Retirement one day before the increment date does not defeat entitlement to notional increment and consequential retiral benefits.

Naresh Kumar, an Accounts Assistant under the East Central Railway, superannuated on 31 December 2022. Although he completed the preceding year of service and would ordinarily have become entitled to an annual increment on 1 January 2023, the increment was denied because he retired one day before its formal accrual date.

He challenged the denial before the Central Administrative Tribunal, Patna Bench, in O.A. No. 050/00198/2024. Relying on Director (Administration and Human Resources), KPTCL v. C.P. Mundinamani, the Tribunal directed the Railway authorities to grant the annual increment, recalculate the retiral benefits, issue a revised pension payment order, and pay interest at 6% per annum.

The Union of India and Railway authorities challenged that order before the Patna High Court. During the writ proceedings, the respondent stated that a revised pension payment order had been issued and pension arrears had been paid, but the consequential revision of gratuity, leave encashment and commuted pension remained outstanding.

Whether an employee who retires on 31 December is entitled to the annual increment falling due on 1 January of the following year, where the increment was earned through satisfactory service during the preceding year?

Whether the consequential pensionary and retiral benefits were required to be revised in light of the Supreme Court’s directions in C.P. Mundinamani and Union of India v. M. Siddaraj?

The Court applied the principle laid down in Director (Administration and Human Resources), KPTCL v. C.P. Mundinamani & Ors., (2023) 14 SCC 411, that an employee who retires on the day immediately preceding the date on which an annual increment is formally payable cannot be denied the increment where it was earned by rendering service during the preceding year with good conduct and efficiency.

The Court also applied the Supreme Court’s directions in Union of India & Anr. v. M. Siddaraj, Miscellaneous Application Diary No. 2400 of 2024 in Civil Appeal No. 3933 of 2023, order dated 20 February 2025. Under those directions, the benefit of the increment for third parties is generally reflected in pension payable on and after 1 May 2023; cases involving pending or successful proceedings are governed by the specified directions concerning finality, appeals and the period for payment of enhanced pension.

The respondent had retired on 31 December 2022, but the increment due on 1 January 2023 represented the financial recognition of service completed during the preceding year. Applying C.P. Mundinamani, the Court accepted that retirement one day before the increment date was not, by itself, a valid basis for denying the benefit.

The Court further considered the subsequent directions in M. Siddaraj, which regulated the date and extent to which enhanced pension and related benefits were payable.

Since the revised pension payment order and pension arrears had already been issued, the remaining question concerned the consequential revision of gratuity, leave encashment and commuted pension. The petitioners agreed to recalculate and pay those benefits in accordance with the two Supreme Court decisions, and the High Court disposed of the writ petition on that agreed basis.

The Railway authorities were directed, in terms of their undertaking, to revise and pay the outstanding gratuity, leave-encashment and commutation benefits in accordance with C.P. Mundinamani read with M. Siddaraj within four weeks.

The writ petition was disposed of on those terms, with the express agreement of the parties.