The Bombay High Court delivered a significant ruling affirming that leave encashment is a legal right of employees, equating it to a salary and thus categorizing it as a form of property under the Constitution.
In the case of Dattaram Sawant & Anr. v. Vidarbha Konkan Gramin Bank, the court ruled that leave encashment is a right akin to a salary and is protected as property under Article 300A of the Indian Constitution. In this case, two former employees, Dattaram and Seema Sawant, resigned after serving over three decades and were denied leave encashment by their employer. The court directed the employer to pay the due leave encashment amounts, emphasizing that the employer’s regulations enacted after their resignation did not negate their right to leave encashment. The decision underscored that leave encashment rights can only be restricted by statutory provisions, not by administrative decisions.
In various rulings, the Bombay High Court reiterated that leave encashment is a statutory right, and employees cannot be deprived of it without due process of law. Consequently, pension, gratuity, and leave encashment were highlighted as fundamental rights that cannot be denied arbitrarily.
The court consistently held that leave encashment is not a discretionary benefit but a right, similar to a salary, and thus constitutes the employee’s property. Withholding leave encashment without a valid statutory provision violates constitutional protections under Article 300-A, which ensures that no person can be deprived of their property without the authority of law. Leave encashment cannot be treated as a gratuitous payment subject to the employer’s discretion but must be honored as a statutory obligation. Resignation does not negate the right to leave encashment; employees are entitled to encashment accrued before their resignation.
The ruling by the Bombay High Court establishes a clear legal precedent that leave encashment is an enforceable right under Indian law. Employers must honor this right, failing which, they can be directed by courts to compensate the affected employees with interest. These decisions strengthen the legal framework protecting employees’ rights to their earned benefits.
