Introduction:
The High Court of Jammu & Kashmir and Ladakh has delivered a significant judgment clarifying the respective responsibilities of parent and borrowing organisations concerning the payment of retiral benefits to employees serving on deputation. In M. Naseer U Zaman v. Managing Director, J&K and Ladakh Financial Corporation & Others, 2026 LiveLaw (JKL) 283, Justice Sanjay Dhar held that while the borrowing organisation is obligated to assess and release the leave salary payable to an employee who served on deputation, the parent organisation continues to bear the responsibility of releasing gratuity. The Court further ruled that the parent department cannot indefinitely withhold gratuity merely because correspondence between departments regarding reimbursement remains pending.
The judgment arose from a writ petition filed by an employee seeking release of gratuity and leave encashment benefits that remained unpaid despite his resignation from service. The petitioner also sought interest on the delayed payment of his retiral dues, contending that the prolonged withholding of statutory benefits was arbitrary, illegal and contrary to the provisions of the Jammu & Kashmir Civil Service Regulations (CSR) as well as the Payment of Gratuity Act.
The petitioner was initially appointed as a Techno Economic Analyst with the Jammu & Kashmir and Ladakh Financial Corporation (JKLFC), which remained his parent organisation throughout his service. Subsequently, pursuant to a Government Order, he was deputed to the Jammu & Kashmir Power Development Corporation (JKPDC), where he served for a considerable period. After rendering long service with the borrowing organisation, he tendered his resignation, which was duly accepted by his parent organisation. Thereafter, he joined another employment.
Following the acceptance of his resignation, the petitioner expected the release of all retiral benefits that had accrued during his service. Although his provident fund dues were paid, gratuity and leave salary remained unpaid for several years. The prolonged delay compelled him to invoke the writ jurisdiction of the High Court, seeking directions for release of the outstanding amounts together with statutory interest.
The dispute before the High Court did not concern the petitioner’s entitlement to gratuity or leave encashment, which was undisputed by the parties. Rather, the controversy centred on identifying the authority legally responsible for making payment of these benefits where an employee had spent a substantial part of his service on deputation with another government corporation. The case therefore required the Court to interpret the provisions of the Jammu & Kashmir Civil Service Regulations governing deputation, leave salary and gratuity, while balancing the rights of the employee against the administrative arrangements between the two organisations.
Arguments of the Parties:
The petitioner contended that despite the acceptance of his resignation and cessation of service, the respondent authorities had failed to release his legitimate retiral benefits within the time prescribed by law. He submitted that gratuity and leave encashment were statutory benefits earned through years of service and could not be withheld indefinitely because of administrative correspondence between different government organisations.
It was argued that the petitioner had lawfully served both the parent organisation and the borrowing organisation pursuant to a valid order of deputation. Therefore, internal disputes or uncertainty regarding financial contributions between the two organisations could not adversely affect his statutory entitlement to retiral dues. The petitioner maintained that the prolonged delay had caused him considerable financial hardship and sought not only release of the outstanding amounts but also payment of interest for the period during which the authorities had illegally withheld the benefits.
The Jammu & Kashmir and Ladakh Financial Corporation (JKLFC), the parent organisation, admitted that the provident fund dues had already been released. However, it justified the delay in releasing gratuity and leave salary by stating that the petitioner had served with the borrowing organisation, JKPDC, for a substantial period on deputation. According to JKLFC, the Finance Department had advised that post-retiral benefits should be released only after obtaining proportionate contributions from the borrowing organisation corresponding to the deputation period.
The parent organisation further submitted that it had already initiated correspondence with JKPDC requesting release of the appropriate financial contribution. It argued that since the necessary contribution had not yet been received, the payment of gratuity and leave salary could not be processed immediately.
On the other hand, the Jammu & Kashmir Power Development Corporation (JKPDC), the borrowing organisation, disputed its liability to make payment directly to the petitioner. Relying upon Rule 12 of Schedule XVIII of the Jammu & Kashmir Civil Service Regulations, it contended that the responsibility for determining and releasing retiral benefits rested exclusively upon the parent department.
JKPDC also relied upon a speaking order issued by it, asserting that under the applicable service regulations the petitioner possessed no enforceable claim against the borrowing organisation. According to JKPDC, any obligation concerning payment of retiral dues remained exclusively with the parent employer, and therefore no direction could be issued requiring it to release leave salary.
The controversy thus required the Court to examine the relevant provisions of the Jammu & Kashmir Civil Service Regulations to determine the precise legal obligations of both organisations regarding gratuity and leave salary payable to an employee who had served on deputation.
Court’s Judgment:
Justice Sanjay Dhar allowed the writ petition and clarified the respective statutory responsibilities of the parent and borrowing organisations concerning payment of gratuity and leave salary.
At the outset, the Court noted that the material facts were undisputed. The petitioner had been initially appointed by JKLFC, was validly deputed to JKPDC under a Government Order and thereafter resigned from service after completing a substantial tenure with the borrowing organisation. It was equally undisputed that despite acceptance of his resignation, gratuity and leave encashment had not been released.
The Court observed that the real controversy was not whether the petitioner was entitled to these benefits, but which of the respondent organisations bore the legal responsibility for releasing them.
Justice Dhar first examined Rule 12 of Schedule XVIII of the Jammu & Kashmir Civil Service Regulations, which prescribes the standard terms applicable to employees serving on deputation. The Rule provides that where an employee is deputed to a corporation, company or autonomous body, sanction of leave and payment of leave salary are ordinarily regulated by the parent department. However, the Court emphasized that the Rule cannot be read in isolation and must be interpreted together with the Note appended to it.
The Court observed that the Note specifically refers to the Government Instructions framed under Article 185-B of the Civil Service Regulations. These Government Instructions create a detailed procedural mechanism governing payment of leave salary in cases involving deputation on foreign service, and the same procedure has been made applicable to employees deputed to corporations, companies and autonomous bodies.
After analysing these provisions, Justice Dhar held that the borrowing organisation is required to maintain the leave account of the deputationist throughout the period of deputation. It must assess the leave earned by the employee, sanction the admissible leave and release the corresponding leave salary. Once payment is made, the borrowing organisation becomes entitled to seek reimbursement from the parent department in accordance with the prescribed procedure.
The Court categorically observed that the statutory framework places the initial responsibility for payment of leave salary upon the borrowing organisation. The right of reimbursement from the parent department is an administrative arrangement between the two organisations and cannot prejudice the employee’s entitlement.
Applying these principles to the facts of the present case, the Court found that JKPDC had failed to discharge its statutory obligation. Instead of calculating and releasing the petitioner’s leave salary and thereafter seeking reimbursement, the borrowing organisation had simply denied liability altogether. Justice Dhar held that such an approach was directly contrary to the provisions of the Jammu & Kashmir Civil Service Regulations governing deputation.
Turning to the issue of gratuity, the High Court examined Article 240-BB of the Jammu & Kashmir Civil Service Regulations. The Court observed that gratuity becomes payable by the parent organisation upon retirement or cessation of service. Consequently, JKLFC, being the petitioner’s parent employer, remained legally responsible for releasing gratuity irrespective of any pending financial adjustments with the borrowing organisation.
Justice Dhar rejected the parent organisation’s justification that payment was being delayed because correspondence regarding proportionate contribution remained pending. The Court held that internal administrative communication between departments cannot become a valid reason for withholding a statutory retiral benefit payable to an employee. Once gratuity becomes due, the employer is under a legal obligation to release it within the time prescribed by law.
The Court further examined Section 7(3-A) of the Payment of Gratuity Act, which provides that where gratuity is not paid within thirty days from the date it becomes payable, the employer becomes liable to pay interest at the notified rate unless the delay is attributable to the employee. Justice Dhar found that in the present case the delay extended over several years despite acceptance of the petitioner’s resignation. Since the delay was entirely attributable to the employer, statutory interest necessarily followed.
The Court also observed that the object of gratuity legislation is to ensure that an employee receives financial security immediately upon cessation of service. This beneficial purpose would be defeated if employers were permitted to indefinitely postpone payment while awaiting resolution of inter-departmental financial issues.
Accordingly, the High Court held that JKLFC, as the parent organisation, was liable to release the gratuity payable to the petitioner together with interest at the rate of 10% per annum calculated from thirty days after acceptance of his resignation until actual payment.
In respect of leave salary, the Court directed JKPDC to calculate the amount payable to the petitioner and release the same within one month. The borrowing organisation was granted liberty to recover or seek reimbursement of the amount from JKLFC in accordance with the procedure prescribed under the Civil Service Regulations. Additionally, the Court directed JKPDC to pay interest at the rate of 6% per annum on the leave salary from the date of filing of the writ petition until its actual realization.
The judgment is an important exposition of the law governing deputation in public service. It clearly distinguishes the respective liabilities of parent and borrowing organisations and ensures that employees are not compelled to suffer because of administrative disagreements between government bodies. By holding that the borrowing organisation must initially release leave salary while the parent organisation remains responsible for gratuity, the High Court has reinforced the principle that statutory retiral benefits cannot be indefinitely withheld on account of internal correspondence or reimbursement disputes. The decision further strengthens employee rights by affirming that delayed payment of gratuity attracts statutory interest and that administrative convenience cannot override the legal entitlements of retiring employees.