Reinstatement with continuity of service entitles the employee to notional increments for pay fixation.

The Petitioner was appointed as a Conductor with the Delhi Transport Corporation (DTC) in 1982 and was removed from service on 07.10.1994

On 01.02.2010, the Labour Court ordered his reinstatement with continuity of service, though without back wages; later, back wages were fixed at ₹4,00,000/- by the High Court

Upon reinstatement on 11.08.2010, the Petitioner sought fixation of basic pay by including notional increments for the period between 1994 and 2010

The Central Administrative Tribunal (CAT) dismissed his application (OA 3617/2012) on 27.02.2017, reasoning that the Labour Court’s award did not specifically direct the grant of notional benefits

The Petitioner retired from service in 2017 during the pendency of the dispute

1. Whether a direction for "reinstatement with continuity of service" entitles an employee to notional increments for the period they remained out of service

2. Whether the Petitioner is entitled to benefit of ACP/MACP and consequential retiral benefits based on such re-fixation

The Court followed the principle that a direction for "continuity of service" implies that the employee must be granted notional increments for the duration of their absence to maintain their pay grade as if they had never been terminated

It relied on the Supreme Court’s decision in Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (2013) 10 SCC 324 and the Delhi High Court Division Bench precedent in Mahabir Prasad v. Delhi Transport Corporation (2014) 144 DRJ 422, which established that "continuity" entails notional pay fixation and counting the period of removal for pension and gratuity

It distinguished J.K. Synthetics Ltd. v. K.P. Agrawal (2007) 2 SCC 433, noting that limitations on consequential benefits apply primarily when a dismissal is substituted by a lesser punishment, not when the termination is held illegal

The Court determined that the CAT erred in its restrictive interpretation of the Labour Court's award

It reasoned that since the termination was found illegal and continuity was specifically granted, the Petitioner must be placed in the same financial position regarding pay scale as his counterparts who remained in service

Applying the ratio in Mahabir Prasad, the Court held that continuity of service is not a mere formality but requires the employer to calculate notional increments in the relevant pay grade

The Court rejected the Respondent's reliance on Rajasthan State Road Transport v. Shyam Bihari Lal Gupta, finding it irrelevant to the specific issue of notional pay fixation following a reinstatement order

The Court concluded that the Petitioner's pay must be recalculated as if there were no break in service to determine his correct final salary and subsequent pensionary benefits

It held that the Petitioner is entitled to re-fixation of pay with notional increments for the period he was out of employment (1994–2010)

The Court directed the Respondent to: (i) fix the Petitioner’s pay including notional increments within two months; (ii) place him in equivalent revised grades if applicable; and (iii) pay all consequential retiral benefits resulting from the re-fixation