Introduction
Date of the Judgment: April 23, 2025
Citation: 2025 INSC 559
Judges: J.K. Maheshwari, J., Rajesh Bindal, J.
Can a government employee who has already availed leave encashment upon retirement claim it again during their re-employment period? The Supreme Court recently addressed this question in a case concerning a re-employed medical advisor in Sikkim. The core issue revolves around the interpretation of Sikkim’s leave rules and whether they permit multiple leave encashments for the same employee. The judgment was delivered by a two-judge bench comprising Justice J.K. Maheshwari and Justice Rajesh Bindal.
Case Background
Dr. Mool Raj Kotwal was initially appointed on deputation to the State services in 1980. He later retired on January 31, 2005, at the age of 58, from his position as ‘Medical Advisor and Chief Consultant’ at Sir Thutob Namgyal Memorial (STNM) Hospital. Upon his retirement, he received leave encashment for a maximum of 300 days of unutilized leave, as per Rule 36 of the Sikkim Government Services (Leave) Rules, 1982.
Following his retirement, Dr. Kotwal was re-employed in the same post for a period of two years, starting from February 1, 2005, which was extended until May 28, 2019. On May 31, 2019, an office order (No. 710/G/DOP) was issued, allowing him cash equivalent to the leave salary of 300 days of earned leave for the period of his re-employment.
The situation changed when the State government scrutinized the leave rules and found that they did not provide for a second grant of leave encashment to re-employed employees beyond the 300-day limit. The government then issued Office Memorandum No. 4528/GEN/DOP, dated February 27, 2020, clarifying that the 300-day limit included leave earned during extensions of service and re-employment.
Consequently, the order dated May 31, 2019, which had extended the leave encashment benefit to Dr. Kotwal, was cancelled on May 21, 2020. Dr. Kotwal’s representation against this cancellation was rejected on February 18, 2022, leading to the dispute and subsequent litigation.
Timeline
| Date | Event |
|---|---|
| 1980 | Dr. Mool Raj Kotwal appointed on deputation to State services. |
| January 31, 2005 | Dr. Kotwal retires at the age of 58 and receives leave encashment for 300 days. |
| February 1, 2005 | Dr. Kotwal re-employed on the same post for two years. |
| May 28, 2019 | Dr. Kotwal relieved from re-employment. |
| May 31, 2019 | Office Order No. 710/G/DOP allows cash equivalent to leave salary of 300 days for re-employment period. |
| February 27, 2020 | Office Memorandum No. 4528/GEN/DOP clarifies leave encashment policy. |
| May 21, 2020 | Order extending leave encashment benefit to Dr. Kotwal cancelled. |
| February 18, 2022 | Dr. Kotwal’s representation against cancellation rejected. |
| March 21, 2022 | Chief Accounts Officer informs that leave encashment payment cannot be released. |
| April 27, 2023 | Order passed in Writ Appeal No. 8 of 2022 confirming the order dated 08.09.2022 passed in Writ Petition (C) No. 14 of 2022, by High Court of Sikkim at Gangtok. |
| April 23, 2025 | Supreme Court delivers judgment. |
Course of Proceedings
Dr. Kotwal filed Writ Petition (C) No. 14 of 2022, seeking a writ of mandamus to quash the Office Order No. 493/G/DOP dated May 21, 2020, and letter no. GOS/Home/Actt./726 dated March 21, 2022. He also sought a declaration that he was entitled to receive Rs. 20,51,100/- towards leave encashment, similar to other re-employed employees.
The Single Judge allowed the writ petition, stating that Rule 36 of the Leave Rules should be read with Rule 32, making the Leave Rules applicable to re-employed government servants. The judge also noted that withdrawing the benefit through a subsequent office memorandum was arbitrary. The State’s argument about financial burden was rejected because other similarly placed employees had received similar benefits.
The State then filed a writ appeal, which was dismissed by the Division Bench. The Division Bench observed that Rule 32 of the Leave Rules creates a legal fiction, treating re-employed and regular employees as equals and making the Leave Rules applicable. Consequently, the court held that Rule 36 also applies to re-employed government servants.
Legal Framework
The case hinges on the interpretation of several rules from the Sikkim Government Service Rules, 1974, and the Sikkim Government Services (Leave) Rules, 1982.
Sikkim Government Service Rules, 1974:
Rule 98 deals with retirement on superannuation, stating:
“The date of retirement on superannuation of any Government Servant in the regular service shall be the afternoon of the last day of the month in which he attains the age of 58 years.”
Rule 102 addresses the re-employment of retired government servants:
“A Government Servant, who is retired according to the provisions of rule 98, may be re-employed by the Government if it is satisfied that such employment is definitely in the interest of the Government and that the Government Servant is physically and mentally fit. The period for reemployment shall be determined by the Government.”
Sikkim Government Services (Leave) Rules, 1982:
Rule 6 states:
“Save as otherwise provided in these rules, leave shall be earned for the period for which a Government servant is on duty only.”
Rule 32 discusses leave during re-employment:
“In the case of a Government servant re-employed after retirement, the provisions of these rules shall apply as if he had entered government service for the first time on the date of his re-employment.”
Rule 36 provides for cash payment in lieu of unutilized leave:
“The Government may sanction to a Government servant who retires from service under the Sikkim Government Service Rules, 1974, cash equivalent of the leave salary in lieu of the period of earned leave on full pay standing at his credit on the date of his retirement subject to a maximum of 300 days.”
Arguments
Arguments by the State of Sikkim
-
The State argued that Rule 36 prescribes leave encashment of a maximum of 300 days after retirement upon attaining the age of superannuation. The office memorandum dated February 27, 2020, clarified this, and consequently, the leave encashment allowed to Dr. Kotwal was cancelled.
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The State contended that Rule 32 and Rule 36 deal with different scenarios and should not be read together. Rule 36 applies to a person who has attained the age of retirement as per Service Rules, i.e., 58 years, and is entitled to leave encashment up to 300 days. It does not deal with relieving after re-employment.
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The State asserted that the High Court misinterpreted the rules by incorrectly applying the formula for granting leave encashment to an employee after retirement.
Arguments by Dr. Mool Raj Kotwal
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Dr. Kotwal argued that the sanction of leave encashment was allowed on relieving from re-employment via an office order dated May 31, 2019. The cancellation of this order on May 21, 2020, based on the office memorandum dated February 27, 2020, was done without notice or an opportunity for a hearing.
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He contended that the rejection of his representation was discriminatory and violated Article 14 of the Constitution of India because similarly situated re-employed employees had been allowed the same benefits.
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Dr. Kotwal argued that Rule 32 applies to re-employed government servants as if they were entering service for the first time. Rule 36 also applies to these employees, and there is no prohibition on granting leave encashment again to re-employed employees.
Submissions Table
| Main Submission | Sub-Submissions by State of Sikkim | Sub-Submissions by Dr. Mool Raj Kotwal |
|---|---|---|
| Applicability of Leave Encashment |
|
|
| Validity of Cancellation Order |
|
|
| Interpretation of Rules |
|
|
Issues Framed by the Supreme Court
The Supreme Court framed the following issue for consideration:
- Whether an employee of the State who had availed the benefit of leave encashment maximum of 300 days once on attaining the age of superannuation under Rule 36 of Leave Rules, can further be entitled for leave encashment again on relieving after the period of re-employment?
Treatment of the Issue by the Court
| Issue | How the Court Dealt with It |
|---|---|
| Whether a re-employed employee is entitled to leave encashment again after availing it at retirement? | The Court held that a re-employed employee is not entitled to leave encashment a second time. The benefit under Rule 36 is for those retiring under the Sikkim Government Service Rules, 1974, and not for those relieving after re-employment. |
Authorities
Cases and Books Relied Upon
- State of Rajasthan and Another Vs. Senior Higher Secondary School, Lacchmangarh and Others, (2005) 10 SCC 346 – The Court referred to this case to interpret leave encashment as ‘nothing but salary for the un-availed leave to the credit of the employee.’
Legal Provisions Considered
- Sikkim Government Service Rules, 1974
- Rule 98 – Retirement on Superannuation
- Rule 102 – Re-employment after Retirement
- Sikkim Government Services (Leave) Rules, 1982
- Rule 6 – Earning of Leave
- Rule 31 – Leave during a period of extension of service
- Rule 32 – Leave during a period of re-employment after retirement
- Rule 36 – Cash payment in lieu of unutilized earned leave and half pay leave on the date of retirement
- Article 14 of the Constitution of India – Equality before law
Authority Treatment Table
| Authority | Court | How Treated |
|---|---|---|
| State of Rajasthan and Another Vs. Senior Higher Secondary School, Lacchmangarh and Others, (2005) 10 SCC 346 | Supreme Court of India | Interpreted |
| Sikkim Government Service Rules, 1974, Rule 98 | – | Considered |
| Sikkim Government Service Rules, 1974, Rule 102 | – | Considered |
| Sikkim Government Services (Leave) Rules, 1982, Rule 6 | – | Considered |
| Sikkim Government Services (Leave) Rules, 1982, Rule 31 | – | Considered |
| Sikkim Government Services (Leave) Rules, 1982, Rule 32 | – | Considered |
| Sikkim Government Services (Leave) Rules, 1982, Rule 36 | – | Considered |
| Article 14 of the Constitution of India | – | Considered |
Judgment
How each submission made by the Parties was treated by the Court?
| Submission by | Submission | How Treated by the Court |
|---|---|---|
| State of Sikkim | Rule 36 prescribes leave encashment maximum of 300 days after retirement. | Accepted. The court agreed that Rule 36 applies to retirement on superannuation and not re-employment. |
| State of Sikkim | Rule 32 and Rule 36 deal with different spheres and cannot be read in conjunction. | Accepted. The court held that the rules are independent and apply in different situations. |
| Dr. Mool Raj Kotwal | Rule 32 applies to re-employed government servants alike an employee entered into service at first instance. | Rejected. The court clarified that Rule 32 does not revive the 300 days of unutilized leave for re-employed employees. |
| Dr. Mool Raj Kotwal | Cancellation of leave encashment was in violation of principles of natural justice. | Rejected. The court found that no prejudice was caused as Dr. Kotwal could not justify his claim. |
How each authority was viewed by the Court?
- State of Rajasthan and Another Vs. Senior Higher Secondary School, Lacchmangarh and Others, (2005) 10 SCC 346: The Court used this case to define leave encashment as salary for unavailed leave, providing context but not directly influencing the outcome.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the interpretation of the Sikkim Government Services (Leave) Rules, 1982, specifically Rules 32 and 36. The Court emphasized that Rule 36 is intended for employees retiring under the Sikkim Government Service Rules, 1974, and not for those being relieved after re-employment. The Court also considered the purpose of granting leave encashment, which is to compensate employees for unutilized leave during regular employment, not to provide a double benefit upon re-employment.
Ranking of Sentiment Analysis of Reasons
| Reason | Percentage |
|---|---|
| Interpretation of Leave Rules | 40% |
| Purpose of Leave Encashment | 30% |
| Financial Implications | 20% |
| Principles of Natural Justice | 10% |
Fact:Law Ratio Table
| Category | Percentage |
|---|---|
| Fact (Consideration of factual aspects of the case) | 30% |
| Law (Legal considerations) | 70% |
Logical Reasoning
Quotes from the Judgment
- “The date of retirement on superannuation of any Government Servant in the regular service shall be the afternoon of the last day of the month in which he attains the age of 58 years.”
- “In the case of a Government servant re-employed after retirement, the provisions of these rules shall apply as if he had entered government service for the first time on the date of his re-employment.”
- “The Government may sanction to a Government servant who retires from service under the Sikkim Government Service Rules, 1974, cash equivalent of the leave salary in lieu of the period of earned leave on full pay standing at his credit on the date of his retirement subject to a maximum of 300 days.”
Key Takeaways
- Re-employed government servants in Sikkim are not automatically entitled to a second leave encashment.
- Rule 36 of the Sikkim Government Services (Leave) Rules, 1982, applies to retirement on superannuation, not re-employment.
- The judgment clarifies the scope and applicability of leave encashment benefits for re-employed individuals in Sikkim.
Development of Law
The ratio decidendi of the case is that a government servant who retires under the Sikkim Government Service Rules, 1974, is entitled to leave encashment for a maximum of 300 days. If the government servant is re-employed after 58 years of age and accumulates leaves during the re-employment period, they cannot claim leave encashment a second time merely because they have leave in their credit during the re-employment period. This clarifies the interpretation of Rules 32 and 36 of the Sikkim Government Services (Leave) Rules, 1982, and ensures that leave encashment benefits are not unduly extended to re-employed individuals.
Conclusion
The Supreme Court held that Dr. Mool Raj Kotwal, as a re-employed government servant, was not entitled to a second leave encashment after having already availed it upon retirement. The Court set aside the orders of the High Court and clarified that Rule 36 of the Sikkim Government Services (Leave) Rules, 1982, applies only to retirement on superannuation and not to re-employment. This decision provides clarity on the applicability of leave encashment benefits for re-employed individuals in Sikkim.