Contractual Service Must Be Counted for Annual Increments: Himachal Pradesh High Court

“To allow pension but deny increments for the same service would violate principles of equality and consistency” – Himachal Pradesh High Court Himachal Pradesh High Court, in the case of Narayan Dutt Sharma & Others v. State of Himachal Pradesh & Others, delivered a significant judgment addressing the contentious issue of whether contractual service should be counted for annual increments, in addition to being recognized for pensionary purposes under the Central Civil Services (Pension) Rules, 1972.

A Division Bench comprising Acting Chief Justice Tarlok Singh Chauhan and Justice Satyen Vaidya ruled in favor of the appellants, holding that contractual service must be treated uniformly for both pensionary benefits and annual increments. The decision partially reversed an earlier ruling by a Single Judge, granting retrospective notional benefits to the appellants while restricting financial arrears to three years before filing the petitions.

The appellants, led by Narayan Dutt Sharma, challenged the denial of annual increments for their contractual service, which had already been recognized for pensionary purposes following earlier judicial decisions. The controversy arose from a judgment by a Single Judge in CWP No. 2130 of 2021, which granted relief for pensionary recognition of contractual service but denied increments.

Initially, 646 petitioners had filed a joint writ petition, which was later split into individual petitions as per court orders. The appellants relied on earlier judgments such as Jagdish Chand v. State of H.P. and Ram Chand v. State of H.P., which had established the principle that contractual service should be considered for increments.

The State, however, argued that the principle upheld by the Supreme Court in Sheela Devi v. State of H.P. (2023) limited such recognition to pensionary entitlements alone, thereby excluding increments.

The key legal issues before the Court were:

Whether contractual service should be counted for annual increments in addition to pensionary entitlements.

Whether the Supreme Court’s order in Sheela Devi v. State of H.P. implicitly overruled High Court judgments granting increments for contractual service.

The extent to which retrospective benefits could be granted to the petitioners.

The Court held that it would be inconsistent and inequitable to treat contractual service differently for pensionary and incrementary purposes. Citing earlier decisions, the Bench stated:

“To allow pension but deny increments for the same service would violate principles of equality and consistency.”

The Court emphasized that contractual service must be recognized uniformly for all service-related benefits once regularized.

The Court clarified that the Supreme Court’s judgment in Sheela Devi v. State of H.P. only dealt with the recognition of contractual service for pensionary entitlements. The issue of annual increments was neither addressed nor decided in Sheela Devi. Thus, the Court concluded:

“The disposal of Jagdish Chand in terms of Sheela Devi cannot be construed to have set aside the judgment granting annual increments, as the issue was not discussed or decided on merits.”

The Court relied on a series of judgments, including Jagdish Chand v. State of H.P., Ram Chand v. State of H.P., and Satish Kumar Banyal v. State of H.P., which had consistently upheld the recognition of contractual service for annual increments. These judgments had become binding precedents, and the Court found no reason to deviate from them.

The Court struck a balance between the petitioners’ rights and the financial burden on the State. It granted actual financial benefits for increments limited to three years prior to the filing of petitions, with notional benefits for the rest of the period.

The Division Bench allowed LPA No. 338 of 2024 and all connected writ petitions. The following directions were issued:

Recognition of Contractual Service for Annual Increments:

Contractual service shall count for both annual increments and pensionary benefits under the CCS (Pension) Rules, 1972.

Retrospective Benefits:

Actual financial arrears were restricted to three years before the filing of petitions.

Benefits beyond this period were granted on a notional basis.

Implementation Timeline:

The State was directed to implement the judgment and release all due benefits within four months.

This landmark ruling reaffirms the principle of equal treatment for contractual employees in public service. By holding that contractual service must be uniformly recognized for both pensionary and incrementary benefits, the Court has provided much-needed clarity on the rights of contractual employees. The judgment is expected to impact a significant number of government employees in Himachal Pradesh, ensuring parity and consistency in the application of service rules.

Key Takeaways from the Judgment

Uniform Treatment: Contractual service must be recognized for both pension and increments once regularized.

Supreme Court’s Order in Sheela Devi Did Not Limit Increment Rights: The judgment clarified that the Supreme Court’s disposition in Sheela Devi did not overturn High Court rulings granting increments for contractual service.

Retrospective Benefits Limited: While financial benefits were limited to three years before filing petitions, notional recognition was granted for the entire period.

Date of Decision: November 12, 2024