JAGDISH PRASAD SAINI & ORS.versusSTATE OF RAJASTHAN & ORS.

                         [2022] S.C.R. 463                                463


                JAGDISH PRASAD SAINI & ORS.                               A
                                  v.
                 STATE OF RAJASTHAN & ORS.
                   (Civil Appeal No. 6953 of 2022)
                       SEPTEMBER 26, 2022                                 B
[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,
                                                                          C
1993 – rr.47, 82 – Rajasthan Non-Government Educational
Institutions Act, 1989 – ss. 2, 29 – Appellants were appointed
against sanctioned posts by fourth respondent-school, controlled
by 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 –       D
Appellants sought absorption with the State in accordance with the
rules, denied – Eventually, Supreme Court set aside the denial of
absorption of the appellants and directed their regularization –
However, their complaint of non-compliance with the respondent’s
obligation to pay leave encashment and gratuity for the period they
                                                                          E
were in the aided establishment was not gone into, permitted to
agitate grievance before High Court – By impugned judgment High
Court has now held that since arrears of salary had been paid,
nothing more was to be done – On appeal, held: Salary includes
leave encashment – Further, 2010 Rules were framed to enable the
absorption of employees and teachers of non-government aided              F
institutions – Condition in clause (viii) of r.5 i.e., bar on carry
forward of balance privilege leave and requiring employees to seek
encashment from their previous employer i.e., aided institutions, is
an arbitrary condition which cannot be enforced – Also, in the
present case, the management establishment was recipient of 70%
                                                                          G
aid, in the form of grant – Thus, the State cannot shrug its part of
the responsibility to pay the appellants the share of leave encashment
benefits, and hide behind either r.5 (viii) or the undertaking executed
by them – Appellants entitled to privilege leave entitlement benefits,
to be paid by the State and management establishment in the ratio
                                                                          H
                                 463
464            SUPREME COURT REPORTS                     [2022] 13 S.C.R.


A     of 70:30, respectively – Management also liable to pay gratuity to
      the appellants – Impugned order set aside – Service Law.
             Service Law – Leave encashment, if part of salary – Held:
      Yes.
             Allowing the appeal, the Court
B
            HELD: 1.1 Non-government educational institutions in
      Rajasthan are governed by the Rajasthan Non-Government
      Educational Institutions Act, 1989 (“Act”) and the rules framed.
      Section 2 (r) of the Act defines salary as “the aggregate of the
      emoluments of an employee including dearness allowance or any
C     other allowance or relief for the time being payable to him but does
      not include compensatory allowance”. Section 3 of the Act provides
      for recognition of grant-in-aid institutions; Sections 4 to 6 of the
      Act provide for the eventuality of refusal of recognition, withdrawal
      of aid and the remedies for the institution. Section 7 of the Act
D     onwards are regulatory provisions requiring audit, recruitment,
      orders of termination of teachers, provision of tribunal for
      redressal of teachers’ grievances regarding dismissal or
      termination, etc. Section 29 of the Act is relevant for the present
      purposes. The relevant provisions of the 1993 Rules are Rules
      47, and, pertinently, 82. Rule 47 deals with privilege leave. [Paras
E     14-16][472-D-E, G; 473-A, E]
             1.2 As far as leave encashment dues are concerned, the
      issue is no longer at large. In Senior Higher Secondary School
      Lachhmangarh this court held that “salary” under the Act,
      includes leave encashment. The reasoning therein is binding,
F     and conclusive as regards entitlement of the appellants to claim
      leave encashment benefits. However, the State had urged that
      by virtue of Rule 5 of the 2010 Rules, the employees who were
      regularized could not claim these benefits. The 2010 Rules were
      framed in exercise of powers under proviso to Article 309 of the
G     Constitution. Evidently, these rules were framed to enable the
      absorption of employees and teachers of non-government aided
      institutions. What is relevant for the purposes of this case is that
      by Rule 5(viii), carry forward of existing privilege leave is denied;
      likewise, the period of service in aided institutions is not to be
      reckoned for the purpose of gratuity under Rule 5(ix). Every
H
 JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                     465
                      & ORS.

employee had to furnish an undertaking in the prescribed form          A
to accept the terms and conditions. Ordinarily no public employer
can be faulted in imposing pre-conditions before it recruits an
employee. However, such conditions cannot be arbitrary, or so
onerous as to be unconscionable. In the opinion of this court, the
condition in clause (viii) of Rule 5 i.e., carry forward of balance
                                                                       B
privilege leave, is barred and requiring employees to seek
encashment from their previous employer, i.e., aided institutions,
is an arbitrary and unconscionable condition, which cannot be
enforced. [Paras 18-20][475-B, 476-H; 477-A; 478-F-H; 479-A]
      State of Rajasthan and Anr. v. Senior Higher Secondary
      School, Lachhmangarh (2005) 10 SCC 346 – relied                  C
      on.
       1.3 In the scheme of 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 forms part of the
approved expenditure that would be the content of aid, is provided     D
by Rule 14. In the present case, the management establishment
was recipient of 70% aid, in the form of grant. In these
circumstances, the State cannot shrug its responsibility to
shoulder its part of the responsibility to pay the appellants the
share of leave encashment benefits, and hide behind either Rule        E
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 service of 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 balance 30% shall be payable by the management                 F
establishment. On the issue of gratuity, again, the question of
liability has been conclusively settled. Although the management
relied on a Chhattisgarh High Court decision Ambika Mission
Boys Model School, this court is of the opinion that it cannot be
construed as an authority, because the court in that case analysed     G
the provisions of the Payment of Gratuity Act, 1972, as amended
in 2009. However, in the present case, the scheme of the 1993
Rules, which contained the conditions of grant, categorically cast
the liability to pay gratuity on the employer, i.e., the aided
establishment, i.e., the fourth, fifth and sixth respondents in this
                                                                       H
466            SUPREME COURT REPORTS                    [2022] 13 S.C.R.


A     case. Furthermore, Rajasthan Welfare Society 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 to bear the
      liability 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 absolved
B
      of their liability to pay gratuity, upon termination of their
      relationship with the appellants as their employers. Rule 82 is a
      condition of grant, which meant that the management
      establishment was conscious and aware of its liability when it
      applied and was granted aid, under the 1993 Rules. Therefore, it
C     cannot 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 the
      respondent nos. 3 to 7 are liable to pay the appellants, in the
      ratio of 70:30 respectively. The respondent nos. 3 to 7 shall also
D     calculate and pay the amount of gratuity, to the appellants (on the
      basis of their initial date of entry in the school, till the date of
      order of absorption, by the respondent State), within six weeks
      from today. Since both sets of respondents contested their liability
      and denied them to the appellants, the amounts payable to the
      appellants shall also carry interest, at the rate of 10% from the
E     date(s) of their entitlement, till the date of payment. The impugned
      order 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 Provident
            Fund Commissioner v. Sanatan Dharam Girls
F           Secondary School & Ors. (2007) 1 SCC 268 : [2006] 7
            Suppl. SCR 849; Pani Ram v. Union of India & Ors.
            2021 SCC OnLine SC 1277; Central Inland Water
            Transport Corporation Limited & Anr. v. Brojo Nath
            Ganguly & Anr. (1986) 3 SCC 156 : [1986] 2 SCR 278
G           – referred to.
            Ambika Mission Boys Model School v. State of
            Chattisgarh, (2020) 2 CLR 177 – distinguished.



H
    JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                           467
                         & ORS.

                             Case Law Reference                                 A
[2005] 3 SCR 387                       referred to                    Para 10
[2006] 7 Suppl. SCR 849                referred to               Para 13
[1986] 2 SCR 278                       referred to                    Para 20
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6953                       B
of 2022.
      From the Judgment and Order dated 26.04.2019 of the High Court
of Judicature for Rajasthan at Jaipur Bench, Jaipur in S.B. Writ
Miscellaneous Application No. 357 of 2017.
                                                                                C
      Deepak Nargolkar, Sr. Adv., Syed Ahmed Saud, Daanish Ahmed
Syed, 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, Upendra
Pratap Singh, Harsh Singh Rawat, Abhinav S. Raghuvanshi, Suprabh
                                                                                D
Kumar Roshan, Ms. Snehal U. Kanzarkar, Ms. Sneha Jankiraman, Moha
Paranjpe, 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,        E
the appeal was heard finally. The appeal is directed against a judgment
and order of the Rajasthan High Court, Jaipur Bench,1 dismissing the
appellant’s application, seeking enforcement of this court’s previous
judgment.2
       2. The appellants were appointed against sanctioned posts by the         F
fourth respondent (a senior secondary school, established and controlled
by the fifth respondent trust, hereafter referred to collectively as the
“establishment”) in 1993. They continued to work uninterruptedly in that
establishment on a regular basis. The establishment was recipient of
grant-in-aid from the State of Rajasthan (hereafter, “State”). By a             G
unilateral resolution dated 5th November 2008, the managing committee
of the establishment decided to discontinue receipt of grant-in-aid from
the State with effect from 1st 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             H
468             SUPREME COURT REPORTS                         [2022] 13 S.C.R.


A     order dated 28th December 2012 ceased to grant aid with effect from 1st
      March 2012.
             3. In the meanwhile, the State had framed and brought into force
      the Rajasthan Voluntary Rural Education Service Rules, 2010 (hereafter,
      “2010 Rules”) with the objective of providing security to the employees
B     working in aided institutions, and to absorb them in the State’s service.
      The appellants sought their absorption with the State in accordance with
      the rules, by unavailingly representing in this regard. Finally, they were
      driven to file writ petitions before the High Court. The State had, pursuant
      to the rules framed by it, absorbed other employees and teachers from
      aided institutions, but denied this benefit to the appellants.
C
             4. The appellants writ petitions were clubbed with several other
      petitions and disposed of by the High Court, refusing to direct the State
      to absorb these employees. The employees, including the appellants,
      unsuccessfully sought review of those orders; which was rejected on
      29th November 2013. The appellants thereafter approached this court
D     by petitions for special leave to appeal questioning the orders of the
      High Court.
             5. By its final order of 19th of July 2016, this court set aside the
      denial of absorption of the appellants. The court directed as follows:

E           “..We are therefore convinced that the said eleven teachers
            having been in the service of the school management in the
            aided posts and were in receipt of such aid from the state
            government, right from the date of their entry into service till
            the aid came to be discontinued in 2008, only at the instance
            of the school management, which has now been restored
F           pursuant to the orders of this court, the state government can
            be directed to pass necessary orders for their absorption
            applying the 2010 rules as from the date such rules came into
            effect. We therefore set aside the orders denying such
            absorption and remit the matter back to the respondent number
G           one-state government to consider the claim of the eleven aided
            teachers for their absorption as from the date when the 2010
            rules came into effect and such orders shall be passed within
            one month from the date of receipt of a copy of this order.
            After passing such orders of absorption, it is needless to state
            that whatever salary that fell due and payable to the said
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 JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                      469
            & ORS. [S. RAVINDRA BHAT, J.]

      eleven teachers for the past period i.e. from 23.3.2008 shall     A
      be restored in the manner such aid is to be granted prior to
      the coming into force of the 2010 rules. In other words, such
      aid is to be sanctioned to an extent of 70% and 30% to be
      borne by the school management, such calculation shall be
      made, and the extent to which aid is to be sanctioned shall be
                                                                        B
      granted up to the date by which the order of absorption is
      passed on thereafter the full salary payable for an absorbed
      teacher in the state service shall also be calculated and
      sanctioned by respondent No 1/ state government.
      On such orders being passed, we also direct the school
      management to take necessary steps for praying the 30% of         C
      their liability from March 2008 up to date of the absorption
      of the eleven teachers, as per the orders to be passed by the
      state government.
      We permit the school management to make such payment of
      30% to the eleven teachers in easy instalments by negotiating     D
      with the concerned teachers in order to ensure that sudden
      huge financial liability is not cast on the school management
      so that the running of the school for the benefit of the school
      going children in that location.”
      ******                                                            E

      We also direct the school management to submit a statement
      of calculation as regards the salary which was actually
      disbursed to the aided teachers as well as non-aided teachers
      from the month of April, 2008. The school management shall
      separately prepare a statement of calculation as regards the      F
      salary paid to the aided teachers and forward it to the state
      government with proof of payment in order to enable the State
      government to comply with our directions with regard to the
      payment of salary payable up to the date of absorption. As
      far as revision in the payment of salary is to be granted, the    G
      same shall also be prepared and appropriate order be passed
      by the state government. Such payment shall also be effected
      positively by the school management.”
     6. After this order, in September 2016, the establishment moved
an application seeking directions from this court. The application
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470                SUPREME COURT REPORTS                     [2022] 13 S.C.R.


A     contended that the establishment had to pay the 11 aided employees,
      (i.e., the appellants) to the tune of ` 57.68 lakhs, and privilege leave
      salary to the tune of 36.20 lakhs. The application also produced a chart
      of calculation of gratuity and leave encashment. This application was
      not allowed. Contemporaneously, the appellants also filed contempt
      proceedings, i.e., C.P. No (Civil) 640 – 642/ 2017, in the disposed of
B
      Civil Appeal Nos. 6601-6603 of 2016. This court by order of 6th March
      2017, allowed the appellants to withdraw the contempt petitions, with
      liberty to move the High Court for enforcement of orders of this court.
      In these circumstances, the appellants moved the High Court contending
      that the orders of this court had not been properly complied with, to the
C     extent that they had not been paid privilege leave encashment and gratuity
      amounts.
             7. The High Court by the impugned order rejected the applications
      preferred before it on the ground that since the salary required to be
      disbursed had in fact been paid to the appellant employees, there was no
D     cause to pursue the matter further. The High Court was of the opinion
      that neither gratuity nor leave encashment was covered by the expression
      “salary”, even under Rule 10 of the 2010 Rules or under the Rajasthan
      Non-Government Educational Institutions (Recognition Grant-In-Aid and
      Service Conditions, Etc.) Rules, 1993 (hereafter, “1993 Rules”).
E            8. The aggrieved appellants have therefore approached this court.
      It was contended on their behalf by Mr Deepak Nargokar, learned senior
      counsel, that the expression “salary” included both components, i.e.,
      gratuity, as well as leave encashment. It was pointed out that one of the
      original appellants who approached this court, was in fact paid gratuity
      as well as leave encashment by the respondent establishment. It was
F     also argued that under Rule 5 of the 2010 Rules, employees were entitled
      to leave encashment and gratuity benefits from private institutions.
              9. The learned senior counsel next relied upon the averments made
      in the application by the management establishment, especially para 13(6),
      filed in this court3. It was submitted that the management establishment
G     clearly admitted to its liability for payment of leave encashment dues
      and gratuity. In these circumstances, the establishment could not deny
      those liabilities. He also relied upon the chart produced by the
      establishment management which specifically set out the gratuity and

      3
          In Civil Appeal Nos 6601-6603 of 2016
H
 JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                                    471
            & ORS. [S. RAVINDRA BHAT, J.]

leave encashment amounts which all the 11 employees were entitled to,                 A
according to it. He also relied upon the judgment of this court in State of
Rajasthan and Anr. v. Senior Higher Secondary School,
Lachhmangarh4 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 argued            B
that in terms of Rule 5 (xi) of the 2010 Rules, every employee had
executed an undertaking that she or he accepted all terms and conditions
of service prescribed by the 2010 Rules. Furthermore, the concept of
‘carry forward of balance of privileged leave’ too was denied by Rule
5(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 of                    C
privileged leave only from the private institutions. The State, therefore,
could not be fastened with the liability on that score. So far as the question
of gratuity liability was concerned, Dr. Singhvi relied upon the judgment
in Rajasthan Welfare Society v. State of Rajasthan5 and submitted
that by virtue of Rule 82 of the 1993 Rules, the employees of aided                   D
educational institutions were entitled to gratuity under the Payment of
Gratuity Act, 1972. Yet, in terms of Rule 14 of the 1993 Rules, gratuity
was not an approved expenditure. As a consequence, this court held in
no uncertain terms that gratuity was not part of the recurring grant and
that the State was not liable in that regard.
                                                                                      E
       11. Mr. C.U. Singh, learned senior counsel appearing for the
establishment, submitted that the order of this court was explicit in its
terms and that leave encashment and gratuity could not be said to form
part of “salary”. It was further submitted that the example provided by
the appellants, i.e., that one amongst them (Mr S.S. Shekhawat,
respondent no.8) was paid gratuity is a solitary instance which per se                F
could not cast liability without any corresponding obligation in law.
      12. It was further submitted that privileged leave cannot be included
within the term salary which under the Rajasthan Non-Governmental
Educational Institutions Act, 1989 (Section 2(r)) means “aggregate of
the emoluments of an employee”. Learned counsel relied upon the                       G
judgment of this court in Senior Higher Secondary School
Lachhmangarh (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                   H
472             SUPREME COURT REPORTS                           [2022] 13 S.C.R.


A     has to be disbursed by the State Government, to enable the payment of
      privileged leave.
             13. So far as the gratuity was concerned, learned counsel relied
      upon a decision of the Chhattisgarh High Court in Ambika Mission
      Boys Model School v. State of Chhattisgarh6 and urged that the State
B     was primarily liable to disburse the gratuity of employees of aided
      institutions. It was also submitted that the Chhattisgarh High Court had
      relied upon the previous judgment of this court in Regional Provident
      Fund Commissioner v. Sanatan Dharam Girls Secondary School &
      Ors7, to hold that although aided institutions did not “belong” to the
      Central or the State Government yet they were under the “control” of
C     the State under various ways. The judgment had further noted that the
      Payment of Gratuity Act, 1972 had amended the definition of “employee”
      under Section 2(e) with retrospective effect from 3rd April 1997.
             Analysis and Conclusions

D           14. Non-government educational institutions in Rajasthan are
      governed by the Rajasthan Non-Government Educational Institutions
      Act, 1989 (hereafter “Act”) and the rules framed. Section 2 (r) of the
      Act defines salary as “the aggregate of the emoluments of an employee
      including dearness allowance or any other allowance or relief for
      the time being payable to him but does not include compensatory
E     allowance”. Compensatory allowance, by Section 2 (d) means:
             “(d) ”compensatory allowance” means an allowance granted
             to meet personal expenditure necessitated by the special
             circumstances in which duty is performed and shall include a
             travelling allowance but shall not include a sumptuary
F            allowance nor the grant of a free passage to or from any
             place outside India”.
             15. Section 3 of the Act provides for recognition of grant-in-aid
      institutions; Sections 4 to 6 of the Act provide for the eventuality of
      refusal of recognition, withdrawal of aid and the remedies for the
G     institution. Section 7 of the Act onwards are regulatory provisions
      requiring audit, recruitment, orders of termination of teachers, provision
      of 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 School
H     & Ors, 2007 (1) SCC 268
    JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                                 473
               & ORS. [S. RAVINDRA BHAT, J.]

termination, etc. Section 29 of the Act, which is relevant for the present            A
purposes, states as follows:
       “29. Pay and allowances of employees.— (1) The scales of
       pay and allowances except compensatory allowances with
       respect to all the employees of an aided institution shall not
       be less than those prescribed for the staff belonging to similar               B
       categories in Government institutions.
       (2) Notwithstanding any contract to the contrary, the salary
       of an employee of a recognised institution, for any period
       after commencement of this Act, shall be paid to him by the
       management before the expiry of the fifteenth day or such                      C
       earlier day, as the State Government may, by general or
       special order appoint, of the month next following the month
       in 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 salary                   D
       and allowances.
       (3) The salary shall be paid without deductions of any kind
       except those authorised by the rules made under this Act or
       by any other law for time being in force.”
       16. The relevant provisions of the 1993 Rules are Rules 47, and,               E
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-teaching
staff whether temporary or permanent, shall be entitled to privilege leave of
30 days in a calendar year. Fifteen days privilege leave shall be credited to
the leave account of the employee on 1st January and the remaining fifteen            F
days on 1st of July, each year subject to the total accumulation upto a maximum
of 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 in
            any calendar year, in which they avail themselves of the full             G
            vacation, except to the extent indicated under clause (b) of this
            sub-rule;
      (b)   The teaching staff in schools and colleges shall be entitled to fifteen
            days/privilege leave in a calendar year. The leave account shall
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474             SUPREME COURT REPORTS                             [2022] 13 S.C.R.


A           “82. Gratuity and Insurance.- (1) The employees of the Aided
            educational institutions shall be entitled to Gratuity as
            admissible under Payment of Gratuity Act, 1972 as amended.
            from time to time.
            (2) The managing committee shall arrange for Group
B           Insurance of its employees under the respective scheme of
            Life Insurance Corporation of India.”
              17. In the present case, the appellants had to fight for their
      entitlements. The State initially refused them the benefit of regularization.
      Their petitions for relief were unsuccessful. Ultimately, this court, by its
C     order, dated 19th July 2016, directed their regularization. The court even
      initiated suo motu contempt proceedings, after which the appellants were
      paid their salaries and arrears according to the recommendations of the
      Pay Commission. However, the appellants’ complaint of non-compliance
      with the respondent’s obligation to pay leave encashment and gratuity
                 be credited with fifteen days privilege leave immediately after expiry
D
                 of every calendar year, the unavailaed portion of the so credited
                 privilege leave shall be qualified for carry forward to the next year
                 upto a maximum of 300 days.
          (c)    The teaching staff appointed during a calendar year shall be
                 allowed privilege leave @ 1 1/4 days for each completed month of
E
                 his service immediately after the expiry of that calendar year subject
                 to the condition laid down in clause (b) above in proportion of
                 8:7 respectively;
          (d)    The privilege leave admissible to such an employee in respect of
                 any calendar year in which he is prevented from availing himself
F                of the full vacation shall be in such proportion of 15 days as the
                 number of days of vacation not taken bears to the full vacation. If
                 in any calendar year the employee does not avail the full vacation,
                 fifteen days privilege leave will be admissible to him at the end of
                 the vacation in respect of that calendar year.
G         (e)    Vacation may be taken in combination with or in continuation of
                 any kind of leave under these rules provided that the total duration
                 of vacation and privilege leave taken in combination or in
                 continuation of other leave, shall not exceed the amount of
                 privilege leave due and admissible to an employee at a time under
                 sub-rule (1) above.
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 JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                        475
            & ORS. [S. RAVINDRA BHAT, J.]

for the period they were in the aided establishment was not gone into.    A
They were permitted to agitate that grievance before the High Court.
Upon their doing so, the High Court, by its impugned order, gave short
shrift to their argument, holding that since arrears of salary had been
paid, nothing more was needed to be done.
      18. As far as leave encashment dues are concerned, the issue is     B
no longer at large. In Senior Higher Secondary School Lachhmangarh
(supra) this court held that “salary” under the Act, includes leave
encashment. The relevant observations are extracted below:
      “19. The contention urged is that Section 16 refers to various
      conditions of service including pay whereas Section 29(1)           C
      refers only to ‘scales of pay and allowances’ and not the
      ‘conditions of service’. Learned Counsel submits that by
      implication, Section 29 excludes the benefit of leave
      encashment. We are unable to accept the above contention.
      20. Section 16 confers a rule-making power on the State             D
      Government to regulate recruitment and conditions of service
      including conditions relating to qualifications, pay, gratuity,
      insurance, age of retirement, entitlement of leave, conduct
      and discipline etc. of employees of aided institutions. Section
      16 has to be read and worked harmoniously with Section 29
      which directs maintenance of parity in the scales of pay and        E
      allowances between employees of aided institutions and
      Government institutions.
      21. As we have held above the expression pay and allowances
      in Section 29 read with wider definition of the word ‘salary’
      in Section 2(r) of the Act has a very vide connotation. We          F
      have come to the conclusion that the expression includes
      benefit of leave encashment which is nothing but salary for
      the unavailed leave to the credit of the employee.
      22. Section 16 confers rule-making power on the State
      Government to regulate ‘Conditions of service’ of employees         G
      of aided institutions. The Section specifically confers power
      to frame rules regarding entitlement of leave. If leave salary
      is of kind a salary within the wide definition of ‘salary’ under
      Section 2(r), the rules to regulate conditions of service of
      employees of aided institutions, must be so framed as to
                                                                          H
476            SUPREME COURT REPORTS                        [2022] 13 S.C.R.


A           maintain parity in conditions of service in that regard with
            employees in Government institutions. That is the mandate of
            Section 29 of the Act. The contention, therefore, advanced
            that subject-matter of entitlement of leave encashment is
            covered by Section 16 of the State but is beyond the purview
            of Section 29 of the Act, is fallacious and has to be rejected.
B
            23. While construing the provision under consideration, it is
            to be borne in mind that interpretation of a welfare legislation
            should be to promote education. The service conditions of
            the employees of the aided institutions are sought to be
            improved and brought at par with those in Government
C           educational institutions to maintain educational standards. It
            has also to be borne in mind that our Constitution makers
            have placed the field of education at a higher pedestal and
            granted it a special status. Various provisions of the
            Constitution deal with the aspect of advancement of
D           education. The primary education has been held to be a
            fundamental right in the decision of this Court in Unni
            Krishnan, J.P. and Ors. v. State of Andhra Pradesh 1993 (1)
            SCC 645 and this aspect still holds the field despite the
            decision having been overruled on some other aspects in
            T.M.A. Pai Foundation and Ors. v. State of Karnataka and
E           Ors. 2002 (8) SCC. To improve education, various State
            Governments grant aid to educational institutions and, by
            and large, teachers of aided private schools deserve to be
            treated at par with teachers of Government institutions to the
            extent possible. The provisions of these Acts deserve to be
F           liberally interpreted in favour of the teaching class except
            where statute may compel otherwise. A statute of no other
            State has been brought to our notice where similar benefit
            has been denied to the teachers of the aided institutions to
            improve education. The service conditions of the teachers also
            deserve to be improved.”
G
             19. This court is of the opinion that the aforementioned reasoning
      is binding, and conclusive as regards entitlement of the appellants to
      claim leave encashment benefits. However, the State had urged that by
      virtue of Rule 5 of the 2010 Rules, the employees who were regularized
      could not claim these benefits. The 2010 Rules were framed in exercise
H
 JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                           477
            & ORS. [S. RAVINDRA BHAT, J.]

of powers under proviso to Article 309 of the Constitution. Rule 5, to the   A
extent it is relevant, states as follows:
      “5. Terms and condition for appointment of employees in
      Government Service.—The regularly appointed existing
      employees in the No.- Government Aided Educational
      Institutions who are working against sanctioned aided post             B
      on the date of commencement of these rules shall be appointed
      under the Rajasthan Voluntary Rural Education Service on
      the following terms and conditions, namely :—
      (i) The employee should possess the requisite educational and
      professional qualification for the respective posts as per the         C
      relevant service rules applicable to the Government servant
      of similar cadre.
      (ii) The posts on which the employees shall be appointed in
      the Government shall constitute a separate dying cadre for
      each category of employees.                                            D
      (iii) The appointed employees shall be posted only in the
      colleges/ schools, as the case may be, in the rural areas on
      the equivalent posts specified in column number 2 of the
      Schedule. However, in case there is no such equivalent post
      in the government, they shall be appointed on other posts              E
      carrying the same pay scale of aided posts:
      ***************                         **************
      (vi) The salary of all the appointed employees shall be fixed
      on the basis of the salary as drawn at the time of appointment
      as per the Sixth Pay Commission with effect from the date              F
      they join in the government under these rules. Those who are
      drawing salary in Rajasthan Civil Services (Revised Pay
      Scale) Rules, 1998, Rajasthan Civil Services (Revised Pay
      Scales) for Government College Teachers including Librarian
      and PTI Rules, 1999 and Rajasthan Civil Services Revised
                                                                             G
      Pay Scales for Government Polytechnic College Teachers,
      Librarians and Physical Training Instructors Rules, 2001 shall
      be allowed benefit of Rajasthan Civil Services (Revised Pay)
      Rules, 2008, Rajasthan Civil Services (Revised Pay Scales)
      for Government College teachers including Librarian and PTI
      Rules, 2009 and Rajasthan Civil Services (Revised Pay Scales)          H
478             SUPREME COURT REPORTS                          [2022] 13 S.C.R.


A           for Government Polytechnic College Teachers, Librarians and
            Physical Training Instructors Rules, 2010 respectively with
            effect from the date they join in the Government after
            appointment under these rules.
            (vii) No arrears on any account whatsoever, (including arrears
B           of salary, selection scale, Assured Career Progression or
            Career Advancement Scheme) shall be paid by the State
            Government for the period prior to the date of their joining
            in the Government after appointment under these rules.
            (viii) Carry forward of the balance of Privilege Leave shall
C           not be allowed. Employees shall be free to get payment of
            encashment 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 be
            counted for payment of gratuity, The employees shall be free
            to obtain payment of gratuity from the respective grant in aid
            educational institution.
            (xi) Each employee shall be required to execute an
E           undertaking, in Form - II, that he/she voluntarily accepts all
            the terms and conditions of service prescribed under these
            rules and agrees to serve in the government educational
            institutions situated in the rural areas till attaining the age of
            superannuation in the service of Government.”
F            20. Evidently, these rules were framed to enable the absorption of
      employees and teachers of non-government aided institutions. What is
      relevant for the purposes of this case is that by Rule 5(viii), carry forward
      of existing privilege leave is denied; likewise, the period of service in
      aided institutions is not to be reckoned for the purpose of gratuity under
      Rule 5(ix). Every employee had to furnish an undertaking in the prescribed
G
      form to accept the terms and conditions. Ordinarily no public employer
      can be faulted in imposing pre-conditions before it recruits an employee.
      However, such conditions cannot be arbitrary, or so onerous as to be
      unconscionable. In the opinion of this court, the condition in clause (viii)
      of Rule 5 i.e., carry forward of balance privilege leave, is barred and
H     requiring employees to seek encashment from their previous employer,
     JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                            479
                & ORS. [S. RAVINDRA BHAT, J.]

i.e., aided institutions, is an arbitrary and unconscionable condition, which     A
cannot be enforced. Speaking that such conditions are enforceable, this
court, recently, in Pani Ram vs. Union of India & Ors.9 after quoting
the observations in Central Inland Water Transport Corporation
Limited & Anr. V Brojo Nath Ganguly & Anr10 held as follows:
        23. “….Right to Equality guaranteed Under Article 14 of the               B
        Constitution of India would also apply to a man who has no
        choice or rather no meaningful choice, but to give his assent
        to a contract or to sign on the dotted line in a prescribed or
        standard form or to accept a set of Rules as part of the
        contract, however unfair, unreasonable and unconscionable
        a Clause in that contract or form or Rules may be.”                       C

       21. This court had categorically ruled, in Senior Higher Secondary
School (supra) that leave encashment is part of salary. In the scheme
of 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 forms
part of the approved expenditure that would be the content of aid, is             D
provided by Rule 14. In the present case, the management establishment
was recipient of 70% aid, in the form of grant. In these circumstances,
the State cannot shrug its responsibility to shoulder its part of the
responsibility to pay the appellants the share of leave encashment benefits,
and hide behind either Rule 5 (viii) or the undertaking executed by them.         E
The appellants are held entitled to privilege leave entitlement benefits.
Such benefit shall be calculated from the date they entered the service
of 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 balance
30% shall be payable by the management establishment.
                                                                                  F
      22. On the issue of gratuity, again, the question of liability has
been conclusively settled. Although the management relied on a
Chhattisgarh High Court decision Ambika Mission Boys Model School
(supra), this court is of the opinion that it cannot be construed as an
authority, because the court in that case analysed the provisions of the
Payment of Gratuity Act, 1972, as amended in 2009. However, in the                G
present case, the scheme of the 1993 Rules, which contained the
conditions 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                                                            H
480             SUPREME COURT REPORTS                         [2022] 13 S.C.R.


A     employer, i.e., the aided establishment, i.e., the fourth, fifth and sixth
      respondents 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 to
      bear 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 which
            applies for grant-in-aid shall be deemed to have accepted its
            obligation to comply with the conditions laid therein, one of
            it being that the Management shall appoint teachers and other
            staff and shall follow the conditions of service, as laid down
C           in the Rules. Rule 11 deals with the procedure for grant-in-
            aid. Rule 13 deals with the assessment of annual recurring
            grant. In, inter alia, provides that annual recurring grant will
            be given on the basis of estimated expenditure of the current
            year and be subject to adjustment from the grant payable in
D           the next year. It also stipulates that the approved expenditure
            shall be arrived at according to the Rules and such other
            instructions that may be issued from time to time. Rule 14 deals
            with approved expenditure and to the extent relevant for the
            present case reds as under :
E           Rule 14. Approved Expenditure- Approved expenditure
            referred to in Rule 13 above, shall related to the following
            items only- All the items from (a) to (v) mentioned below will
            form component ‘A’ of the admissible items of the expenditure.
            (a) Actual salary, and provident fund contribution not
F           exceeding 8.33% in respect of teaching and non-teaching
            staff.
            (b) to (v).......”
            8. Note 2 appended to Rule 14 is relevant for the present
            purposes and reads thus :
G
            “Note - 2. Charges on account of contribution made by the
            Institution to a pension fund or a gratuity scheme or on
            account of the pension or gratuity paid to former teachers
            are ordinarily not admitted for the purpose of grant-in-aid
            unless the Rules on the subject are approved by Government;
H
JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                       481
           & ORS. [S. RAVINDRA BHAT, J.]

   Provided that in the case of staff obtained on lent services         A
   from any State Government or Government of India, pension
   and leave salary contribution shall be allowed as approved
   expenditure.”
   9. Rule 82 provides that the employees of the aided educational
   institution shall be entitled to gratuity as payable under the       B
   Payment of Gratuity Act, 1972, as amended from time to time.
   ************                 ***********
   ************
   14. The gratuity cannot be termed to be an emolument for the
   time being payable to the employees so as to come within the         C
   definition of salary defined in Section 2 (r) of the Act. Further,
   Rule 14 uses the word ‘actual salary’. Be that as it may, it
   seems clear the non-recurring payment of this nature cannot
   be included in the definition of salary. Gratuity is payable at
   the time of retirement/termination of the employment. Reliance       D
   on the decision of the case of Metal Box Company of India
   Limited v. Their Workmen (1969) I LLJ 785 (SC) can render
   little assistance to the appellant. It is a case under Payment
   of Bonus Act. It was only dealing with accountancy principles.
   Observations were made that an estimated liability under the
   gratuity schemes even if it amounts to a contingent liability        E
   and is not a debt under the Wealth Tax Act, if properly
   ascertainable and its present value is fairly discounted, is
   deductible from the gross receipts while preparing the profits
   and loss account. In trading circles or in rule or direction in
   the Bonus Act, there was no prohibition from such a practice.        F
   The question in that case was whether while working out the
   net profits the trader can provide from his gross receipts his
   liability to pay a certain sum for every additional year of
   service which he receives from his employees. It was answered
   in affirmative. If such liability was properly ascertainable, it
   was possible to arrive at a proper discounted vale. This             G
   decision, in our view, is not relevant to determine the point in
   issue in the present case.
   15. Further, gratuity cannot be included in the approved
   expenditure as under Rule 9 the State Government can
                                                                        H
482            SUPREME COURT REPORTS                         [2022] 13 S.C.R.


A           sanction the grants under four Heads provided therein and
            gratuity does not fall under any one of them. It is not claimed
            that the gratuity falls under Heads 2 to 4. The Head No. 1 is
            ‘maintenance or recurring grant’. Admittedly a gratuity cannot
            come under the category of maintenance. It is also not a
            recurring grant as already noticed hereinbefore. It is, thus,
B
            clear that payment of gratuity cannot come under any of the
            four categories mentioned in Rule 9.
            16. In view of the aforesaid, the gratuity within the meaning
            of the Act and the Rules cannot form part of recurring grant.
            It is not includable as part of approved expenditure for the
C           purposes of computing the amount of grant payable to the
            purposes of computing the amount of grant payable to the
            appellant. In this view, communication dated 26th May, 1994
            of Government of Rajasthan to the effect that the Rules do
            not provide for grant-in-aid on amount of gratuity, the same
D           being not included in the approved expenditures, cannot be
            held to be illegal. This will, however, not affect the rights of
            the employees to get the gratuity from the concerned institution.
            17. Before parting, we wish to note that if representations are
            made by aided Non-Government Educational Institutions, the
E           State Government would consider sympathetically the question
            of the gratuity amount payable to the employees being taken
            into consideration for the purpose of computing the amount
            of grant-in-aid. We, however, clarify that pending making of
            such representation and its consideration, the payment of
            gratuity to the employees shall not be delayed.”
F
              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 absolved of their liability to pay gratuity, upon
      termination of their relationship with the appellants as their employers.
      Rule 82 is a condition of grant, which meant that the management
G     establishment was conscious and aware of its liability when it applied
      and was granted aid, under the 1993 Rules. Therefore, it cannot escape
      its liability on that score.
            23. In view of the above discussion, it is held that with respect to
      leave encashment, the State and the respondent nos. 3 to 7 are liable to
H
 JAGDISH PRASAD SAINI & ORS. v. STATE OF RAJASTHAN                               483
            & ORS. [S. RAVINDRA BHAT, J.]

pay the appellants, in the ratio of 70:30 respectively. The respondent           A
State shall, within four weeks from today, determine the extent of
entitlement of each appellant, and communicate the extent of amount
payable by the management establishment (respondent nos. 3 to 7), to
the appellants. These amounts shall be paid by all the respondents, within
six weeks from today. The respondent nos. 3 to 7 shall also calculate
                                                                                 B
and pay the amount of gratuity, to the appellants (on the basis of their
initial date of entry in the school, till the date of order of absorption, by
the respondent State), within six weeks from today. Since both sets of
respondents contested their liability and denied them to the appellants,
the amounts payable to the appellants shall also carry interest, at the
rate of 10% from the date(s) of their entitlement, till the date of payment.     C
       24. The impugned order is therefore set aside. The appeal is
allowed in terms of the above directions. There shall be no order on
costs.

Divya Pandey                                                   Appeal allowed.
                                                                                 D
(Assisted by : Deepak Panwar, LCRA)




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