The Supreme Court has ruled that a government employee in Sikkim who has already availed the benefit of 300 days’ leave encashment upon retirement is not entitled to claim the same benefit again for the period of re-employment. The Court allowed the appeal filed by the State of Sikkim against the High Court’s order, holding that the leave encashment rules must be interpreted strictly to prevent misuse and unjust enrichment.
Background
The dispute arose after Dr. Mool Raj Kotwal, a former Medical Advisor and Chief Consultant at the STNM Hospital, retired on January 31, 2005, upon reaching the age of 58 under Rule 98 of the Sikkim Government Service Rules, 1974. He was granted leave encashment for 300 days of unutilized earned leave in accordance with Rule 36 of the Sikkim Government Services (Leave) Rules, 1982.
Subsequently, he was re-employed on the same post from February 1, 2005, to May 28, 2019. After his re-employment ended, he was again granted leave encashment for 300 days under an order dated May 31, 2019.
However, the State government later issued a clarificatory Office Memorandum on February 27, 2020, stating that the 300-day maximum for leave encashment includes leave earned during extension or re-employment. Based on this clarification, the second grant of leave encashment was cancelled on May 21, 2020, prompting Dr. Kotwal to file a writ petition before the High Court.
High Court’s Finding
The High Court ruled in favor of Dr. Kotwal, holding that Rule 36, when read with Rule 32, entitled re-employed employees to leave encashment as if they had entered service for the first time. The State’s writ appeal was dismissed by the Division Bench, affirming the Single Judge’s ruling.
Supreme Court’s Analysis
The Bench of Justices J.K. Maheshwari and Rajesh Bindal allowed the State’s appeal and overturned the High Court’s orders. The Court held:
“Rule 36 shall apply to those government servants who were in regular service prior to their retirement up to attaining the age of superannuation, i.e., 58 years… The employee cannot get benefit of leave encashment second time in lieu of his relieving on completing the period of re-employment.”
The Court further clarified that:
“Rule 32 cannot be read in a manner to revive the 300 days of unutilized leave afresh for the re-employed employees who have already availed the benefit during regular service.”
The Court emphasized that leave encashment is a form of deferred compensation and must be applied fairly but within statutory limits. It warned against granting dual benefits that could lead to unjust enrichment at the expense of the public exchequer.
On Natural Justice
The respondent had also challenged the cancellation on grounds of violation of natural justice. However, the Court rejected this contention:
“No prejudice was caused in cancelling the order granting leave encashment second time… the argument of not granting an opportunity and violation of natural justice is hereby repelled.”
Conclusion
The Supreme Court held that the clarificatory Office Memorandum dated February 27, 2020, was in consonance with the spirit of the Leave Rules and upheld its validity. Consequently, the orders passed by the Single Judge and the Division Bench were set aside, and the State’s appeal was allowed.
Citation: State of Sikkim & Ors vs Dr. Mool Raj Kotwal, Civil Appeal Nos. ___ of 2025 (Arising out of SLP (C) Nos. 23709–23710 of 2023)
