Supreme Court Allows Bank Appeal, Sets Aside HC Orders But Directs Rs.2.5 Lakh Ex-Gratia Payment Instead Of Compassionate Appointment

A Bench of Justices Dipankar Datta and Prashant Kumar Mishra heard an appeal by Canara Bank against a Division Bench of the Kerala High Court which had upheld a Single Judge’s order directing the bank to grant compassionate appointment to the son of an employee who died in service. The appeal challenged the High Court’s findings on the application of the Bank’s 1993 “Scheme for employment on compassionate grounds”, the relevance of terminal benefits and family pension in assessing indigence, and the direction to appoint the respondent decades after the death.

The Court held that the High Court should not have directed appointment without subjecting the claimant to a suitability test and that assessment of the family’s financial condition was a legitimate and necessary part of consideration under the 1993 Scheme. The Bench set aside the Single Judge’s and Division Bench’s orders but, invoking Article 142, directed the bank to pay a lumpsum of Rs.2.5 lakh to the respondent within two months as full and final settlement (in addition to Rs.50,000 earlier paid). The Court emphasised that compassionate appointment was an extraordinary relief to meet “immediate financial difficulties” caused by the sudden stoppage of the breadwinner’s income and reiterated that the scheme required an assessment of indigence and suitability before granting relief. The Court, in its reasoning, observed: “In our considered view, the objectives of the scheme of 1993 and the requirements of disclosure relating to financial condition and the details of liabilities of the deceased employee in the prescribed formats (Annexures I and II, respectively) would leave none in doubt about the intention of the policy makers. Overcoming the immediate financial difficulties on account of sudden stoppage of the main source of income and existence of indigent circumstances necessitating employment to one of the dependants being at the heart of the scheme of 1993, it is difficult, if not impossible, to accept it as a valid proposition of law that grant of terminal benefits cannot be of any consequence since paragraph 3.2 of the scheme of 1993 permits the offer of appointment to be kept open till such time the surviving minor dependant, who is to be offered appointment, attains majority. … The idea for incorporation of this clause in the scheme of 1993 cannot be confused with grant/release of terminal benefits. Both operate in different arena and, therefore, we respectfully disagree with the reasoning in paragraph 19 of Canara Bank (supra).”

Background The respondent’s father died in service on 20 December 2001 with roughly four months’ service remaining. The respondent applied on 15 January 2002 for a compassionate appointment under Canara Bank’s Circular No.154/93 (1993 Scheme). The bank refused on 30 October 2002, citing that the family received family pension and terminal benefits and that the son was over the 26-year upper age limit for sub-staff posts; the 1993 Scheme, however, allowed discretionary age relaxation up to five years. The respondent sought reconsideration; the bank again declined. During the first writ petition the bank introduced Circular No.35/2005 (2005 Scheme) providing for a lumpsum ex-gratia payment and discontinuing compassionate appointments.

A Single Judge of the Kerala High Court in 2015 set aside the bank’s rejection and directed reconsideration in light of this Court’s precedents (including Canara Bank v. M. Mahesh Kumar and State Bank of India v. Somveer Singh), directing decision within 45 days. The bank’s MD & CEO re-examined and again refused in September 2015, concluding that the family was not in “acute financial distress” given pension and terminal benefits. The respondent filed a fresh writ petition; a Single Judge in 2016 directed appointment in the sub-staff cadre and compensation of Rs.5 lakh. A Division Bench dismissed the bank’s intra-court appeal, awarded costs of Rs.5 lakh and directed appointment within a month, relying substantially on the coordinate bench decision in Canara Bank (supra) which had held that grant of terminal benefits and family pension was “of no consequence” in certain contexts.

The Supreme Court noted a wider conflict in precedents about whether the governing scheme was that in force on the date of death or the date of consideration, and that some earlier coordinate decisions on the 1993 Scheme had been referred to larger benches. The Court found that the bank’s MD & CEO had not acted “unlawfully” in assessing the family’s financial position, observed that suitability must be tested before any appointment, disagreed with reading paragraph 19 of the earlier Canara Bank coordinate decision as precluding consideration of terminal benefits, and concluded that ordering direct appointment on appeal without suitability assessment was impermissible. The Court allowed the appeal, set aside the High Court orders and directed the bank to pay Rs.2.5 lakh to the respondent within two months (additional to Rs.50,000 previously paid), closing the proceedings.

Case Details: Case No.: Civil Appeal No. 255 of 2025 (Arising out of SLP (C) No. 30532/2019) Case Title: Canara Bank v. Ajithkumar G.K. Appearances: For the Petitioner(s): [Not indicated in the judgment] For the Respondent(s): [Not indicated in the judgment]