J&K CSR | Borrowing Organisation Must Release Leave Salary To Deputationist Before Seeking Reimbursement From Parent Department: High Court

The Court further held that the parent organisation remains liable to release gratuity and cannot indefinitely withhold the same on the ground of pending inter-departmental correspondence.

The Court was hearing a writ petition seeking release of gratuity and leave salary that had remained unpaid after the petitioner resigned from service following a long tenure on deputation with another corporation. The petitioner challenged the failure of the concerned authorities to release his retiral dues despite cessation of service and sought interest on the delayed payments.

A Bench of Justice Sanjay Dhar observed,

"From a perusal of the aforesaid Government Instructions, it is clear that the procedure regarding payment of leave salary applicable to cases relating to deputation on foreign service has to be made applicable to release of leave salary in the case of employees deputed to Corporation, Company, Autonomous Body etc."

In the instant case the petitioner was appointed as Techno Economic Analyst with Jammu & Kashmir and Ladakh Financial Corporation (JKLFC). Subsequently, he was deputed to the Jammu & Kashmir Power Development Corporation (JKPDC) under a Government Order and continued to serve with the borrowing organisation for a substantial period before tendering his resignation, which was accepted by his parent organisation. Thereafter, he joined another employment.

According to the petitioner, despite acceptance of his resignation, gratuity and leave encashment benefits were not released, compelling him to approach the High Court seeking payment of the dues along with interest.

JKLFC contended that while provident fund dues had already been released, payment of gratuity and leave salary had been delayed because the petitioner had served with JKPDC for a significant period.

It submitted that the Finance Department had advised that post-retirement benefits be released after obtaining necessary contribution from the borrowing organisation corresponding to the period the petitioner had served there. The parent organisation further asserted that it had already initiated correspondence with JKPDC seeking release of proportionate amounts.

JKPDC, on the other hand, argued that under Rule 12 of Schedule XVIII of the J&K CSR, the responsibility for determining and releasing retiral benefits rested with the parent organisation. It relied upon a speaking order issued by it and maintained that the petitioner had no enforceable claim against the borrowing organisation.

Court's Observations:

The Court noted that the material facts were undisputed. The petitioner had initially been appointed with the parent organisation, was validly deputed to the borrowing organisation and had not been paid gratuity and leave encashment after resignation. The controversy, therefore, centred upon determination of the entity responsible for payment of these dues.

Justice Dhar examined Rule 12 of Schedule XVIII of the J&K CSR governing standard terms of deputation. The provision stipulates that where deputation is to a corporation, company or autonomous body, sanction to leave and disbursement of leave salary are to be regulated by the parent department. The Court observed that the Rule must be read together with the Note appended thereto, which specifically refers to the Government Instructions below Article 185-B of the CSR.

The Court found that the Government Instructions create a distinct procedural framework. Under this framework, the borrowing employer is required to maintain the leave account of the deputationist, assess admissible leave, sanction it and make payment of leave salary. Thereafter, the borrowing employer becomes entitled to seek reimbursement from the parent department.

Emphasising this position, the Court observed,

"As per this procedure, the borrowing organization will have to assess the leave admissible to the employee concerned and sanction it under intimation to the parent organization. The payment of leave salary has to be made by the borrowing organization, whereafter it has to claim reimbursement of leave salary from the parent organization."

The Court held that JKPDC had failed to follow the procedure prescribed under the CSR and had instead simply denied the petitioner's entitlement to leave salary.

Justice Dhar observed,

"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 which are applicable to both respondent No.1 as well as to respondent No.2."

On the issue of gratuity, the Court held that the liability squarely rested upon the parent organisation. Referring to Article 240-BB of the J&K CSR, the Court noted that gratuity is payable by the parent organisation upon retirement or cessation of service. The Court found that the parent organisation had unnecessarily engaged itself in inter-departmental correspondence instead of releasing the gratuity amount due to the petitioner.

The Court further examined Section 7(3-A) of the Payment of Gratuity Act and held that once gratuity is not paid within thirty days from the date it becomes payable, the employer becomes liable to pay statutory interest. Since the gratuity amount had remained unpaid for several years after acceptance of resignation, the parent organisation was held liable to pay interest at the notified rate.

Holding that gratuity was payable by the parent organisation and leave salary was required to be released by the borrowing organisation in the first instance, the Court disposed of the writ petition with directions to both respondents.

The Court directed JKLFC to release the gratuity amount due to the petitioner in accordance with the rules along with interest at the rate of 10 per cent per annum from thirty days after acceptance of resignation until actual payment.

The Court further directed JKPDC to calculate and release the leave salary due to the petitioner within one month, with liberty to seek reimbursement from JKLFC. JKPDC was also directed to pay interest at the rate of 6 per cent per annum on the leave salary amount from the date of filing of the writ petition till its realization.

Case Title: M. Naseer U Zaman v. Managing Director J&K and Ladakh Financial Corporation & Ors.

Citation: 2026 LiveLaw (JKL) 283

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