Grant of Notional Increment Accrued on the Date of Retirement (Payable Next Day)

 Grant of Notional Increment Accrued on the Date of Retirement (Payable Next Day)  

As per the provisions of Rule 56 of LIC of India (Staff) Rules, 1960, increments shall fall due on the first day of the month following that in which the employee completes twelve months service from the date of his first appointment or from the date on which his last annual increment accrued. Increments shall ordinarily be drawn as a matter of course unless the employee has reached the maximum of the grade, or the employee cannot be allowed any increment in accordance with Schedule III related to Special Provisions applicable to Development Officers, or it is withheld as a disciplinary measure under Regulation 39. 

There is the provision of addition to basic pay after reaching maximum of scale to the employees as per the provisions of their Service Rules, amended from time to time.

As per the existing practice, the annual increment accrued on the date of retirement to an employee, is not paid as it falls due next day of his retirement. This is an anomalous situation that the benefit is accrued during service is denied just on the pretext that it falls due on next day when the employee is not in service. Denying an employee the benefit of annual increment, which he has already earned while rendering specified period of service with good conduct and efficiently in the last preceding year is unreasonable. It would be punishing a person for no fault of him. The increment can be withheld only by way of punishment or he has not performed the duty efficiently. It is a globally accepted principle that any interpretation which would lead to arbitrariness or unreasonableness should be avoided. The employee becomes entitled to receive increment when he completes requisite length of service with good conduct. Here, the word “accrue” should be understood liberally and would mean payable on the succeeding day. As per the standard practices in our country, the salary has been being disbursed on the First Day of the following month (Khush hai zamana aaj pehli tareekh hai) though it is earned during last month. If an employee is superannuated on the last day of the month, would he not get the salary earned for the last month? Yes, he will get. So is the case of the increment accrued on the last day of the year, which may happen to be the date of his superannuation.

This anomalous situation is not there in LIC of India alone, but also in the Fundamental Rules applicable to the Central Civil Services Employees, Service Rules of Railways and several other Central and State Governments’ PSUs. Employees of these establishments have been raising the issue from time to time but of no avail and hence ultimately approached the courts and tribunals.  

Shri Shailesh Tiwari, Retried Assistant Divisional Manager, LIC of India, Divisional Office, Jabalpur, after his request being turned down by LIC, had also approached the judiciary on the issue of grant of notional increment accrued on the date of retirement but payable on next day of retirement. He had secured a favourable judgment from High Court, Jabalpur in the WRIT PETITION (C) No. 19950 of 2024 on 1st Aug. 2024. The judgment was challenged by LIC of India by filing the Review Petition No. 1089 of 2024, which was dismissed on 5/11/2024. The Bench of HON'BLE SHRI JUSTICE SANJEEV SACHDEVA and HON'BLE SHRI JUSTICE VINAY SARAF of Hon’ble High Court Jabalpur, assailed the points raised by LIC in detail and passed the order on the ratio of the Supreme Court Judgment dated 11/4/2023 in Civil Appeal No. 2471 of 2023 (The Director (Admn. & HR), KPTCL& Ors. Vs. C P Mundinamani & Ors (2023). 

However, LIC challenged the judgment of Jabalpur High Court in SC vide SLP (C) No. 5025 of 2025 (Diary No. 1997/2025) which has also been dismissed at admission stage vide order dated 20/02/2025 with following directions:

In view of the judgment passed by this Court “Union of India & Anr. v. M. Siddaraj”, we are not inclined to interfere with the impugned judgments/orders and, hence, the present special leave petitions are dismissed.

Equally, the directions issued by this Court today in the connected matters, that is, M.A. Diary No. 2400/2024 and other miscellaneous applications/petitions will apply.

The LIC shall comply with the impugned judgments/orders. We, however, clarify that the dismissal of the present special leave petitions will not be read as an interpretation of the rules framed by the Life Insurance Corporation of India.

Pending application(s), if any, shall stand disposed of.

As per item no. (i) the ratio of “Union of India & Anr. v. M. Siddaraj”, is applicable to the case of Shri Shailesh Tiwari. The ratio is that the word “accrue” should be understood liberally and would mean payable on the succeeding day. Any contrary view would lead to arbitrariness and unreasonableness and denying a government servant legitimate one annual increment though he is entitled to for rendering the services over a year with good behaviour and efficiently and therefore, such a narrow interpretation should be avoided.

As per item no. (ii), the directions issued by Hon’ble Supreme Court in M.A. Diary No. 2400/2024 and other miscellaneous applications/petitions will be applicable to Shri Shailesh Tiwari’s case also. The directions are in respect of dates of applicability of the judgment for different categories of employees viz. Petitioners, Impleaders/interventionists, Petitioners of similar other cases tagged and third parties (employees who are not parties to the litigation but are having interest in the subject matter). Relevant part of the judgment is as under: 

The judgment dated 11.04.2023 will be given effect to in case of third parties from the date of the judgment, that is, the pension by taking into account one increment will be payable on and after 01.05.2023. Enhanced pension for the period prior to 30.04.2023 (erroneously mentioned as 31.04.2023 in the Order) will not be paid.

For persons who have filed writ petitions and succeeded, the directions given in the said judgment will operate as res judicata, and accordingly, an enhanced pension by taking one increment would have to be paid.

The direction in (b) will not apply, where the judgment has not attained finality, and cases where an appeal has been preferred, or if filed, is entertained by the appellate court.

In case any retired employee has filed any application for intervention/impleadment in Civil Appeal No.3933/2023 or any other writ petition and a beneficial order has been passed, the enhanced pension by including one increment will be payable from the month in which the application for intervention/impleadment was filed.

In the final order of Hon’ble Supreme Court, part (d) is slightly changed, but as the same is not relevant in the case of LIC employees, it is not given here. In the case of Shri Shailesh Tiwari and other similarly LIC employees, the dates are to be reckoned as per the judgment dated 20/02/2025 of Hon’ble Supreme Court in SLP (C) No. 5025 of 2025 (Diary No. 1997/2025).

Item no. (iii) expressly directs that LIC has to comply with the impugned judgment of Jabalpur High Court which directs as under:

 “Accordingly, respondents are directed to grant the annual increment to the petitioner which became payable on 01.07.2023 with all consequential benefits.” 

The increment accrued on the date of retirement but payable on first day of following month has to be paid as on the date of retirement as on the first day of following month he will not be in service. So, his last month’s pay has to be increased by one notional increment and accordingly all the consequential benefits are to be paid.

Consequential benefits refer to quantifiable benefits that flow from a court order such as loss of salary, emoluments, and other monetary entitlements. [Union of India VS Col Ran Singh Dudee - Supreme Court] 

Thus, Shri Shailesh Tiwari and other similarly placed retired employees are entitled to following benefits:

Calculation of increased Basic Pay by adding the notional increment, 

Calculation of increased basic pension on the basis of increased Basic Pay as calculated at (i) above and DR thereon. (It is to be kept in mind that only last month’s increased Basic Pay would be taken into account for calculating average emoluments.) 

Arrears of the increased pension (Basic Pension + DR) from 1st Jul 2023 in case of Shri Shailesh Tiwari and from the date of order by SC i.e. 20/02/2025 in case of other similarly placed persons [as per the precedent of DOTP vide OM No.19/116/2024-Pers.Pol.(Pay)(Pt.) dated 14.10.2024, para 6 (a)].

Difference of Leave Encashment,

Difference of Gratuity.

Needless to state that the increased pension is to be paid in continuum.

The case is decided on the basis of the provisions of rule 56 of LIC of India (Staff) rules, 1960 which provides for accrual of the benefit of increment after a satisfactory service of one year (365/366 days as the case may be). So, the SLP is dismissed on the basis of faulty execution of the Rule and Rules are not interpreted by the Supreme Court. 

As evident from the directions given by Hon’ble Supreme Court, as discussed above, the benefit is to be paid to all similarly placed employees to avoid multiple litigation. 

LIC of India has been known for the best personnel practices. Earlier, the grievances resolved through judicial process were executed promptly as per the intent of the judicial proclamation. But, now a days, LIC has implemented the courts verdicts in such a manner that the real intent is frustrated.  It gives an impression that a person who approaches the Court for claiming his rights is being treated with prejudices. The Management of the Corporation should bear in mind that its credibility and reputation depend on judicious decision making and fair execution by due application of mind and not in a mechanical and routine manner.  

Hope that the decision given by the Supreme Court will be honoured as per the true intent of the rules and precedents.  

 

M P Agnihotri

Hyderabad/ 24th Apr 2025