JAGDISH PRASAD SAINI & ORS. versus STATE OF RAJASTHAN & ORS. on 26 September 2022

JAGDISH PRASAD SAINI & ORS.

v.

STATE OF RAJASTHAN & ORS.

(Civil Appeal No. 6953 of 2022)

SEPTEMBER 26, 2022

[UDAY UMESH LALIT, CJI AND S. RAVINDRA BHATT, JJ.]

Rajasthan Voluntary Rural Education Service Rules, 2010 –rr.5, 10 – Rajasthan Non-Government Educational Institutions(Recognition Grant-In-Aid and Service Conditions, Etc.) Rules,1993 – rr.47, 82 – Rajasthan Non-Government EducationalInstitutions Act, 1989 – ss. 2, 29 – Appellants were appointedagainst sanctioned posts by fourth respondent-school, controlledby fifth respondent trust (collectively “establishment”) –Establishment discontinued receipt of grant-in-aid from the State –In the meanwhile, 2010 Rules were brought into force by the State –Appellants sought absorption with the State in accordance with therules, denied – Eventually, Supreme Court set aside the denial ofabsorption of the appellants and directed their regularization –However, their complaint of non-compliance with the respondent’sobligation to pay leave encashment and gratuity for the period theywere in the aided establishment was not gone into, permitted toagitate grievance before High Court – By impugned judgment HighCourt has now held that since arrears of salary had been paid,nothing more was to be done – On appeal, held: Salary includesleave encashment – Further, 2010 Rules were framed to enable theabsorption of employees and teachers of non-government aidedinstitutions – Condition in clause (viii) of r.5 i.e., bar on carryforward of balance privilege leave and requiring employees to seekencashment from their previous employer i.e., aided institutions, isan arbitrary condition which cannot be enforced – Also, in thepresent case, the management establishment was recipient of 70%aid, in the form of grant – Thus, the State cannot shrug its part ofthe responsibility to pay the appellants the share of leave encashmentbenefits, and hide behind either r.5 (viii) or the undertaking executedby them – Appellants entitled to privilege leave entitlement benefits,to be paid by the State and management establishment in the ratio

463

A

B

CDEF

G

H

Aof 70:30, respectively – Management also liable to pay gratuity tothe appellants – Impugned order set aside – Service Law.

Service Law – Leave encashment, if part of salary – Held:Yes.

Allowing the appeal, the CourtB

HELD: 1.1 Non-government educational institutions inRajasthan are governed by the Rajasthan Non-GovernmentEducational Institutions Act, 1989 (“Act”) and the rules framed.Section 2 (r) of the Act defines salary as “the aggregate of theemoluments of an employee including dearness allowance or anyCother allowance or relief for the time being payable to him but doesnot include compensatory allowance”. Section 3 of the Act providesfor recognition of grant-in-aid institutions; Sections 4 to 6 of theAct provide for the eventuality of refusal of recognition, withdrawalof aid and the remedies for the institution. Section 7 of the ActDonwards are regulatory provisions requiring audit, recruitment,orders of termination of teachers, provision of tribunal forredressal of teachers’ grievances regarding dismissal ortermination, etc. Section 29 of the Act is relevant for the presentpurposes. The relevant provisions of the 1993 Rules are Rules47, and, pertinently, 82. Rule 47 deals with privilege leave. [ParasE14-16][472-D-E, G; 473-A, E]

1.2 As far as leave encashment dues are concerned, theissue is no longer at large. In Senior Higher Secondary SchoolLachhmangarh this court held that “salary” under the Act,includes leave encashment. The reasoning therein is binding,Fand conclusive as regards entitlement of the appellants to claimleave encashment benefits. However, the State had urged thatby virtue of Rule 5 of the 2010 Rules, the employees who wereregularized could not claim these benefits. The 2010 Rules wereframed in exercise of powers under proviso to Article 309 of theGConstitution. Evidently, these rules were framed to enable theabsorption of employees and teachers of non-government aidedinstitutions. What is relevant for the purposes of this case is thatby Rule 5(viii), carry forward of existing privilege leave is denied;likewise, the period of service in aided institutions is not to bereckoned for the purpose of gratuity under Rule 5(ix). EveryH

employee had to furnish an undertaking in the prescribed formto accept the terms and conditions. Ordinarily no public employercan be faulted in imposing pre-conditions before it recruits anemployee. However, such conditions cannot be arbitrary, or soonerous as to be unconscionable. In the opinion of this court, thecondition in clause (viii) of Rule 5 i.e., carry forward of balanceprivilege leave, is barred and requiring employees to seekencashment from their previous employer, i.e., aided institutions,is an arbitrary and unconscionable condition, which cannot beenforced. [Paras 18-20][475-B, 476-H; 477-A; 478-F-H; 479-A]

State of Rajasthan and Anr. v. Senior Higher SecondarySchool, Lachhmangarh (2005) 10 SCC 346 – reliedon.

1.3 In the scheme of the 1993 Rules, the assessment of,and determination of the extent of, aid to be granted to anyinstitution, is provided by Rule 13. What forms part of theapproved expenditure that would be the content of aid, is providedby Rule 14. In the present case, the management establishmentwas recipient of 70% aid, in the form of grant. In thesecircumstances, the State cannot shrug its responsibility toshoulder its part of the responsibility to pay the appellants theshare of leave encashment benefits, and hide behind either Rule5 (viii) or the undertaking executed by them. The appellants areheld entitled to privilege leave entitlement benefits. Such benefitshall be calculated from the date they entered the service of theestablishment till the date of their absorption, by the State, in2016. The State shall pay the benefits due to the extent of 70%,and the balance 30% shall be payable by the managementestablishment. On the issue of gratuity, again, the question ofliability has been conclusively settled. Although the managementrelied on a Chhattisgarh High Court decision Ambika MissionBoys Model School, this court is of the opinion that it cannot beconstrued as an authority, because the court in that case analysedthe provisions of the Payment of Gratuity Act, 1972, as amendedin 2009. However, in the present case, the scheme of the 1993Rules, which contained the conditions of grant, categorically castthe liability to pay gratuity on the employer, i.e., the aidedestablishment, i.e., the fourth, fifth and sixth respondents in this AB

C

D

EF

G

H

Acase. Furthermore, Rajasthan Welfare Society is an authority, inthat it considered the effect of the 1993 Rules, and held that it isthe management of the aided institution which has to bear theliability towards payment of gratuity. Neither has Rule 82 changed,nor has any other material been brought to the notice of the court,to say that the management, i.e., respondent nos. 3-7 are absolvedBof their liability to pay gratuity, upon termination of theirrelationship with the appellants as their employers. Rule 82 is acondition of grant, which meant that the managementestablishment was conscious and aware of its liability when itapplied and was granted aid, under the 1993 Rules. Therefore, itCcannot escape its liability on that score. [Paras 21, 22][479-C-G;480-A-B; 482-G]

1.4 With respect to leave encashment, the State and therespondent nos. 3 to 7 are liable to pay the appellants, in theratio of 70:30 respectively. The respondent nos. 3 to 7 shall alsoDcalculate and pay the amount of gratuity, to the appellants (on thebasis of their initial date of entry in the school, till the date oforder of absorption, by the respondent State), within six weeksfrom today. Since both sets of respondents contested their liabilityand denied them to the appellants, the amounts payable to theappellants shall also carry interest, at the rate of 10% from theEdate(s) of their entitlement, till the date of payment. The impugnedorder is set aside. [Para 23][482-H; 483-A-C]

Rajasthan Welfare Society v. State of Rajasthan (2005)5 SCC 275 : [2005] 3 SCR 387; Regional ProvidentFund Commissioner v. Sanatan Dharam GirlsFSecondary School & Ors. (2007) 1 SCC 268 : [2006] 7Suppl. SCR 849; Pani Ram v. Union of India & Ors.2021 SCC OnLine SC 1277; Central Inland WaterTransport Corporation Limited & Anr. v. Brojo NathGanguly & Anr. (1986) 3 SCC 156 : [1986] 2 SCR 278G– referred to.

Ambika Mission Boys Model School v. State ofChattisgarh, (2020) 2 CLR 177 – distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6953of 2022.

From the Judgment and Order dated 26.04.2019 of the High Courtof Judicature for Rajasthan at Jaipur Bench, Jaipur in S.B. WritMiscellaneous Application No. 357 of 2017.

Deepak Nargolkar, Sr. Adv., Syed Ahmed Saud, Daanish AhmedSyed, Mohd. Parvez Dabas, Uzmi Jameel Husain, Aqib Baig, Mohd.Shahib, M/s. Shakil Ahmad Syed, Advs. for the Appellants.

Dr. Manish Singhvi, C.U. Singh, Sr. Advs., D. K. Devesh, UpendraPratap Singh, Harsh Singh Rawat, Abhinav S. Raghuvanshi, SuprabhKumar Roshan, Ms. Snehal U. Kanzarkar, Ms. Sneha Jankiraman, MohaParanjpe, M/s. Khaitan & Co., Advs. for the Respondents.

The Judgment of the Court was delivered by

S. RAVINDRA BHAT, J.

1. Special leave granted. With consent of counsel for the parties,the appeal was heard finally. The appeal is directed against a judgmentand order of the Rajasthan High Court, Jaipur Bench,[1] dismissing theappellant’s application, seeking enforcement of this court’s previousjudgment.[2]

2. The appellants were appointed against sanctioned posts by thefourth respondent (a senior secondary school, established and controlledby the fifth respondent trust, hereafter referred to collectively as the“establishment”) in 1993. They continued to work uninterruptedly in thatestablishment on a regular basis. The establishment was recipient ofgrant-in-aid from the State of Rajasthan (hereafter, “State”). By aunilateral resolution dated 5[th] November 2008, the managing committeeof the establishment decided to discontinue receipt of grant-in-aid fromthe State with effect from 1[st] April 2008. Accordingly, the State by an 1 Dated 26th April 2019 in SBWMA No. 357/2017

2 Order dated 19th July 2016 in Civil Appeal No 6601-6603 of 2016

A

B

C

D

E

F

G

H

Aorder dated 28[th] December 2012 ceased to grant aid with effect from 1[st]March 2012.

3. In the meanwhile, the State had framed and brought into forcethe Rajasthan Voluntary Rural Education Service Rules, 2010 (hereafter,“2010 Rules”) with the objective of providing security to the employeesBworking in aided institutions, and to absorb them in the State’s service.The appellants sought their absorption with the State in accordance withthe rules, by unavailingly representing in this regard. Finally, they weredriven to file writ petitions before the High Court. The State had, pursuantto the rules framed by it, absorbed other employees and teachers fromaided institutions, but denied this benefit to the appellants.C

4. The appellants writ petitions were clubbed with several otherpetitions and disposed of by the High Court, refusing to direct the Stateto absorb these employees. The employees, including the appellants,unsuccessfully sought review of those orders; which was rejected on29[th] November 2013. The appellants thereafter approached this courtDby petitions for special leave to appeal questioning the orders of theHigh Court.

5. By its final order of 19[th] of July 2016, this court set aside thedenial of absorption of the appellants. The court directed as follows:

E“..We are therefore convinced that the said eleven teachershaving been in the service of the school management in theaided posts and were in receipt of such aid from the stategovernment, right from the date of their entry into service tillthe aid came to be discontinued in 2008, only at the instanceof the school management, which has now been restoredFpursuant to the orders of this court, the state government canbe directed to pass necessary orders for their absorptionapplying the 2010 rules as from the date such rules came intoeffect. We therefore set aside the orders denying suchabsorption and remit the matter back to the respondent numberGone-state government to consider the claim of the eleven aidedteachers for their absorption as from the date when the 2010rules came into effect and such orders shall be passed withinone month from the date of receipt of a copy of this order.

After passing such orders of absorption, it is needless to statethat whatever salary that fell due and payable to the said H

eleven teachers for the past period i.e. from 23.3.2008 shallbe restored in the manner such aid is to be granted prior tothe coming into force of the 2010 rules. In other words, suchaid is to be sanctioned to an extent of 70% and 30% to beborne by the school management, such calculation shall bemade, and the extent to which aid is to be sanctioned shall begranted up to the date by which the order of absorption ispassed on thereafter the full salary payable for an absorbedteacher in the state service shall also be calculated andsanctioned by respondent No 1/ state government.

On such orders being passed, we also direct the schoolmanagement to take necessary steps for praying the 30% oftheir liability from March 2008 up to date of the absorptionof the eleven teachers, as per the orders to be passed by thestate government.

We permit the school management to make such payment of30% to the eleven teachers in easy instalments by negotiatingwith the concerned teachers in order to ensure that suddenhuge financial liability is not cast on the school managementso that the running of the school for the benefit of the schoolgoing children in that location.”******

We also direct the school management to submit a statementof calculation as regards the salary which was actuallydisbursed to the aided teachers as well as non-aided teachersfrom the month of April, 2008. The school management shallseparately prepare a statement of calculation as regards thesalary paid to the aided teachers and forward it to the stategovernment with proof of payment in order to enable the Stategovernment to comply with our directions with regard to thepayment of salary payable up to the date of absorption. Asfar as revision in the payment of salary is to be granted, thesame shall also be prepared and appropriate order be passedby the state government. Such payment shall also be effectedpositively by the school management.”

6. After this order, in September 2016, the establishment movedan application seeking directions from this court. The application AB

C

D

E

F

G

H

Acontended that the establishment had to pay the 11 aided employees,(i.e., the appellants) to the tune of ` 57.68 lakhs, and privilege leavesalary to the tune of 36.20 lakhs. The application also produced a chartof calculation of gratuity and leave encashment. This application wasnot allowed. Contemporaneously, the appellants also filed contemptproceedings, i.e., C.P. No (Civil) 640 – 642/ 2017, in the disposed ofBCivil Appeal Nos. 6601-6603 of 2016. This court by order of 6[th] March2017, allowed the appellants to withdraw the contempt petitions, withliberty to move the High Court for enforcement of orders of this court.In these circumstances, the appellants moved the High Court contendingthat the orders of this court had not been properly complied with, to theCextent that they had not been paid privilege leave encashment and gratuityamounts.

7. The High Court by the impugned order rejected the applicationspreferred before it on the ground that since the salary required to bedisbursed had in fact been paid to the appellant employees, there was noDcause to pursue the matter further. The High Court was of the opinionthat neither gratuity nor leave encashment was covered by the expression“salary”, even under Rule 10 of the 2010 Rules or under the RajasthanNon-Government Educational Institutions (Recognition Grant-In-Aid andService Conditions, Etc.) Rules, 1993 (hereafter, “1993 Rules”).

E8. The aggrieved appellants have therefore approached this court.It was contended on their behalf by Mr Deepak Nargokar, learned seniorcounsel, that the expression “salary” included both components, i.e.,gratuity, as well as leave encashment. It was pointed out that one of theoriginal appellants who approached this court, was in fact paid gratuityas well as leave encashment by the respondent establishment. It wasFalso argued that under Rule 5 of the 2010 Rules, employees were entitledto leave encashment and gratuity benefits from private institutions.

9. The learned senior counsel next relied upon the averments madein the application by the management establishment, especially para 13(6),filed in this court[3]. It was submitted that the management establishmentGclearly admitted to its liability for payment of leave encashment duesand gratuity. In these circumstances, the establishment could not denythose liabilities. He also relied upon the chart produced by theestablishment management which specifically set out the gratuity and leave encashment amounts which all the 11 employees were entitled to,according to it. He also relied upon the judgment of this court in State ofRajasthan and Anr. v. Senior Higher Secondary School,Lachhmangarh[4] where the court declared that leave encashment had,“to be read and understood with the definition of the word salary”.

10. Learned senior counsel for the State, Dr. Manish Singhvi arguedthat in terms of Rule 5 (xi) of the 2010 Rules, every employee hadexecuted an undertaking that she or he accepted all terms and conditionsof service prescribed by the 2010 Rules. Furthermore, the concept of‘carry forward of balance of privileged leave’ too was denied by Rule5(viii) of the 2010 Rules. It was submitted that in terms of Rule 5(viii),the employees could seek payment of leave encashment of balance ofprivileged leave only from the private institutions. The State, therefore,could not be fastened with the liability on that score. So far as the questionof gratuity liability was concerned, Dr. Singhvi relied upon the judgmentin Rajasthan Welfare Society v. State of Rajasthan[5]and submittedthat by virtue of Rule 82 of the 1993 Rules, the employees of aidededucational institutions were entitled to gratuity under the Payment ofGratuity Act, 1972. Yet, in terms of Rule 14 of the 1993 Rules, gratuitywas not an approved expenditure. As a consequence, this court held inno uncertain terms that gratuity was not part of the recurring grant andthat the State was not liable in that regard.

11. Mr. C.U. Singh, learned senior counsel appearing for theestablishment, submitted that the order of this court was explicit in itsterms and that leave encashment and gratuity could not be said to formpart of “salary”. It was further submitted that the example provided bythe appellants, i.e., that one amongst them (Mr S.S. Shekhawat,respondent no.8) was paid gratuity is a solitary instance which per secould not cast liability without any corresponding obligation in law.

12. It was further submitted that privileged leave cannot be includedwithin the term salary which under the Rajasthan Non-GovernmentalEducational Institutions Act, 1989 (Section 2(r)) means “aggregate ofthe emoluments of an employee”. Learned counsel relied upon thejudgment of this court in Senior Higher Secondary SchoolLachhmangarh (supra) and submitted that corresponding aid, therefore, 4 State of Rajasthan and Anr. v. Senior Higher Secondary School, Lachhmangarh, 2005(10) SCC 346

5 Rajasthan Welfare Society v. State of Rajasthan, 2005 (5) SCC 275

A

BC

D

E

F

G

H

Ahas to be disbursed by the State Government, to enable the payment ofprivileged leave.

13. So far as the gratuity was concerned, learned counsel reliedupon a decision of the Chhattisgarh High Court in Ambika MissionBoys Model School v. State of Chhattisgarh[6]and urged that the StateBwas primarily liable to disburse the gratuity of employees of aidedinstitutions. It was also submitted that the Chhattisgarh High Court hadrelied upon the previous judgment of this court in Regional ProvidentFund Commissioner v. Sanatan Dharam Girls Secondary School &Ors[7], to hold that although aided institutions did not “belong” to theCentral or the State Government yet they were under the “control” ofCthe State under various ways. The judgment had further noted that thePayment of Gratuity Act, 1972 had amended the definition of “employee”under Section 2(e) with retrospective effect from 3[rd] April 1997.

Analysis and Conclusions

D14. Non-government educational institutions in Rajasthan aregoverned by the Rajasthan Non-Government Educational InstitutionsAct, 1989 (hereafter “Act”) and the rules framed. Section 2 (r) of theAct defines salary as “the aggregate of the emoluments of an employeeincluding dearness allowance or any other allowance or relief forthe time being payable to him but does not include compensatoryEallowance”. Compensatory allowance, by Section 2 (d) means:

“(d) ”compensatory allowance” means an allowance grantedto meet personal expenditure necessitated by the specialcircumstances in which duty is performed and shall include atravelling allowance but shall not include a sumptuaryFallowance nor the grant of a free passage to or from anyplace outside India”.

15. Section 3 of the Act provides for recognition of grant-in-aidinstitutions; Sections 4 to 6 of the Act provide for the eventuality ofrefusal of recognition, withdrawal of aid and the remedies for theGinstitution. Section 7 of the Act onwards are regulatory provisionsrequiring audit, recruitment, orders of termination of teachers, provisionof tribunal for redressal of teachers’ grievances regarding dismissal or 6 Ambika Mission Boys Model School v. State of Chattisgarh, (2020) 2 CLR 177

7 Regional Provident Fund Commissioner v. Sanatan Dharam Girls Secondary SchoolH& Ors, 2007 (1) SCC 268

termination, etc. Section 29 of the Act, which is relevant for the presentpurposes, states as follows:

“29. Pay and allowances of employees.— (1) The scales ofpay and allowances except compensatory allowances withrespect to all the employees of an aided institution shall notbe less than those prescribed for the staff belonging to similarcategories in Government institutions.

(2) Notwithstanding any contract to the contrary, the salaryof an employee of a recognised institution, for any periodafter commencement of this Act, shall be paid to him by themanagement before the expiry of the fifteenth day or suchearlier day, as the State Government may, by general orspecial order appoint, of the month next following the monthin respect of which or part of which it is payable:

Provided that if at any time the State Government deems it fit,it may prescribe a different procedure for payment or salaryand allowances.

(3) The salary shall be paid without deductions of any kindexcept those authorised by the rules made under this Act orby any other law for time being in force.”

16. The relevant provisions of the 1993 Rules are Rules 47, and,pertinently, 82. Rule 47 deals with privilege leave.[8] Rule 82 is as follows:

8 47. Privilege Leave.- (1) Non-Teaching Staff - Members of the non-teachingstaff whether temporary or permanent, shall be entitled to privilege leave of30 days in a calendar year. Fifteen days privilege leave shall be credited tothe leave account of the employee on 1st January and the remaining fifteendays on 1st of July, each year subject to the total accumulation upto a maximumof 300 days.

(2) Teaching staff -

(a) Privilege leave is not admissible to the members of teaching staff,whether temporary or permanent, in respect of duty performed inany calendar year, in which they avail themselves of the fullvacation, except to the extent indicated under clause (b) of thissub-rule; (b)The teaching staff in schools and colleges shall be entitled to fifteendays/privilege leave in a calendar year. The leave account shall A

B

C

D

E

F

G

H

A“82. Gratuity and Insurance.- (1) The employees of the Aidededucational institutions shall be entitled to Gratuity asadmissible under Payment of Gratuity Act, 1972 as amended.from time to time.

(2) The managing committee shall arrange for GroupBInsurance of its employees under the respective scheme ofLife Insurance Corporation of India.”

17. In the present case, the appellants had to fight for theirentitlements. The State initially refused them the benefit of regularization.Their petitions for relief were unsuccessful. Ultimately, this court, by itsCorder, dated 19[th] July 2016, directed their regularization. The court eveninitiated suo motu contempt proceedings, after which the appellants werepaid their salaries and arrears according to the recommendations of thePay Commission. However, the appellants’ complaint of non-compliancewith the respondent’s obligation to pay leave encashment and gratuity be credited with fifteen days privilege leave immediately after expiryDof every calendar year, the unavailaed portion of the so creditedprivilege leave shall be qualified for carry forward to the next yearupto a maximum of 300 days.

(c) The teaching staff appointed during a calendar year shall beallowed privilege leave @ 1 1/4 days for each completed month ofEhis service immediately after the expiry of that calendar year subjectto the condition laid down in clause (b) above in proportion of8:7 respectively; (d)The privilege leave admissible to such an employee in respect ofany calendar year in which he is prevented from availing himselfFof the full vacation shall be in such proportion of 15 days as thenumber of days of vacation not taken bears to the full vacation. Ifin any calendar year the employee does not avail the full vacation,fifteen days privilege leave will be admissible to him at the end ofthe vacation in respect of that calendar year.

G(e)Vacation may be taken in combination with or in continuation ofany kind of leave under these rules provided that the total durationof vacation and privilege leave taken in combination or incontinuation of other leave, shall not exceed the amount ofprivilege leave due and admissible to an employee at a time undersub-rule (1) above.H

for the period they were in the aided establishment was not gone into.They were permitted to agitate that grievance before the High Court.Upon their doing so, the High Court, by its impugned order, gave shortshrift to their argument, holding that since arrears of salary had beenpaid, nothing more was needed to be done.

18. As far as leave encashment dues are concerned, the issue isno longer at large. In Senior Higher Secondary School Lachhmangarh(supra) this court held that “salary” under the Act, includes leaveencashment. The relevant observations are extracted below:

“19. The contention urged is that Section 16 refers to variousconditions of service including pay whereas Section 29(1)refers only to ‘scales of pay and allowances’ and not the‘conditions of service’. Learned Counsel submits that byimplication, Section 29 excludes the benefit of leaveencashment. We are unable to accept the above contention.

20. Section 16 confers a rule-making power on the StateGovernment to regulate recruitment and conditions of serviceincluding conditions relating to qualifications, pay, gratuity,insurance, age of retirement, entitlement of leave, conductand discipline etc. of employees of aided institutions. Section16 has to be read and worked harmoniously with Section 29which directs maintenance of parity in the scales of pay andallowances between employees of aided institutions andGovernment institutions.

21. As we have held above the expression pay and allowancesin Section 29 read with wider definition of the word ‘salary’in Section 2(r) of the Act has a very vide connotation. Wehave come to the conclusion that the expression includesbenefit of leave encashment which is nothing but salary forthe unavailed leave to the credit of the employee.

22. Section 16 confers rule-making power on the StateGovernment to regulate ‘Conditions of service’ of employeesof aided institutions. The Section specifically confers powerto frame rules regarding entitlement of leave. If leave salaryis of kind a salary within the wide definition of ‘salary’ underSection 2(r), the rules to regulate conditions of service ofemployees of aided institutions, must be so framed as to A

B

C

DE

F

G

H

A

B

C

D

E

F

G

H

maintain parity in conditions of service in that regard withemployees in Government institutions. That is the mandate ofSection 29 of the Act. The contention, therefore, advancedthat subject-matter of entitlement of leave encashment iscovered by Section 16 of the State but is beyond the purviewof Section 29 of the Act, is fallacious and has to be rejected.

23. While construing the provision under consideration, it isto be borne in mind that interpretation of a welfare legislationshould be to promote education. The service conditions ofthe employees of the aided institutions are sought to beimproved and brought at par with those in Governmenteducational institutions to maintain educational standards. Ithas also to be borne in mind that our Constitution makershave placed the field of education at a higher pedestal andgranted it a special status. Various provisions of theConstitution deal with the aspect of advancement ofeducation. The primary education has been held to be afundamental right in the decision of this Court in UnniKrishnan, J.P. and Ors. v. State of Andhra Pradesh 1993 (1)SCC 645 and this aspect still holds the field despite thedecision having been overruled on some other aspects inT.M.A. Pai Foundation and Ors. v. State of Karnataka andOrs. 2002 (8) SCC. To improve education, various StateGovernments grant aid to educational institutions and, byand large, teachers of aided private schools deserve to betreated at par with teachers of Government institutions to theextent possible. The provisions of these Acts deserve to beliberally interpreted in favour of the teaching class exceptwhere statute may compel otherwise. A statute of no otherState has been brought to our notice where similar benefithas been denied to the teachers of the aided institutions toimprove education. The service conditions of the teachers alsodeserve to be improved.”

19. This court is of the opinion that the aforementioned reasoningis binding, and conclusive as regards entitlement of the appellants toclaim leave encashment benefits. However, the State had urged that byvirtue of Rule 5 of the 2010 Rules, the employees who were regularizedcould not claim these benefits. The 2010 Rules were framed in exercise of powers under proviso to Article 309 of the Constitution. Rule 5, to theextent it is relevant, states as follows:

“5. Terms and condition for appointment of employees inGovernment Service.—The regularly appointed existingemployees in the No.- Government Aided EducationalInstitutions who are working against sanctioned aided poston the date of commencement of these rules shall be appointedunder the Rajasthan Voluntary Rural Education Service onthe following terms and conditions, namely :—

(i) The employee should possess the requisite educational andprofessional qualification for the respective posts as per therelevant service rules applicable to the Government servantof similar cadre.

(ii) The posts on which the employees shall be appointed inthe Government shall constitute a separate dying cadre foreach category of employees.

(iii) The appointed employees shall be posted only in thecolleges/ schools, as the case may be, in the rural areas onthe equivalent posts specified in column number 2 of theSchedule. However, in case there is no such equivalent postin the government, they shall be appointed on other postscarrying the same pay scale of aided posts:

***************

**************

(vi) The salary of all the appointed employees shall be fixedon the basis of the salary as drawn at the time of appointmentas per the Sixth Pay Commission with effect from the datethey join in the government under these rules. Those who aredrawing salary in Rajasthan Civil Services (Revised PayScale) Rules, 1998, Rajasthan Civil Services (Revised PayScales) for Government College Teachers including Librarianand PTI Rules, 1999 and Rajasthan Civil Services RevisedPay Scales for Government Polytechnic College Teachers,Librarians and Physical Training Instructors Rules, 2001 shallbe allowed benefit of Rajasthan Civil Services (Revised Pay)Rules, 2008, Rajasthan Civil Services (Revised Pay Scales)for Government College teachers including Librarian and PTIRules, 2009 and Rajasthan Civil Services (Revised Pay Scales)

A

B

C

D

E

F

G

H

Afor Government Polytechnic College Teachers, Librarians andPhysical Training Instructors Rules, 2010 respectively witheffect from the date they join in the Government afterappointment under these rules.

(vii) No arrears on any account whatsoever, (including arrearsBof salary, selection scale, Assured Career Progression orCareer Advancement Scheme) shall be paid by the StateGovernment for the period prior to the date of their joiningin the Government after appointment under these rules.

(viii) Carry forward of the balance of Privilege Leave shallCnot be allowed. Employees shall be free to get payment ofencashment of balance of P. L. from the respective grant-in-aid educational institutions.

************************************

D(x) The period of service in the aided institutions shall not becounted for payment of gratuity, The employees shall be freeto obtain payment of gratuity from the respective grant in aideducational institution.

(xi) Each employee shall be required to execute anEundertaking, in Form - II, that he/she voluntarily accepts allthe terms and conditions of service prescribed under theserules and agrees to serve in the government educationalinstitutions situated in the rural areas till attaining the age ofsuperannuation in the service of Government.”F20. Evidently, these rules were framed to enable the absorption ofemployees and teachers of non-government aided institutions. What isrelevant for the purposes of this case is that by Rule 5(viii), carry forwardof existing privilege leave is denied; likewise, the period of service inaided institutions is not to be reckoned for the purpose of gratuity underRule 5(ix). Every employee had to furnish an undertaking in the prescribedGform to accept the terms and conditions. Ordinarily no public employercan be faulted in imposing pre-conditions before it recruits an employee.However, such conditions cannot be arbitrary, or so onerous as to beunconscionable. In the opinion of this court, the condition in clause (viii)of Rule 5 i.e., carry forward of balance privilege leave, is barred andHrequiring employees to seek encashment from their previous employer, i.e., aided institutions, is an arbitrary and unconscionable condition, whichcannot be enforced. Speaking that such conditions are enforceable, thiscourt, recently, in Pani Ram vs. Union of India & Ors.[9]after quotingthe observations in Central Inland Water Transport CorporationLimited & Anr. V Brojo Nath Ganguly & Anr[10]held as follows:

23. “….Right to Equality guaranteed Under Article 14 of theConstitution of India would also apply to a man who has nochoice or rather no meaningful choice, but to give his assentto a contract or to sign on the dotted line in a prescribed orstandard form or to accept a set of Rules as part of thecontract, however unfair, unreasonable and unconscionablea Clause in that contract or form or Rules may be.”

21. This court had categorically ruled, in Senior Higher SecondarySchool (supra) that leave encashment is part of salary. In the schemeof the 1993 Rules, the assessment of, and determination of the extent of,aid to be granted to any institution, is provided by Rule 13. What formspart of the approved expenditure that would be the content of aid, isprovided by Rule 14. In the present case, the management establishmentwas recipient of 70% aid, in the form of grant. In these circumstances,the State cannot shrug its responsibility to shoulder its part of theresponsibility to pay the appellants the share of leave encashment benefits,and hide behind either Rule 5 (viii) or the undertaking executed by them.The appellants are held entitled to privilege leave entitlement benefits.Such benefit shall be calculated from the date they entered the serviceof the establishment till the date of their absorption, by the State, in 2016.The State shall pay the benefits due to the extent of 70%, and the balance30% shall be payable by the management establishment.

22. On the issue of gratuity, again, the question of liability hasbeen conclusively settled. Although the management relied on aChhattisgarh High Court decision Ambika Mission Boys Model School(supra), this court is of the opinion that it cannot be construed as anauthority, because the court in that case analysed the provisions of thePayment of Gratuity Act, 1972, as amended in 2009. However, in thepresent case, the scheme of the 1993 Rules, which contained theconditions of grant, categorically cast the liability to pay gratuity on the 9 Pani Ram vs. Union of India & Ors, 2021 SCC OnLine SC 1277

10 Central Inland Water Transport Corporation Limited & Anr. V Brojo Nath Ganguly& Anr (1986) 3 SCC 156

A

BC

D

E

F

G

H

Aemployer, i.e., the aided establishment, i.e., the fourth, fifth and sixthrespondents in this case. Furthermore, Rajasthan Welfare Society(supra) is an authority, in that it considered the effect of the 1993 Rules,and held that it is the management of the aided institution which has tobear the liability towards payment of gratuity:

B“7. Rule 10 provides for general conditions governing grant-in-aid. It inter alia, provides that every institution whichapplies for grant-in-aid shall be deemed to have accepted itsobligation to comply with the conditions laid therein, one ofit being that the Management shall appoint teachers and otherstaff and shall follow the conditions of service, as laid downCin the Rules. Rule 11 deals with the procedure for grant-in-aid. Rule 13 deals with the assessment of annual recurringgrant. In, inter alia, provides that annual recurring grant willbe given on the basis of estimated expenditure of the currentyear and be subject to adjustment from the grant payable inDthe next year. It also stipulates that the approved expenditureshall be arrived at according to the Rules and such otherinstructions that may be issued from time to time. Rule 14 dealswith approved expenditure and to the extent relevant for thepresent case reds as under :

ERule 14. Approved Expenditure- Approved expenditurereferred to in Rule 13 above, shall related to the followingitems only- All the items from (a) to (v) mentioned below willform component ‘A’ of the admissible items of the expenditure.

(a) Actual salary, and provident fund contribution notFexceeding 8.33% in respect of teaching and non-teachingstaff.

(b) to (v).......”

8. Note 2 appended to Rule 14 is relevant for the presentpurposes and reads thus :

G

“Note - 2. Charges on account of contribution made by theInstitution to a pension fund or a gratuity scheme or onaccount of the pension or gratuity paid to former teachersare ordinarily not admitted for the purpose of grant-in-aidunless the Rules on the subject are approved by Government; H

Provided that in the case of staff obtained on lent servicesfrom any State Government or Government of India, pensionand leave salary contribution shall be allowed as approvedexpenditure.”

9. Rule 82 provides that the employees of the aided educationalinstitution shall be entitled to gratuity as payable under thePayment of Gratuity Act, 1972, as amended from time to time.

************ ***********

************

14. The gratuity cannot be termed to be an emolument for thetime being payable to the employees so as to come within thedefinition of salary defined in Section 2 (r) of the Act. Further,Rule 14 uses the word ‘actual salary’. Be that as it may, itseems clear the non-recurring payment of this nature cannotbe included in the definition of salary. Gratuity is payable atthe time of retirement/termination of the employment. Relianceon the decision of the case of Metal Box Company of IndiaLimited v. Their Workmen (1969) I LLJ 785 (SC) can renderlittle assistance to the appellant. It is a case under Paymentof Bonus Act. It was only dealing with accountancy principles.Observations were made that an estimated liability under thegratuity schemes even if it amounts to a contingent liabilityand is not a debt under the Wealth Tax Act, if properlyascertainable and its present value is fairly discounted, isdeductible from the gross receipts while preparing the profitsand loss account. In trading circles or in rule or direction inthe Bonus Act, there was no prohibition from such a practice.The question in that case was whether while working out thenet profits the trader can provide from his gross receipts hisliability to pay a certain sum for every additional year ofservice which he receives from his employees. It was answeredin affirmative. If such liability was properly ascertainable, itwas possible to arrive at a proper discounted vale. Thisdecision, in our view, is not relevant to determine the point inissue in the present case.

15. Further, gratuity cannot be included in the approvedexpenditure as under Rule 9 the State Government can A

B

CD

E

F

G

H

Asanction the grants under four Heads provided therein andgratuity does not fall under any one of them. It is not claimedthat the gratuity falls under Heads 2 to 4. The Head No. 1 is‘maintenance or recurring grant’. Admittedly a gratuity cannotcome under the category of maintenance. It is also not arecurring grant as already noticed hereinbefore. It is, thus,Bclear that payment of gratuity cannot come under any of thefour categories mentioned in Rule 9.

A

16. In view of the aforesaid, the gratuity within the meaningof the Act and the Rules cannot form part of recurring grant.It is not includable as part of approved expenditure for theCpurposes of computing the amount of grant payable to thepurposes of computing the amount of grant payable to theappellant. In this view, communication dated 26th May, 1994of Government of Rajasthan to the effect that the Rules donot provide for grant-in-aid on amount of gratuity, the sameDbeing not included in the approved expenditures, cannot beheld to be illegal. This will, however, not affect the rights ofthe employees to get the gratuity from the concerned institution.

17. Before parting, we wish to note that if representations aremade by aided Non-Government Educational Institutions, theEState Government would consider sympathetically the questionof the gratuity amount payable to the employees being takeninto consideration for the purpose of computing the amountof grant-in-aid. We, however, clarify that pending making ofsuch representation and its consideration, the payment ofgratuity to the employees shall not be delayed.”F

Neither has Rule 82 changed, nor has any other material beenbrought to the notice of the court, to say that the management, i.e.,respondent nos. 3-7 are absolved of their liability to pay gratuity, upontermination of their relationship with the appellants as their employers.Rule 82 is a condition of grant, which meant that the managementGestablishment was conscious and aware of its liability when it appliedand was granted aid, under the 1993 Rules. Therefore, it cannot escapeits liability on that score.

23. In view of the above discussion, it is held that with respect toleave encashment, the State and the respondent nos. 3 to 7 are liable toH

pay the appellants, in the ratio of 70:30 respectively. The respondentState shall, within four weeks from today, determine the extent ofentitlement of each appellant, and communicate the extent of amountpayable by the management establishment (respondent nos. 3 to 7), tothe appellants. These amounts shall be paid by all the respondents, withinsix weeks from today. The respondent nos. 3 to 7 shall also calculateand pay the amount of gratuity, to the appellants (on the basis of theirinitial date of entry in the school, till the date of order of absorption, bythe respondent State), within six weeks from today. Since both sets ofrespondents contested their liability and denied them to the appellants,the amounts payable to the appellants shall also carry interest, at therate of 10% from the date(s) of their entitlement, till the date of payment.

24. The impugned order is therefore set aside. The appeal isallowed in terms of the above directions. There shall be no order oncosts.

Divya Pandey(Assisted by : Deepak Panwar, LCRA)

Appeal allowed.

A

B

C

D

E

F

G

H