Setback to Himachal Government as High Court strikes down phased release of employee arrears

Court quashes key provisions of 2022 Revised Pay Rules and Office Memorandum; holds financial constraints cannot justify withholding legitimate dues

Shimla, Nov 1,

A setback to the Himachal Pradesh government, the High Court has struck down key provisions allowing the State to defer and release revised salary and pensionary arrears of government employees and pensioners in a phased manner, holding that administrative discretion and financial constraints cannot override statutory monetary entitlements.

A Division Bench of Justice Vivek Singh Thakur and Justice Ranjan Sharma, in a judgment pronounced on October 31, 2026, allowed a batch of writ petitions led by Madhu Deshta versus State of Himachal Pradesh and others (CWP No. 8504 of 2025), challenging the government’s mechanism for staggered release of revised pay arrears and retirement benefits arising from the Revised Pay Rules notified on January 3, 2022.

The Court read down Rule 13 of the Himachal Pradesh Civil Services (Revised Pay) Rules, 2022, declaring the offending provisions inoperative to the extent that they gave the government unrestricted discretion to determine the time and manner of payment of revised salary arrears.

It also quashed Para 10 of the Office Memorandum dated February 25, 2022, which allowed the government to decide the future schedule for releasing revised pension, family pension and gratuity arrears. Further, Para 8.2 of the memorandum, providing for phased release of revised commuted pension, was quashed and set aside. The State’s action in withholding or delaying revised leave encashment was also set aside.

Court rejects financial constraints argument

The State government had defended the staggered payment mechanism on the grounds of financial constraints, particularly following the discontinuation of the Revenue Deficit Grant by the Central Government.

However, the Bench rejected this argument, observing that once the government had notified Revised Pay Rules with retrospective effect from January 1, 2016, and conferred corresponding monetary entitlements upon employees and retirees, it could not subsequently restrict or indefinitely defer their payment through administrative orders.

The Court held that financial constraints could not be invoked to defeat legitimate monetary dues flowing from statutory rules.

It further observed that the State could not introduce artificial cut-off dates between 2022 and 2026 for releasing benefits whose entitlement had already accrued under the applicable statutory framework.

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The Bench also took note of the differential treatment meted out to different categories of pensioners, observing that selectively releasing benefits to certain retirees while keeping others waiting amounted to inter-se discrimination within a homogeneous class.

Monetary entitlements protected under Article 300-A

A central issue examined by the Court was whether accrued salary and retirement benefits could be withheld through provisions granting unrestricted discretion to the government.

Holding that such benefits constituted valuable legal entitlements protected under Article 300-A of the Constitution, the Bench observed that the State could not deprive employees and pensioners of their accrued rights through arbitrary administrative action.

The judgment described the impugned provisions as conferring “unfettered, unbridled, uncanalised and unrestricted discretion” upon the State authorities.

Rejecting the government’s contention that the absence of a specific provision for interest barred such claims, the Court relied upon the Supreme Court’s judgment in S.K. Dua versus State of Haryana and another (2008), holding that employees could claim interest on delayed retirement benefits by invoking constitutional protections even in the absence of specific statutory provisions.

Six per cent interest; arrears to be released by February 2027

Apart from striking down the offending provisions, the High Court directed the State to release the entire revised salary arrears and admissible revised retirement benefits to the lead petitioner in two equal instalments.

The first instalment must be released by December 15, 2026, and the second by February 28, 2027.

The directions cover revised pension and family pension, gratuity, commuted pension and leave encashment, wherever admissible.

The Court also ordered simple interest at 6 per cent per annum from June 1, 2022, until actual release of the benefits, including on amounts that remain unpaid and are scheduled for release under the judgment.

These directions have been extended, with necessary modifications, to all connected writ petitions, with the State authorities, Boards and Corporations directed to extend admissible benefits within the same timeframe.

Those who did not approach court will not get interest

Significantly, the Bench clarified that employees and pensioners who had not filed writ petitions by October 30, 2026, would also remain entitled to their substantive monetary benefits. However, they would not be entitled to the 6 per cent interest awarded to the petitioners in the present batch of cases.

The judgment thus draws a distinction between the substantive entitlement to revised arrears and the additional interest relief granted to those who had pursued legal remedies.

The batch of petitions was accordingly allowed, with the parties directed to bear their respective costs.

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