Notional Interest Earned On Terminal Benefits Of Deceased Family Member Relevant To Determine Eligibility For Ex-Gratia Compensation: Delhi HC
The Delhi High Court has held that the notional interest on terminal benefits earned by the family of a deceased government employee is relevant when determining its need and eligibility for grant of ex-gratia compensation in lieu of compassionate appointment.
Justice Prateek Jalan observed that the objective of the scheme is to provide immediate relief from indigence, without constituting a right or entitlement.
“This requires a comprehensive analysis of the family's financial situation in the immediate aftermath of the death of the employee…While evaluating the financial condition of the family, income from its assets is certainly a relevant consideration,” the bench said.
The Court was dealing with the plea moved by a widow seeking ex-gratia payment in lieu of compassionate appointment, following the death of her husband, who was employed as a Daftari in Bank of Maharashtra.
As per a scheme of the Indian Banks' Association, where compassionate appointment is not provided to the family members of deceased employees, it may be granted ex-gratia (i) if eligible and (ii) if requested for within 6 months from the date of death of the employee.
The same is also subject to the monthly income of the family from all sources being less than 60% of the last drawn gross salary of the deceased employee.
Petitioner's entitlement to ex-gratia payment was rejected on the ground that the monthly income of her family exceeds 60% of the last drawn salary of her late husband.
The 60% of gross salary works out to Rs. 19,549/-. Whereas the family's total monthly income including interest on terminal benefits, income from investment and family pension was found to be Rs. 28,789/-.
Petitioner argued that the Bank ought not to have taken into account notional interest upon terminal benefits and investments, as part of the family's income.
It was submitted that such a computation cannot be used to deprive the family of a deceased employee of ex-gratia payment, without any factual analysis as to whether the amounts received by the family in fact yielded any interest at all.
The High Court was of the view that there is no illegality in the Bank's proceeding on the basis of notional interest income which the family would have derived from its investments and from the terminal benefits of the deceased employee. It observed,
“The policy in the present case expressly provides for consideration of interest on terminal benefits on a notional basis. There is no challenge to the terms of the policy itself in the writ petition. The validity of the scheme's terms is therefore not directly in issue,” it said.
Further, on the question whether income accruing therefrom can be calculated on a notional basis or only on the basis of what the family has actually earned, the Court said,
“As the objective of the scheme itself is to provide relief in the immediate aftermath of the death, I am of the view that insistence upon an analysis of whether the family has actually earned interest on the accumulated assets and terminal benefits, is impracticable.”
Particularly in the present case, the Court noted that the application is required to be made within six months of the death of the employee. Thus, whether or not the family actually earns interest on the terminal benefits received is not a matter which would be known at that time.
“The analysis at a later point of time, contingent upon whether the family has actually earned interest on the said amount, is inconsistent with the immediacy of the required action,” it said.
Appearance: Mr. Ranjit Sharma, Advocate; Mr. V.K. Gupta, Advocate for R-1.
Case title: Omwati v. The Bank Of Maharashtra And Anr
Citation: 2025 LiveLaw (Del) 1207
Case no.: W.P.(C) 9252/2025