Public Exchequer Funds With Official Liquidator Cannot Be Used For Employee Welfare: Calcutta High Court
The Calcutta High Court bench of Justice Krishna Rao has held that using funds from the Official Liquidator's Establishment Charges Account for medical or terminal benefits is generally impermissible, as these funds are earmarked for administrative and operational costs related to the liquidation process—such as legal fees, publication expenses, and office overheads—not employee welfare or benefits.
Brief Facts:
The present application has been filed under Rules 308 and 309 of the Companies (Court) Rules, 1959, by the Company Paid Staff working in the Office of the Official Liquidator, High Court at Calcutta (hereinafter referred to as the “Applicants”), seeking the grant of terminal medical benefits along with exemption from Income Tax under Section 10(10) of the Income Tax Act.
The Office of the Official Liquidator has two categories of employees: (a) Central Government employees and (b) Company Paid Staff. Under the Companies Act, 1956 and Rules 308–309 of the Companies (Court) Rules, 1959, the Official Liquidator may appoint Company Paid Staff with judicial sanction. These staff, though performing duties equal to Central Government employees, were paid nominal salaries and received minimal ex-gratia upon retirement. No new Company Paid Staff have been appointed since 2002.
Efforts to improve their conditions began in 1992, with the Court modifying a scheme in 1996 to align their service benefits with those of Central Government staff. In 1998, the Central Government attempted regularisation under the 1978 Scheme, but it only benefited 23 employees, mostly at the lowest pay scale. Dissatisfied, affected workers filed writ petitions. Though the High Court gave no relief, the Supreme Court on 4th November 2008 directed all Official Liquidators to submit reports for regularisation and to address rising costs of living.
Following these directions, a One Time Ex-gratia scheme was introduced, combining gratuity with an ad hoc payment upon retirement. Currently, 57 Company Paid Staff serve in the Kolkata Office—38 in Group “C” and 19 in Group “D”.
The Applicants submitted that the current retirement benefits for regular Company Paid Staff are insufficient to sustain a dignified post-retirement life, especially given rising costs of living, education, and healthcare. There is no pension, CPF, or CGHS facility for such staff.
It was further submitted that a mere ₹2,000 per month as medical allowance is inadequate, and any prolonged hospitalisation could cost upwards of ₹15 lakhs, risking financial distress and social insecurity. An additional post-retirement provision is essential to address medical and livelihood exigencies.
It was further submitted that the applicants are not claiming medical benefits as a matter of right, but only request, the Hon'ble Court to consider their plight empathetically.In case of a medical emergency affecting either the retired employee or a family member, a significant portion of the Ex-gratia amount would be consumed. Once the Ex-gratia is exhausted on medical expenses, the employee would be left without sufficient means to support themselves.
In reply, the Official Liquidator submitted that Company Paid Staff are not only receiving salaries and benefits on par with Central Government employees but, in some cases, even more—particularly compared to Group “C” (UDC) and MTS employees with over 30 years of service. Company Paid Staff receive ₹2,000 as monthly medical allowance and ₹1,000 toward public provident fund, whereas Central Government employees have deductions toward GPF, CGEGIS, and CGHS.
It was further submitted that Company Paid Staff enjoy LTC, TA, MACP, and other benefits similar to Central Government employees. For CGHS, Group “C” employees contribute ₹250/month, and post-retirement, a lump sum of ₹78,000 is required for 10 years of coverage. Additionally, three Group “C” Company Paid Staff who retired recently received retirement benefits of ₹46.9 lakhs, ₹46.4 lakhs, and ₹47.5 lakhs, respectively.
Observations:
The court noted that the Supreme Court in Official Liquidator Vs. Dayanand and Others held that the respondents, appointed by the Official Liquidators with court sanction under Rule 308 of the 1959 Rules and paid from company funds—not the Consolidated Fund of India—cannot claim parity in pay with regular government employees merely on the basis of similar work. Granting such parity would require the government to sanction new posts and allocate funds, which it is not obligated to do, especially since its decision to reduce direct recruitment posts is legally valid.
The Apex Court in the above further held that however, acknowledging the rising cost of living, the Supreme Court, following Jawaharlal Nehru Technological University v. T. Sumalatha, directed Official Liquidators to request a revision of emoluments for Company Paid Staff from the concerned High Courts. These requests should be sympathetically considered and any enhancement must be subject to fund availability.
The court further noted that an accumulated fixed deposit of ₹50,98,62,300.80 currently lies in the Official Liquidator's Establishment Charges Account. This fund is specifically meant to cover office expenses, including staff salaries and operational costs, and is separate from accounts related to individual company liquidations.
It held that “using public exchequer funds for medical or terminal benefits from an Official Liquidator's establishment charges account is generally not permissible. These funds are typically allocated for specific administrative and operational expenses related to the liquidation process, not for employee benefits.”
Based on the above, the court noted that the applicants seek terminal medical benefits, citing that the current medical allowance of ₹24,000 per year (₹2,000/month), fixed in 2011, is inadequate given rising healthcare costs.
While the Court found no ground to allow terminal benefits, it acknowledged the steep rise in medical expenses due to increased demand, chronic illnesses, and costly treatments. Referring to Official Liquidator vs. Dayanand & Ors., and considering the unchanged allowance over 14 years, the Court directed that the monthly medical allowance be increased to ₹3,000 from 1st July 2025.
Accordingly, the present application was disposed of.
Case Title: FIRE & GENERAL INSURANCE COMPANY OF INDIA LTD. (IN LIQN.) -AND- CHANDAN KUMAR GANGULY AND ORS. -VS- THE OFFICIAL LIQUIDATOR, HIGH COURT, CALCUTTA
Case Number: C. A. No. 93 of 2025 In C. P. No. 4 of 1956
Judgment Date: 25/06/2025
Mr. Ranjan Bachawat, Sr. Adv. Mr. Sarosij Dasgupta, Adv Mr. Nilay Sengupta, Adv. Mr. Sujit Banerjee, Adv. ... for the applicants
Ms. Manju Bhuteria, Sr. Adv. Ms. Arundhati Barman Roy, Ms. Shreya Choudhary, Adv. ... for the Official Liquidator.