Resignation After 5 Years Service Entitles Employee to Gratuity Under Payment of Gratuity Act, 1972, Overriding Contrary University Rules: Punjab & Haryana High Court - 2025-05-15

Gratuity a Statutory Right on Resignation After 5 Years, University Rules Can't Override Act: Punjab & Haryana HC

Chandigarh: The High Court of Punjab and Haryana, in a significant ruling, has reiterated that an employee who resigns after completing five years of continuous service is entitled to gratuity under the Payment of Gratuity Act, 1972. The Court, presided over by Mangal Singh , J., held that any internal rules of an employer, such as a university, that impose conditions contrary to this statutory provision cannot be used to deny this benefit. However, the Court denied the petitioner's claim for leave encashment upon resignation, citing a lack of supporting legal provisions.

The judgment came in the case of J.P. Singh vs V.C. CCS HAU (CWP 17569 / 1997), where the petitioner, J.P. Singh , sought directions for the release of his gratuity and leave encashment from Chaudhary Charan Singh Haryana Agricultural University (CCS HAU) following his resignation.

Case Background

Mr. J.P. Singh joined CCS HAU as an Assistant Scientist (Agronomy) on July 5, 1986. After a period of service, including a deputation, he was selected for a post with the National Federation of Cooperative Sugar Factories Limited. His request for a two-year lien with CCS HAU was only partially approved for one year (June 15, 1996, to June 15, 1997). As the lien was not extended, Mr. Singh 's service with CCS HAU ended with a "technical resignation," accepted with effect from September 16, 1997. By this time, he had completed over 11 years of service with the university.

While his Contributory Provident Fund (CPF) dues were released by the university, his claims for gratuity and leave encashment were denied, leading to the present writ petition.

Arguments Presented

Petitioner's Contentions (Mr. J.P. Singh ):

* Gratuity: The petitioner argued that under Section 4 of the Payment of Gratuity Act, 1972, an employee is entitled to gratuity upon resignation after completing at least five years of continuous service. He asserted that this central statute overrides any contrary provisions in the University's Calendar (specifically Clause 10, which stipulated gratuity only upon retirement with 10 years of service or death after 5 years). He cited precedents like D.S. Nakara & Others vs. Union of India and Texmaco Ltd. vs. Sri Ram Dhan to support that gratuity is a statutory right and not deniable upon voluntary resignation.

* Leave Encashment: The petitioner also claimed entitlement to the amount of leave encashment that had accrued to his share.

Respondent's Defense (CCS HAU):

* Gratuity: The University relied on Clause 10 of its Calendar, arguing that since the petitioner had resigned and not retired or died in service as per its conditions, he was not eligible for gratuity.

* Leave Encashment: The University cited Clause 12, Sub-Clause 17 of its Acts & Statutes, which provided for cash payment equivalent to leave salary for unutilized earned leave (up to 300 days) only upon an employee's retirement on superannuation. Since the petitioner resigned, he was deemed ineligible.

Court's Analysis and Reasoning

The High Court meticulously examined the arguments and the relevant legal provisions.

On Gratuity: The Court unequivocally upheld the petitioner's claim for gratuity. It emphasized Section 4(1) of the Payment of Gratuity Act, 1972, which clearly states that gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, inter alia, "on his resignation."

The Court observed: >"So far as the stand of the respondents for denial of the benefit of gratuity to the petitioner on the ground of the relationship having come to an end due to technical resignation is concerned, the position in law is settled to the effect that gratuity is not a charity but a statutory right granted to an employee, as held in the judgment of D.S.Nakara & Others vs. Union of India , reported as AIR 1983 SC 130. The same being a benevolent provision under the special statute, the conditions imposed by the respondent-employer, which run contrary to Section 4 of the Payment of Gratuity Act, 1972, cannot over-ride the special statute or be accepted as a valid ground to deny the benefit that has lawfully accrued in favour of an employee."

The Court further cited Texmaco Ltd. vs. Sri Ram Dhan , (1993) I LLJ 24 (Delhi), where it was held that gratuity cannot be denied to an employee merely on the ground of voluntary resignation. Since Mr. Singh had completed more than the requisite five years of service, his resignation entitled him to gratuity under the Act.

On Leave Encashment: Regarding leave encashment, the Court sided with the University's argument. It noted that the petitioner's counsel was unable to "refer to any provision or instruction to the contrary" of the University's Clause 12(17), which restricted leave encashment to cases of retirement on superannuation. The Court stated: >"Under the given circumstances, the prayer for grant of proportionate leave encashment cannot be accepted for want of any reference to a legal provision to support the claim of the petitioner."

The Verdict

The High Court partly allowed the writ petition. * The respondents (CCS HAU) were directed to ascertain the gratuity admissible to Mr. J.P. Singh for his period of service. * This amount is to be released to the petitioner within three months from the date of receipt of a certified copy of the order. * The payment must include interest at the rate of 9% per annum calculated from the date of the institution of the writ petition (1997) until the date of actual payment. The Court added that if the payment is not made within the specified three months, the petitioner would be entitled to claim interest at 9% per annum for the period beyond the specified time. * The petitioner's claim for leave encashment was disallowed.

This judgment reinforces the supremacy of statutory employee rights, like gratuity, over conflicting internal regulations of an employer and clarifies the conditions under which such benefits accrue, particularly in cases of resignation.