• Can my company penalise and debit from my FnF settlement? leave encashment

I had quit my company with proper notice. When I recieved my fnf settlement I realised that a certain amount was debited due to a pending customer issue, which I feel is opportunistic. My outstanding amount was leave encashment how do I take it forward
Asked 1 year ago in Labour

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10 Answers

Issue a legal notice against the said act. 

Sanjay Narayandas
Advocate, Hyderabad
103 Answers

5.0 on 5.0

Dear Client,

Such a question can be answered only after going through your employment contract. After checking your employment contract you can take any action.

Thank you

Anik Miu
Advocate, Bangalore
6115 Answers
66 Consultations

4.9 on 5.0

You issue a legal demand notice demanding the amount due to you, let the company give a reply denying to pay your claim, you can resort to legal action after that as per law.


T Kalaiselvan
Advocate, Vellore
80532 Answers
1730 Consultations

5.0 on 5.0

1. The Company can't take unilateral decision to penalise and debit from your fnf settlement.

2.  Send a legal notice to the Company demanding to forthwith release your outstanding amount.

3.  If the Company refuses to pay your dues in respect of leave encashment, file a case against it in the jurisdictional Labour Court/Civil Court, as the case may be, and get back your due amount.

Shashidhar S. Sastry
Advocate, Bangalore
4557 Answers
267 Consultations

5.0 on 5.0

send email to company to pay amount wrongly deducted from your FNF settlement 


if company fails to pay sue company to recover money wrongly deducted 


Ajay Sethi
Advocate, Mumbai
90363 Answers
6617 Consultations

5.0 on 5.0

Send a legal notice to the company through lawyer and seek refund 

Prashant Nayak
Advocate, Mumbai
28990 Answers
110 Consultations

4.1 on 5.0

You have to resolve the issue amicably with your ex-employer. Try to sort it out with the customer. If you take any confrontationist stand now, your ex-employer may create unnecessary problems for you.

Swaminathan Neelakantan
Advocate, Coimbatore
2301 Answers
20 Consultations

4.9 on 5.0

These cases are very common in various Courts of India and Supreme Court of India. I can understand your concern in this regard. Full and final settlement is usually used by the employers to absolve themselves from all the previous dues and claims of their employees. It is usually actuated in the form of a settlement contract and effectively concludes the employer-employee relationship. Ideally such a settlement ought to serve its purpose and lead to the dissolution of all the pre-existing disputes and claims between the employer and employee. Sadly, that is not always the case. Employers usually get dragged into the labour courts for certain previous dues or claims which are claimed by the employees to be beyond the purview of the terms of settlement. 

Leave encashment can be done for only the Earned / Privilege / Annual leave that the company provides to the employee and not on the Sick or casual leave. During full and final settlement it is mandatory that the leave be encashed. Balance leave can also be adjusted towards the notice period the balance leave needs to be give by way of encashment to the employee.

India’s Supreme Court ruled on 24 April 2020 that employers may deduct leave encashment only when actually paid and not when due, upholding the constitutionality of section 43B (f) of the Income Tax Act, 1961 (ITA). However, in your case you are entitled for it. Encashment of Earned Leave / Privileged leave is mandatory under Factory act and rules framed there under.

In Bennett Coleman & Co. (P) Ltd v. Punya Priya Das Gupta (1970), the employee, after resigning from the company, claimed his dues for the leave period. While receiving his full and final settlement from the company, he signed a receipt which had no mention of the payment of dues during the leave period. The Supreme Court held that the employee can claim his dues for the leave period, since he has not waived his claims for such dues in the full and final settlement.

Complaint can be filed to Ministry of Labour & Employment. Please visit https://mahakamgar.maharashtra.gov.in/complaint.htm

Complaint can be filed online or visiting the nearest Commissioner of Labour office in Maharashtra.

You can send a legal notice through Advocate asking for compensation for the mental and physical agony you are facing. My team has handled with similar issues. A legal notice is, therefore, a formal communication to a person or an entity, informing the other party of your intention to undertake legal proceedings against them. This notice, when sent, conveys your intention before the legal proceedings and thus, makes the party aware of your grievance. Many times, a legal notice served will bring the other party on heels, and the problem can get resolved out of court too, with fruitful discussions on both sides. And, if the other party is still not heeding to the grievance, one can always start the court proceedings after a particular interval, as stated by the law. Although a legal notice can serve as a purpose of negotiations between the parties and save time, effort and money that are usually spent in court cases.


You may contact my secretary to connect with me for clarification.


Gopal Verma

Advocate on Record

Supreme Court of India




Shri Gopal Verma
Advocate, New Delhi
317 Answers
5 Consultations

4.0 on 5.0


Sanjeev Gupta
Advocate, Delhi
107 Answers
1 Consultation

5.0 on 5.0

- As per Specific Relief Act, if any employee quits before the notice period, the Employer can only recover the Notice pay, and the Company cannot force to serve the entire notice period.

- Further, the resignation decision is the employee’s decision, and the employer cannot sue for breach of contract, if the employee leaves without serving contractual notice. 

- Further, the employment bond with the negative covenant is valid and legally enforceable, if the parties agree with their free consent i.e. without force, coercion, undue influence, misrepresentation and mistake, but it is not enforceable, if it is either one sided, unconscionable or unreasonable.

- Hence, if have not work for the notice period mentioned in the offer letter , then employer can deduct the same and out of this they cannot debit any amount in anticipation . 

- If they debit the amount , then send a legal demand notice for getting refund. 

Mohammed Shahzad
Advocate, Delhi
10840 Answers
136 Consultations

5.0 on 5.0

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