Court held Leave Encashment Is Not A Bounty; But A Right Of Employee : Bombay High Court
The Bombay High Court’s ruling reinforces the idea that leave encashment is not a discretionary favor, but a legitimate right earned by employees, safeguarded by constitutional principles.
In the case of Dattaram Sawant & Anr. v. Vidarbha Konkan Gramin Bank, the Bombay High Court made a significant ruling regarding leave encashment. The court held that leave encashment, paid on account of unutilized leave, is not a mere favour, but a right earned by the employee. Let’s delve into the details of this judgment:
Background and Parties Involved:
Petitioners: Advocates Shailendra Kanetkar and Yash Dhawal.
Respondent: Advocates Bhavesh Wadhwani and Shrishti Shetty, briefed by MV Kini & Co.
The petitioners were former employees of Vidarbha Konkan Gramin Bank who sought encashment of their privilege leaves after dedicating over three decades to the bank and subsequently resigning.
Legal Interpretation:
- The Division Bench, comprising Justice Nitin Jamdar and Justice MM Sathaye, emphasized that leave encashment is akin to a salary and constitutes an employee’s property.
- Depriving an individual of their property without a valid statutory provision would violate Article 300 A of the Constitution of India.
- The court clarified that leave encashment, when paid for unutilized leave, is not a mere bonus or bounty. Instead, it becomes the right of the employee if they have earned it and chosen to accumulate their earned leave.
The Bank’s Regulations:
According to the bank’s rules, employees were entitled to one day of privilege leave for every 11 days of duty.
Dattaram Sawant claimed 250 days of credited privilege leave, amounting to ₹6,57,554, while Seema Sawant asserted 210 days of credited privilege leave, equivalent to ₹4,66,830.
The Denial and the Court’s Verdict:
Upon requesting encashment, the bank informed the petitioners that the facility for encashment of privilege leave for resigning employees had been established only after their resignation dates, thus denying them the benefit.
The court deemed this denial arbitrary and unsustainable.
It declared that the petitioners are entitled to leave encashment as prayed for.
The respondent bank was directed to calculate the amounts payable towards encashment to the petitioners along with interest at the rate of Rs.6% per annum and pay the same within six weeks from the judgment date.
The Bombay High Court’s ruling reinforces the idea that leave encashment is not a discretionary favor, but a legitimate right earned by employees, safeguarded by constitutional principles.
Brief Facts:
In the matter of Dattaram Sawant & Anr. v. Vidarbha Konkan Gramin Bank, [2024:BHC-AS:20584-DB], the Bombay High Court held that a leave encasement paid on account of unutilized leave is an employee’s privilege, not a bounty.
The petitioners sought encashment of their privilege leaves, which their employer, Vidarbha Konkan Gramin Bank, had denied. Both had worked at the bank for nearly three decades before resigning, which was acknowledged by their bosses, who handed them experience certificates.
A Division Bench of Justice Nitin Jamdar and Justice MM Sathaye ruled that “leave encashment is akin to a salary, which is property.” Depriving a person of his property without a legal statutory provision would violate Article 300 A of the Indian Constitution. Leave encashment paid for unused leave is not a bounty. If an employee has earned it and has decided to accrue his earned leave to his credit, encashment is his right.”
Advocate Shailendra Kanetkar appeared for the petitioners, while Advocate Bhavesh Wadhwani represented the respondent.
Employees were entitled to one day of luxury leave for every 11 days on duty, according to bank standards. Dattaram Sawant requested 250 days of credited privilege leave worth ₹6,57,554, while Seema Sawant requested 210 days worth ₹4,66,830.
When the petitioners requested encashment, the bank informed them that the mechanism for encashment of privilege leave for resigning workers had been established after their resignation dates, denying them the benefit.
The Court found the rejection of encashment unreasonable and unsustainable, arguing that the bank could not dismiss the accrued right of encashment. As a result, it stated, “The Respondent-Bank’s refusal to extend the benefit of encashment of privilege leave is arbitrary and cannot be sustained.” 23. Thus, it is declared that the Petitioners are entitled to the requested leave encashment. The Respondent – Bank is directed to calculate the amounts payable for encashment to the Petitioners, along with interest at a rate of Rs.6% per annum, and pay the same to the Petitioners within six weeks of today.”
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