INTRODUCTION
In a judgement passed on 24th December, 2024 in the case of Ahmedabad Municipal Corporation v. Sadgunbhai Semulbhai Solankhi (hereinafter referred to as the “Case”), the Hon’ble Gujarat High Court single judge bench of Justice M. K. Thakker (the “Court”) held that` leave encashment is akin to salary, which is property, and depriving a person of his/her property without any valid statutory provision is a violation of rights enshrines in the Constitution of India.
BACKGROUND
Mr. Sadgunbhai Semulbhai Solankhi (“Respondent”) had started working as an employee for the Ahmedabad Municipal Corporation (“Petitioner”) in 1975 and thereafter, the Responded tendered his resignation on 6th March, 2013 without depositing the notice pay and proposing that the resignation be effective from 7th March, 2013. However, the Petitioner failed to respond to the Respondent’s resignation for 7 (seven) months and then eventually on 9th October, 2013 and 8th November, 2013, the Petitioner asked the Respondent to deposit the notice pay which he failed to deposit. Eventually, the Respondent attained the age of superannuation on 30th April, 2014.
Thereafter, the Respondent made an application for encashing his leaves for the period from 6th March, 2013 to 30th April, 2014, amounting to a total of INR 2,82,703/- (Indian Rupees Two Lakhs Eighty Two Thousand Seven Hundred and Three Only) and this application also remained unattended by the Petitioner as it contended that the Respondent remained unauthorisedly absent for this period. The Respondent then filed a recovery application before the Labour Court for the recovering the benefit of leave encashment (“Recovery Application”) and the Labour Court allowed the same along with a cost of INR 1,000/- (Indian Rupees One Thousand Only).
The Petitioner then filed this petition under Articles 226 and 227 of the Constitution of India challenging the award granted by the Labour Court.
ISSUES BEFORE THE COURT
The issues before the Court were as follows:
i. Whether the Recovery Application was maintainable before the Labour Court?
ii. Whether the Respondent was entitled to such leave encashment?
ANALYSIS OF THE COURT
i. On the first issue of maintainability of the Recovery Application, the Court held that the Recovery Application was maintainable before the Labour Court as per Section 33C(2) of the Industrial Disputes Act, 1947 (“ID Act”),
“(2) Where any workman is entitled to receive from the employer any money or any benefit which is capable of being computed in terms of money and if any question arises as to the amount of money due or as to the amount at which such benefit should be computed, then the question may, subject to any rules that may be made under this Act, be decided by such Labour Court as may be specified in this behalf by the appropriate Government; within a period not exceeding three months:
[Provided that where the presiding officer of a Labour Court considers it necessary or expedient so to do, he may, for reasons to be recorded in writing, extend such period by such further period as he may think fit.]”
Thus, basis Section 33C(2) of the ID Act, the Court held that the Recovery Application was maintainable by the Labour Court
ii. On the second issue, the Court observed that as per the service regulations applicable to the Respondent, i.e., Gujarat Civil Service Rules, 2002 (“GCSR”), as Rule 49(1) and (2) of the GCSR, which states the following:
“(1) A Government employee at any time after completion of twenty-five years’ qualifying service, may, by giving notice of not less than three months in writing to the appointing authority, retire from service;
(2) The notice of voluntary retirement given under sub-rule (1) shall require acceptance by the appointing authority;”
Accordingly, the Petitioner was required to send a communication of acceptance or rejection of the resignation within 3 (three) months, and failure to respond results in the retirement being effective from the date of expiry of the said period. However, as stated above, the Petitioner did not respond for 7 (seven) months. The Court also observed that in a gratuity case separately filed by the Respondent, which was also decided in the Respondent’s favour, the date of retirement was considered as 7th June, 2013. Further, the Court observed that as there was no acceptance for a period of 3 (three) months, there arose no necessity on the Respondent to pay the 1 (one) month notice pay.
In determining the leave encashment period, the Court relied on Rule 22 of the GCSR, which states that:
“(1) Except as provided in rule-63 and this rule, any claim to leave to the credit of a Government employee, who is dismissed or removed or who resigns from Government service, ceases from the date of such dismissal or removal or resignation, as the case may be.”
As such, the Court upheld the decision of the Labour Court.
CONCLUSION
In this case, the Court held that if an employee has earned leave and he then chooses to accumulate it to his credit, then its encashment becomes his right, and this right cannot be violated without valid authority. A similar case had arisen before the Hon’ble Bombay High Court in the case of Dattaram Atmaram Sawant & Ors. v. Vidarbha Konkan Gramin Bank, wherein the court on 2nd May, 2024 had also held that leave encashment is akin to salary, which is property, and it being a statutory right granted by the Constitution of India, this right once earned cannot be forfeited without explicit statutory provision.
The Court, has re-affirmed this position. While in the present case , the employee was a government employee, the same principles would be equally relevant and applicable to private sector employees as well.
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