Karnataka HC directs NWKRTC to pay interest on delayed leave encashment payment

Bengaluru: In a relief to several retired employees of the North Karnataka Road Transport Corporation (NWKRTC), the Dharwad bench of the high court has directed the corporation to pay 6% interest on delayed payment of leave encashment. “In the event the Corporation would not pay the said amount within 12 weeks, the petitioners would become entitled to interest at 9% per annum, from the date the payment fell due, till the date of its payment,” Justice M Nagaprasanna said.

The petitioners: drivers, conductors, traffic controllers, office assistants, artisans, had retired from service between 2020-2022. The leave encashment amount was paid to them after a delay, ranging from two years and beyond from the date of retirement. The petitioners sought 9%-10% interest on the delayed payment.

On the other hand, the corporation placed before the court a detailed statement of assets and liabilities as on August 31, 2025. The corporation stated that the outstanding liabilities exceed Rs 1700 crore encompassing several statutory and loan obligations. It was further submitted that since it has suffered losses post Covid-19 lockdown, it is willing to pay a lower interest.

After perusing the statement of objections, along with balance sheets and government orders relating to the corporation as well as the Apex Court judgements in the matter, the court noted that retirement benefits are no longer considered a bounty. Therefore, the Corporation is bound to pay interest on any delayed payment of terminal benefit, the court said.

Justice Nagaprasanna noted that the corporation was compelled to borrow Rs 2000 crore only to meet its salary obligations. This was compounded by the economic fall out of the pandemic and a strike that the Corporation employees undertook in 2022.

“Later comes the policy of the State of free bus travel. This undoubtedly added to the dent that had been caused to the economic status of the Corporation as a result of the onset of Covid-19. The loss that ensued to the Corporation during Covid-19 for a period of two years appears to have continued till today. While the wisdom of policy choices is beyond judicial scrutiny, particularly in these proceedings, their economic impact on the Corporation cannot be ignored,” Justice Nagaprasanna said.

The court further said, “The balance must be struck between the right of employees to be compensated for delay and the financial realities confronting a Public Corporation sustained by public funds. Wherefore, I deem it appropriate to direct payment of interest by the Corporation on every delayed payment of leave encashment not at 10%, not at 9%, not at 7% and not even at 5.48% as is projected by the Corporation, but at 6% per annum, which would be just and equitable and legally sustainable, which aligns with various factors viz., the judgment of the Apex Court, several judgments of the coordinate benches, the judgments of the Division Bench of High Courts of Madras and Delhi, prevailing bank interest rates and the financial condition of the respondent Corporation.”