Annual salary increments are close to the hearts of the employees. We wait patiently for the the golden news of the increase. Our spending plans are based on the anticipated increase. Nevertheless, as long as employer pays above the minimum wages as notified by the respective state government, employers are not under any obligation for salary hike every year.
In view of this, this is more a employee relations issues than a legal issue. Withholding increments is one of the means of cost-cutting, however, employers fail to measure the cost of cost-cutting. Annual increments are so perfected norms that these have become unwritten rules. Therefore, employers could have thought of the impact on the motivation of the employees. A timely communication would have helped in controlling the bout of frustration that you and your colleagues going through. Add up to this was ill-mannered behaviour of HR (as perceived by you) which has rubbed salt on the wound.
When company faces rough weather of the business, keeping trust with the employees is utmost essential. Your employers have exactly failed on this leadership quality. Putting in abeyance the salary increment is not something new. It has happened anywhere and everywhere however, brand image of the company or the leadership at the top was so strong that generally employees did not question the action or decision of the management. But then leadership lies in treating employees as assets and not mere as instrument for promoting one's business.
Non-communication from MD speaks volumes. It speaks psyche of him as to how much he values his human resources.
Now you have couple of options to follow. One is to wait patiently irrespective of the time span it takes for the next salary increase. If you do this, in future when the balmy days return, you could get rewards for your patience. MD may condone your normal misconduct and value you for not deserting in the bad days of the company.
Second one is to ask for formal meeting with MD to know the facts. You may ask the meeting in individual capacity or collectively. Nevertheless, this option comes up with the risk as MD may perceive that your application has stirred the calmness of the organisation.
Third one is to start looking for a change. Which option to follow, is your choice.