Dismissed Employee Has No Right to Leave Encashment Under Statutory Rules: Punjab and Haryana High Court

“Dismissal entails forfeiture of past service; benefit of leave encashment impermissible once service stands forfeited” – In a significant judgment affecting service jurisprudence, the Punjab and Haryana High Court reaffirmed that an employee dismissed from service due to criminal conviction is not entitled to leave encashment under the applicable statutory rules. The decision came in CWP, wherein Justice Namit Kumar dismissed the petitioner’s plea challenging an order rejecting his claim for leave encashment post-dismissal.

The Court decisively held that "a dismissed employee is not entitled to the benefit of leave encashment in light of Rule 8.21 and Rule 3.17-A(1)(ix) of the Punjab Civil Services Rules, Volume I, Part I", emphasizing that dismissal from service carries with it the consequence of forfeiture of past service, thereby extinguishing any accrued entitlement.

"A judgment rendered in ignorance of statutory rules is per incuriam and not binding": Court discards Dhir Chand precedent

The petitioner, a former Senior Assistant in the Department of Rural Development and Panchayats, Punjab, had been convicted in a criminal case on November 30, 2015, and was consequently dismissed from service in February 2016. He claimed entitlement to leave encashment, which was denied by the competent authority via a speaking order dated February 20, 2023. Challenging this rejection, the petitioner relied primarily on the decision in Dhir Chand v. State of Haryana, (2019) 1 SCT 134, where a Coordinate Bench had granted leave encashment to a dismissed employee.

However, the Court noted that "the judgment in Dhir Chand was rendered per incuriam, having failed to consider the binding instructions and statutory rules, including the Full Bench review in Pyare Lal’s case dated 11.08.2014." Justice Kumar observed that “while Dhir Chand held that leave encashment is a matter of property protected under Article 300-A, it failed to examine Rule 8.21 which permits such benefit only at the time of retirement, not dismissal.”

Justice Namit Kumar relied heavily on subsequent and reasoned decisions including Ram Kumar Ranga v. State of Haryana, (2019) 4 SCT 99, and Balwinder Singh v. State of Punjab, (2020) 2 SCT 437, which held that “dismissal, unlike retirement, results in loss of qualifying service, and thus disentitles a person from benefits like leave encashment which are linked to continuation and culmination of service.”

The petitioner had sought a writ of certiorari to quash the rejection of his leave encashment claim and a mandamus directing the State to release the said amount along with 18% interest. He initially approached the authorities through a representation dated December 14, 2020, and later served a legal notice on August 8, 2022. As no response followed, he filed CWP No. 23716 of 2022, in which the High Court directed the authorities to pass a speaking order. The rejection, when it came on February 20, 2023, was challenged in the present writ.

The petitioner’s case rested on the proposition that since leave was accrued during active service, it constituted a property right, and his dismissal should not affect this entitlement. This argument leaned on the ruling in Dhir Chand, which in turn relied on the Full Bench decision in Pyare Lal, and decisions from the Allahabad and Jharkhand High Courts.

The central issue was whether a dismissed government employee is entitled to encashment of unutilized earned leave, accrued prior to dismissal, particularly in light of statutory rules governing service benefits in Punjab.

Referring to Rule 8.21, the Court emphasized: "This rule only permits leave encashment upon retirement, not in cases of dismissal. Retirement signifies honorable conclusion of service, whereas dismissal is a punitive end, which carries disqualifying consequences."

Further, Rule 3.17-A(1)(ix) was cited to establish that “removal from public service for misconduct entails forfeiture of past service.” Since leave encashment is payable only for qualifying service, once that service is forfeited, the benefit is extinguished.

The Court dismissed the petitioner’s reliance on Article 300-A of the Constitution, stating: “Leave encashment is a statutory benefit, and Article 300-A does not override explicit exclusions under service rules.”

On the principle of per incuriam, the Court stated: “A judgment rendered in ignorance of binding statutory provisions and relevant case law cannot constitute good law.” Citing Subhash Chandra v. DSSSB, (2009) 3 SCT 827, and S. Pushpa’s case, the Court underscored that “decisions ignoring statutory provisions or binding precedents lack precedential value.”

The Court also took note of the fact that even the judge who authored Dhir Chand had, in a later judgment (Harbans Lal v. State of Punjab, 2019), admitted the earlier decision was rendered in ignorance of applicable rules and should no longer be considered good law.

Justice Namit Kumar concluded that “since the petitioner has been convicted by a criminal court and dismissed from service based on that conviction, he is not entitled to leave encashment under the prevailing rules”, adding that the writ petition lacked merit and was therefore dismissed without costs.

The Court has once again reinforced the position that leave encashment is not an unconditional post-employment benefit, but a statutorily governed privilege contingent upon the manner of separation from service.

Date of Decision: December 4, 2025