultimately dropped or the employee is exonerated, courts have ordered payment of arrears with interest, recognizing that delayed payment causes real financial harm.

The principle that pension is a property right, not a mere privilege, has gained increasing recognition. As a deferred compensation earned through years of service, pension cannot be denied except through due process and for grave misconduct established through proper inquiry. Mere allegations or pendency of proceedings do not justify withholding what is rightfully earned.

Practical Implications for Employers and Employees

For Disciplinary Authorities

Disciplinary authorities must ensure scrupulous compliance with rules regarding payment of subsistence allowance. Non-payment or delayed payment not only violates the employee’s rights but also vitiates the entire inquiry, potentially rendering any punishment imposed illegal and unenforceable. Authorities should:

1. Issue orders for subsistence allowance immediately upon suspension, clearly stating the amount and payment schedule.
2. Ensure regular monthly payment of subsistence allowance without requiring separate applications for each payment.
3. Review suspension cases every ninety days and revoke suspension if no longer necessary or if proceedings have not progressed.
4. Maintain detailed records of payments made and reasons for any delays or reductions.
5. When continuing proceedings post-retirement, carefully consider whether pension should be withheld and ensure such withholding is legally justified and procedurally proper.

For Employees Facing Proceedings

Employees facing departmental proceedings or suspension should be aware of their rights and remedies:

1. Subsistence allowance is a statutory right, not a favor, and must be claimed assertively.
2. If subsistence allowance is not paid, the employee should make written representations to the disciplinary authority and superior authorities.
3. Non-payment can be challenged before the Central Administrative Tribunal or High Court through writ petition under Article 226 of the Constitution.
4. If financial constraints prevent effective participation in inquiry, this should be clearly communicated in writing to all concerned authorities, as such communication strengthens legal remedies if proceedings are challenged.
5. Legal advice should be sought early, as delays in challenging improper suspension or non-payment can weaken remedies.

Conclusion

The principle established through judicial decisions and reinforced through administrative rules is clear and unambiguous: departmental inquiry is no ground to deny pension or subsistence allowance to an employee. These financial entitlements are rights earned through service and essential to ensuring that employees can defend themselves fairly in administrative proceedings.

The landmark judgment in UCO Bank v. Rajendra Shankar Shukla crystalized the jurisprudence on this issue, holding that denial of financial resources to a delinquent employee amounts to depriving them of access to justice. This principle reflects the fundamental constitutional values of fairness and natural justice that must govern all administrative actions, including disciplinary proceedings.

As the Supreme Court eloquently stated, access to justice is a valuable right available to every person, even to criminals who receive free legal representation. In departmental inquiries, where the employee is at most accused of misconduct, denying pension or subsistence allowance creates an untenable situation where financial distress prevents effective defense. Such denial not only violates the employee’s rights but also undermines the integrity and fairness of the entire disciplinary process.

The legal framework comprising the CCS (Pension) Rules, 1972, the CCS (CCA) Rules, 1965, and constitutional protections under Article 311 provides comprehensive safeguards for employee rights. Disciplinary authorities must respect these provisions, ensuring timely payment of subsistence allowance, regular review of suspension, and fair conduct of proceedings. Only when these requirements are met can the outcome of disciplinary proceedings be considered just and legally sustainable.

References

[1] UCO Bank v. Rajendra Shankar Shukla, (2018) 14 SCC 92. Available at: https://www.supremecourtcases.com/uco-bank-ors-v-rajendra-shankar-shukla/ 

[2] Ram Nath Singh v. State of U.P. and Others, 2002. Available at: https://indiankanoon.org/doc/1329686/ 

[3] Captain M. Paul Anthony v. Bharat Gold Mines Ltd., AIR 1999 SC 1416.

[4] Jagdamba Prasad Shukla v. State of U.P. and Others, (2000) 7 SCC 90.

[5] Central Civil Services (Pension) Rules, 1972. Available at: https://persmin.gov.in/pension/rules/pencomp.htm 

[6] Central Civil Services (Classification, Control and Appeal) Rules, 1965. Available at: https://dopt.gov.in/ccs-cca-rules-1965-0 

[7] Amarjit Singh v. Union of India, Administrative Tribunal Reporter 1988 (2) CAT 637.

[8] Department of Personnel and Training Office Memoranda on Suspension and Subsistence Allowance. Available at: https://persmin.gov.in/pension/rules/pencomp2.htm 

[9] New Suspension Rules for Government Employees India 2025. Available at: https://restthecase.com/knowledge-bank/new-rules-for-suspending-government-employees-in-india 

Authorized and published by Prapti Bhatt