Supreme Court says a daily-wage past cannot block an increment after regularisation

The Supreme Court on Tuesday held that daily-wage skilled workers who were later treated as permanent employees cannot be denied the annual increment that fell due after they retired, on the ground that they had once been daily wagers. A bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva set aside a Gujarat High Court division bench judgment and allowed the appeal in Chhaganbhai Kohyabhai Pateliya and others versus the State of Gujarat.

The workers had been brought under a government resolution of 17 October 1988, given regular pay scales, and granted retirement benefits. The state's additional solicitor general did not dispute that the petitioners fell in that category. The Court said the argument that they were not entitled to the increment merely because they had been daily wagers could not be accepted, and that the argument ignored the 1988 resolution and the benefits that flowed from it.

The increment in question is the one earned on the day after retirement, a point the Court said was no longer open in light of its earlier ruling in C.P. Mundinamani. The employees had worked the year. The increment crystallised the next day. The High Court had treated the original daily-wage status as a reason to refuse it. The Supreme Court treated the regularisation, and the resolution that produced it, as the relevant status.

The sums are individual and small against a state budget. The rule is not. Gujarat, and any other state that regularised daily-wage staff under a similar resolution and then withheld the last increment, now has a judgment that ties the increment to the regular service actually rendered, not to the label on the first appointment letter. The bench did not limit the holding to one department. It limited it to workers who had been placed in the permanent category, paid on a regular scale, and given retirement benefits.

That limit is the part a personnel department can use. A worker who was never regularised is outside the judgment. A worker who was regularised, retired, and was refused the increment that fell due one day later is inside it. The 1988 date matters because it is the state's own instrument. The Court did not invent a scale. It read the resolution the state had already applied when it paid these employees as permanent staff.

Justice Sanjay Kumar wrote the judgment. The appeal was allowed on Tuesday, 6 October. LiveLaw reported the case as 2026 LiveLaw (SC) 1020. The High Court division bench is reversed. The state has the option of a review, which is a narrow remedy, or of paying the increment and the consequential pension revision. The judgment does not set a rupee figure. It sets the entitlement.

For the appellants the practical next step is a calculation: one increment, added to the last pay, carried into the pension. For other retirees in the same category the practical next step is a representation citing Pateliya. The Court has already answered the objection the state used in this case. A fresh objection would have to find a different distinction than daily-wage origin.

The one-day rule is what makes the case look technical and decides the money. An employee who retires on the last day of a month has completed the year of service that earns the increment. The increment is added the next day, when the person is already a pensioner. States have argued that a pensioner cannot earn a pay rise. The Supreme Court, in Mundinamani and now in Pateliya, has treated the increment as already earned. Gujarat's extra argument, that a daily-wage origin blocked even that earned increment, is the argument Tuesday removed.

Counsel for the state had to live with the 1988 resolution because the state had used it. Regular pay scales and retirement benefits were already in the service book. The only item withheld was the last increment. The Court called that distinction untenable. Departments that copied it in other cadres now have a citation, the case name, the bench, and the date, 6 October 2026.