Leave encashment is a legal entitlement and earned benefit payable despite dismissal from service.

The Applicant, formerly a Steno-OG (Gr. III) in the CPWD, was dismissed from service on March 17, 2011, following a conviction in a criminal case

Although the conviction was subsequently stayed and a criminal appeal is pending, the Respondents denied interest on the Applicant’s GPF closing balance of ₹8,63,005 for the period between April 1, 2011, and November 26, 2014

The Respondents further withheld leave encashment and Central Government Employees Group Insurance Scheme (CGEGIS) benefits, contending that under Rule 9(1) of the CCS (Leave) Rules, 1972, such claims cease upon dismissal

The Applicant contended that GPF settlement is a suo motu statutory duty of the department under Rule 34 and that leave encashment is a vested right that cannot be withheld as a penalty

1. Whether the Respondents are liable to pay interest on the GPF balance from the date of dismissal until the actual date of disbursement

2. Whether the Applicant is entitled to leave encashment and CGEIS benefits despite dismissal from service, particularly when the conviction has been stayed

Rule 34 of the GPF Rules and Clause 4 of GSD 34, which mandate that the department must proactively process GPF final withdrawals without requiring an application from the subscriber

State of Sikkim v. Dr. Mool Raj Kotwal (2025), which established that leave encashment is "deferred compensation" and a legal entitlement grounded in equity and economic security

GNCTD v. Prem Nath Manchanda (2018), holding that interest on delayed terminal benefits can be claimed under Articles 14, 19, and 21 of the Constitution even in the absence of specific statutory rules

Shri Narottam Singh Shami v. GNCTD (2025), which affirmed that leave encashment is akin to a fundamental right and not a bounty

The Tribunal found the Respondents' stance inconsistent, noting they had previously communicated in 2013 that the Applicant was entitled to GPF and leave encashment

The Bench rejected the Respondents' argument that the Applicant’s failure to submit "FORM 4" caused the delay, clarifying that under GSD 34, the department was obligated to initiate disbursement via "FORM 1"

The court reasoned that the State cannot derive "undue enrichment" by retaining interest on an employee's earned funds

Applying the "deferred wages" theory, the Tribunal held that leave encashment is a property right earned through service; therefore, withholding it based on a dismissal—especially while a conviction is stayed—constitutes an arbitrary deprivation of constitutional rights

The Applicant is entitled to interest on the GPF balance until the date of actual payment and to the release of leave encashment

The Respondents were directed to: 1. Release ₹2,41,323 as the differential GPF amount along with accrued interest. 2. Pay the leave encashment due as per service records, carrying interest at the prevailing GPF rate.

The payments must be disbursed within two months of receipt of the order