Sunday 4 April 2021

Is the employer liable to pay interest to the employee if he withholds his leave encashment without specific order?

  We, accordingly, allow the petition partially by directing

the respondent to pay the petitioner his leave encashment dues

along with interest at the rate of 8% per annum from the date

the same became due, till payment.”{Para 11}

15. Another Division Bench of this Court in Prem Nath (supra)

dealing with a similar issue in the context of Rule 39 (3) of the CCS (Leave) Rules, 1972 held as under:-

“7. It is undisputed that the respondent retired from service on

31.08.2010 on attaining the age of superannuation and that at

the time of his retirement, or immediately thereafter, leave

encashment was not released to him. There is also no dispute

on the proposition that leave encashment can be withheld under

Rule 39 (3) of CCS (Leave) Rules, 1972, if at the time of

retirement, an employee is under suspension or disciplinary or

criminal proceedings are pending against him. However, a

reading of the said provision clearly shows that in order to

withhold the leave encashment in whole or in part, the authority

competent to grant leave has to pass an order specifically

withholding the encashment, if in its view there is a possibility

of some money becoming recoverable from the employee on

conclusion of the proceedings against him. 

8. Learned counsel for the respondent vehemently submitted

that no such order was passed by the competent authority and

the learned counsel for the petitioners was not able to rebut the

said fact. Consequently, the petitioners herein could not have

withheld the leave encashment and the money ought to have

been released to the respondent soon after his retirement. We

also do not agree with the submissions of the learned counsel

for the petitioners that only because there is no Rule for grant

of interest of leave encashment, the respondent would not be

entitled to the same. Learned counsel has not been able to point

out any rule to the contrary, which creates a bar for grant of

interest in case due amount is released after a considerable

delay. It has been clearly held by the Apex Court in several

judgments including S.K.Dua vs. State of Haryana & Anr.,

(2008) 3 SCC 44 that if there are Statutory Rules or

Administrative Instructions occupying the field, an employee

could claim payment of interest relying on such rule, but even

in the absence of any Statutory Rules or Administrative

Instructions or Guidelines, an employee can claim interest

under Part-III of the Constitution relying on Articles 14, 19 and

21 of the Constitution of India. In this regard, we also rely on a

decision passed by the Division Bench of this Court in Writ

Petition (C) No.1186/2012, titled as ‘Government of NCT of

Delhi vs. S.K.Srivastava’. This judgment also supports our view

that if no order is passed under Rule 39(3) of Leave Rules, the

leave encashment cannot be withheld. The fact of the matter is

that the petitioners are retaining the money of the respondent

from the year 2010 to 2015 and the respondent is, thus, clearly

entitled to interest on the delayed payment. Interest is awarded

to compensate the recipient for the falling value of money due

to inflation. In so far as, the plea of the petitioners that serious

cases were pending against the respondent and, therefore, the

leave encashment was not released is concerned, the same has

no merit either. Although neither the petitioners nor the

respondent have been able to throw any light on the status of

the criminal and disciplinary proceedings as of today, however,

if this was the reason for withholding the leave encashment

then the same status continues perhaps even today. The reason

given for releasing the leave encashment in 2015 is an order

passed by the Public Grievances Commission. We fail to

understand that if the petitioners were withholding the leave

encashment due to pending proceedings then they had the

remedy of not implementing the order of the Public Grievances

Commission. However, having complied with that order and

released the leave encashment, the petitioners cannot be heard

to say that the leave encashment was withheld due to pending

proceedings. Learned tribunal has, thus, rightly come to

conclusion that the respondent deserves interest at the GPF

rate for the delayed payment of leave encashment.”


W.P.(C) 3114/2020 & CM 10817/2020



Pronounced on: 17.11.2020.

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