Leave encashment is akin to a salary…paid on account of unutilized leave is not a bounty:” Bombay High Court

Recently, the Bombay High Court, while hearing the Dattaram Sawant & Anr v. Vidarbha Konkan Gramin Bank case, considered a question in the petition that “whether the Petitioners have lost their right to encash privilege leave because they resigned from the services of the Respondent—Bank.” The Bombay HC bench constituting Justice Nitin Jamdar and Justice MM Sathaye held that “Leave encashment is akin to a salary, which is property. Depriving a person of his property without any valid statutory provision would violate Article 300 A of the Constitution of India. Leave encashment paid on account of unutilized 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 petitioners were two employees, Dattaram Sawant and Seema Sawant, who approached the HC seeking encashment of privilege leaves which was rejected by their employer (Vidarbha Konkan Gramin Bank). Both worked with the Respondent-Bank for over 30 years before resigning. Their senior accepted the resignation and issued an experience certificate for the period during which they worked with the Respondent-Bank as satisfactory. Dattaram Sawant and Seema Sawant claimed they had 250 days and 210 days of credit privilege leave amounting to Rs. 6,57,554 and Rs. 4,66,830 respectively. After tendering resignations, the Petitioners requested the Respondent–Bank for encashment of their privilege leave. Firstly, there was no response then on January 30, 2018, the General Manager of the Respondent-Bank addressed a letter to the advocate for the Petitioners informing that the facility for encashment of privilege leave for those who have resigned came into existence on 14 September 2015, after the Petitioners had resigned from service. 

Aggrieved by the refusal by the Respondent-Bank, the Petitioners have sought a writ of mandamus to direct the Respondent-Bank to pay the amounts of privilege leave standing to their credit with interest at Rs.8% per annum. During the proceedings, learned Counsel Mr. Shailendra Kanetkar appeared for the Petitioners, and learned Counsel Mr. Bhavesh Wadhwani represented the Respondent-Bank. After hearing the contentions, the HC bench held that “the Petitioners are entitled to succeed. Their accrued right of encashment of privilege leave could not have been rejected by the Respondent -Bank.” It added, “The refusal by the Respondent -Bank to extend the benefit of encashment of privilege leave is arbitrary and cannot be sustained.” Following this, the HC directed the Vidarbha Konkan Gramin Bank 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 to the Petitioners within 6 weeks from today (May 2, 2024).