Facts
The petitioner was appointed as a Techno Economic Analyst with the J and Ladakh Financial Corporation (JKLFC) in December 2010
Source reference: p. 2, para. 2In March 2013, he was deputed to the J Power Development Corporation (JKPDC), where he served for approximately 84 months until March 2020
Source reference: p. 2, para. 2Upon his resignation being accepted by the parent organization (JKLFC) on February 20, 2020, he joined the State Bank of India
Source reference: p. 2, para. 2Post-resignation, JKLFC withheld his leave encashment and gratuity, claiming that JKPDC (the borrowing organization) must contribute proportionately for the period the petitioner served there
Source reference: p. 3, para. 4-5Conversely, JKPDC disclaimed liability, asserting that service benefits must be settled by the parent organization under the JK Civil Service Regulations (CSR)
Source reference: p. 4, para. 6Issues
1. Whether the parent organization (JKLFC) or the borrowing organization (JKPDC) is liable for the payment of gratuity and leave encashment salary to a deputed employee
Source reference: p. 5, para. 9Law Applied
Schedule XVIII, Rule 12 of the JK Civil Service Regulations (CSR), which mandates that for employees deputed to Corporations or Autonomous Bodies, the disbursement of leave salary and GP fund shall be made by the parent department
Source reference: p. 5-6, para. 10-11Article 240-BB of the JK CSR regarding the parent organization’s liability for gratuity
Source reference: p. 6, para. 12Section 7(3-A) of the Payment of Gratuity Act, which stipulates a 10% per annum interest rate for delayed payments
Source reference: p. 7, para. 13Government Instructions under Article 185-B of the JK CSR were applied to define the reimbursement mechanism for leave salary between borrowing and parent organizations
Source reference: p. 7-8, para. 14-15Reasoning
Regarding gratuity, the Court held it is the absolute liability of the parent organization (JKLFC) at the time of retirement or resignation; JKLFC’s attempt to seek contributions from JKPDC was deemed an "abdication of duty" that caused unnecessary delay
Source reference: p. 6, para. 12Regarding leave salary, the Court harmonized Rule 12 with the instructions under Article 185-B. It reasoned that the borrowing organization (JKPDC) is responsible for assessing and initially paying the leave salary, which it then claims as a reimbursement from the parent organization
Source reference: p. 9, para. 15-16The Court found JKPDC’s outright denial of liability contrary to the regulations, as it is the functional paymaster for the leave salary prior to seeking reimbursement
Source reference: p. 9, para. 16Holding
Respondent No. 1 (JKLFC) must release the gratuity amount with 10% interest per annum starting from 30 days after the acceptance of resignation
Respondent No. 2 (JKPDC) must calculate and release the leave salary within one month, with 6% interest per annum from the date of filing the writ petition, and subsequently seek reimbursement from JKLFC
Source reference: p. 10, para. 17Original Court PDF
M NASEER U ZAMANvsMANAGING DIRECTOR, J AND K AND OTHERS FINANCIAL CORPORATION
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