IN THE PUNJAB AND HARYANA HIGH COURT AT CHANDIGARH LPA No.519 of 2011 (O&M) Date of Decision: April 05, 2011 Anglo Sanskrit High School Khanna Trust and Management Society (Regd.), Khanna and Anr. …Appellants Versus State of Punjab and Ors. …Respondents CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE T.P.S. MANN Present: Mr. Sameer Sachdeva, Advocate, for the appellants. Mr. Puneet Jindal, Advocate, for respondents-caveators. ***** 1. To be referred to the Reporters or not? 2. Whether the judgment should be reported in the Digest? M.M. KUMAR, J. 1. The instant appeal under Clause X of the Letters Patent is directed against the judgment dated 06.07.2010 rendered by learned Single Judge disposing of two writ petitions involving the issue as to whether the writ petitioner-respondents No.3 and 4 were entitled to payment of gratuity, full leave encashment and contributory provident fund by calculating the same at the rate of 10% of the salary. The learned Single Judge has adjudicated on the issue of contributory provident fund and no adjudication was felt necessary because the balance gratuity and leave encashment were paid during the pendency of the writ proceedings. 2. Brief facts of the case are that the writ petitioner-respondents LPA No.519 of 2011 (O&M) were employees of the appellant college, which is a private aided institution. They had joined service on various dates and have retired on attaining the age of superannuation. The detail of writ petitioner-respondents 3 to 9 showing their date of appointment and retirement is given in the following table:- Respo ndent No. Name of petitioner/ designation Date of appointment Date of retirement 3 Sh. R.G. Gupta, Lecturer 16.07.1996 30.11.2003 4 Sh. N.K. Sud, Lecturer 01.07.1965 30.11.2002 5 Sh. R.K. Manroa, Lecturer 05.07.1966 30.09.2003 6 Sh. R.D. Sharma, Lecturer 18.07.1988 30.09.2002 7 Sh. Ram Murti, Lecturer 18.07.1972 28.02.2002 8 Sh. R.P. Sharma, Lecturer 03.10.1967 28.02.2002 9 Sh. V.K. Chum, Lecturer 07.10.1971 31.05.2003 3. The appellant is affiliated with the Panjab University and the service conditions of its employees are governed by the conditions of service and conduct of teachers in non-government affiliated colleges as incorporated in Panjab University Calendar. The appellant-college also receives 95% aid from the respondent-State of Punjab and in matters concerning disciplinary action, its employees are governed by the provisions of Punjab Affiliated Colleges (Security of Service of Employees) Act, 1974. When the management refused to pay them full benefits of leave encashment, gratuity and the contributory provident fund then, they approached this Court for payment of complete and full financial benefits. The learned Single Judge after noticing that the payment of balance gratuity and full leave encashment along with interest has been made by the appellant voluntarily during the pendency of the writ petitions then, no necessity was felt to decide the issues 2 LPA No.519 of 2011 (O&M) concerning entitlement of the writ petitioner-respondents. The only question decided by the learned Single Judge is whether the writ petitioner-respondents were entitled to contributory provident fund by calculating the same at the rate of 10% of the salary in contrast to the benefit conceded by the appellant namely that it was payable at the rate of 8% of the basic pay. In support of their claim the writ petitioner/respondents have placed reliance on the provisions of Para 12.3 Chapter VIII (E) Vol.I of Panjab University Calendar as also Para 3 of Annexure II of the Policy instructions dated 21.03.1979, which defined pay to mean pay plus all allowances excluding house rent allowance. The view of the learned Single Judge is discernible from the concluding para of the judgment: - “Since there is no dispute regarding the admissibility of benefit of Contributory Provident Fund which is to be calculated at the rate of 10% of the salary which has been termed to include pay and all allowances except the house rent allowance in terms of Para 12.3 of the Panjab University Calendar Chapter VIII (E) Vol.I, the Court is of the opinion that the writ petition deserves to succeed. The Court is also of the opinion that respondent no.4 could not have withheld such a benefit from the petitioners on the ground of paucity of funds. It, therefore, directs respondent no.4 to release the amount due to the petitioners by calculating it in accordance with the terms of Rule 12.3 Para 2 forthwith and release these benefits to the petitioners within 2 months from today. The respondent State of Punjab shal reimburse this amount after such a payment has 3 LPA No.519 of 2011 (O&M) been made within a period of three months from the time when a claim for such a reimbursement is lodged with them. There shall be no deviation in making such payments by the respondents whether it is in the shape of payment to the petitioners in the first instance by respondent no.4 or in the shape of reimbursement by respondent nos.1 to respondent no.4. The amount shall be released to the petitioners alongwith interest at the rate of 9% from the date when it became due. The other benefits such as leave encashment and gratuity which were released to the petitioners belatedly shall also carry interest at the rate of 9% p.a. from the date when they were due till the date when the payment was made. The liability to pay the same would be of respondent no.4. Both petitions stands allowed.” 4. It is thus evident that the learned Single Judge has placed reliance on Para 12.3 of the Panjab University Chapter VIII (E) Vol.I as also Para 3 of Annexure II of the Policy instructions dated 21.03.1979. 5. Mr. Sameer Sachdeva, learned counsel for the appellant has vehemently argued that the learned Single Judge has committed grave error in law by refusing to adjudicate on the issue concerning leave encashment. According to the learned counsel, the appellant is a charitable education society running various education institutes and survives on the 95% grant in aid, which is given by the respondent-State w.e.f. 01.09.1978. He has maintained that in the absence of essential grant in aid disburse by the respondent-State, the appellant would be unable to disburse even the monthly salary to its teaching and non-teaching staff. According to the learned counsel, 4 LPA No.519 of 2011 (O&M) the payment of balance gratuity and leave encashment during the pendency of the writ petition should not have been taken as admission of right of the writ petitioner-respondents for the grant of leave encashment and gratuity. The question should have been adjudicated as to whether employees of the private aided colleges were entitled to leave encashment. In respect of payment of contributory provident fund, learned counsel has argued that the contributory provident fund is admissible only on the basic pay, which is based on a uniform criteria adopted in the State of Punjab in respect of Punjab affiliated aided colleges. It has been submitted that adopting the formula of payment at the rate of 10% of the actual pay is wholly misconceived and incomprehensible on the strength of the provisions made in Para 12.3 Chapter VIII (E) Vol.I of the Panjab University Calendar. 6. Mr. Puneet Jindal, learned counsel for the writ petitioner- respondents has filed a caveat application and has argued the expression 'pay and allowances' used in Para 3 of Annexure II of Policy instructions dated 21.03.1979 would include the payment of leave encashment. According to the learned counsel, the appellants have voluntarily made the payment of balance gratuity and leave encashment during the pendency of the writ petitions. Therefore, the payment of the amount has been rightly regarded as admission of rights of the writ petitioner-respondent for payment of gratuity and leave encashment of the appellant. In support of his submission that the expression 'pay and allowances' would include the salary for the earned leave period, learned counsel has placed reliance on a judgment of the Supreme Court rendered in the case of State of Rajasthan v. S.R. Higher Secondary School, Lachhmangarh, (2005) 10 SCC 346. 7. Having heard the learned counsel for the parties at a considerable 5 LPA No.519 of 2011 (O&M) length and perusing the record, we find that the instant appeal lacks merit and is thus liable to be dismissed. There is hardly any dispute with regard to entitlement of the writ petitioner-respondents to payment of balance amount of gratuity. The writ petitioner-respondents were initially paid only a lump- sum amount of Rs.25,000/- towards gratuity and there has been huge outstanding amount payable by the appellant. The authorities of the Panjab University has sent circular to all the Managing Committees including the appellants desiring them to pay gratuity to the retired staff immediately after their retirement (P-2) but the amount of gratuity had not been paid. The annual report of the appellant-college for the year 2002-2003 has conceded that balance amount of gratuity was still due to be paid by the appellant. For example in respect of Sh. R.G. Gupta an amount of Rs.3,50,000/- was shown as payable, therefore, we do not entertain any doubt with regard to entitlement of the writ petitioner-respondents that balance gratuity has been rightly paid to them and the interest as imposed by the learned Single Judge is also payable. 8. Moreover this Court further finds that there was no necessity for the learned Single Judge to adjudicate upon issue concerning gratuity because in reply to Paras 7 and 8, the appellants in their written statement have conceded that the amount of gratuity was already paid and the receipts Annexures R/3-1 to R/3-6 have been placed on record. In respect of Professor N.K. Sud, it has been stated that the amount could not be paid as he was out of the country and that he could collect the amount any time from the appellant. It is thus evident that the appellants themselves did not seek any adjudication on the entitlement of the writ petitioner-respondents for gratuity. Therefore, no issue with regard to payment of gratuity to the retired teachers of the appellant-college would arise. 6 LPA No.519 of 2011 (O&M) 9. In respect of the benefit concerning earned leave, it would be necessary to make reference to Para 3 of Annexure II of the Policy instructions dated 21.03.1979 (R-3) (17)which reads as under: - 'A to A+' “3. The approved items of expenditure shall be as follows: i. Pay and allowances of the teaching and non teaching staff. ii. Contribution towards the Provident Fund of the eligible employees.” 10. A perusal of the aforesaid provision would show that the approved items of expenditure constitute part of terms and conditions of the financial grant to be given to the private colleges on the basis of 95% of the deficit and pay and allowances of teaching and non-teaching staff as one of the terms. The question which arises for consideration is whether the words 'pay and allowance' would include the leave encashment. For answer to the aforesaid question, it would be profitable to place reliance on the judgment of Hon'ble the Supreme Court in S.R. Higher Secondary School, Lachhmangarh (supra). In that case, the expression 'salary' was defined to include all emoluments of an employee including dearness allowance or any other allowance etc. The question arose whether the expression or any other allowance would include the benefit of leave encashment, it has been held by Hon'ble the Supreme Court that the use of the expression 'pay and allowances' in the title to the section is with the intention to give a wider meaning so as to any encompass all emolument and other allowances and reliefs. The benefit of encashment of leave is nothing else but payment of salary for the leave not availed by an employee and which is lying to his credit in his leave account. It 7 LPA No.519 of 2011 (O&M) was concluded that leave encashment is thus part of salary and was covered in the expression 'scales of pay and allowances'. Therefore, we are of the view that the aforesaid expression 'pay and allowances' used in Para 3 of Annexure II of the Policy instructions dated 21.03.1979 would include the element of leave encashment. We are further of the view that leave encashment is only a deferred payment of the salary in respect of time spent an employer on duty and rendered in actual service. In other words, he has earned the leave by virtue of time spent by him on actual service. Conceptually, an employee discharges duty on a day when he could have been on leave and, therefore, he earns the leave to which is credited to his account. The credit of that Leave could not be encashed to the extent provided by the rules. For the aforesaid proposition, we place reliance on Para 7 of the judgment of Hon'ble the Supreme Court in the case of Union of India v. Justice Gurnam Singh (1982) 2 SCC 314. Moreover, the amount of leave encashment was paid by the appellant themselves voluntarily. Therefore, the issue in any case is decided against the appellant and in favour of the writ petitioner-respondents. 11. This takes us to the last issue as to whether the writ petitioner- respondents are entitled to the grant of contributory provident fund by calculating the same at the rate of 10% of the salary instead of calculating the same at the rate of 8% of the basic pay. The learned Single Judge has rightly placed reliance on Para 12.3 Chapter VIII (E) Vol.I of the Panjab University Calendar titled as 'Conditions of Service and Conduct of Teachers in Non- government Affiliated Colleges, which reads as under: - “12.3 The rate of subscription of an employee shall be 10 per cent of his salary. He may, however, be permitted to subscribe towards non-contributory Provident Fund, 8 LPA No.519 of 2011 (O&M) provided the total subscription towards Provident Fund, i.e. contributory (10 per cent) as well as non-contributory shall not exceed 60% of the monthly + salary of the subscriber. The contribution of the college towards the Provident Fund of a teacher shall be 10 per cent of his + salary and this shall be contributed at the end of each month. The college shall pay interest and the amount of such interest shall be placed monthly to the credit of each depositor. When the calculation involves paise amounting to less than 50 it shall be ignored and when it amounts to 50 paise or more, full rupee shall be deducted. Provided that where a higher rate of Provident Fund contribution already prevails, it shall not be reduced without the consent of the University. The monthly rate of + salary of a teacher during any college year shall be taken to be that at which he draws +salary for the month of the college year.” 12. A perusal of the aforesaid para would show that the rate of subscription of employee is 10% of his salary and there is no concept of 8% of the basic pay. The learned Single Judge has recorded a categorical finding that the appellant in fact did not dispute the entitlement of the writ petitioner- respondents but only asserted that the amount first be paid to them by the State so as to enable them to pass it to the writ petitioner-respondents. It has further been found that even the State of Punjab did not dispute the liability but pleaded that the appellant being the principal employer should pay the benefit to its employee first and then get the same reimburse from them. It was in the 9 LPA No.519 of 2011 (O&M) aforesaid context that the learned Single Judge exhorted the appellant as well as the State of Punjab by observing as under: - “It appears that the petitioners have unnecessarily been deprived of this benefit. They were the employees of respondent No.4 who was expected to act as a model employer. The management cannot plead that it is unable to pay the pay and allowances admissible to its employees but at the same time go on extracting work from them. Model employer is expected to discharge its liability towards its employees and insufficiency of funds is no justification to deny an employee of his hard earned benefits. Equally strange is the stand of the State of Punjab. Moreso, when the petition has been pending for the last six years. They were conscious of the fact that the amount, which is being claimed by the petitioners forms a part of the grant in aid, however, there is only a tinge of justification in what they have stated.” 13. The aforesaid discussion would show that the amount of contributory provident fund has to be paid at the rate of 10% of the pay and not at the rate of 8% of the basic pay. Para 12.3 Chapter VIII (E) Vol.I of the Panjab University Calendar has made it absolutely clear and no doubt is entertainable in that respect. Therefore, even on the third issue, the appeal filed by the appellant would lack merit. 14. As a sequel to the above discussion, we are of the considered view that the present appeal does not merit admission and thus is liable to be dismissed. 10 LPA No.519 of 2011 (O&M) 15. Accordingly, the appeal fails and the same is dismissed. (M.M. KUMAR) JUDGE (T.P.S. MANN) April 05, 2011 JUDGE Rajan 11