Retirement or resignation doesn’t give entitlement to leave encashment: Kerala HC

The Kerala High court ruled that this entitlement exists only if explicitly authorised by applicable laws, regulations, or established service provisions


In a recent ruling, the Kerala High Court ruled that any voluntary resignation or retirement doesn’t give the departing employee an automatic entitlement or inherent privilege to demand leave encashment.

Overturning a previous ruling, the Division Bench, composed of Justice Alexander Thomas and Justice C. Jayachandran, clarified that this entitlement exists only if explicitly authorised by applicable laws, regulations, or established service provisions.

The appeal was filed by the National Insurance Company.  Sudeep Kumar, the individual in question, resigned from his position at the company following 21 years of service. Despite being notified of his eligibility, when he did not receive the earned leave encashment benefit, he filed a petition before the single judge.

However, the authority rejected his representation on 30 July, 2009, on the grounds that he had chosen to resign from his role, and therefore, he wouldn’t be entitled to the said benefit. It was clarified that this benefit was exclusively accessible to individuals who had retired from service.

In the previous hearing with a single judge, the company was ordered to provide leave encashment to the employee, arguing that such payment constituted a component of the salary. The court’s analysis highlighted that the respondent falls within the purview of clause 5 in the 1976 Scheme due to the fact that his employment ended based on his voluntary submission of a resignation letter, along with a request to waive the stipulated notice period.

However, in an official statement from the company, the respondent did not qualify for earned leave encashment because he hadn’t reached the age of 55 years when he submitted his resignation letter. Furthermore, it was emphasised that the option of voluntary retirement after completing 20 years of service applied exclusively to employees who selected the pension scheme of 1995, and the employee opted for the pension scheme of 1976.

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