Resignation entails forfeiture of past service and bars pension, but does not defeat statutory gratuity and leave encashment

The Supreme Court of India has clarified that resignation from service results in forfeiture of past service and disentitles an employee from claiming pension under the Central Civil Services (Pension) Rules, 1972. However, the Court simultaneously held that such forfeiture does not extend to statutory benefits like gratuity under the Payment of Gratuity Act, 1972, nor to leave encashment where no legal bar exists.

Partly allowing the appeal filed by the legal heirs of a deceased Delhi Transport Corporation employee, the Court drew a clear legal distinction between pensionary benefits governed by service rules and terminal benefits arising from an independent statutory regime. The decision brings clarity to the legal consequences of resignation, especially in cases where long years of service precede exit from employment.

Case Background

The dispute concerned the retiral benefits of Ashok Kumar Dabas, who was appointed as a conductor with the Delhi Transport Corporation in 1985. In August 2014, citing family circumstances, he tendered his resignation, which was accepted by the competent authority in September 2014. After his resignation was accepted, his request to withdraw the resignation was rejected, following which he sought release of pension, gratuity, leave encashment, and other retiral dues.

What The Lower Authorities Held

The Delhi Transport Corporation rejected the claim for pensionary benefits on the ground that resignation entails forfeiture of past service. While provident fund was released, other benefits were denied. The Central Administrative Tribunal upheld this decision, and the review application filed by the employee was also dismissed.

The Delhi High Court affirmed the Tribunal’s view, holding that once resignation had been accepted, the employee could not claim pensionary benefits under the applicable rules. Aggrieved, the legal heirs of the deceased employee approached the Supreme Court.

The Court’s Reasoning

The Supreme Court examined the legal consequences flowing from resignation under the Central Civil Services (Pension) Rules, 1972, and considered whether long years of service or the language used in the resignation letter could alter those consequences.

Resignation and forfeiture of service

The Court noted that it was undisputed that the deceased employee had tendered a resignation, which was accepted by the competent authority. His subsequent request for withdrawal of resignation was expressly rejected. In such circumstances, the employment relationship stood conclusively terminated by resignation.

The Court rejected the argument that the resignation letter should be construed as an application for voluntary retirement. It held that resignation and voluntary retirement are distinct legal concepts, governed by different rules and carrying different consequences.

Effect of length of service

Although the employee had rendered more than 20 years of service, the Court held that length of service becomes legally irrelevant once resignation attracts forfeiture of past service. Even eligibility thresholds under the pension rules cannot override the express consequence attached to resignation.

Relying on its earlier decision in BSES Yamuna Power Limited v. Ghanshyam Chand Sharma, the Court reaffirmed that resignation leads to automatic forfeiture of service, and courts cannot dilute this rule by reclassifying resignation as voluntary retirement.

Statutory Interpretation

The Court undertook a detailed examination of the Central Civil Services (Pension) Rules, 1972, particularly Rule 26, which provides that resignation from service entails forfeiture of past service unless withdrawal is permitted in public interest by the appointing authority.

The Court contrasted Rule 26 with Rules 48 and 48-A, which govern voluntary retirement after completion of 30 years and 20 years of qualifying service respectively. It held that these provisions apply only where an employee retires in accordance with the rules, and not where service ends by resignation.

By giving full effect to Rule 26, the Court emphasised that statutory rules must be applied as written, and that equitable considerations cannot override explicit legal consequences prescribed by service law.

Statutory Benefits Beyond Pension

Having affirmed that resignation disentitles an employee from pension under the Central Civil Services (Pension) Rules, 1972, the Supreme Court turned to examine whether other terminal benefits could also be denied on the same footing. The Court made a clear distinction between pensionary benefits governed by service rules and benefits that flow from independent statutory regimes.

The Court held that forfeiture of past service under Rule 26 of the CCS (Pension) Rules is confined to pensionary entitlements alone. It does not automatically extend to all terminal benefits, particularly where such benefits are protected by separate legislation.

Gratuity under the Payment of Gratuity Act, 1972

The Court examined the applicability of the Payment of Gratuity Act, 1972 to the case at hand. It noted that gratuity is a statutory right conferred upon an employee who has rendered continuous service for not less than five years, subject to the conditions specified in the Act.

Importantly, the Court observed that resignation is not one of the grounds on which gratuity can be forfeited under the Gratuity Act. Forfeiture is permissible only in limited circumstances expressly provided by statute, such as termination for acts involving moral turpitude or wilful damage to the employer’s property.

Since none of the statutory grounds for forfeiture were attracted in the present case, the Court held that gratuity could not be denied merely because the employee had resigned. The entitlement to gratuity survived the forfeiture of past service for pensionary purposes.

The Court therefore directed that gratuity payable to the deceased employee be released to his legal heirs in accordance with law, along with applicable interest.

Leave Encashment

The Supreme Court also addressed the issue of leave encashment. It noted that leave encashment is not governed by the CCS (Pension) Rules, 1972, but by separate service regulations applicable to the employer.

The Court found that neither the Delhi Transport Corporation nor the applicable service rules had demonstrated any statutory or regulatory bar on payment of leave encashment in cases of resignation. In the absence of such a prohibition, denial of leave encashment was held to be unjustified.

The Court emphasised that leave encashment represents the monetisation of earned leave accumulated during service. Unless expressly barred by law, such a benefit cannot be withheld merely because the employee exited service by resignation.

Rejection of Equitable Reclassification Arguments

The appellants had urged the Court to treat the resignation as voluntary retirement, relying on the length of service rendered by the deceased employee and the circumstances stated in the resignation letter. The Supreme Court categorically rejected this submission.

The Court reiterated that resignation and voluntary retirement are governed by distinct legal regimes. Voluntary retirement is a statutory right exercisable in accordance with prescribed conditions, whereas resignation is a unilateral act that brings service to an end with immediate legal consequences.

Permitting courts to recharacterise resignation as voluntary retirement on equitable considerations would, in the Court’s view, undermine the certainty and discipline of service jurisprudence. Such an approach would amount to rewriting statutory rules under the guise of equity.

Why This Judgment Matters

This judgment provides important clarity on the legal consequences of resignation in public employment. It reaffirms that resignation entails forfeiture of past service for pensionary purposes, regardless of the length of service rendered.

At the same time, the ruling protects employees from overbroad denial of statutory benefits by drawing a clear boundary between pension governed by service rules and benefits arising under independent welfare legislation.

For employers, the decision underscores the need to apply service rules strictly while ensuring compliance with statutory mandates such as the Payment of Gratuity Act. For courts and practitioners, it reinforces doctrinal consistency in distinguishing resignation from voluntary retirement.

Final Outcome

The Supreme Court partly allowed the appeal. It upheld the denial of pension on the ground that resignation resulted in forfeiture of past service under the CCS (Pension) Rules, 1972.

However, the Court directed the Delhi Transport Corporation to release gratuity and leave encashment payable to the deceased employee, along with interest as admissible in law. The claims of the legal heirs were thus allowed to this limited extent.

Case Details

• Case Title: Ashok Kumar Dabas (Dead Through Legal Heirs) v. Delhi Transport Corporation
• Citation: 2025 INSC 1404
• Court & Bench: Supreme Court of India; Aniruddha Bose J. and Sudhanshu Dhulia J.
• Date of Judgment: 9 December 2025