Discharge with superannuation benefits includes entitlement to earned-leave encashment under applicable service regulations.

The petitioner, an officer of Indian Overseas Bank, was imposed the punishment of “discharge from service with superannuation benefits” under Clause 6(d) of the Bipartite Settlement dated 10.04.2002, by order dated 23.10.2019.

He did not challenge the disciplinary order, which consequently attained finality.

The Bank paid his provident fund and gratuity benefits but denied encashment of accumulated earned/privilege leave on the basis of its Circular dated 13.03.2004, as amended on 03.02.2016, which treated discharged employees as ineligible for leave encashment.

The petitioner claimed leave encashment for up to 240 days, contending that “superannuation benefits” included all benefits ordinarily available upon retirement.

He also argued that leave encashment constituted a property right protected under Article 300-A of the Constitution.

The Bank relied on Regulation 38 of the Indian Overseas Bank (Officers’) Service Regulations, 1979, under which leave ordinarily lapsed upon discharge, dismissal or termination, and contended that the petitioner was therefore disentitled to leave encashment.

Whether an employee discharged from service with superannuation benefits under Clause 6(d) of the Bipartite Settlement is entitled to the terminal benefits ordinarily available to an employee retiring from service, including encashment of accumulated privilege leave up to 240 days?

Whether the Bank’s Circular dated 13.03.2004, as amended on 03.02.2016, could deny leave encashment to such an employee contrary to Regulation 38 of the Officers’ Service Regulations?

Whether the petitioner’s accumulated leave could be treated as lapsed merely because his cessation was formally described as “discharge” rather than retirement?

The Court applied Regulation 38 of the Indian Overseas Bank (Officers’) Service Regulations, 1979, which provides for lapse of leave upon resignation, retirement, death, discharge, dismissal or termination, but expressly permits payment equivalent to emoluments for up to 240 days of privilege leave upon retirement or compulsory retirement, including compulsory retirement as a punishment.

It also applied Clause 6(d) of the Bipartite Settlement dated 10.04.2002, under which discharge from service with superannuation benefits carries pension, provident fund and gratuity as would otherwise be due under the applicable rules.

Relying on Bank of Baroda v. S.K. Kool (D) through LRs., (2014) 2 SCC 715, the Court held that “superannuation benefits” include benefits ordinarily available on retirement to an employee otherwise eligible for them.

It followed Central Bank of India v. O. Vijayan, whose decision directing leave encashment for an employee discharged with superannuation benefits was subsequently upheld by the Supreme Court in S.L.P. (C) No.31705 of 2018.

The Court also relied on State of Jharkhand v. Jitendra Kumar Srivastava, (2013) 12 SCC 210, for the principle that pensionary and terminal benefits constitute “property” and cannot be withheld except by authority of law.

The Court treated the expression “superannuation benefits” in Clause 6(d) as substantive rather than limited to pension, provident fund and gratuity alone.

Since Regulation 38 preserves leave encashment for an employee retiring from service, and the petitioner’s discharge expressly carried superannuation benefits, the Court held that he was entitled to the benefits ordinarily available upon retirement, including encashment of accumulated privilege leave.

The reasoning in S.K. Kool required the phrase “as would be due otherwise” to be construed harmoniously so that the punishment of discharge with superannuation benefits retained meaningful effect and did not deprive an otherwise eligible employee of all retirement-related benefits.

The Court further relied on O. Vijayan, which had directly addressed the same issue and had been affirmed by the Supreme Court.

Accordingly, the Bank’s Circular, insofar as it categorically excluded discharged employees from leave encashment, was held inconsistent with Regulation 38 and incapable of overriding it.

It set aside the Bank’s Circular dated 13.03.2004, as amended, to the extent that it was contrary to Regulation 38, and held that the petitioner was entitled to earned/privilege leave encashment up to 240 days as part of his superannuation benefits.

The respondents were directed to disburse the amount within eight weeks from receipt of the order, together with interest at 6% per annum from the date of discharge until payment.

No costs were awarded.