Leave Encashment Dilemma: Are We Legally Required to Pay for Unused Leaves in Maharashtra?

I am the company HR of a private company in Thane, Maharashtra. One of our employees resigned and was relieved a few months back, and now he wants to encash his paid leaves which he did not take. My company has a policy that we give paid leave to employees only when we receive at least 4-5 days' notice in advance; otherwise, it's treated as absent, and salary is deducted. However, some employees still take that leave and accept the deduction from their salary.

Leave Encashment Policy Concerns

In the case of the above employee, he took many leaves without any approval, so most of the time, his salary was deducted. Now he wants to encash those remaining leaves. As per the Shop and Establishment Act, Maharashtra, are we mandated to encash leaves? If yes, this could become an easy tool for employees to misuse as they will take leave without any intimation/approval and later encash those remaining leaves (possibly at a higher rate, in case of a salary increment later).

Section 35(2) of the Bombay Shop & Establishment Act mandates that payment of leave salary is due and has to be made. The provision is as follows:

(2) If an employee entitled to leave under sub-section (1) or (1-A) is discharged by his employer before he has been allowed the leave, or if, having applied for and having been refused the leave, he quits his employment before he has been allowed the leave, the employer shall pay him the amount payable under section in respect of the leave.