REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2471 OF 2023
(@ SLP (C) No. 6185/2020)

The Director (Admn. and HR) ..Appellant(s)

KPTCL & Ors.

Versus

C.P. Mundinamani & Ors. …Respondent(s)

JUDGMENT

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the

impugned judgment and order passed by the

High Court of Karnataka at Bengaluru in Writ

Appeal No. 4193/2017, by which, the

Division Bench of the High Court has allowed

Signature Not Verified

Digitally signed by
Neetu Sachdeva
Date: 2023.04.11
16:36:55 IST
Reason:
the said appeal preferred by the employees -

Page 1 of 28
 respondents herein by quashing and setting

aside the judgment and order passed by the

learned Single Judge and directing the

appellants to grant one annual increment

which the respondents had earned one day

prior to they retired on attaining the age of

superannuation, the management – KPTCL

has preferred the present appeal.

2. The undisputed facts are that one day earlier

than the retirement and on completion of one

year service preceding the date of retirement

all the employees earned one annual

increment. However, taking into

consideration Regulation 40(1) of the

Karnataka Electricity Board Employees

Service Regulations, 1997 (hereinafter

referred to as the Regulations), which

Page 2 of 28
provides that an increment accrues from the

day following that on which it is earned, the

appellants denied the annual increment on

the ground that the day on which the

increment accrued the respective employees –

original writ petitioners were not in service.

The writ petition(s) filed by the original writ

petitioners claiming the annual increment

came to be dismissed by the learned Single

Judge. By the impugned judgment and order

and following the decision of the Andhra

Pradesh High Court in the case of Union of

India and Ors. Vs. R. Malakondaiah and

ors. reported in 2002(4) ALT 550 (D.B.) and

relying upon the decisions of other High

Courts, the Division Bench of the Karnataka

High Court has allowed the appeal and has

directed that the appellants to grant one

Page 3 of 28
 annual increment to the respective

employees-respondents by observing that the

respective employees as such earned the

increment for rendering their one-year service

prior to their retirement.

2.1 Feeling aggrieved and dissatisfied with the

impugned judgment and order passed by the

Division Bench of the High Court, the

management – KPTCL has preferred the

present appeal.

3. Shri Huzefa Ahmadi, learned Senior Advocate

has appeared on behalf of the appellants and

Shri Mallikarjun S. Mylar, learned counsel

has appeared on behalf of the respective

employees – respondents.

Page 4 of 28
3.1 Shri Ahmadi, learned Senior Advocate

appearing on behalf of the appellants has

vehemently submitted that the decision of the

Andhra Pradesh High Court in the case of R.

Malakondaiah (supra) which has been relied

upon by the Division Bench of the High Court

while passing the impugned judgment and

order has been subsequently overruled by the

Full Bench of the Andhra Pradesh High Court

in the case of Principal Accountant-General,

Andhra Pradesh and Anr. Vs. C. Subba Rao

reported in 2005 (2) LLN 592.

3.2 It is further submitted by Shri Ahmadi,

learned Senior Advocate appearing on behalf

of the appellants that there are divergent

views of different High Courts on the issue. It

is submitted that the Madras High Court, the

Page 5 of 28
 Delhi High Court, the Allahabad High Court,

the Madhya Pradesh High Court, the Gujarat

High Court have taken a contrary view than

the view taken by the Full Bench of the

Andhra Pradesh High Court, the Kerala High

Court and the Himachal Pradesh High Court.

It is submitted that various High Courts

taking the contrary view have as such

followed the decision of the Madras High

Court in the case of P. Ayyamperumal Vs.

The Registrar and Ors. (W.P. No.

15732/2017 decided on 15.09.2017).

3.3 On merits, Shri Ahmadi, learned Senior

Advocate appearing on behalf of the

appellants has vehemently submitted that the

words used in Regulation 40(1) of the

Regulations are very clear and unambiguous.

Page 6 of 28
 It is submitted that it categorically provides

that “an increment accrues from the day

following that on which it is earned.” It is

submitted that therefore, when the right to

get the increment is accrued the employee

must be in service. It is submitted that in the

present case when the right to get the

increment accrues in favour of the respective

respondents they were not in service but on

their superannuation retired from the

services. It is submitted that therefore, they

shall not be entitled to the annual increment

which might have been earned one day earlier

i.e., on the last day of their service.

3.4 It is further submitted by Shri Ahmadi,

learned Senior Advocate appearing on behalf

of the appellants that the annual increment is

Page 7 of 28
 in the form of a good service and it is an

incentive so that the concerned employee may

serve effectively and may render good

services. It is submitted that therefore, when

the concerned employees are not in service

due to their retirement there is no question of

grant of any annual increment which as such

is in the form of incentive to encourage the

employee for better performance.

3.5 Shri Ahmadi, learned Senior Advocate

appearing on behalf of the appellants has also

taken us to the definition of the word “accrue”

in the Law Lexicon (the encyclopaedic law

dictionary) and the definition of the word

“increment.” It is submitted that as per the

Law Lexicon, “increment” means a unit of

increase in quantity or value. It means a

Page 8 of 28
promotion from a lower grade to a higher

grade. As per the definition “increment”

means an upward change in something. It is

submitted that as per the Law Lexicon the

word “accrue” means to come into existence

as an enforceable claim or right. It is

submitted that therefore, on true

interpretation of Regulation 40(1) of the

Regulations, an increment accrues from the

day following that on which it is earned. It is

submitted that therefore, the Division Bench

of the High Court has materially erred. It is

submitted that therefore, the view taken by

the Division Bench of the High Court and

other High Courts that the concerned

employees shall be entitled to the benefit of

one annual increment which they earned one

day prior to their retirement is erroneous and

Page 9 of 28
 is on mis-interpretation of the relevant

statutory provisions. Making the above

submissions, it is prayed to allow the present

appeal.

4. Learned counsel appearing on behalf of the

respective employees – respondents, has

heavily relied upon the decision of the Madras

High Court in the case of P. Ayyamperumal

(supra) and the decisions of the Gujarat High

Court, the Delhi High Court, the Allahabad

High Court, the Madhya Pradesh High Court

and the Orissa High Court taking the view

that the concerned employees who earned the

annual increment for rendering one year

service prior to their retirement they cannot

be denied the benefit of the annual increment

which they actually earned, solely on the

Page 10 of 28
 ground that they retired on attaining the age

of superannuation on the very next day. It is

submitted that therefore, the Division Bench

of the High Court has not committed any

error in allowing one annual increment in

favour of the respective employees which they

actually earned.

4.1 Making the above submissions, it is prayed to

dismiss the present appeal.

5. We have heard learned counsel appearing on

behalf of the respective parties.

6. The short question which is posed for the

consideration of this Court is whether an

employee who has earned the annual

increment is entitled to the same despite the

Page 11 of 28
 fact that he has retired on the very next day

of earning the increment?

6.1 In the present case, the relevant provision is

Regulation 40(1) of the Regulations which

reads as under: -

“Drawals and postponements of

increments
40(1) An increment accrues from the day
following that on which it is earned. An
increment that has accrued shall ordinarily
be drawn as a matter of course unless it is
withheld. An increment may be withheld
from an employee by the competent
authority, if his conduct has not been good,
or his work has not been satisfactory. In
ordering the withholding of an increment,
the withholding authority shall state the
period for which it is withheld, and whether
the postponement shall have the effect of
postponing future increments.”

6.2 It is the case on behalf of the appellants that

the word used in Regulation 40(1) is that an

increment accrues from the day following that

on which it is earned and in the present case

the increment accrued on the day when they

Page 12 of 28
 retired and therefore, on that day they were

not in service and therefore, not entitled to

the annual increment which they might have

earned one day earlier. It is also the case on

behalf of the appellants that as the increment

is in the form of incentive and therefore, when

the employees are not in service there is no

question of granting them any annual

increment which as such is in the form of

incentive.

6.3 At this stage, it is required to be noted that

there are divergent views of various High

Courts on the issue involved. The Full Bench

of the Andhra Pradesh High Court, the

Himachal Pradesh High Court and the Kerala

High Court have taken a contrary view and

have taken the view canvassed on behalf of

Page 13 of 28
the appellants. On the other hand, the

Madras High Court in the case of P.

Ayyamperumal (supra); the Delhi high Court

in the case of Gopal Singh Vs. Union of

India and Ors. (Writ Petition (C) No.

10509/2019 decided on 23.01.2020); the

Allahabad High Court in the case of Nand

Vijay Singh and Ors. Vs. Union of India and

Ors. (Writ A No. 13299/2020 decided on

29.06.2021); the Madhya Pradesh High

Court in the case of Yogendra Singh

Bhadauria and Ors. Vs. State of Madhya

Pradesh; the Orissa High Court in the case of

AFR Arun Kumar Biswal Vs. State of

Odisha and Anr. (Writ Petition No.

17715/2020 decided on 30.07.2021); and

the Gujarat High Court in the case of State

Page 14 of 28
 of Gujarat Vs. Takhatsinh Udesinh Songara

(Letters Patent Appeal No. 868/2021) have

taken a divergent view than the view taken by

the Full Bench of the Andhra Pradesh High

Court and have taken the view that once an

employee has earned the increment on

completing one year service he cannot be

denied the benefit of such annual increment

on his attaining the age of superannuation

and/or the day of retirement on the very next

day.

6.4 Now so far as the submission on behalf of the

appellants that the annual increment is in

the form of incentive and to encourage an

employee to perform well and therefore, once

he is not in service, there is no question of

grant of annual increment is concerned, the

Page 15 of 28
 aforesaid has no substance. In a given case, it

may happen that the employee earns the

increment three days before his date of

superannuation and therefore, even

according to the Regulation 40(1) increment

is accrued on the next day in that case also

such an employee would not have one year

service thereafter. It is to be noted that

increment is earned on one year past service

rendered in a time scale. Therefore, the

aforesaid submission is not to be accepted.

6.5 Now, so far as the submission on behalf of

the appellants that as the increment has

accrued on the next day on which it is earned

and therefore, even in a case where an

employee has earned the increment one day

prior to his retirement but he is not in service

Page 16 of 28
the day on which the increment is accrued is

concerned, while considering the aforesaid

issue, the object and purpose of grant of

annual increment is required to be

considered. A government servant is granted

the annual increment on the basis of his good

conduct while rendering one year service.

Increments are given annually to officers with

good conduct unless such increments are

withheld as a measure of punishment or

linked with efficiency. Therefore, the

increment is earned for rendering service with

good conduct in a year/specified period.

Therefore, the moment a government servant

has rendered service for a specified period

with good conduct, in a time scale, he is

entitled to the annual increment and it can be

said that he has earned the annual increment

Page 17 of 28
for rendering the specified period of service

with good conduct. Therefore, as such, he is

entitled to the benefit of the annual increment

on the eventuality of having served for a

specified period (one year) with good conduct

efficiently. Merely because, the government

servant has retired on the very next day, how

can he be denied the annual increment which

he has earned and/or is entitled to for

rendering the service with good conduct and

efficiently in the preceding one year. In the

case of Gopal Singh (supra) in paragraphs

20, 23 and 24, the Delhi High Court has

observed and held as under: -

(para 20)

“Payment of salary and increment to a

central government servant is regulated
by the provisions of F.R., CSR and
Central Civil Services (Pension) Rules.

Page 18 of 28
Pay defined in F.R. 9(21) means the
amount drawn monthly by a central
government servant and includes the
increment. A plain composite reading of
applicable provisions leaves no
ambiguity that annual increment is
given to a government servant to enable
him to discharge duties of the post and
that pay and allowances are also
attached to the post. Article 43 of the
CSR defines progressive appointment to
mean an appointment wherein the pay
is progressive, subject to good behaviour
of an officer. It connotes that pay rises,
by periodical increments from a
minimum to a maximum. The increment
in case of progressive appointment is
specified in Article 151 of the CSR to
mean that increment accrues from the
date following that on which it is earned.
The scheme, taken cumulatively, clearly
suggests that appointment of a central
government servant is a progressive
appointment and periodical increment in
pay from a minimum to maximum is
part of the pay structure. Article 151 of
CSR contemplates that increment
accrues from the day following which it
is earned. This increment is not a matter
of course but is dependent upon good
conduct of the central government
servant. It is, therefore, apparent that
central government employee earns
increment on the basis of his good
conduct for specified period i.e. a year in
case of annual increment. Increment in
pay is thus an integral part of

Page 19 of 28
progressive appointment and accrues
from the day following which it is
earned.”
(para 23)

“Annual increment though is attached to

the post & becomes payable on a day
following which it is earned but the day
on which increment accrues or becomes
payable is not conclusive or
determinative. In the statutory scheme
governing progressive appointment
increment becomes due for the services
rendered over a year by the government
servant subject to his good behaviour.
The pay of a central government servant
rises, by periodical increments, from a
minimum to the maximum in the
prescribed scale. The entitlement to
receive increment therefore crystallises
when the government servant completes
requisite length of service with good
conduct and becomes payable on the
succeeding day.”

(para 24)

“In isolation of the purpose it serves the

fixation of day succeeding the date of
entitlement has no intelligible differentia
nor any object is to be achieved by it.
The central government servant retiring
on 30th June has already completed a
year of service and the increment has
been earned provided his conduct was
good. It would thus be wholly arbitrary if
the increment earned by the central

Page 20 of 28
 government employee on the basis of his
good conduct for a year is denied only
on the ground that he was not in
employment on the succeeding day
when increment became payable.”

“In the case of a government servant

retiring on 30th of June the next day on
which increment falls due/becomes
payable looses significance and must
give way to the right of the government
servant to receive increment due to
satisfactory services of a year so that the
scheme is not construed in a manner
that if offends the spirit of
reasonableness enshrined in Article 14
of the Constitution of India. The scheme
for payment of increment would have to
be read as whole and one part of Article
151 of CSR cannot be read in isolation
so as to frustrate the other part
particularly when the other part creates
right in the central government servant
to receive increment. This would ensure
that scheme of progressive appointment
remains intact and the rights earned by
a government servant remains protected
and are not denied due to a
fortuitous circumstance.”

6.6 The Allahabad High Court in the case of Nand

Vijay Singh (supra) while dealing with the

same issue has observed and held in

paragraph 24 as under: -

Page 21 of 28
“24. Law is settled that where
entitlement to receive a benefit
crystallises in law its denial would be
arbitrary unless it is for a valid reason.
The only reason for denying benefit of
increment, culled out from the scheme is
that the central government servant is
not holding the post on the day when
the increment becomes payable. This
cannot be a valid ground for denying
increment since the day following the
date on which increment is earned only
serves the purpose of ensuring
completion of a year’s service with good
conduct and no other purpose can be
culled out for it. The concept of day
following which the increment is earned
has otherwise no purpose to achieve. In
isolation of the purpose it serves the
fixation of day succeeding the date of
entitlement has no intelligible differentia
nor any object is to be achieved by it.
The central government servant retiring
on 30th June has already completed a
year of service and the increment has
been earned provided his conduct was
good. It would thus be wholly arbitrary if
the increment earned by the central
government employee on the basis of his
good conduct for a year is denied only
on the ground that he was not in
employment on the succeeding day
when increment became payable. In the
case of a government servant retiring on
30th of June the next day on which
increment falls due/becomes payable

Page 22 of 28
 looses significance and must give way to
the right of the government servant to
receive increment due to satisfactory
services of a year so that the scheme is
not construed in a manner that if
offends the spirit of reasonableness
enshrined in Article 14 of the
Constitution of India. The scheme for
payment of increment would have to be
read as whole and one part of Article
151 of CSR cannot be read in isolation
so as to frustrate the other part
particularly when the other part creates
right in the central government servant
to receive increment. This would ensure
that scheme of progressive appointment
remains intact and the rights earned by
a government servant remains protected
and are not denied due to a fortuitous
circumstance.”

6.7 Similar view has also been expressed by

different High Courts, namely, the Gujarat

High Court, the Madhya Pradesh High Court,

the Orissa High Court and the Madras High

Court. As observed hereinabove, to interpret

Regulation 40(1) of the Regulations in the

manner in which the appellants have

understood and/or interpretated would lead

Page 23 of 28
to arbitrariness and denying a government

servant 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. It

would be punishing a person for no fault of

him. As observed hereinabove, the increment

can be withheld only by way of punishment

or he has not performed the duty efficiently.

Any interpretation which would lead to

arbitrariness and/or unreasonableness

should be avoided. If the interpretation as

suggested on behalf of the appellants and the

view taken by the Full Bench of the Andhra

Pradesh High Court is accepted, in that case

it would tantamount to denying a government

servant the annual increment which he has

earned for the services he has rendered over a

Page 24 of 28
year subject to his good behaviour. The

entitlement to receive increment therefore

crystallises when the government servant

completes requisite length of service with

good conduct and becomes payable on the

succeeding day. In the present case 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.

We are in complete agreement with the view

taken by the Madras High Court in the case

of P. Ayyamperumal (supra); the Delhi High

Page 25 of 28
Court in the case of Gopal Singh (supra); the

Allahabad High Court in the case of Nand

Vijay Singh (supra); the Madhya Pradesh

High Court in the case of Yogendra Singh

Bhadauria (supra); the Orissa High Court in

the case of AFR Arun Kumar Biswal (supra);

and the Gujarat High Court in the case of

Takhatsinh Udesinh Songara (supra). We do

not approve the contrary view taken by the

Full Bench of the Andhra Pradesh High Court

in the case of Principal Accountant-General,

Andhra Pradesh (supra) and the decisions of

the Kerala High Court in the case of Union of

India Vs. Pavithran (O.P.(CAT) No.

111/2020 decided on 22.11.2022) and the

Himachal Pradesh High Court in the case of

Hari Prakash Vs. State of Himachal

Page 26 of 28
 Pradesh & Ors. (CWP No. 2503/2016

decided on 06.11.2020).

7. In view of the above and for the reasons

stated above, the Division Bench of the High

Court has rightly directed the appellants to

grant one annual increment which the

original writ petitioners earned on the last

day of their service for rendering their

services preceding one year from the date of

retirement with good behaviour and

efficiently. We are in complete agreement with

the view taken by the Division Bench of the

High Court. Under the circumstances, the

present appeal deserves to be dismissed and

is accordingly dismissed. However, in the

facts and circumstances of the case, there

shall be no order as to costs.

Page 27 of 28
 I.A. No. 149091/2022 stands disposed of

in terms of the above.

………………………………….J.
[M.R. SHAH]

………………………………….J.
[C.T. RAVIKUMAR]
NEW DELHI;
APRIL 11, 2023

Page 28 of 28