Dear Sam,
Every unilateral termination of the contract of employment, either on the side of the employee by way of formal resignation or discharge simpliciter by the employer, has to be preceded by a notice of a certain duration prementioned in the contract of employment or as per the service regulations. Failure in this regard by one party would entitle the other party to claim compensation based on the amount of salary payable for the period of notice. The objective behind such a clause of unilateral exit is to enable the employer to find a suitable substitute and the employee to overcome the difficulties of loss of earnings due to such an involuntary and sudden exit.
Such an exit clause may provide for the buy-out of the notice period by the employee in full or in part subject to the discretionary acceptance of the employer. Otherwise, the employee has to serve the notice period and in case of failure, the employer can deduct the same from the F&F dues or refuse to relieve him and initiate disciplinary action for unauthorized absence, which can result in the dismissal of the employee.
Normal industry practice dictates that no leave would be allowed during the notice period. If formally sanctioned, it cannot be treated as LOP.
In the given case, leave salary should not be recovered or deducted if there is sufficient leave in the employee's leave account as it stands already sanctioned; only the salary for the unserved notice period can be deducted.