The Supreme Court has held that workers who began as daily wagers but were treated as permanent employees under a Gujarat government resolution cannot be denied the annual increment falling due immediately after retirement merely because of their original employment status.

The bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva allowed the appeal of retired Irrigation Department workers who had superannuated on June 30 and sought the benefit of the increment due on July 1 for recalculation of their pension.

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The bench directed the authorities to calculate and release the amounts payable within 30 days, failing which interest at 6% per annum would become payable for the subsequent period until payment. 

The dispute concerned workers who had rendered more than 30 years of service in Gujarat’s Irrigation Department. Having retired on June 30 of different years, they sought recognition of the annual increment falling due on July 1.

A single judge of the Gujarat High Court accepted their claim on September 26, 2023, relying on the Supreme Court’s ruling in Director (Administration and Human Resources), KPTCL, and others v. C.P. Mundinamani and others, decided on April 11, 2023.

Before the single judge, the State argued that the employees would not be entitled to arrears following the grant of the increment. The judge rejected this contention, referring to earlier decisions granting consequential benefits and arrears in similar circumstances.

The single judge directed the employees to submit applications and required the authorities to verify their details, grant the increment, revise their pension and disburse the applicable retirement benefits and arrears within the prescribed timeframe.

The State challenged the single judge’s order insofar as it concerned Special Civil Application No. 20921 of 2022, filed by Chhaganbhai Kohyabhai Pateliya and 18 others.

Before the High Court’s Division Bench, the State advanced a new ground: the employees were daily wagers and therefore could not claim the increment benefit recognised in C.P. Mundinamani.

The Division Bench accepted that argument on January 9, 2025. It held that the benefit was available to regular employees and could not be extended to the workers concerned, setting aside the single judge’s order.

Chhaganbhai Kohyabhai Pateliya and 11 others subsequently approached the Supreme Court.

The Supreme Court found that the Government Resolution dated October 17, 1988, was central to deciding the workers’ entitlement.

The resolution granted pay and employment benefits to daily-wage skilled workers serving in different departments of the Gujarat government. The relevant category covered workers who had completed at least 10 years of service as on October 1, 1988.

Such workers were to be considered permanent and placed in the running pay scale of the concerned cadre. They were entitled to salary, dearness allowance, house rent allowance and local compensatory allowance, together with retirement benefits under the applicable rules.

The resolution also fixed their superannuation age at 60 years and provided that the period spent in permanent employment would be pensionable.

The Additional Solicitor General appearing for the State did not dispute that all the original writ petitioners fell within this category.

The Supreme Court consequently held that, once the workers were treated as permanent employees for pay scales, allowances, pension and retirement benefits, their daily-wage origin could not justify denying the increment.

The bench observed that the State’s argument before the Division Bench overlooked the resolution and the benefits flowing from it. Its contention that C.P. Mundinamani did not apply to the workers was therefore without merit. 

While recognising entitlement to the increment, the Supreme Court applied the arrears framework settled in proceedings arising from Union of India and another v. M. Siddaraj.

The bench explained that the earlier increment rulings were governed by the Court’s subsequent directions dated February 20, 2025.

Under modified clause (d) of those directions, eligible retired employees who had instituted the specified proceedings could receive enhanced pension incorporating one increment for the period of three years preceding the month in which their application or petition was filed.

Since the workers in the present case had filed their writ petition in 2022, the Supreme Court held that modified clause (d) applied to them.

Their pension and arrears must therefore be worked out under that framework, taking account of each worker’s retirement date. The Court left the individual calculations to the authorities.

The Supreme Court also extended relief to the remaining original writ petitioners who had not joined as appellants but were arrayed as proforma respondent Nos. 5 to 11.

The bench reasoned that the governing directions applied to everyone falling within their scope. The applicable increment and enhanced pension benefits must therefore also be extended to those proforma respondents.

The Court distinguished interest on accumulated arrears from interest arising out of a failure to comply with a payment deadline.

Referring to its December 19, 2025 decision in Madhya Pradesh Purv Kshetra Vidyut Vitran Company Ltd. v. Vidyut Mandal Pension Samaj and others, the bench noted that interest was not payable on the arrears themselves.

However, the authorities remained bound to comply with the deadlines fixed by courts or tribunals for disbursement.

In this case, the authorities must examine the individual claims, calculate the amounts payable and release payment within 30 days of the judgment. If they fail to do so, interest at 6% per annum will run for the period thereafter until payment.

The Supreme Court allowed the appeal on these terms and directed the parties to bear their own costs.

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