The Delhi High Court has held that terminal benefits received by the family of a deceased employee cannot be treated as a source of “notional income” by assuming that the entire amount has been invested and is generating interest, unless there is material to show that the family has actually retained or invested the money in such a manner.
The court observed that “To capitalise the entirety of such benefits and attribute to the family a monthly income that it neither receives nor is obliged to earn would, in substance, amount to treating the receipt of terminal benefits as a disqualification for compassionate employment.”
The court further held that “The expression ‘notional income’ must, however, be construed in a manner consistent with the object of the Scheme, namely, to identify families that are indigent and require immediate assistance to alleviate financial destitution.”
The judgment was delivered by Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia on an appeal filed by Anita against Punjab and Sind Bank.
The appeal challenged the February 13, 2025, order of a single judge dismissing her writ petition against the rejection of her application for compassionate employment.
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Anita’s husband, Ashok Kumar, had joined the bank as a peon in 1995 and worked there continuously until his death on 23 September, 2022. Anita was the sole surviving member of his family.
The bank had rejected Anita’s application on September 10, 2024, holding that her monthly family income exceeded the eligibility limit prescribed under Clause 5.1 of its “PSB Jeevan Sahara: Comprehensive Scheme For Appointment On Compassionate Grounds And Payment Of Ex-Gratia Amount In Lieu Of Appointment On Compassionate Grounds” scheme for compassionate appointment.
The bank calculated her monthly income at Rs. 33,422.37, against Rs. 32,371.86, representing 60 per cent of her husband’s last drawn salary after tax.
The calculation included Rs. 8,337.26 as notional interest on terminal benefits amounting to Rs. 15,04,468.05, along with family pension and the Rs. 3,000 monthly pension received from the All India Punjab and Sind Bank Employees Welfare Society.
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The High Court found that the calculation of notional interest on the terminal benefits was unsupported by the material on record.
It noted that there was no evidence to establish that Anita had invested the net corpus of terminal benefits at the assumed annual rate of 6.65 per cent.
The court also rejected the assumption that the entire corpus would remain unutilised throughout her lifetime.
“Such an assumption is without basis, as the Appellant cannot be expected to not utilize the terminal benefits for her needs merely to preserve them as income-generating investments throughout her lifetime,” the bench said.
It noted, “Once the terminal benefits have been transferred to the Appellant, the Respondent cannot control the manner of its utilization.”
The bench further held that neither the compassionate appointment scheme nor any other provision brought before it required the deceased employee’s family to invest the terminal benefits.
It clarified that notional income may include income actually received by the family or income capable of being generated from assets actually held by it but cannot extend to income notionally attributed to terminal benefits that the family was under no obligation to retain in an income-bearing form.
After excluding the notional interest of Rs. 8,337.26, Anita’s family income came down to Rs. 25,780.11 per month, below the prescribed threshold of Rs. 32,371.86.
The court consequently held that she fell within Clause 5.1(c)(i) of the scheme and was eligible for compassionate appointment.
The court also held that the family pension of Rs. 21,888 per month and the Rs. 3,000 monthly pension from the Welfare Society could not be treated as a bar to compassionate employment.
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Referring to the Supreme Court decisions in Govind Prakash Verma vs. Life Insurance Corporation of India, (2005) 10 SCC 289 and Canara Bank vs. M. Mahesh Kumar, (2015) 7 SCC 412 the bench observed that such benefits “cannot, merely by reason of their receipt, operate as a substitute for, or a bar to, compassionate employment.”
It said the object of compassionate appointment is to help the family overcome the immediate financial hardship caused by the sudden loss of its source of livelihood.
The bench observed that,
”The consideration of such a claim must be based on the humanitarian purpose of the Scheme and cannot be defeated merely because the family has received pensionary or other service-related benefits to which it is otherwise lawfully entitled.”
The court, however, found it unnecessary to examine whether Anita’s surrender of the Rs. 3,000 monthly Welfare Society pension, which took place after submission of her appointment application, could independently establish her eligibility.
Since the bank’s income computation itself was found to be based on assumptions without basis, the court set aside the Single Judge’s order dated February 13, 2025, quashed the bank’s rejection order dated September 10, 2024, and allowed the instant appeal.
Respondent was directed to grant appellant a compassionate appointment within two months from the date of the judgment.
Case: Anita vs Punjab and Sind Bank
Case No: LPA-208/2025
Date of Order: 08.09.2026
Status: Allowed
