What Happens to Pension Rights When an Employee Resigns? Supreme Court on CCS Pension Rules
Resignation leads to forfeiture of pension under CCS Rules, Supreme Court clarifies, while safeguarding gratuity and leave encashment as statutory rights.
Pension is often perceived as a deferred reward for long and continuous public service. Over time, Indian constitutional jurisprudence has recognised pension not as a mere bounty, but as a valuable statutory and social security right. However, the entitlement to a pension is not unconditional. It flows strictly from statutory rules governing service conditions.
A recurring controversy before courts has been whether an employee who resigns after decades of service can still claim pensionary benefits, particularly when the employee would otherwise have qualified for voluntary retirement. This issue was conclusively addressed by the Supreme Court in Ashok Kumar Dabas (Dead through Legal Heirs) v. Delhi Transport Corporation, decided on 9 December 2025.
The judgment provides authoritative clarity on the legal consequences of resignation under the Central Civil Services (Pension) Rules, 1972, and sharply distinguishes resignation from voluntary retirement. The ruling also examines entitlement to gratuity and leave encashment after resignation, harmonising pension rules with welfare legislation like the Payment of Gratuity Act, 1972.
Factual Background of the Case
Ashok Kumar Dabas was appointed as a conductor with the Delhi Transport Corporation (DTC) in 1985. In 1992, DTC introduced a pension scheme, which he opted into. After nearly 29 years of service, he resigned on 7 August 2014, citing family circumstances. The resignation was formally accepted on 19 September 2014.
Subsequently, Dabas sought to withdraw his resignation, but the competent authority rejected the request. He then claimed release of retirement benefits, including pension, gratuity, provident fund, and leave encashment. DTC granted only provident fund benefits, denying pension and gratuity on the ground that resignation entails forfeiture of past service.
His challenge before the Central Administrative Tribunal failed. The Delhi High Court upheld the Tribunal’s decision. After his death, the matter reached the Supreme Court through his legal heirs.
Issues Before the Supreme Court
The Supreme Court was required to decide:
- Whether resignation after long service entitles an employee to pension under the CCS (Pension) Rules, 1972.
- Whether resignation can be treated as voluntary retirement for pensionary purposes.
- Whether gratuity is payable despite resignation.
- Whether leave encashment can be denied after resignation.
Statutory Framework: CCS (Pension) Rules, 1972
Rule 26 – Forfeiture of Past Service on Resignation
Rule 26(1) of the CCS (Pension) Rules provides:
“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.”
This rule forms the backbone of the pension disqualification regime. Once resignation is accepted and not withdrawn in public interest, the employee’s entire qualifying service stands forfeited.
Rules 36, 48 and 48-A – Retirement and Pension
Rules 36, 48, and 48-A govern eligibility for retiring pension:
- Rule 48 allows voluntary retirement after 30 years of qualifying service.
- Rule 48-A permits voluntary retirement after 20 years of qualifying service.
- Rule 36 ties pension entitlement strictly to retirement under these provisions.
The Supreme Court emphasised that these rules apply only where the employee retires or is retired, not where the employee resigns.
Resignation v. Voluntary Retirement: A Crucial Distinction
A key argument advanced by the appellant was that the resignation should be treated as voluntary retirement, given that the employee had completed more than 20 years of service.
The Supreme Court firmly rejected this contention. Relying on earlier precedent, particularly BSES Yamuna Power Ltd. v. Ghanshyam Chand Sharma (2020), the Court held that resignation and voluntary retirement are legally distinct concepts with different consequences.
Resignation is a unilateral act severing the employment relationship, attracting forfeiture of past service. Voluntary retirement, on the other hand, is a statutorily regulated exit route preserving pensionary benefits. Conflating the two would render Rule 26 meaningless.
The Court observed that even if an employee is otherwise eligible for voluntary retirement, choosing to resign attracts the statutory consequence of forfeiture.
Rejection of Earlier Liberal Interpretations
The appellant relied on decisions such as RBI v. Cecil Dennis Solomon and Shashikala Devi v. Central Bank of India, where courts had adopted a more liberal approach.
However, the Supreme Court clarified that such interpretations cannot override the explicit mandate of Rule 26. The Court reaffirmed that sympathy, equity, or length of service cannot dilute clear statutory provisions.
The Court reiterated that pension rights flow strictly from the rules and not from equitable considerations.
Supreme Court’s Finding on Pension Entitlement
The Supreme Court held unequivocally that:
- Resignation entails forfeiture of the entire past service.
- Once past service is forfeited, there is no qualifying service left to found a pension claim.
- Completion of 20 or 30 years of service becomes legally irrelevant once resignation occurs.
Accordingly, the claim for pension and family pension was rejected.
Gratuity After Resignation: Protection Under the Payment of Gratuity Act, 1972
Statutory Right Under Section 4
Unlike pension, gratuity is governed by the Payment of Gratuity Act, 1972, a welfare legislation. Section 4 expressly provides that gratuity is payable on resignation after completion of five years of continuous service.
The Supreme Court noted that DTC had failed to establish any statutory exemption under Section 5 of the Gratuity Act. Therefore, the Act continued to apply.
Harmonising Pension Rules and Welfare Legislation
The Court held that while CCS Pension Rules govern pension, they do not override the Payment of Gratuity Act unless an express exemption exists. Consequently, resignation cannot be used to deny gratuity where statutory conditions are satisfied.
The legal heirs were therefore held entitled to gratuity for the entire qualifying period of service.
Leave Encashment: An Independent Monetary Right
The respondent fairly conceded that leave encashment was payable. The Court accepted this position and directed payment of leave encashment dues to the legal heirs.
The Court clarified that leave encashment is neither pension nor gratuity, but a distinct financial entitlement earned during service and payable upon cessation of employment.
Final Relief Granted by the Supreme Court
The appeal was partly allowed with the following directions:
- Pension and family pension claims were rejected.
- Gratuity under the Payment of Gratuity Act, 1972 was allowed.
- Leave encashment was directed to be paid.
- Interest at 6% per annum was awarded from the date of resignation until payment.
Conclusion
The Supreme Court’s decision in Ashok Kumar Dabas v. Delhi Transport Corporation decisively clarifies the law governing pension rights upon resignation. While a pension remains a valuable statutory right, it is not immune from forfeiture where resignation is chosen over retirement under statutory rules.
At the same time, the Court ensures that welfare protections like gratuity and leave encashment are not unfairly denied, maintaining a careful balance between statutory discipline and social security. The decision will therefore serve as a guiding precedent for courts, administrators, and employees alike, shaping future service-law adjudication and informed decision-making at the stage of exit from public employment.
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