Industrial Relations And Labour Laws
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Thread Started by #ask_me

My orgnisation (PSU) is denying encashment of balance leaves on resignation. Is this legal or can it be challenged based on any existing law. I have heard that this year Hon'ble Supreme Court has delivered some judgement on this subject saying that since earn leave has been "earned" by the employee, so it cannot be denied even on resignation. However, I am unable to locate this judgement. I shall be grateful if someone points me in the right direction.
19th September 2008 From India, Ranchi
Earned leave can be encashed on leaving the organisation due to any reason including resignation. There shall not be a different approach in this regard and I feel any provision given in the Standing Orders (if there exists any order in your Standing Orders not to give encashment of earned leave on resignation) of your organisation shall be invalid. Please verify the Standing Orders and what exactly is written in it about encashment of leave.
20th September 2008 From India, Kannur
Dear Madhu,
Thanks a lot for your reply. There is no order in my organisation regarding encashment of balance leaves at the time of resignation. However, there are orders regarding encashment of balance leaves at the time of VRS, Retirement, Death, Superannuation. Hence the interpretation of my organisation is NOT to encash balance leaves at the time of resignation since there is no explicit order in this respect, like in other case.
My query is whether this stand is legally challengable. If yes, on what basis ? Is there any act, rule, law, case law, Supreme / High Court Judgement or direction from GoI in this regard.
According to me earn leave is "earned" by every employee, based on his/her attendance. Hence the natural justice says that the employee owns it and it is not at all at the prerogative of an organisation. I am sure that filling a writ petition on this shall surely be admitted and awarded. But it's a long drawn process. However if there is already any case law then it shall be easy to enforce it in my organisation.
20th September 2008 From India, Ranchi
In the absence of an agreement/ provision to the contrary, a particular matter shall be taken in favour and not against. Therefore, if your Standing Orders do not specify the scope of encasing the EL at the time of resignation, it should be deemed as encashable. Otherwise it should have been clarified that encashment would not be possible when the employee leaves after resignation.I do not have any judgement in support of it but the act of not giving EL encashment can be challenged. No doubt of it.
20th September 2008 From India, Kannur
whether supreme court judgement is their or not as per factories act section 79 clause 3, it is clearly mentioned which states
if a worker is discharged or dismissed from service or quits his employment or is supernuated or dies while in service,during the course of calender year,he or his heir or nominee,as the case may be,shll be entitle wages in leiu of leave.
pls go through provisions of act aand u are entitle for same.
j s malik
20th September 2008 From India, Delhi
there has been a judgement passed by Supreme Court on the leave encashment. Mr.Akil Anand had previously posted this and I am citing his reply to you.
Hon’ble Supreme Court has given a remarkable judgment on 12.03.2008 relating to payment of Leave Encashment in the Case No. Appeal (civil) 1832 of 2004, Petitioner: Manipal Academy of Higher Education Versus Provident Fund Commissioner

Manager-HR, Chennai
20th September 2008 From India, Madras
Please note that if there is any provision of leave enchashment in the employment rules/ standing orders as per aplicability in your cae of the company or you can refer the factories act if it is a factory or shops and commercial establishment act if it is registered uder it.
To clarify you the supreme court judgement on leave enchasment is related to PF as the judgement speaks about pf deduction is not required in case of leave encashment as leave is not a wages under the pf act.
21st September 2008
Dear S/Shri Madhu,Malikjs,S. Chandrasekar,R. K. Panda,
Thanks a lot for your replies.
Yes, interpretation should be in positive, but that's the way it stands as of now. Maybe my organisation is trying to "retain" employees.
Factories act is not applicable here in this instant case.
I 'll check the case quoted by you and see whether it is applicable or not. I think its regarding PF deduction from balance leave deduction at the time of resignation.
According to this judgement, leave is NOT part of wages, so I wonder how much claim an employee has on it.
Another thought is whether it is possible to exhaust leaves during the notice period by availing them.
Another angle which I am exploring is whether notice period (days) can be adjusted against the balance leaves OR notice money can be adjusted against the encashment/money value of balance leaves.
Looking forward for more discussion.
Once gain thanks a lot for your time and inputs.
21st September 2008 From India, Ranchi
If you are covered under the Shops & Establishments Act there is no worry as even after your resignation you can file a petion for claiming it as per your State Enactment.
With kind regards,
V.Sounder Rajan
Chennai – 600 001.,
Off : 044-42620864, 044-65874684
22nd September 2008 From India, Bangalore
Dear AskMe,
Before asking any query on any issue / subject of ur organistation, I feel existing rule position of ur orgn first be informed by posting on the site for opinion as such questions are not general in nature concerning all.

However, the following are for information:
1. Usually in PSUs, Leave Encashment is permissable if resignation is to take up new eployment in another Govt. Dept/ PSU through preper channel.

2. Otherwise, only Earned Leave is encashsble and not HPL. This can be contested before HC / SC, I feel, through Writ / PIL. Denying such right is vey much arbitrary. Not allowing such benefit may also be treated as Bonded labour as it binds the employees to serve particular orgn and not allowed to freely avail employment opprtunities outside.

3. Because HPL could have been availed during service period but accumulated for sake of its use at a later date for any reason. As per the carifications of Govt., leave includes even EOL. If so, HPL obviously is included in the defintion of leave.

4. During Notice period, HPL / Commuted leave can be availed.

5. If rule specify EL can be adjusted against notice period, that could be done. If rule specify leave can be adjusted against notice period, HPL as commuted leave can be adjusted. Usually. service regulations are framed with the Board's approval and administrative order can not take away such right by simple clarification that HPL can not be adjusted against notice period.

22nd September 2008 From India, Jaipur
Dear Ask Me
Logically it should be mentioned in your employment conditions that so many days of earned leave is authorised in a year , out of which you can encash say 50% /20% or 10% then it becomes a legal binding otherwise one can't claim.It is an additional facility given to employees must be recorded in standing orders if applicable eg central Govt employees can encash up to 300 days ONLY beyond that it is lapsed.
Thanks & Regards
Ashok malik
24th September 2008 From India, New Delhi
Pl go through the definition of employeeunder the factories act or state factory rules; which clearly says that even the managers are employee under the factories acti.e. even if you are not covered under the standing order or out of the purview of the standing orders or even if in the service rules applicable to you, you are employee under the factories act/rules. Section 79 is applicable to you. The best resource is write a letter to labour department regarding violation of actories act/rules clearly mentioning violation of section 79. this is the only quick way to get the payment.
ak malhotra
sr general manager
29th September 2008 From India, Guwahati
Dear HR Colleagues,
Please guide me on the following issue:
Employee has resigned from service and his leave has never been refused during service.
Once the person submits resignation, leave balance at credit gets freeze and he is neither
allowed to avail leave during notice period nor given encashment of balance leave.
This organisation is one of the Government Undertakings and is governed by Bombay Shops & Establishment Act.
What is the legal stand on this. Your early responses will help me a lot.
4th December 2009 From India, Mumbai
Would like your esteemed opinion in the case of organisations which are registered societies, also exempted under 80G of income tax act - we have as per our rules - epf, leave and leave accumulation but not leave encashment. we are also registered under shops and establishments. Is leave encashment at the time of resignation and retirement a right of employees as per Indian labour law?
Please advise.
17th March 2019 From India, Bhopal
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