Summary
Eleven teachers of an aided Rajasthan school, absorbed into State service under the 2010 Voluntary Rural Education Service Rules on this Court's 2016 direction, sought leave encashment and gratuity for their aided service. The High Court refused, holding these were not 'salary'. The Supreme Court allowed their appeal. Following Lachhmangarh, 'salary' under Section 2(r) of the 1989 Act includes leave encashment. Rule 5(viii) of the 2010 Rules, which barred carrying forward leave and pushed encashment onto the aided school, was an arbitrary and unconscionable term that employees had no real choice but to accept (Brojo Nath Ganguly). Leave encashment was payable by the State and the management in the ratio 70:30. Under Rule 82 of the 1993 Rules, gratuity was the management's liability alone. All amounts carried 10% interest.
Issues
- Whether leave encashment and gratuity for service in an aided institution are payable to teachers absorbed into State service under the 2010 Rules, and by whom.
- Whether Rule 5(viii) of the 2010 Rules, and the undertaking executed by employees, could deny them carry-forward or encashment of privilege leave as against the State.
- Whether gratuity forms part of 'salary' and of the State's grant-in-aid, or is a liability of the management.
Provisions considered
- Sections 2(r) and 29, Rajasthan Non-Government Educational Institutions Act, 1989'Salary' is the aggregate of emoluments, and Section 29 requires parity with government staff. Leave encashment, being salary for unavailed leave, is part of salary (Lachhmangarh). (¶¶ 14, 15, 18, 19)
- Rule 5(viii) and (xi), Rajasthan Voluntary Rural Education Service Rules, 2010The bar on carrying forward privilege leave, which required employees to seek encashment from the aided institution, was arbitrary and unconscionable. It could not be enforced against them despite the undertaking. (¶¶ 19, 20, 21)
- Rules 14 and 82, Rajasthan Non-Government Educational Institutions (Recognition, Grant-in-Aid and Service Conditions etc.) Rules, 1993Gratuity is payable under the Payment of Gratuity Act but is not approved expenditure for grant-in-aid. As a condition of aid, it is the management's liability (Rajasthan Welfare Society). (¶¶ 16, 22)
- Article 14, Constitution of IndiaUnfair and unconscionable terms imposed on employees who have no meaningful choice but to accept them violate the right to equality (Brojo Nath Ganguly, Pani Ram). (¶ 20)
Held
- Leave encashment is part of 'salary' under the 1989 Act, as Lachhmangarh held. The High Court erred in holding that payment of salary arrears satisfied the earlier directions. (¶¶ 17, 18, 19)
- Rule 5(viii) of the 2010 Rules, which denied carry-forward of privilege leave and pushed encashment onto the aided institution, is arbitrary and unconscionable and cannot be enforced. Because the school received 70% aid, the State and the management must bear leave encashment in a 70:30 ratio for the period from entry to absorption. (¶¶ 20, 21)
- Gratuity is a non-recurring payment that is neither salary nor approved expenditure under the grant rules. Rule 82, a condition of aid, places it on the management, and Ambika Mission Boys Model School, decided under the amended Gratuity Act, did not alter that. (¶ 22)
- Both sets of respondents had contested liability, so the amounts were to carry interest at 10% from the dates of entitlement, with the State to quantify leave encashment within four weeks and all payments to be made within six weeks. (¶ 23)
Result
Appeal allowed. The High Court's order was set aside. Leave encashment was to be paid by the State and the management in the ratio 70:30, and gratuity by the management, with 10% interest, quantified within four weeks and paid within six weeks. No costs.