State Of Sikkim vs Dr. Mool Raj Kotwal 2025 INSC 559 - Leave Encashment
Sikkim Government Services (Leave) Rules, 1982 - Rule 36 -Under Rule 36 of Leave Rules, a regular government servant, if retires under Sikkim Government Service Rules, 1974 would be entitled for leave encashment maximum for 300 days. If the government servant is re-employed after 58 years of age and continued for a long time and get leaves accumulated during the period of re-employment, he/she cannot get benefit of leave encashment second time merely because he/she is having leave in his/her credit during the period of re-employment. (Para 33)
Leave encashment- Leave encashment is a legal entitlement that exists within the framework of service law and in the welfare of the employee. It allows employees to receive a monetary benefit in exchange for leave they have earned but not taken during regular employment. This right is based on the principle of deferred compensation to an employee who has not taken leaves and served, for which the employer must compensate not only for his/her work, but also for benefits of leave accumulated over time limited to 300 days maximum. This entitlement is often established in statutory provisions, service rules (such as Rule 36 of the Leave Rules) or employment contracts, ensuring that employees are fairly compensated for their unutilized leave- while leave encashment ensures that extra- ordinary work ethic of an employee is rewarded, it must be applied in a way that upholds both employee rights and institutional sustainability. Naturally, courts must interpret leave encashment rules and statutes in a manner that prevents undue financial burden on employers while ensuring that employees receive what they are lawfully entitled to. (Para 25-27)
