Resignation, Forfeiture of Pension and Statutory Right to Gratuity: Commentary on Ashok Kumar Dabas (Dead through LRs) v. Delhi Transport Corporation, 2025 INSC 1404

1. Introduction

The Supreme Court of India’s decision in Ashok Kumar Dabas (Dead through Legal Heirs) v. Delhi Transport Corporation, 2025 INSC 1404 (decided on 9 December 2025), squarely addresses two recurring issues in service jurisprudence:

Whether an employee who has resigned from service under the Central Civil Services (Pension) Rules, 1972 can claim pension or family pension by asking courts to treat the resignation as voluntary retirement; and
Whether such resignation also deprives the employee (or their legal heirs) of the statutory right to gratuity under the Payment of Gratuity Act, 1972.

The Court follows and reinforces the ratio of BSES Yamuna Power Ltd. v. Ghanshyam Chand Sharma, (2020) 3 SCC 346, to hold that resignation entails forfeiture of past service for the purpose of pension under Rule 26 of the CCS (Pension) Rules, 1972, and that courts cannot re-characterize resignation as voluntary retirement. At the same time, the Court draws a sharp distinction between pension rights under service rules and gratuity rights under a central welfare statute. It holds that, in the absence of an exemption notification under Section 5 of the Payment of Gratuity Act, 1972, the employer cannot deny gratuity even where the employee resigned.

This judgment thus crystallizes an important doctrinal position: resignation forfeits pension but does not displace the statutory guarantee of gratuity.

2. Background and Procedural History

2.1 Facts in Brief

The deceased employee, Ashok Kumar Dabas, was appointed as a conductor with the Delhi Transport Corporation (DTC) in 1985.
In 1992, by Office Order No. 16 dated 27.11.1992, DTC introduced a new pension scheme based on the Central Civil Services (Pension) Rules, 1972 (“1972 Rules”). Dabas opted into this scheme.
On 07.08.2014, he tendered a letter of resignation from service, citing “family circumstances”.
DTC accepted his resignation on 19.09.2014. At this point, his employment relationship legally ended.
Subsequently, on 13.04.2015, he sought to withdraw his resignation. The competent authority rejected this request by order dated 28.04.2015.
On 15.10.2015, he requested release of all retiral benefits: pension, gratuity, provident fund and leave encashment.
By order dated 23.10.2015, DTC held that since he had resigned, he was entitled only to the provident fund and no other retiral benefits.

2.2 Litigation History

Dabas challenged this denial before the Central Administrative Tribunal, Principal Bench, New Delhi, in O.A. No. 4645/2015.
The Tribunal dismissed the O.A. on 24.09.2018, and later rejected a review in R.A. No. 207/2018 on 29.10.2018.
He then approached the Delhi High Court via W.P.(C) No. 13642/2018. The Division Bench dismissed the writ petition on 20.12.2022.
Meanwhile, Dabas passed away, and the appeal to the Supreme Court (arising out of SLP (C) No. 4818 of 2023) was pursued by his legal heirs.

3. Issues Before the Supreme Court

From the judgment, the principal legal issues can be framed as:

Pension / Family Pension: Whether, despite having resigned, the deceased employee (and hence his legal heirs) could claim pension or family pension by:
- relying on Rules 36, 48 and 48-A of the CCS (Pension) Rules, 1972 (retiring pension on completion of 20/30 years); and/or
- urging a liberal interpretation of his “resignation” letter as a request for voluntary retirement.
Gratuity: Whether, notwithstanding the resignation and the pension rules, DTC was obligated to pay gratuity under Section 4 of the Payment of Gratuity Act, 1972, especially when:
- the employee had over 5 years of continuous service; and
- no exemption notification under Section 5 of the Gratuity Act had been shown for DTC.
Leave Encashment: Whether the legal heirs were entitled to leave encashment despite the resignation.

4. Summary of the Judgment

4.1 On Pension / Family Pension

The Court (Rajesh Bindal, J., speaking for a Bench also comprising Manmohan, J.) held that:

Rule 26(1) of the CCS (Pension) Rules, 1972, clearly provides that resignation, unless permitted to be withdrawn in public interest, entails forfeiture of past service.
In this case:
- The employee resigned on 07.08.2014.
- DTC accepted the resignation on 19.09.2014.
- The request to withdraw the resignation was rejected on 28.04.2015.
Thus, the statutory consequence of resignation—forfeiture of past service—unavoidably followed.
Rules 36, 48 and 48-A, which provide for retiring pension on voluntary retirement or compulsory retirement, apply only to:
- cases of retirement or voluntary retirement, not to resignation; and
- those who have not forfeited their service under Rule 26.
Following BSES Yamuna Power Ltd. v. Ghanshyam Chand Sharma, the Court refused to equate resignation with voluntary retirement or to “convert” one into the other by a benevolent reading of the letter.
Therefore, the deceased employee was not entitled to pension, and correspondingly, his legal heirs were not entitled to family pension.

4.2 On Gratuity

On gratuity, the Court took a different approach:

Section 4(1) of the Payment of Gratuity Act, 1972, specifically provides that gratuity is payable on termination of employment:
- on superannuation, or
- on retirement or resignation, or
- on death or disablement,
provided the employee has rendered at least five years’ continuous service (except in cases of death/disablement).
The deceased employee had unquestionably completed well over five years of service with DTC.
The Court noted that there was no exemption notification under Section 5 of the Gratuity Act exempting DTC from the Act’s operation.
Accordingly, the Court held that even though he resigned, the deceased employee’s legal heirs were entitled to gratuity strictly in terms of Section 4 of the Gratuity Act.

4.3 On Leave Encashment

Regarding leave encashment:

Counsel for DTC fairly conceded before the Supreme Court that amounts due towards leave encashment would be paid to the legal heirs.
The Court therefore directed that leave encashment also be released.

4.4 Final Directions

The appeal was thus partly allowed:

No relief on pension/family pension—claim rejected.
Relief on gratuity—legal heirs held entitled to gratuity in terms of the Gratuity Act.
Relief on leave encashment—legal heirs held entitled to the due amount.
DTC was directed to pay all amounts due (gratuity and leave encashment) within six weeks, with interest at 6% p.a. from the date of the employee’s resignation (07.08.2014) till actual payment.

5. Statutory and Regulatory Framework

5.1 CCS (Pension) Rules, 1972

The decision turns crucially on four provisions:

Rule 26 – Forfeiture of service on resignation
Provides that resignation from service, unless allowed to be withdrawn in public interest, entails forfeiture of past service.
Rule 36 – Retiring pension
Retiring pension is granted to:
- a government servant who retires or is retired in advance of the age of compulsory retirement in accordance with Rule 48, 48-A or Rule 56 of the Fundamental Rules; and
- a government servant declared surplus who opts for voluntary retirement under Rule 29.
Rule 48 – Retirement on completion of 30 years’ qualifying service
Allows a government servant, after completing 30 years’ qualifying service, to retire voluntarily (with 3 months’ notice) and receive retiring pension.
Rule 48-A – Retirement on completion of 20 years’ qualifying service
Allows a government servant, after completing 20 years’ qualifying service, to retire voluntarily (with 3 months’ notice) and receive retiring pension.

The critical point is that Rule 26 operates at the threshold: where there is resignation (not voluntary retirement) and it is not permitted to be withdrawn, the entire past service stands forfeited, rendering Rules 36, 48 and 48-A inapplicable for pension.

5.2 Payment of Gratuity Act, 1972

Two provisions are central:

Section 4(1):
“Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,—
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease…”
Section 5: enables the appropriate government to exempt any establishment or employee, if the rules of such establishment provide for gratuity or pensionary benefits not less favourable than under the Act, by issuing a notification.

Unless such an exemption notification is shown, the Gratuity Act applies with full force, and its rights cannot be curtailed by internal service rules.

6. Precedents Considered and Their Influence

6.1 Earlier Supreme Court Decisions Cited by the Appellant

6.1.1 Reserve Bank of India v. Cecil Dennis Solomon, (2004) 9 SCC 461

The appellant relied on Cecil Dennis Solomon to argue for a liberal, purposive approach to pension, emphasizing that pension is earned and should not be denied on technicalities. While that case involved interpretation of specific pension regulations of the RBI, the key themes were:

Pension as a form of deferred compensation and social security.
Beneficial interpretation of pension regulations to avoid unjust denial of benefits.

However, in the present judgment, the Court does not rest its reasoning on Cecil Dennis Solomon because:

It is now bound by the more recent and more directly applicable ruling in BSES Yamuna Power Ltd., which specifically interprets Rule 26 of the CCS (Pension) Rules.
Where the text of Rule 26 is clear about forfeiture of past service on resignation, a general principle of beneficial interpretation cannot override it.

6.1.2 Shashikala Devi v. Central Bank of India, (2014) 16 SCC 260

Shashikala Devi concerned bank employees and the interplay between resignation and pensionary rights under banking pension regulations. It was used by the appellant to support the proposition that resignation ought not automatically to disentitle an employee from pension if the underlying purpose of the scheme is satisfied.

Yet, the present Court, guided by BSES Yamuna Power Ltd., indicates that:

Shashikala Devi turned on the language and structure of specific bank pension regulations.
The CCS (Pension) Rules, 1972, contain an explicit forfeiture clause in Rule 26, making the regulatory framework fundamentally different.

6.2 High Court Decisions Relied Upon by the Appellant

6.2.1 Shanti Devi v. Delhi Transport Corporation, W.P.(C) 4871/2010 (Delhi HC, 15.10.2012)

In Shanti Devi, the Delhi High Court granted similar relief to a DTC employee, and the Supreme Court had dismissed DTC’s SLP (C) No. 9516/2013. The appellant used this to argue that a consistent approach should be followed in the present case.

However:

Dismissal of a Special Leave Petition by a non-speaking order does not amount to affirmation of the High Court’s reasoning as binding precedent.
More importantly, the legal position has since been clarified by a later, reasoned judgment of the Supreme Court in BSES Yamuna Power Ltd.

Thus, Shanti Devi could not prevail over the binding ratio of BSES Yamuna.

6.2.2 Delhi Transport Corporation v. Ram Kishan, W.P.(C) 2627/2015 (Delhi HC, 17.03.2015)

This decision related to the pensionary entitlements of DTC employees. It, along with Shanti Devi, formed part of the landscape the appellant sought to rely upon. Again, the Supreme Court has now definitively anchored the interpretation of resignation under the CCS rules in BSES Yamuna, which narrows the room for such High Court-level variations.

6.3 Precedents Relied upon by the Respondent / Adopted by the Court

6.3.1 BSES Yamuna Power Ltd. v. Ghanshyam Chand Sharma, (2020) 3 SCC 346

This is the pivotal precedent in the Supreme Court’s reasoning. The case involved an employee who had resigned after long years of service and sought pensionary benefits under a scheme tied to the CCS (Pension) Rules. The Court held:

Rule 26 of the CCS (Pension) Rules contains an unambiguous stipulation: resignation, unless withdrawn in public interest, entails forfeiture of past service.
The Court expressly disapproved the approach in Asger Ibrahim Amin v. LIC, (2016) 13 SCC 797, which had blurred the distinction between resignation and voluntary retirement.
It emphasized that it is not open to courts to re-characterize a resignation as voluntary retirement simply by looking at the years of service or the employee’s intent, as this would render Rule 26 nugatory.

The present judgment directly quotes BSES Yamuna (paras 14 and 17):

“… Irrespective of whether the first respondent had completed the requisite years of service to apply for voluntary retirement, his was a decision to resign and not a decision to seek voluntary retirement. If this Court were to re-classify his resignation as a case of voluntary retirement, this would obfuscate the distinction between the concepts of resignation and voluntary retirement and render the operation of Rule 26 nugatory.”

Applying this reasoning, the Court in Ashok Kumar Dabas concludes that:

The deceased employee’s clear act of resigning attracted Rule 26.
His past service stood forfeited for pension purposes.
The fact that he had completed more than 20 years of service (sufficient for voluntary retirement under Rule 48-A) is legally irrelevant once he chooses resignation instead of invoking voluntary retirement.

6.3.2 Raj Kumar v. Union Of India, 2017 SCC OnLine Del 10877

This Delhi High Court decision also recognized the binding effect of Rule 26 and the distinction between resignation and voluntary retirement. The respondent cited it to reinforce that the legal consequence of resignation cannot be avoided by subsequent reinterpretation. The Supreme Court’s position is consistent with this line of reasoning.

7. Legal Reasoning in Detail

7.1 Distinguishing Resignation from Voluntary Retirement

A central plank of the appellant’s case was that his “resignation” letter should not be construed literally, since he was not conversant with legal language and had essentially intended to end his service after long years of work, which ought to be treated as voluntary retirement under Rule 48-A.

The Court rejected this argument for several reasons:

The act performed was clearly labelled as “resignation”, and it was processed and accepted as such by the employer.
Unlike voluntary retirement, resignation:
- does not invoke any particular pension conferring provision; and
- immediately triggers the application of Rule 26, which causes forfeiture of past service for the purpose of pension.
Voluntary retirement under Rule 48-A is a structured legal route requiring:
- completion of at least 20 years of qualifying service; and
- three months’ notice in writing to the appointing authority, clearly seeking to retire under that rule.
To allow courts to retrospectively “convert” a resignation into voluntary retirement would:
- undermine the legislative scheme that consciously differentiates between the two; and
- render the express forfeiture clause in Rule 26 meaningless.

Following BSES Yamuna, the Court affirms a strict doctrinal boundary: resignation and voluntary retirement are legally distinct events with different consequences, and they cannot be judicially conflated merely on equitable considerations.

7.2 Scope and Effect of Forfeiture under Rule 26

Once it is established that the employee had resigned and that his attempt to withdraw the resignation was rejected, Rule 26 operates automatically:

All past service stands forfeited for purposes of pension computation.
Because the employee is treated as having no qualifying service, he is disqualified from pension even if, in reality, he has worked for decades.
Consequently, his legal heirs cannot claim family pension, since that too arises only where the employee was otherwise eligible for pension or died in service, not after resignation-with-forfeiture.

This reflects a formal, rule-based approach: the Court is not balancing equities but enforcing the statute as written.

7.3 Pension as a Right vs. the Pension Scheme’s Terms

The appellant’s counsel emphasized that “pension is not a bounty” and is earned through long service. While this principle has been recognized in multiple judgments (such as D.S. Nakara v. Union of India), the Court implicitly underscores that:

Pension is indeed a right, but it is a right created and circumscribed by the governing pension scheme.
Where the scheme itself (here, the CCS Rules) prescribes that resignation wipes out qualifying service, an employee exercising the choice to resign voluntarily accepts that legal consequence.
Equitable notions cannot override or rewrite clear statutory conditions of eligibility.

7.4 Gratuity: Autonomy of the Statutory Right under the Gratuity Act

The most significant doctrinal clarification in this judgment lies in its treatment of gratuity as distinct from pension.

The Court notes that Section 4(1)(b) of the Gratuity Act expressly includes “resignation” as one of the modes of termination upon which gratuity is payable, as long as the five-year continuous service condition is met.
The CCS (Pension) Rules and DTC’s internal circulars cannot dilute or override this statutory right unless DTC is formally exempted under Section 5 of the Act.
There is no Section 5 exemption notification shown for DTC.
Therefore, regardless of how resignation operates under the pension rules, it cannot extinguish the employee’s entitlement to gratuity under the Gratuity Act.

Although Section 14 of the Gratuity Act (which gives the Act an overriding effect over inconsistent laws) is not expressly mentioned in the judgment, the reasoning is entirely consistent with its spirit.

Thus, the Court decisively holds that:

“Once it could not be established by the respondent that the 1972 Act is not applicable to the Corporation, the claim of the appellant for release of gratuity cannot be denied even if he had resigned from service.”

7.5 Leave Encashment

Leave encashment is not governed by the Gratuity Act or the CCS (Pension) Rules but by the employer’s own service rules or policies. DTC’s counsel conceded liability, and the Court therefore directs release of the due amounts. Notably:

The Court does not suggest that resignation forfeits or bars leave encashment where the service rules provide for it.
This implicitly recognizes that different retiral benefits can be governed by different legal sources (statute vs. rules vs. contract), and resignation affects each according to its own governing framework.

7.6 Interest on Delayed Payment

The Court directs payment of gratuity and leave encashment with interest at 6% per annum from the date of resignation until payment. While the Gratuity Act envisages interest at a rate notified by the government under Section 7(3A), the Court, sitting in appellate jurisdiction, uses 6% as an equitable and reasonable rate. This:

Compensates the legal heirs for the delay since 2014; and
Signals that employers should not withhold statutory or contractual retiral dues without strong legal basis.

8. Complex Concepts Simplified

8.1 Resignation vs. Voluntary Retirement

Resignation:
- Employee unilaterally ends the employment relationship.
- Under the CCS (Pension) Rules, resignation (once accepted) leads to forfeiture of all past service for pension purposes.
- The employee usually gets only statutory benefits that are independent of the pension scheme (e.g., gratuity, provident fund, leave encashment, subject to rules).
Voluntary Retirement (e.g., under Rules 48/48-A):
- Legally recognized route to retire early after a prescribed period of qualifying service (20 or 30 years).
- Requires notice and satisfaction of conditions under the relevant rule.
- Past service is counted for pension (subject to other conditions), and the employee receives a “retiring pension”.

The crucial takeaway: Words matter. Calling something a resignation and having it processed as such has very different legal consequences from formally invoking voluntary retirement under a specific rule.

8.2 Forfeiture of Service

“Forfeiture of service” means that, for a particular purpose (here, pension), the law treats the employee as if they had no qualifying service at all. It does not necessarily erase all rights (e.g., gratuity may still be payable), but it bars any claim to pension which depends on counting that service.

8.3 Pension vs. Gratuity vs. Leave Encashment vs. Provident Fund

Pension: a monthly recurring payment after retirement, based on qualifying service and last pay, governed by the pension scheme (e.g., CCS Rules).
Gratuity: a lump sum paid at the end of employment, governed by the Payment of Gratuity Act (unless exempt). It accrues as a statutory right and is payable even on resignation after 5 years’ service.
Leave Encashment: a lump sum paid for unavailed earned leave as per service rules. It is more in the nature of deferred salary, not a pension.
Provident Fund: a savings-cum-contribution scheme where employer and employee contribute during service, and the accumulated corpus is paid out (with interest) on retirement, resignation, etc.

8.4 “Appropriate Government” and Exemption under Section 5 of the Gratuity Act

The appropriate government (Central or State, depending on the establishment) can exempt an employer from the Gratuity Act if its own rules provide better or equivalent benefits.
This is done by issuing a notification under Section 5 in the Official Gazette.
In the absence of such a notification, employers cannot unilaterally claim to be outside the Act.

9. Impact and Future Implications

9.1 For DTC and Similar Public Sector Employers

The judgment has clear operational consequences for DTC and comparable public-sector entities that have adopted the CCS (Pension) Rules:

It confirms that employees who have resigned cannot claim pension or family pension by retrospectively arguing that their resignation should be treated as voluntary retirement.
Human resources and administrative departments must ensure that employees are:
- clearly informed of the distinction between resignation and voluntary retirement; and
- advised of the consequences of each in terms of pension eligibility.
On the gratuity front, DTC must:
- recognize that the Payment of Gratuity Act applies in full, absent an exemption notification;
- review any policy or practice that denies gratuity solely because an employee “resigned”; and
- settle any pending or future claims in conformity with this statutory obligation.

9.2 For Employees and Trade Unions

For employees covered by the CCS (Pension) Rules or similar schemes, the message is unambiguous:

If you wish to retain pensionary benefits after leaving early, do not simply resign. Instead,:
- invoke voluntary retirement provisions (e.g., Rule 48-A) explicitly; and
- comply with all notice and eligibility requirements.
At the same time, even if an employee has resigned:
- they (or their heirs) can still assert a statutory right to gratuity under the Gratuity Act; and
- they can seek leave encashment and provident fund as per applicable rules.

This decision thus both warns employees about the pensionary risks of resignation and empowers them to claim gratuity as a non-negotiable statutory entitlement.

9.3 Clarification of the Relationship Between Service Rules and Welfare Statutes

Doctrinally, the judgment reinforces a dual-track analysis:

Pension rights are governed by the specific pension scheme (e.g., CCS Rules), and employees must satisfy its conditions.
Gratuity rights flow from an overriding welfare legislation—the Payment of Gratuity Act—which sets a statutory floor of benefits that service rules cannot reduce, unless exempted by the government.

This demarcation will influence future litigation where employers rely on internal rules to curtail or deny statutory entitlements.

9.4 Judicial Attitude: Textual Fidelity over Equitable Rewriting

The Court’s approach mirrors a broader trend in recent service law decisions:

A strong preference for textual fidelity to the language of service rules and statutes.
Limited willingness to employ equitable or purposive interpretations where the text is clear and unambiguous.
Willingness to extend full relief where statutory rights (like gratuity) unambiguously support the claimant, even if the employee’s conduct (e.g., a poor service record) might otherwise invite a less sympathetic view.

10. Conclusion

Ashok Kumar Dabas (Dead through LRs) v. Delhi Transport Corporation is a significant judgment that:

Strongly reaffirms the principle from BSES Yamuna Power Ltd. that under the CCS (Pension) Rules, resignation is fatal to pensionary rights because it triggers forfeiture of past service under Rule 26.
Clarifies that courts cannot, on equitable considerations, recharacterize a resignation as voluntary retirement to circumvent the statutory consequence of forfeiture.
Simultaneously underscores that gratuity is a statutory right under the Payment of Gratuity Act, 1972, payable even on resignation (after five years’ service), and that this right survives unaffected by the pension rules unless the employer is specifically exempted under Section 5.
Affirms that leave encashment, where provided by service rules, must also be honored regardless of resignation, and that unjustified delays in paying retiral benefits warrant interest.

The key takeaways for the broader legal landscape are:

Employees must be acutely aware of the distinct legal paths of resignation and voluntary retirement and choose accordingly if they wish to preserve pensionary benefits.
Employers cannot use internal pension rules or service regulations to deny gratuity guaranteed by the Gratuity Act, absent an express statutory exemption.
Courts will continue to enforce clear textual distinctions in service rules while giving full effect to social welfare legislation like the Payment of Gratuity Act.

In sum, this judgment draws a sharp, doctrinally coherent line: resignation under the CCS (Pension) Rules forfeits pension but not the statutorily mandated gratuity. It will likely serve as an important precedent in future service law disputes involving the interplay between resignation, pension, and statutory retiral benefits.