Rajasthan Voluntary Rural Education Service Rules, 2010 – rr.5, 10 – Rajasthan Non-Government Educational Institutions (Recognition Grant-In-Aid and Service Conditions, Etc.) Rules, 1993 – rr.47, 82 – Rajasthan Non-Government Educational Institutions Act, 1989 – ss. 2, 29 – Appellants were appointed against sanctioned posts by fourth respondent-school, controlled by fifth respondent trust (collectively “establishment”) – Establishment discontinued receipt of grant-in-aid from the State – In the meanwhile, 2010 Rules were brought into force by the State – Appellants sought absorption with the State in accordance with the rules, denied – Eventually, Supreme Court set aside the denial of absorption of the appellants and directed their regularization – However, their complaint of non-compliance with the respondent’s obligation to pay leave encashment and gratuity for the period they were in the aided establishment was not gone into, permitted to agitate grievance before High Court – By impugned judgment High Court has now held that since arrears of salary had been paid, nothing more was to be done – On appeal, held: Salary includes leave encashment – Further, 2010 Rules were framed to enable the absorption of employees and teachers of non-government aided institutions – Condition in clause (viii) of r.5 i.e., bar on carry forward of balance privilege leave and requiring employees to seek encashment from their previous employer i.e., aided institutions, is an arbitrary condition which cannot be enforced – Also, in the present case, the management establishment was recipient of 70% aid, in the form of grant – Thus, the State cannot shrug its part of the responsibility to pay the appellants the share of leave encashment benefits, and hide behind either r.5 (viii) or the undertaking executed by them – Appellants entitled to privilege leave entitlement benefits, to be paid by the State and management establishment in the ratio of 70:30, respectively – Management also liable to pay gratuity to the appellants – Impugned order set aside – Service Law. Service Law – Leave encashment, if part of salary – Held: Yes.
Allowing the appeal, the Court
HELD: 1.1 Non-government educational institutions in Rajasthan are governed by the Rajasthan Non-Government Educational Institutions Act, 1989 (“Act”) and the rules framed. Section 2 (r) of the Act defines salary as “the aggregate of the emoluments of an employee including dearness allowance or any other allowance or relief for the time being payable to him but does not include compensatory allowance”. Section 3 of the Act provides for recognition of grant-in-aid institutions; Sections 4 to 6 of the Act provide for the eventuality of refusal of recognition, withdrawal of aid and the remedies for the institution. Section 7 of the Act onwards are regulatory provisions requiring audit, recruitment, orders of termination of teachers, provision of tribunal for redressal of teachers’ grievances regarding dismissal or termination, etc. Section 29 of the Act is relevant for the present purposes. The relevant provisions of the 1993 Rules are Rules 47, and, pertinently, 82. Rule 47 deals with privilege leave. [Paras 14-16][472-D-E, G; 473-A, E]
1.2 As far as leave encashment dues are concerned, the issue is no longer at large. In Senior Higher Secondary School Lachhmangarh this court held that “salary” under the Act, includes leave encashment. The reasoning therein is binding, and conclusive as regards entitlement of the appellants to claim leave encashment benefits. However, the State had urged that by virtue of Rule 5 of the 2010 Rules, the employees who were regularized could not claim these benefits. The 2010 Rules were framed in exercise of powers under proviso to Article 309 of the Constitution. Evidently, these rules were framed to enable the absorption of employees and teachers of non-government aided institutions. What is relevant for the purposes of this case is that by Rule 5(viii), carry forward of existing privilege leave is denied; likewise, the period of service in aided institutions is not to be reckoned for the purpose of gratuity under Rule 5(ix). Every & ORS.
employee had to furnish an undertaking in the prescribed form to accept the terms and conditions. Ordinarily no public employer can be faulted in imposing pre-conditions before it recruits an employee. However, such conditions cannot be arbitrary, or so onerous as to be unconscionable. In the opinion of this court, the condition in clause (viii) of Rule 5 i.e., carry forward of balance privilege leave, is barred and requiring employees to seek encashment from their previous employer, i.e., aided institutions, is an arbitrary and unconscionable condition, which cannot be enforced. [Paras 18-20][475-B, 476-H; 477-A; 478-F-H; 479-A]
State of Rajasthan and Anr. v. Senior Higher Secondary School, Lachhmangarh (2005) 10 SCC 346 – relied on.
1.3 In the scheme of the 1993 Rules, the assessment of, and determination of the extent of, aid to be granted to any institution, is provided by Rule 13. What forms part of the approved expenditure that would be the content of aid, is provided by Rule 14. In the present case, the management establishment was recipient of 70% aid, in the form of grant. In these circumstances, the State cannot shrug its responsibility to shoulder its part of the responsibility to pay the appellants the share of leave encashment benefits, and hide behind either Rule
5 (viii) or the undertaking executed by them. The appellants are held entitled to privilege leave entitlement benefits. Such benefit shall 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 shall pay the benefits due to the extent of 70%, and the balance 30% shall be payable by the management establishment. On the issue of gratuity, again, the question of liability has been conclusively settled. Although the management relied on a Chhattisgarh High Court decision Ambika Mission Boys Model School, this court is of the opinion that it cannot be construed as an authority, because the court in that case analysed the provisions of the Payment of Gratuity Act, 1972, as amended in 2009. However, in the present case, the scheme of the 1993 Rules, which contained the conditions of grant, categorically cast the liability to pay gratuity on the employer, i.e., the aided establishment, i.e., the fourth, fifth and sixth respondents in this case. Furthermore, Rajasthan Welfare Society is an authority, in that it considered the effect of the 1993 Rules, and held that it is the management of the aided institution which has to bear the liability towards payment of gratuity. Neither has Rule 82 changed, nor has any other material been brought to the notice of the court, to say that the management, i.e., respondent nos. 3-7 are absolved of their liability to pay gratuity, upon termination of their relationship with the appellants as their employers. Rule 82 is a condition of grant, which meant that the management establishment was conscious and aware of its liability when it applied and was granted aid, under the 1993 Rules. Therefore, it cannot escape its liability on that score. [Paras 21, 22][479-C-G; 480-A-B; 482-G]
1.4 With respect to leave encashment, the State and the respondent nos. 3 to 7 are liable to pay the appellants, in the ratio of 70:30 respectively. The respondent nos. 3 to 7 shall also calculate and pay the amount of gratuity, to the appellants (on the basis of their initial date of entry in the school, till the date of order of absorption, by the respondent State), within six weeks from today. Since both sets of respondents contested their liability and denied them to the appellants, the amounts payable to the appellants shall also carry interest, at the rate of 10% from the date(s) of their entitlement, till the date of payment. The impugned order is set aside. [Para 23][482-H; 483-A-C]
Rajasthan Welfare Society v. State of Rajasthan (2005)
5 SCC 275 : [2005] 3 SCR 387; Regional Provident Fund Commissioner v. Sanatan Dharam Girls
Secondary School & Ors. (2007) 1 SCC 268 : [2006] 7 Suppl. SCR 849; Pani Ram v. Union of India & Ors. 2021 SCC OnLine SC 1277; Central Inland Water
Transport Corporation Limited & Anr. v. Brojo Nath Ganguly & Anr. (1986) 3 SCC 156 : [1986] 2 SCR 278 – referred to.
Ambika Mission Boys Model School v. State of
Chattisgarh, (2020) 2 CLR 177 – distinguished. & ORS.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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