Accrued annual increment due after retirement must be included in salary for BSNL VRS benefits.

The petitioners, retired Junior Telecom Officers of BSNL, opted for voluntary retirement under the BSNL Voluntary Retirement Scheme, 2019, and were relieved with effect from 31 January 2020.

BSNL calculated and paid the benefits under the Scheme, which the petitioners accepted. They subsequently claimed that each had earned an annual service increment during the preceding year, although it became payable on 1 February 2020—the day after their retirement—and that the increment ought to have been included while calculating their Scheme benefits. Their representations were rejected, leading them to institute O.A. No. 653 of 2020 before the Central Administrative Tribunal, Ernakulam Bench. The Tribunal dismissed the Original Application and later rejected the petitioners’ review application. The petitioners therefore approached the Kerala High Court under Article 226/227 of the Constitution through the present Original Petition.

Whether the annual increment earned by the petitioners during their last year of service, but becoming payable on the day following their voluntary retirement, was required to be included in “salary” for calculating benefits under the BSNL Voluntary Retirement Scheme, 2019

Whether inclusion of the accrued increment would impermissibly modify the contractual terms of the Voluntary Retirement Scheme, particularly when the petitioners had accepted the benefits already paid

Whether the Tribunal’s dismissal of the Original Application and rejection of the review application were legally sustainable

Clause 3(j) of the BSNL Voluntary Retirement Scheme, 2019 defines “salary” as “Basic Pay plus Dearness allowance thereon as applicable on the effective date of Voluntary retirement”.

The Court applied the principle in Director (Admn. & HR), KPTCL v. C.P. Mundinamani, Civil Appeal No. 2471 of 2023, that an annual increment is earned upon completion of the requisite period of satisfactory and efficient service and cannot be denied merely because it becomes payable on the day after retirement.

The Court also relied on the reasoning approved in Gopal Singh v. Union of India, that increment forms part of pay and that the date on which it becomes payable is not determinative of the employee’s accrued entitlement.

The decisions in Union of India v. Kulbir Singh and BSNL v. Gulshan Sood were followed insofar as they held that the increment must be reckoned for employees retiring under the BSNL VRS, notwithstanding that their retirement was voluntary rather than on superannuation.

At the same time, relying on A.K. Bindal v. Union of India, the Court accepted that the terms of a voluntary retirement scheme cannot be judicially varied; the inquiry was therefore limited to whether BSNL had correctly applied the existing Scheme.

The Court distinguished between impermissibly altering the Scheme and correctly interpreting and applying it.

Although the increment became payable on 1 February 2020, the petitioners had completed the requisite period of service with satisfactory conduct before their retirement on 31 January 2020; hence, the entitlement to the increment had already crystallised and its subsequent payment date was merely consequential.

Since the Scheme calculated compensation, ex gratia and other benefits on the basis of “salary,” and “salary” included basic pay, the accrued increment necessarily formed part of the salary to be used in the computation.

The fact that the petitioners retired under the VRS, rather than on attaining superannuation, did not justify a different result because the increment was linked to service actually rendered, not to the mode of retirement.

Acceptance of the initially calculated benefits could not validate a computation inconsistent with the Scheme itself.

Accordingly, the Tribunal erred in treating the petitioners’ claim as an attempt to modify the Scheme rather than as a challenge to its incorrect implementation.

The Court allowed the Original Petition, set aside the Tribunal’s orders in O.A. No. 653 of 2020 and R.A. No. 11 of 2025, and directed the respondents to rework the petitioners’ Scheme benefits in accordance with C.P. Mundinamani and take consequential action within six months from receipt of the judgment.