Leave Encashment Is A Constitutional Property Right; It Cannot Be Denied Without Specific Statutory Authority: Karnataka HC

Karnataka High Court: A single judge bench of Justice M. Nagaprasanna declared that an employee dismissed from service is entitled to leave encashment, as it constitutes a property right under Article 300A of the Constitution. The court held that the Karnataka Gramina Bank refusing to pay leave encashment to a dismissed employee was illegal. It emphasized that once earned, terminal benefits including leave encashment become the employee's property. Thus, they cannot be withheld arbitrarily. Accordingly, the court allowed the writ petition and directed the bank to encash the petitioner's privilege leave.Background G. Linganagouda joined the Thungabhadra Gramina Bank as an Assistant Manager. In 2012, the bank initiated certain disciplinary proceedings against him and issued a charge sheet alleging misconduct. An inquiry followed, and the disciplinary authority imposed a penalty of dismissal with effect from 19.12.2014. After being dismissed, Linganagouda asked for the payment of his terminal benefits. He specifically requested encashment of 220 days of privilege leave that had accrued during his service. The bank rejected his claim. They stated that under the Pragathi Krishna Gramin Bank (Officers and Employees) Service Regulations, 2013, (“Service Regulations”) an employee dismissed from service for misconduct was not entitled to leave encashment. Linganagouda then sent a legal notice on demanding payment. However, the bank rejected his claim through an order. Aggrieved by the rejection, Linganagouda filed a writ petition requesting his leave encashment with 10% interest. Arguments Linganagouda's counsel, Sri Nagangouda M. Patil, argued that Regulation 67 of the Service Regulations could not be invoked to deny payment of leave encashment. Relying on a judgment from the Bombay High Court in Writ Petition No.1347/2016, he argued that leave encashment is a statutory right that cannot be denied arbitrarily. On the other hand, the bank's counsel, Sri M.G. Kulkarni, contended that Regulation 67 dealt with “lapse of leave”. It clearly stated that if an employee was not employed by the bank, they would not be entitled to encashment of privilege leave. He argued that since Linganagouda had been dismissed from service due to misconduct, there was no question of payment of privilege leave. Court's Reasoning Firstly, the court noted that Regulation 61 of the Service Regulations, provided an employee with one day of privilege leave for every 11 days of service completed on duty. Similarly, Regulation 67 dealt with the lapse of leave under certain circumstances. Citing Dattaram Atmaram Sawant v. Vidharbha Konkan Gramin Bank (2024:BHC-AS:20584-DB), the court held that privilege leave available to an employee is akin to his 'property'. Thus, the court ruled that once benefits like pension and leave encashment are earned by an employee, they become the employee's property. Further, Article 300A mandates that 'persons not to be deprived of property save by authority of law'. Thus, the court held that the employer cannot take away this right to terminal benefits without specific statutory authority. Based on these findings, the court declared that the right to leave encashment exists not only under statute, but also under “the fountainhead of all statutes – The Constitution of India”. Accordingly, the court allowed the writ petition. It directed the bank to pay Linganagouda for the 220 days of privilege leave that had accrued during his service. Decided on: 19-02-2025 Neutral Citation: 2025:KHC-D:3366 | G. Linganagouda v. General Manager, Karnataka Gramina Bank Counsel for Linganagouda: Sri Nagangouda M. Patil, Advocate Counsel for Karnataka Gramina Bank: Sri M.G. Kulkarni, AdvocateClick Here To Read/Download The Order Citation No: 2025 LiveLaw (Kar) 115

Leave Encashment Is A Constitutional Property Right; It Cannot Be Denied Without Specific Statutory Authority: Karnataka HC

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Pranav Kumar

Leave Encashment Is A Constitutional Property Right; It Cannot Be Denied Without Specific Statutory Authority: Karnataka HC

Pranav Kumar

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Pranav Kumar

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