Annual Increment Cannot Be Denied to Govt Employees Merely Because They Are To Retire The Next Day Of Earning It- SC

The Supreme Court has held that government employees cannot be denied the annual increment merely because they were to retire on the very next day of earning the increment.

The Bench of Justice MR Shah and Justice C T Ravikumar observed that “...the moment a government servant has rendered service for a specified period with good conduct, in a time scale, he is entitled to the annual increment and it can be said that he has earned the annual increment for rendering the specified period of service with good conduct. Therefore, as such, he is entitled to the benefit of the annual increment on the eventuality of having served for a specified period (one year) with good conduct efficiently. Merely because, the government servant has retired on the very next day, how can he be denied the annual increment which he has earned and/or is entitled to for rendering the service with good conduct and efficiently in the preceding one year.”

The appellant- Karnataka Power Transmission Corporation Ltd. (KTPCL) had denied annual increment to employees on the ground that they had retired the next day. The appellant relied upon Regulation 40(1) of the Karnataka Electricity Board Employees Service Regulations, 1997 which provided that an increment accrued from the day following that on which it was earned. Therefore, the day the increment actually accrued to the respondent- employees, they were not in service.

The employees approached the High Court. The High Court allowed the petition and directed the appellants to grant one annual increment which the employees had earned one day prior to their retirement on attaining the age of superannuation. Aggrieved by the order, the appellants approached the Apex Court.

Senior Advocate Huzefa Ahmadi appeared for the appellant and Advocate Mallikarjun S. Mylar appeared for the respondents.

The issue dealt with was- whether an employee who has earned the annual increment was entitled to the same despite the fact that he has retired on the very next day of earning the increment?

The counsel for the appellant argued that increment was in the form of incentive to encourage the employee to perform well the next year and if the employee was no longer in service, there was no purpose in giving the increment.

The Apex Court rejected the argument and said that “...Increments are given annually to officers with good conduct unless such increments are withheld as a measure of punishment or linked with efficiency.”

“...In the present case the word “accrue” should be understood liberally and would mean payable on the succeeding day. Any contrary view would lead to arbitrariness and unreasonableness and denying a government servant legitimate one annual increment though he is entitled to for rendering the services over a year with good behaviour and efficiently and therefore, such a narrow interpretation should be avoided.” observed the Court.

The Apex Court further noted that different High Courts have expressed different views on the issue. The High Courts of Madras, Delhi, Allahabad, Madhya Pradesh, Orissa and Gujarat had decided in favour of employees that once an employee has earned the increment on completing one year service he could not be denied the benefit of such annual increment on his attaining the age of superannuation and/or the day of retirement on the very next day. Whereas the High Courts of Andhra Pradesh, Kerala and Himachal Pradesh had taken a contrary view.

Therefore, the Court observed that if the interpretation as suggested by the appellant was accepted, it would tantamount to denying a government servant the annual increment which he had earned for the services he had rendered over a year subject to his good behaviour. The entitlement to receive increment therefore crystallized when the government servant completed the requisite length of service with good conduct and became payable on the succeeding day

Accordingly, the appeal was dismissed.

Cause Title- The Director (Admn. and HR) KPTCL & Ors. V. C.P. Mundinamani & Ors. 

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