Leave Encashment Benefit Can't Be Withheld Only Due To Pendency Of Judicial Or Disciplinary Proceedings: Orissa High Court

The Orissa High Court has reiterated that the leave encashment benefit of a retired government employee cannot be withheld only on the ground that a judicial or disciplinary proceeding was pending against him at the time of his superannuation.

While setting aside the order, by which the said post-retirement financial benefit of the petitioner was kept at bay, the Single Bench of Justice Aditya Kumar Mohapatra observed –

“On a careful analysis of the factual background of the present case, further on close scrutiny of the legal provisions governing the field of sanction and disbursement of retiral benefits including cash equivalent of unutilized leave salary, this Court observes that there is no statutory provision either in the shape of an enactment or rules prohibiting payment of such amount to the employee who is found to be involved in a judicial proceeding or a disciplinary proceeding by the time he retires from Government Service.”

Case Background

The petitioner, while working as Inspector of Motor Vehicles in OTES Cadre, retired from service on attainting the age of superannuation on 30.04.2024. By a letter dated 06.08.2024, he was intimated regarding withholding of his cash benefit for unutilised leaves on the ground of pendency of a vigilance case as well as a disciplinary proceeding against him at the time of his retirement.

Being aggrieved by the said order, he impugned it by filing this writ petition. The main thrust of his argument was that there is no statutory provision permitting the authorities to withhold unutilized leave salary in a case where a criminal case as well as a disciplinary proceeding is pending against an employee.

Referring to the judgment of the Supreme Court in the case of State of Jharkhand & Ors. v. Jitendra Kumar Srivastava & Anr. (2013), it was contended that executive instructions are not of statutory character and thus, the same cannot be termed as law within the meaning of the Article 300A of the Constitution. Further, since leave encashment benefit can very well be considered as a property within the definition of Article 300A, the petitioner cannot be deprived of such benefits in the absence of any statutory provision.

Court's Observations

Against the above factual backdrop, the question which cropped up for consideration was whether the leave encashment benefit of the petitioner could have been withheld by the opposite party authorities merely on the ground that a vigilance case as well as a disciplinary proceeding was pending against him at the time of his retirement.

With regard to withholding of the cash equivalent of unutilized leave salary, the Court found that there is no statutory rule or guidelines which specifically prohibits payment of such benefits to the employees who are involved in any judicial/disciplinary proceeding at the time of their retirement from service.

Justice Mohapatra also referred to a Division Bench judgment of the High Court in State of Odisha & Ors. v. Nirmal Chandra Satapathy & Anr. which relied upon the judgment of the Apex Court in Jitendra Kumar Srivastava (supra) to categorically hold that it is not open to the State Government to take away a part of the pension or gratuity or even leave encashment without any statutory provision in the guise of administrative instruction.

During the course of argument, a memorandum dated 26.03.2015 issued by Finance Department, Government of Odisha was produced wherein it was stated that a cash amount equivalent to the unutilized leave salary to the Government servants will not be sanctioned in the event of their retirement on superannuation if it is found that a departmental/judicial proceeding is pending against the Government servants as on the date of their retirement.

The question, therefore, arose as to whether the executive can take away the service benefits, which the petitioner is otherwise entitled to as per law, by virtue of an executive instruction.

“In the said judgment [Jitendra Kumar Srivastava (supra)], the Hon'ble Supreme Court has very categorically observed that it is not open to the State Government to take away a part of the pension or gratuity or even leave encashment without any statutory provision to that effect. Therefore, the Opposite Parties have committed an error in withholding the leave encashment of the Petitioner by referring to the executive instruction dated 26.03.2015,” it held.

It also emphasized that the opposite parties did not mention the aforesaid memorandum in the order withholding the leave encashment. Therefore, it was of the considered view that the impugned order is illegal which deserves to be quashed. Accordingly, the opposite parties were directed to sanction the cash equivalent of the unutilized leave salary for a period of 300 days as is due and admissible to the petitioner.

Case Title: Sri Chittaranjan Senapati v. State of Odisha & Anr.

Case No: W.P.(C) No. 20808 of 2024

Date of Judgment: March 06, 2025

Counsel for the Petitioner: Mr. Prasanta Kumar Mishra, Advocate

Counsel for the Respondents: Mr. Akshaya Pati, Additional Standing Counsel

Citation: 2025 LiveLaw (Ori) 45

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