J&K CSR | Borrowing Organization Must Pay Leave Salary To Deputationist & Seek Reimbursement From Parent Department: High Court

The Court was hearing a writ petition filed by an employee whose gratuity and leave encashment had not been released after his resignation, with the parent organization and the borrowing organization disputing liability for the retiral dues.

A Single Bench of Justice Sanjay Dhar, while examining the provisions of Schedule XVIII of the J&K Civil Service Regulations, observed

“the borrowing organization will have to assess the leave admissible to the employee concerned and thereafter release the amount of leave salary to the petitioner. After undertaking the aforesaid exercise, respondent No.2 had to seek reimbursement of amount released in favour of the petitioner by way of leave salary from respondent No.1.”

Background:

The petitioner was appointed as Techno Economic Analyst with the Jammu & Kashmir and Ladakh Financial Corporation (JKLC) in 2010. By a Government Order in 2013, his services were deputed to the Jammu and Kashmir Power Development Corporation (JKPDC).

He served with the borrowing corporation for approximately 84 months after having served with the parent organization from 01.01.2012 to 25.03.2013. The petitioner tendered his resignation, which was accepted by his parent organization in 2020, and he thereafter joined the State Bank of India, Mumbai.

Following his resignation, the leave encashment and gratuity were not released. JKLC stated that the matter was referred to the Finance Department, which advised that post-retirement benefits should be released after seeking necessary contribution from JKPDC for the period the petitioner served there.

JKLC then requested JKPDC to release a proportionate quantum of leave encashment and gratuity. JKPDC, however, denied any liability, contending that under Rule 12(a) of Schedule XVIII to the J&K Civil Service Regulations, the parent organization alone had to decide the claim.

Court's Observation:

The Court noted that the factual aspects were not in dispute as the petitioner had served with both organizations, and neither gratuity nor leave salary had been paid. The sole question was which of the two respondents bore the liability.

Examining Rule 12 of Schedule XVIII of the J&K CSR, which governs standard terms of deputation, the Court held that under this rule, GP Fund advances and disbursement of leave salary have to be made by the parent department even when an employee is deputed to a corporation or autonomous body.

On gratuity, the Court noted that Article 240-BB of the J&K CSR makes the parent organization liable to pay gratuity at the time of retirement or death. The Court observed,

“Respondent No.1 has abdicated its duty of releasing amount of gratuity in favour of the petitioner and has unnecessarily engaged itself in inter-departmental communications… This attitude of respondent No.1 has resulted in delay of several years.”

The Court then turned to the Government Instructions appended to Article 185B of the J&K CSR, which the petitioner's counsel submitted were applicable. The Instructions state that for purposes of drawing leave salary by a Government servant on deputation with a foreign employer, the borrowing employer will maintain the leave account, sanction leave, and make payment of leave salary, thereafter claiming reimbursement from the parent department. The Court held that this procedure applies to cases of deputation to corporations, companies, and autonomous bodies as well.

Accordingly, the Court concluded that JKPDC (the borrowing organization) was required to sanction leave salary in favour of the petitioner, release the amount, and then seek reimbursement from JKLC. The Court observed that “Instead of doing so, respondent No.2 has simply denied entitlement of the petitioner to leave salary and its liability to pay the same, which is contrary to the provisions contained in J&K CSR.”

Regarding interest, the Court applied Section 7(3-A) of the Payment of Gratuity Act, 1972, which mandates simple interest at the notified rate (10% per annum) if gratuity is not paid within thirty days from the date it becomes payable.

The Court disposed of the writ petition by directing the parent department to release the gratuity due to the petitioner forthwith along with interest at 10% per annum from 30 days after acceptance of his resignation until actual payment.

The borrowing corporation was directed tol calculate the leave salary due to the petitioner and release the same within one month, with a right to claim reimbursement from respondent No.1. Respondent No.2 shall also pay interest at 6% per annum on the leave salary from the date of filing of the writ petition till realization.

Case Title: M. Naseer U Zaman Vs Jammu & Kashmir and Ladakh Financial Corporation & Anr.

Citation: 2026 LiveLaw (JKL) 185

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