Jharkhand HC extends one notional annual increment to employees retiring after January 1, 2006, reads down 2024 cutoff date

The petitioners were retired employees of the State of Jharkhand who superannuated on 30 June in different years, having completed one full year of service from 1 July to 30 June immediately preceding retirement.

They claimed one annual increment on a notional basis for the purpose of revising their pensionary and retiral benefits, relying on The Director (Admn. & HR), KPTCL v. C.P. Mundinamani, 2023 SCC OnLine SC 401.

During the pendency of the writ petitions, the State issued Resolution No. 781/Fin. dated 16 March 2024, granting the notional increment only to employees retiring after 11 April 2023—the date of the Supreme Court’s judgment in C.P. Mundinamani—on 30 June or 31 December.

The petitioners challenged this temporal limitation, and their writ petitions were amended pursuant to the Court’s order dated 14 October 2024.

Whether employees who retired on 30 June after completing one year of service immediately preceding retirement were entitled to one notional annual increment for computation of pensionary and retiral benefits?

Whether the State could restrict the benefit of the notional increment under Resolution No. 781/Fin. dated 16 March 2024 only to employees retiring on or after 11 April 2023?

Whether the cut-off date of 11 April 2023 was liable to be read down so that the benefit applied to eligible employees retiring after 1 January 2006, when the Sixth Pay Revision was enforced?

The Court applied the principle that an annual increment is earned upon completion of the requisite period of service and that an employee retiring immediately before the increment date may be entitled to a notional increment for pensionary computation, as recognised in The Director (Admn. & HR), KPTCL v. C.P. Mundinamani, 2023 SCC OnLine SC 401.

It further relied on the rule that a judicial declaration of law operates retrospectively unless the judgment expressly provides for prospective application, as stated in P.V. George v. State of Kerala, 2007 (3) SCC 557, and reaffirmed in Government of India v. Sri Devraj URS Medical College, 2026 SCC OnLine SC 1479.

The Court also invoked the power of judicial review and reading down under Article 226 of the Constitution, referring to Subramanian Swamy v. Raju, (2014) 8 SCC 390, while recognising that reading down may be used to cure an unconstitutional or legally unsustainable application without undertaking impermissible legislation.

The entitlement was treated as embedded in the Sixth Pay Revision framework, effective from 1 January 2006.

The Court found that each petitioner had completed one year of service immediately preceding retirement on 30 June and was therefore substantively entitled to the annual increment falling due on the following day, on a notional basis.

Since C.P. Mundinamani declared the applicable legal position and did not limit its operation prospectively, the Court held that the decision applied retrospectively.

Although Resolution No. 781/Fin. was otherwise consistent with the entitlement recognised by the Supreme Court, the State failed to provide a rational justification for selecting 11 April 2023 as the cut-off date.

The Court consequently read down that date and substituted the date of retirement of eligible employees retiring after 1 January 2006, corresponding to the enforcement of the Sixth Pay Revision.

As all petitioners retired after 1 January 2006 and before 11 April 2023, they fell within the extended entitlement.

The Court held that the petitioners were entitled to one notional annual increment for the service year completed immediately before their retirement, notwithstanding that they had retired before 11 April 2023.

The cut-off date in Resolution No. 781/Fin. dated 16 March 2024 was read down, and eligibility was extended to employees retiring after 1 January 2006.

The respondents were directed to grant the notional increment, revise the petitioners’ pensionary and retiral benefits, and pay the consequential arrears within eight weeks from receipt or production of the judgment.