The Bombay High Court held that leave encashment is akin to salary and depriving a person of leave encashment would amount to violation of Constitutional right. The Court also noted that leave encashment, is considered as property. If an employee opts to accrue earned leave to their credit, then the right to encashment is established.
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Mumbai: The Bombay High Court ruled that leave encashment is akin to salary, and depriving a person of leave encashment constitutes a violation of constitutional rights.
A Bench comprising Justices Nitin Jamdar and MM Sathaye observed that leave encashment, like salary, is a form of property. If an employee accumulates earned leave, the encashment of that leave becomes their right.
“Leave encashment is akin to a salary, which is property. Depriving a person of his property without any valid statutory provision would violate Article 300A of the Constitution of India. Leave encashment paid on account of unutilised leave is not a bounty. If an employee has earned it and the employee has chosen to accumulate his earned leave to his credit, then encashment becomes his right,”
-the Court held.
The case was brought to the Court by two employees, Dattaram Sawant and Seema Sawant, who sought encashment of their privilege leaves, which their employer, Vidarbha Konkan Gramin Bank, had rejected. Both employees had served the bank for over 30 years before resigning. Their resignations were accepted, and they were issued experience certificates.
According to the bank’s regulations, employees accrued one day of privilege leave for every 11 days of service. Dattaram Sawant had 250 days of privilege leave, amounting to Rs 6,57,554, while Seema Sawant had 210 days, amounting to Rs 4,66,830. However, when they requested encashment, the bank informed them that the facility for encashing privilege leave for those who had resigned was only introduced on September 14, 2015, after they had resigned.
Aggrieved by this, the petitioners approached the Court seeking directions for the bank to pay the amounts due for their accumulated privilege leave with interest at 8% per annum. The Court opined that the accrued right to encash privilege leave could not be rejected by the bank.
“The refusal by the Respondent -Bank to extend the benefit of encashment of privilege leave is arbitrary and cannot be sustained. It is declared that the Petitioners are entitled to leave encashment as prayed for. The Respondent – Bank is directed to calculate the amounts payable towards encashment to the Petitioner along with interest at the rate of 6% per annum and pay the same to the Petitioners within six weeks from today,”
-the Court ordered.
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