KARNATAKA HC: Leave Encashment Is A Constitutional Property Right; It Cannot Be Denied Without Specific Statutory Authority

THE CONCLUSION:

11. The findings of both the High Courts would clearly cover the issue at hand on all its force, as those were also the cases were employees were dismissed from service on misconduct. The petitioner in the case at hand is also dismissed, on account of misconduct. Benefit of leave encashment to an employee is trite, a statutory right, but it has an imprimatur to the legal principle that right to receive terminal benefits is recognized as a right to property obtaining under Article 300-A of the Constitution of India.

"300-A. Persons not to be deprived of property save by authority of law.-No person shall be deprived of his property save by authority of law."

Article 300-A mandates that persons not to be deprived of property save by authority of law. Therefore, it becomes unmistakably clear that any attempt of the employer to take away the right of any part of terminal benefit, which in the case at hand is, leave encashment, without any umbrage of a statutory provision, such action is sans countenanced.

12. Therefore, it is a right of an employee not only under the statute, even under the fountainhead of all statutes - The Constitution of India. 

IN THE HIGH COURT OF KARNATAKA (DHARWAD BENCH)

Writ Petition No. 100339 of 2025 (S-RES)

Decided On: 19.02.2025

G. Linganagouda Vs. General Manager, Karnataka Gramina Bank

Hon'ble Judges/Coram:

Maheshan Nagaprasanna, J.

Citation:  2025:KHC-D:3366, MANU/KA/0674/2025.

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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.”

 IN THE HIGH COURT OF DELHI AT NEW DELHI

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

SH. S.B. SINGH Vs NATIONAL TEXTILE CORPORATION 

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Whether the employer can refuse to pay the amount of provident fund and leave encashment to the employee if he had issued the charge sheet of departmental enquiry to him after retirement?

  With respect the Provident Fund reliance is placed on the

judgement of the Supreme Court in Gorakhpur University & Ors. vs. Dr. Shitla Prasad Nagendra & Ors., (2006) 6 SCC 591, wherein the Court held that terminal benefits including Provident Fund cannot be withheld and the same are immune from attachment, deduction or adjustment even against any of the dues from the employee. To the same effect is the

decision of the Division Bench of the Bombay High Court in Ramdas Govind Bakhle vs. Maharashtra State Financial Corporation (2000)SCC OnLine Bom 9, wherein the Court relying on Bhagirathijena vs. Board of Directors, Orissa State Financial Corporation & Ors., (1993) 3 SCC 666, held that no amount from the Provident Fund of an employee can be deducted in the absence of service Regulations providing so and

the Court directed the Respondent therein to release the Provident Fund of the Petitioner.{Para 7}

13. A perusal of the provisions of Rule 7.7 makes it evident that before the Competent Authority can withhold the Leave Encashment of an employee, wholly or partly, a conscious decision must be taken to withhold the Leave Encashment due to the employee on account of there being a possibility of some money becoming recoverable from him, once the Disciplinary Proceedings conclude.

14. While interpreting the said Rule, the Division Bench held as

follows:-

“10. The aforesaid Rule would show that the competent

authority may wholly or partly, withhold leave encashment in

respect of a Government servant who retires on attaining the

age of superannuation, while under suspension or while

undergoing disciplinary or criminal proceedings, provided the

competent authority is of the view that there is a possibility of

some money becoming recoverable from him on the conclusion

of proceedings against him. In the present case, the respondents

have not produced any order to show that a conscious decision

has been taken by the Government to withhold the leave

encashment due to the petitioner upon his retirement, on

account of there being a possibility of some money becoming

recoverable from him on the conclusion of proceedings against

him. The nature of the charge levied against the petitioner also

does not support the withholding of the leave encashment. We

cannot agree with the submissions of learned counsel for the

respondents that if the charge against the petitioner is proved,

it could also have the effect of nullifying the examination

process in which the petitioner is alleged to have manipulated

the marks of some of the candidates. Pertinently, the said

examination took place in the year 2010. It is not the

respondent’s case that any of the successful candidates have

been put to notice in this regard. It is not claimed that the said

examination process has been assailed by any unsuccessful

candidate on account of the alleged misconduct of the

petitioner, or that the same has been set aside, or the challenge

is still pending. We are, therefore, of the view that withholding

of leave encashment of the petitioner is not justified.

 IN THE HIGH COURT OF DELHI AT NEW DELHI

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

SH. S.B. SINGH Vs NATIONAL TEXTILE CORPORATION 

CORAM: HON'BLE MS. JUSTICE JYOTI SINGH

Pronounced on: 17.11.2020

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