Withholding of Retiral Benefits in Non-Pensionable Establishments

The authority of an employer to withhold, deduct, or effect recoveries from retiral benefits—including gratuity, provident fund, and leave encashment—must be grounded strictly in substantive legal authority and clear service regulations. Where an establishment's service conditions do not provide for pension, an employer cannot rely on rules permitting the withdrawal or withholding of pension to arbitrarily seize other distinct retiral dues. Even where pension rules define pension to include gratuity, statutory entitlements such as provident fund and leave encashment cannot be lawfully withheld absent explicit statutory provisions permitting such deductions. In the absence of lawful authority to proceed with an inquiry or impose monetary reductions, the withholding of an employee's accrued retiral benefits is completely illegal and arbitrary. (Kadirkhan Ahmedkhan Pathan Vs The Maharashtra State Warehousing Corporation & Ors. | 2026 INSC 16)