Non-receipt of Central funding cannot justify withholding an employee’s admitted revised pay entitlement.

The respondent-plaintiff was appointed as a Trained Daai in 1975 under the Border Area Project and superannuated on 30 April 2009. She claimed unpaid increments, salary, gratuity, leave encashment, other retiral benefits, and the revised pay scale applicable from 1 January 2006. Despite statutory notices under Section 80 CPC, the benefits were not initially released, leading her to institute a suit for declaration and mandatory injunction.

During the pendency of the suit, the appellants paid the outstanding salary, gratuity, leave encashment, and other retiral benefits, but did not release the revised pay-scale benefits.

The Trial Court partly decreed the suit on 4 January 2014, directing payment of the revised pay scale from 1 January 2006 to 30 April 2009. The First Appellate Court dismissed the State’s appeal on 1 August 2025, affirming the decree.

The State thereafter preferred the present Regular Second Appeal.

Whether the respondent-plaintiff was entitled to the revised pay scale from 1 January 2006 until her superannuation on 30 April 2009, notwithstanding the non-receipt of the Central Government’s 67% funding share?

Whether the appellants could rely on the alleged closure of the Border Area Project on 31 March 2005 when that plea was neither properly pleaded nor proved?

Whether relief relating to the revised pay scale could be granted despite the absence of a separately worded specific prayer for that relief?

Whether interest could be awarded on the unpaid revised-pay-scale dues in exercise of the High Court’s powers under Order 41 Rule 33 CPC?

The Court applied the principle that an employee’s accrued salary and service benefits cannot be withheld merely because of an inter-governmental funding dispute, particularly where the employee is a stranger to that arrangement and the employer’s liability is otherwise established.

It further applied the procedural principles that a material defence must be specifically pleaded and proved, and that a party cannot rely on an unpleaded and unsupported factual contention at the appellate stage.

A relief may be granted where it is substantially covered by the pleadings and no prejudice is caused, even if it is not expressed in a separately framed prayer.

The Court also invoked Order 41 Rule 33 CPC, which empowers an appellate court to pass such decree or order as may be necessary to do complete justice between the parties.

The appellants’ own witness admitted that the revised pay-scale benefits remained unpaid and attributed the non-payment to the absence of the Central Government’s 67% share; he also acknowledged that the State’s 33% share had not been released.

The Court held that the funding arrangement between the Central and State Governments could not defeat the respondent’s accrued entitlement, since she had rendered service under the appellants until retirement and her wages were not shown to be conditional upon receipt of the Central grant.

The plea that the Project had closed on 31 March 2005 was rejected because it was not pleaded in the written statement or supported by documents. In any event, the appellants had treated the respondent as serving until 30 April 2009 and had released her retiral benefits on that basis.

The Court also noted that the Government of Punjab’s decision dated 21 August 2009 to absorb Project employees, following the Central Government’s communication dated 29 December 2006, demonstrated that the Scheme was operational on 29 December 2006; the respondent therefore fell within the category of employees entitled to consequential benefits, including revised pay scales.

Since the plaint expressly claimed entitlement to the new pay scale as part of her service benefits, no prejudice resulted from the absence of a separately worded prayer.

Given the prolonged withholding of admitted dues, the Court exercised its power under Order 41 Rule 33 CPC to award interest.

It held that the respondent-plaintiff was entitled to the revised pay scale from 1 January 2006 until 30 April 2009, irrespective of the non-receipt of the Central Government’s funding share.

The appellants were directed to pay the amount due together with interest at 9% per annum from the date of accrual until actual realization, and to release the amount within three months from the date of judgment.

The pending limitation application was disposed of as infructuous, and any other pending applications were also disposed of.