J&K High Court Splits Gratuity and Leave Salary Liability Between Parent and Borrowing Organisations in Deputation Dispute

Justice Sanjay Dhar held that JKLFC must pay gratuity with 10% interest, while JKPDC must first release leave salary and then seek reimbursement from the parent body under J&K Civil Service Regulations.

The High Court of Jammu & Kashmir and Ladakh at Srinagar has resolved a years-long dispute over unpaid post-retirement dues of a former Techno Economic Analyst who resigned after serving on deputation for nearly a decade. Justice Sanjay Dhar, sitting singly, disposed of the writ petition on 30 April 2026 by drawing a clear line between the obligations of the parent organisation and the borrowing organisation under the J&K Civil Service Regulations. The judgment directly addresses a recurring administrative impasse: when an employee spends most of his service career with a borrowing body and then resigns, neither organisation steps forward to pay. The court found that this inter-departmental paralysis had no legal basis and directed immediate payment with interest.

The Petitioner’s Service History and the Unpaid Dues

M. Naseer U Zaman was appointed as Techno Economic Analyst with the Jammu & Kashmir and Ladakh Financial Corporation (JKLFC) by order dated 20 December 2010. By Government Order No.470-GAD of 2013 dated 19 March 2013, he was deputed to the Jammu and Kashmir Power Development Corporation (JKPDC).

His deputation with JKPDC ran in two stretches: an initial period from 1 January 2012 to 25 March 2013, and a second, longer period from 25 March 2013 to 31 March 2020 — approximately 84 months. He tendered his resignation, which was accepted by JKLFC on 20 February 2020, and he joined State Bank of India, Mumbai, on 21 February 2020.

After his resignation, neither JKLFC nor JKPDC released the full leave encashment salary and gratuity due to him. JKLFC had released provident fund of Rs.6,52,798 but withheld gratuity and leave salary. The petitioner was left with no option but to approach the High Court.

What Each Respondent Argued

JKLFC, the parent organisation, acknowledged that the amounts had been considered for release but said the delay arose because the petitioner had served with JKPDC for a significant period. It referred the matter to the Finance Department, which, by communication dated 11 January 2024, advised that post-retirement benefits should be released after obtaining a proportionate contribution from JKPDC for the period the petitioner worked there. JKLFC then forwarded a calculation sheet to JKPDC by communication dated 23 April 2024, requesting proportionate leave salary and gratuity. It argued that the delay was not due to negligence but to the need for inter-departmental coordination.

JKPDC took a different position entirely. It submitted that the petitioner’s claim had been examined pursuant to an interim direction of the court and was found to be without merit. It relied on Rule 12(a) of Schedule XVIII to the J&K Civil Service Regulations, which governs standard terms of deputation, to argue that the parent organisation alone must decide the petitioner’s claim. JKPDC pointed to a speaking order it had issued on 30 January 2023 stating that the petitioner had no right to claim any service benefits from it.

The Legal Question: Which Organisation Pays What

Justice Dhar identified the sole legal question as which of the two respondents — parent or borrowing organisation — was liable to pay gratuity and leave salary, and in what manner.

The court turned to Schedule XVIII of the J&K CSR, which governs standard terms of deputation. Rule 12 of that Schedule deals with leave, GP Fund advances, and leave salary during deputation. Rule 12(a) provides that where deputation is to a Corporation, Company, Autonomous Body, or any other non-government organisation, sanction of leave, GP Fund advances and withdrawals, and disbursement of leave salary and advances shall be made by the parent department.

On gratuity, the court looked at Article 240-BB of the J&K CSR, which places the liability to pay gratuity on the parent organisation at the time of retirement or death of an employee. Justice Dhar held that JKLFC, as the parent organisation, was unambiguously liable to pay gratuity. He found that JKLFC had “abdicated its duty of releasing amount of gratuity” and had unnecessarily engaged in inter-departmental communications with the Finance Department and JKPDC, causing a delay of several years.

On leave salary, the petitioner’s counsel pointed to the Note appended to Rule 12, which refers to Government Instructions below Article 185-B of the J&K CSR. Those Instructions set out a procedure applicable to deputation on foreign service: the borrowing organisation maintains the leave account, sanctions leave, and pays leave salary to the employee. It then claims reimbursement from the parent organisation on a half-yearly basis. The parent organisation must verify the claim and arrange reimbursement within one month of receipt.

Justice Dhar held that this procedure, applicable to foreign service deputation, must equally govern cases of deputation to a Corporation, Company, or Autonomous Body by virtue of the Note to Rule 12. The consequence was that JKPDC, as the borrowing organisation, was required to sanction leave salary, release it to the petitioner, and then seek reimbursement from JKLFC. Instead, JKPDC had simply denied any liability, which the court found contrary to the applicable provisions of the J&K CSR binding on both respondents.

Interest on Delayed Gratuity

The court applied Section 7(3-A) of the Payment of Gratuity Act to the delay in releasing gratuity. That provision requires the employer to pay simple interest if gratuity is not paid within thirty days from the date it becomes payable. The applicable rate, as per the relevant Central Government notification, is 10% per annum. Justice Dhar directed that interest at 10% per annum would run from 30 days after JKLFC accepted the petitioner’s resignation until the date of actual payment.

For leave salary, the court directed interest at 6% per annum, running from the date of filing of the writ petition until realisation, to be borne by JKPDC.

Order

Justice Sanjay Dhar disposed of WP(C) No.2973/2022 with the following directions:

Respondent No.1, JKLFC, was directed to release the amount of gratuity due to the petitioner in accordance with rules forthwith, along with interest at 10% per annum from 30 days after acceptance of his resignation until the amount is actually paid.

Respondent No.2, JKPDC, was directed to calculate the amount of leave salary due to the petitioner and release it within one month, with the right to claim reimbursement from JKLFC. JKPDC was also directed to pay interest at 6% per annum on the leave salary amount from the date of filing of the writ petition until realisation.