Earned leave encashment accrued during service cannot be denied due to the employer’s financial crisis.

The appeals under Clause 15 of the Letters Patent were filed by the Managing Director of the Pondicherry State Weavers Co-operative Society against a common order dated 02.01.2024 in several writ petitions.

The first respondents were former employees of the appellant Society, a co-operative society registered under the Pondicherry Co-operative Societies Act, who had retired on attaining superannuation between 2013 and 2018.

Their earned-leave encashment and other terminal benefits, allegedly payable under the applicable Service Rules, had not been disbursed.

The employees challenged the Society’s rejection order dated 17.05.2022 and sought settlement of their retirement benefits.

The Writ Court partly allowed the petitions and directed payment of the earned-leave salary within twelve weeks.

The Society appealed, contending that the non-payment was based on proceedings issued by the Registrar of Co-operative Societies dated 14.01.2020 and was necessitated by financial crisis.

Whether the appellant Society could deny or discontinue the respondents’ earned-leave encashment and other accrued terminal benefits on the ground of financial crisis and pursuant to the Registrar’s proceedings?

Whether the Writ Court was justified in directing the Society to disburse the earned-leave salary and terminal benefits of the retired employees?

Whether the appellant Society was entitled to additional time to mobilise funds and settle the benefits?

The Court applied Clause 15 of the Letters Patent governing intra-court appeals, the applicable Service Rules governing earned-leave encashment, and the general principle that service benefits accrued to an employee cannot be denied without valid justification.

Financial difficulty may justify payment by instalments or the grant of reasonable time, but it does not authorise the employer to extinguish or deny accrued terminal benefits.

No specific judicial precedent or statutory provision beyond these principles was relied upon in the judgment.

The respondents had completed their service and retired on superannuation, thereby crystallising their entitlement to earned-leave salary and other terminal benefits under the applicable Service Rules.

The Society’s reliance on the Registrar’s proceedings and its financial crisis did not constitute a legally valid basis for dispensing with those accrued benefits.

The Court reasoned that financial constraints could affect the timing or mode of payment, including payment by instalments, but could not defeat the employees’ substantive entitlement.

Since the Society acknowledged the need to mobilise funds for settlement, the Court preserved the direction to pay while granting a longer period of six months for compliance.

The writ order directing settlement of the benefits was substantially affirmed.

The Society was granted six months from the date of receipt of the judgment’s copy to settle all terminal benefits due to the respondents.

Accordingly, all writ appeals were dismissed, without costs, and the connected miscellaneous petitions were closed.