Gratuity, leave encashment are components of salary: SC

The Rajasthan High Court had earlier dismissed the plea of the petitioners saying that gratuity and leave encashment were not covered under the term ‘salary’.


According to the Supreme Court, gratuity and leave encashment are components of the salary. This ruling went against the argument of the advocate representing the respondents who said that as per Rule 10 of the Rajasthan Voluntary Rural Education Service Rules, 2010 or under the Rajasthan Non-Government Educational Institutions (Recognition Grant-In-Aid and Service Conditions, Etc.) Rules, 1993, balance privilege leave could not be carried forward.

The apex court maintained that the condition in the Rajasthan Voluntary Rural Education Service Rules, 2010 barring carry forward of balance privilege leave is not only arbitrary but also unacceptable, and therefore, cannot be enforced. According to, the petitioners were appointed by a senior secondary school in 1993, to fill sanctioned posts. When they had sought gratuity and leave encashment, the Rajasthan High Court had dismissed their plea saying that the two were not part of the term ‘salary’ as per Rule 10 mentioned above.

Senior Advocate Deepak Nargokar, who represented the petitioners referred to the decision in the State of Rajasthan and Anr. v. Senior Higher Secondary School, Lachhmangarh 2005 (10) SCC 346 wherein it was ruled that leave encashment had “to be read and understood with the definition of the word salary”.

The Apex Court bench observed that the term ‘salary’ includes leave encashment, which is simply salary paid to the employee for the leave that he or she has not availed.

The Court declared that “the appellants are held entitled to privilege of leave entitlement benefits” and that these benefits should be “calculated from the date they entered the service of the establishment till the date of their absorption, by the State, in 2016”.

The State has been directed to pay them benefits due to the extent of 70 per cent, with the remaining 30 per cent to be paid by the management establishment.

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