Supreme Court’s Landmark Ruling on Pension Forfeiture Upon Resignation:

Ashok Kumar Dabas v. Delhi Transport Corporation (2025)

The Supreme Court of India delivered a landmark judgment on December 9, 2025, in Ashok Kumar Dabas (Dead Through Legal Heirs) v. Delhi Transport Corporation (2025 INSC 1404), clarifying the legal boundaries between resignation and voluntary retirement in the context of employee pension entitlements. The Court’s decision, delivered by Justice Rajesh Bindal and Justice Manmohan, upheld the strict distinction between these two concepts and denied pension benefits to the deceased employee while granting gratuity and leave encashment to his legal heirs. This judgment represents a significant reaffirmation of established jurisprudence on service law and reinforces the principle that employees cannot reclassify a resignation as voluntary retirement merely to claim pensionary benefits, regardless of their years of service. [1][2][3]

Case Background and Procedural History

Ashok Kumar Dabas was appointed as a conductor with the Delhi Transport Corporation in 1985 and had rendered approximately 29 years of service by the time of his resignation. In November 1992, the DTC introduced a new pension scheme through Office Order No. 16, which Dabas opted into. On August 7, 2014, citing family circumstances, Dabas submitted a letter of resignation, which was accepted by the competent authority on September 19, 2014. Subsequently, on April 13, 2015, he attempted to withdraw his resignation, but the DTC declined the request on April 28, 2015. When Dabas later requested release of his retiral benefits on October 15, 2015, the DTC informed him on October 23, 2015, that he was entitled only to his provident fund and no other benefits such as pension, gratuity, or leave encashment.[1]

Aggrieved by this decision, Dabas filed an Original Application before the Central Administrative Tribunal (CAT), which was dismissed on September 24, 2018. A subsequent review application was also dismissed on October 29, 2018. Dabas then approached the High Court of Delhi with a writ petition, which was dismissed on December 20, 2022. Following these rejections, the legal heirs of the deceased Ashok Kumar Dabas (who passed away during the litigation) filed a Special Leave Petition before the Supreme Court, which was granted, leading to this significant judgment.[1]

The Legal Framework: Pension Rules and Gratuity Act

The judgment centered on the interpretation and application of two distinct regulatory frameworks governing employee benefits. The Central Civil Services (Pension) Rules, 1972 govern pension entitlements for the DTC employee. Rule 26(1) of these rules explicitly 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”. In contrast, the Payment of Gratuity Act, 1972, operates as a standalone statutory regime that independently governs gratuity entitlements. Section 4 of this Act provides that “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” on various grounds, including “on his retirement or resignation”.[1]

The Court also considered Rules 36, 48, and 48-A of the 1972 Pension Rules, which define the circumstances under which retiring pensions are granted. Rule 48 permits retirement and pension entitlement after completion of 30 years of qualifying service with appropriate notice, while Rule 48-A provides similar benefits after completion of 20 years of qualifying service. Crucially, these provisions address “retirement” or “voluntary retirement,” distinct legal concepts from resignation.[1]

Supreme Court’s Decision in Ashok Kumar Dabas v. Delhi Transport Corporation (2025 INSC 1404)

The Appellant’s Arguments: Pleas for Pragmatic Interpretation

The learned counsel for the appellant (the legal heirs of the deceased employee) advanced several compelling arguments, seeking to secure pensionary benefits for the long-serving employee despite his formal resignation. First, they argued that the resignation letter, being imperfectly worded due to the employee’s lack of legal expertise, should not be strictly construed as a complete forfeiture of service benefits. This argument appealed to notions of equity and fairness, suggesting that courts should adopt a pragmatic view rather than a literal interpretation of technical language.[1][2]

Second, the appellant’s counsel contended that pension is “not a bounty” but rather earned remuneration for long service rendered to the employer. They emphasized that Dabas had put in approximately 30 years of service and resigned solely due to family circumstances, not due to any disciplinary action or improper conduct. Under this logic, they argued that even if the employee had not completed exactly 30 years of service, his 20+ years of qualifying service entitled him to pension under Rule 48-A of the Pension Rules. They further argued that such rigid forfeiture would be excessively harsh and that the DTC and lower courts should have taken a more compassionate approach.[1]

Third, on the issue of gratuity, the appellant relied on Section 4 of the Payment of Gratuity Act, 1972, which explicitly provides that gratuity is payable upon resignation if the employee has completed at least five years of continuous service. They contended that there was no statutory bar to gratuity payment for resigning employees and that gratuity should be distinguished from pension. Additionally, regarding leave encashment, they argued that no statutory bar existed and that these earned benefits should be paid to the deceased employee’s family members.[2][1]

In support of these arguments, the appellant cited several precedents from the Supreme Court and High Court. They relied on Reserve Bank of India v. Cecil Dennis Solomon and Shashikala Devi v. Central Bank of India, both landmark Supreme Court judgments, as well as the Delhi High Court’s judgment in Shanti Devi v. Delhi Transport Corporation, which the Supreme Court had declined to interfere with when the DTC challenged it. These cases were cited as examples where courts had granted relief to long-serving employees despite their resignations, treating the resignation as a request for voluntary retirement.[2][1]

The Respondent’s Strong Defense of Rule 26

The Delhi Transport Corporation’s counsel presented a robust and legalistic defense, anchored primarily in the explicit language of Rule 26(1) of the 1972 Pension Rules. The respondent’s position was uncompromising: resignation, as a clear legal act, entails forfeiture of past service, and no alternative interpretation or second opinion could alter this fundamental principle. They emphasized that Rule 26 is “quite explicit” and that all other rules in the 1972 Pension Rules operate only if the employee successfully escapes the operation of Rule 26.[1]

A critical plank of the DTC’s defense was the distinction between resignation and voluntary retirement. The respondent argued that once an employee has resigned and that resignation has been accepted, they cannot subsequently be permitted to claim that the resignation should be treated as a voluntary retirement request and that they should be granted pensionary benefits accordingly. This argument sought to prevent precisely the kind of reclassification that the appellant was seeking.[1]

Furthermore, the DTC’s counsel drew attention to the substantial disciplinary history of Ashok Kumar Dabas. According to service records produced before the Court, the deceased employee had been suspended on five separate occasions, received nine written warnings for various acts of misconduct, and faced major and minor punishments on seven occasions. The respondent’s counsel contended that this disciplinary history was itself evidence that Dabas had resigned to escape further employment troubles, adding another dimension to why strict application of Rule 26 was appropriate.[1]

On the specific issues of gratuity and leave encashment, the DTC’s position was more nuanced. While they contested gratuity on the ground that the employee was covered under the 1972 Pension Rules and therefore the Payment of Gratuity Act might not apply, they took a pragmatic stance on leave encashment. The respondent’s counsel “fairly submitted” that leave encashment should be released to the family members of the deceased employee, thereby conceding this claim.[1]

The respondent also relied on recent Supreme Court jurisprudence, particularly the BSES Yamuna Power Limited v. Ghanshyam Chand Sharma judgment (2020), which had reinforced the strict distinction between resignation and voluntary retirement. This judgment was critical because it had overruled earlier, more employee-friendly precedents and established that treating resignation as voluntary retirement would “obfuscate the distinction between the concepts of resignation and voluntary retirement and render the operation of Rule 26 nugatory”.[3][4][1]

The Supreme Court’s Analysis: Reaffirming the Resignation-Voluntary Retirement Distinction

The Supreme Court’s judgment, delivered through Justices Rajesh Bindal and Manmohan, represents a definitive pronouncement on the legal distinction between resignation and voluntary retirement in Indian service law. The Court conducted a detailed analysis of the applicable Rules and statutory provisions, beginning with an examination of Rule 26(1) of the 1972 Pension Rules.[1]

On Pension: The Forfeiture Doctrine

The Court’s analysis on the pension question was straightforward but carried significant implications. The Court observed that the basic facts were undisputed: Dabas had been appointed in 1985, resigned on August 7, 2014, and that resignation was accepted on September 19, 2014. His subsequent request to withdraw the resignation on April 13, 2015, was formally declined. These facts established that Dabas had effectively severed his employment relationship with the DTC.[1]

The Court then examined Rule 26(1) of the 1972 Pension Rules, finding it to be unambiguous: “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”. The Court emphasized that this rule operates categorically and does not require any further inquiry or discretion once resignation has been tendered and accepted.[1]

Crucially, the Supreme Court squarely addressed and rejected the argument that Dabas’s resignation should be recharacterized as voluntary retirement due to his 20+ years of service. The Court cited its own recent judgment in BSES Yamuna Power Limited v. Ghanshyam Chand Sharma and Another (2020) at length. In that landmark case, the Supreme Court had held that treating a resignation as voluntary retirement would “obfuscate the distinction between the concepts of resignation and voluntary retirement and render the operation of Rule 26 nugatory”.[3][4][1]

The Court noted that voluntary retirement is regulated by specific rules—Rules 48 and 48-A of the 1972 Pension Rules—which require formal notice and completion of prescribed years of service. These rules form the exclusive pathway for obtaining pension benefits through voluntary retirement. A resignation, by contrast, can be tendered at any time, requires no prescribed service period, and leads to forfeiture of past service. The Court held that “the only inescapable conclusion is that on resignation by the employee, his past service stood forfeited. Hence, he will not be entitled to any pension”.[1]

The Court’s reasoning made clear that allowing employees to reclassify their resignation as voluntary retirement would undermine the entire statutory framework. If length of service could override the operation of Rule 26, the rule would become meaningless, and employers would face uncertainty about whether a resignation should be accepted as final or whether service record would later shield the employee from its consequences. [4][1]

On Gratuity: Statutory Autonomy of the Gratuity Act

The Court’s approach to the gratuity claim was notably different and reveals an important principle of statutory construction. The Court examined Section 4 of the Payment of Gratuity Act, 1972, which provides that gratuity is payable to an employee on termination of employment after rendering at least five years of continuous service, and explicitly includes termination “on his retirement or resignation”.[1]

The Court observed that the respondent DTC failed to establish that it was exempt from the Payment of Gratuity Act under Section 5 thereof, which allows the appropriate government to exempt organizations from the Act’s application. In the absence of such an exemption, the statutory right to gratuity under Section 4 remained operative. [1]

Here, the Court made a crucial distinction. While Rule 26 of the Pension Rules forfeits past service for pension purposes, the Court held that this forfeiture does not extend to gratuity because gratuity is governed by a separate, distinct statute—the Payment of Gratuity Act, 1972. The Court reasoned 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”.[1]

This reasoning is significant because it establishes that different statutory regimes governing different benefits operate independently. The forfeiture doctrine under the Pension Rules does not automatically apply to other statutes granting separate benefits. The Court essentially held that gratuity is an earned right under a dedicated statute, and an employee’s long service—whether terminated by resignation or otherwise—does not preclude gratuity entitlement if the statutory conditions (five years of service and termination of employment) are satisfied.[1]

On Leave Encashment: Uncontested Entitlement

Regarding leave encashment, the Court noted that the respondent’s counsel had fairly conceded that the amounts due for earned leave should be released to the family members. The Court accordingly held that the legal heirs were entitled to receive the leave encashment amount. This reflects the principle, established in Indian jurisprudence, that leave encashment represents earned remuneration for leave not utilized and cannot be forfeited merely due to resignation.[1]

Key Legal Principles Established

The judgment reinforces and crystallizes several fundamental principles of Indian service law:[1]

First, the categorical distinction between resignation and voluntary retirement. The Court made clear that these are separate legal pathways with distinct consequences. Resignation is unilateral in character, can be tendered at any time regardless of service period, and triggers forfeiture of past service under Rule 26. Voluntary retirement, by contrast, is governed by specific rules (48 and 48-A), requires the completion of prescribed service periods (20 or 30 years), requires formal notice, and preserves entitlement to retiring pension.[3][4][1]

Second, the non-substitutability of these concepts. The Court rejected any suggestion that an employee who has formally resigned can later claim the benefits of voluntary retirement by arguing their intent was to voluntarily retire or that they have sufficient service. This principle prevents circumvention of Rule 26 and ensures the rule retains legal force.[4][1][3]

Third, the autonomy of different statutory regimes. The judgment recognizes that different laws governing different benefits (pension rules vs. gratuity statute) operate independently. Forfeiture under one regime does not automatically extend to another unless expressly provided or clearly intended. This principle is crucial for protecting employee rights under multiple statutory schemes.[1]

Fourth, the requirement for explicit exemption under the Gratuity Act. The Court held that for the Gratuity Act to be inapplicable, an explicit notification exempting the employer must exist under Section 5. In the absence of such a notification, the Act applies regardless of pension rule forfeiture.[1]

Significance for Employee Rights and Employer Obligations

This judgment carries significant implications for both employees and employers in India. For employees, it represents a sobering reminder that the distinction between resignation and voluntary retirement is not merely formal but has profound legal consequences. An employee who resigns forfeits pension benefits, regardless of the length of service, and courts will not reinterpret the resignation retroactively to mitigate this consequence. However, the judgment simultaneously protects other earned benefits—gratuity and leave encashment—which remain payable despite resignation.[1][3][4]

For employers, the judgment provides clear legal authority to defend against pension claims from resigning employees and to deny reclassification of resignations as voluntary retirements. However, employers must ensure they do not over-reach by denying gratuity or leave encashment, which remain statutory rights.[3][1]

The judgment also provides guidance for future cases. It confirms that the BSES Yamuna Power Limited precedent is the governing law on this issue, superseding earlier judgments that had adopted a more sympathetic approach to long-serving employees. Courts must now apply a strict, rule-based approach rather than equitable principles when faced with claims from resigning employees.[4][1][3]

Broader Context and Jurisprudential Development

The Ashok Kumar Dabas judgment represents the continuation of a jurisprudential trajectory that began with the Supreme Court’s recognition in cases like Cecil Dennis Solomon and Shashikala Devi that resignation and voluntary retirement are distinct concepts. However, those earlier judgments contained more nuance and were fact-specific in their application.[1][2][3][5][6]

The BSES Yamuna Power Limited v. Ghanshyam Chand Sharma decision (2020) marked a significant turning point, establishing a much stricter approach. The Supreme Court in BSES explicitly noted that earlier approaches which allowed reclassification of resignations as voluntary retirement were “erroneous” because they removed the important distinction between these concepts. The BSES judgment set out to restore clarity and finality to Rule 26.[3][4][1]

The Ashok Kumar Dabas judgment continues and consolidates this strict approach. The Court’s citation of BSES and its explicit approval of BSES’s reasoning demonstrates that the Supreme Court has firmly committed to this interpretation of service law. This represents a shift from a more employee-protective jurisprudence toward a more rule-based, formalist approach.[4][1][3]

Practical Implications and Recommendations

The judgment carries several practical implications for Indian government and public sector employees, employers, and legal practitioners:[1][2]

For employees: The judgment underscores the critical importance of understanding the distinction between resignation and voluntary retirement before tendering any communication to the employer. An employee who wishes to exit service after completing the requisite years of service should explicitly apply for voluntary retirement rather than resign. Even a poorly worded resignation letter will be treated as a resignation, not as a request for voluntary retirement.[4][1]

For employers: The judgment provides clear legal backing for denying pension claims from resigning employees. However, employers must continue to recognize and pay gratuity and leave encashment, which represent separate statutory entitlements. Employers should also maintain clear, written documentation of whether an employee has resigned or sought voluntary retirement to avoid ambiguity.[1]

For courts and adjudicatory bodies: The judgment instructs lower courts and tribunals to apply Rule 26 strictly without attempting to circumvent it based on sympathy for the employee or the length of service. The distinction between resignation and voluntary retirement must be maintained rigorously.[1]

Conclusion

The Supreme Court’s judgment in Ashok Kumar Dabas (Dead Through Legal Heirs) v. Delhi Transport Corporation (2025 INSC 1404) represents a definitive statement on the intersection of employee resignation, voluntary retirement, and retiral benefits under Indian law. By upholding the forfeiture of pension upon resignation while simultaneously protecting gratuity and leave encashment entitlements, the Court has clarified the scope and limits of Rule 26 of the Central Civil Services (Pension) Rules, 1972. The judgment reaffirms that resignation and voluntary retirement are distinct legal pathways with distinct consequences, and courts cannot reclassify a resignation as voluntary retirement based on the employee’s intent, the length of service, or considerations of equity. This represents a significant victory for strict rule-based adjudication in service law and a setback for employee-protective, equitable interpretation. However, the judgment also demonstrates that the forfeiture doctrine does not extend beyond pension—gratuity and leave encashment remain protected statutory rights that employers cannot deny by invoking Rule 26. The case will undoubtedly serve as a leading precedent for decades to come, shaping how Indian courts approach resignation and retirement disputes in the public sector. [1][3][4]

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