PETITIONER:
A.V. NACHANE & ANOTHER
Vs.
RESPONDENT:
UNION OF INDIA & ANOTHER
DATE OF JUDGMENT28/12/1981
BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
REDDY, O. CHINNAPPA (J)
GUPTA, A.C.
PATHAK, R.S.
CITATION:
1982 AIR 1126 1982 SCR (2) 246
1982 SCC (1) 205 1981 SCALE (4)1959
CITATOR INFO :
F 1983 SC 173 (22)
RF 1984 SC1130 (20,33,34)
D 1985 SC 218 (15)
RF 1986 SC 847 (12)
RF 1991 SC 101 (32)
ACT:
Life Insurance Corporation (Amendment) Act 1981, Life
Insurance Corporation (ordinance) 1981, and Life Insurance
Corporation of India Class III and Class IV Employees (Bonus
and Dearness) Allowance Rules.
Act and ordinance whether ultra vires Articles 19(1)(g)
and 21 of the Constitution-Act whether suffers from
excessive delegation of powers.
Rule 3 of the Rules-Cannot make the writ issued by the
Supreme Court nugatory-Can operate only prospectively.
Constitution of India 1950:
Article 14-Hostile discrimination-Burden of proof-On
whom lies.
Article 21 ‘life’-Whether includes ‘livelihood’
Article 32-Claim based on industrial settlement-Whether
a fundamental right and enforceable.
Administrative Law-Delegated legislation-Statutory rule
over-riding existing law-Validity of.
HEADNOTE:
The Life Insurance Corporation was constituted under
the Life Insurance Corporation Act 1956, to provide for the
nationalisation of life insurance business in India by
transferring all such business to the Life Insurance
Corporation of India. Under Section 11(1) of the Act the
services of the employees of the insurers whose business had
vested in the Corporation were transferred to the
Corporation. Section 49(1 ) empowered the Life Insurance
Corporation of India to make regulations for the purpose of
giving effect to the provisions of the Act.
Two settlements were reached on January 24, 1974 and
February 6, 1974 between the Life Insurance Corporation and
its Class III and Class IV employees. These settlements
covered a large ground including the claim for bonus. These
were settlements under section 18 read with section 2(p) of
the Industrial Disputes Act 1947. Under clause 12 of the
settlements, the settlements were to be effective from 1st
April, 1973 for a period of four years that is, from 1st
April, 1973 to 31st March, 1977. In 1975, the Payment of
Bonus (Amendment) ordinance was promulgated which was
subsequently replaced by the Payment of Bonus (Amendment)
Act 1976. The Central Government decided that the employees
of establishments not covered by the Payment of Bonus Act
would not be liable
247
to get bonus and ex-gratia payment in lieu of bonus. Payment
of Bonus for the A year 1975-1976 to the employees of the
Corporation was stopped under instructions from the Central
Government.
A writ petition filed by the employees of the
Corporation in the Calcutta High Court was allowed, and the
Corporation was directed to act in accordance with the terms
of the settlement. In Madan Mohan Pathak v. Union of India
and Ors. [1978] 3 SCR 334, the Supreme Court held that the
1976 Act offended Article 31(2) of the Constitution and was
void, and directed the Union of India and the Life Insurance
Corporation to forbear from implementing or enforcing the
provisions of the 1976 Act and to pay annual cash bonus for
the years 1st April, 1975 to 31st March, 1976 and 1st April
1976 to 31st March, 1977, to Class III and Class IV
employees in accordance with the settlements.
On March 31, 1978, the Corporation issued a notice
under section 19(2) of the Industrial Disputes Act declaring
its intention to terminate the settlements on the expiry of
two months from the date of notice. On the same day another
notice was also issued by the Corporation under section 9A
of the Industrial Disputes Act stating that it proposed to
effect a change in the conditions of service applicable to
the workmen. These notices were followed by a notification
issued by the Corporation under section 49 of the Life
Insurance Corporation Act on May 26, 1978 substituting 2 new
regulation for the existing regulation No. 58 of the Staff
Regulations. Simultaneously the Life Insurance Corporation
(Alteration of Remuneration and other Terms and Conditions
of Service of Employees) order, 1957, was amended by the
Central Government, substituting a new clause (9) for the
original clause concerning bonus, to take effect from June
1, 1978, to provide that the employees of the Corporation
shall not be entitled to profit-sharing bonus.
The validity of the aforesaid two notices and the
notification issued for the purpose of nullifying any
further claim to annual cash bonus was challenged by the
workmen in a writ petition in the Allahabad High Court. The
High Court allowed the writ petition. In the appeal by the
Corporation to this Court the Life Insurance Corporation of
India v. D.J. Bahadur [1981] 1 SCR 1083 and the writ
petition filed in the Calcutta High Court transferred to
this Court, Chandrasekher Bose and others v. Union of India
and Ors. [1960] 3 SCR 499, a writ was issued to the
Corporation directing it “to give effect to the terms of the
settlements of 1974 relating to bonus until superseded by a
fresh settlement, an industrial award or relevant
legislation”.
On January 31, 1981, the Life Insurance Corporation
(Amendment) ordinance, 1981 was promulgated. A new sub-
clause(c) was inserted with retrospective effect from June
20, 1979 in sub-section (2) of section 48 of the Principal
Act. Three new sub-sections (2A), (2B) and (2C) were also
added to section 48. Sub-section (2A) provided that the
regulations and other provisions with respect to the terms
and conditions of service of the employees and agents of the
Corporation at The commencement of the ordinance shall be
deemed to be rules made under clause (cc) of sub-section (2)
. Sub-section ! (2B) provided that the power to make rules
under clause (cc) of sub-section (2) shall include (i) the
power to give retrospective effect to such rules, and (ii)
the power to amend by way of addition, variation or repeal
the regulations and other provisions referred to in sub-
section (2A) with retrospective effect, but not from a date
earlier than
248
June 20. 1979. Sub-section (2C) provided that provisions of
clause (cc) of sub-section (2) and sub-section (2B) and any
rule made under clause (cc) shall have effect,
notwithstanding any judgment, decree, or order of any court,
tribunal or other authority, the Industrial Disputes Act
1947, any agreement, settlement, award or other instrument.
The Central Government by a notification dated February
2, 1981 made the Life Insurance Corporation of India Class
III and Class IV Employees (Bonus and Dearness Allowance)
Rules 1981. Rule 3 which had been given retrospective
operation with effect from July 1, 1979 provided by sub-rule
(1) that: “No Class Ill or Class IV employee of the
Corporation shall be entitled to the payment of any profit
sharing bonus or any other kind of cash bonus”, and sub-
rule(2) of rule 3 provided that notwithstanding sub-rule
(1), every Class 111 and Class IV employee shall be entitled
to a payment in lieu of bonus (a) for the period commencing
from July 1, 1979 and ending on March 31, 1980 at the rate
of IS per cent of his salary, and (b) thereafter for every
year commencing from 1st April and ending on the 31st day of
the March of the following year at such rate and subject to
conditions which the Central Government may determine. Sub-
rule (3) of rule 3 rescinded regulation 58 of the Staff
Regulations and all other provisions relating to the payment
of bonus to the extent they were inconsistent with rule 3.
The petitioners in their writ petitions to this Court
challenged the validity of the Life Insurance Corporation
(Amendment) ordinance, 1981, the Life Insurance Corporation
(Amendment) Act, 1981 and the Life Insurance Corporation of
India. Class III and Class IV Employees (Bonus and Dearness
Allowance) Rules, 1981 contending that: (1) the Act and the
Rules were violative of Articles 14, 19(1)(g) and 21(2) of
the Constitution: (2) the Act was invalid on the ground of
excessive delegation of legislative functions; (3) sub-
section (2C) of section 48 was invalid to the extent it
permitted retrospective operation to rule 3 to over-ride the
order of this Court in D.J. Bahadur’s case; (4) Article 14
was infringed because the provisions of sub-section (2C) of
section 48 provided that any rule under Clause (cc) of sub-
section (2) of that section touching the terms and
conditions of service of the employees of the Corporation
shall have effect notwithstanding anything contained in the
Industrial Disputes Act, 1947; (S) sub section (2C) added to
section 48 of the Life Insurance Corporation Act, 1956 by
the Amendment Act of 1981 was invalid because of excessive
delegation of legislative functions and if sub-section (2C)
which was an integral part of the Amendment Act was ultra
vires, the entire Amendment Act would be unconstitutional.
and (6) the provisions of the Amendment Act of 1981 could
not nullify the effect of the writ issued by this Court in
D.J. Bahadur’s case.
The writ petitions were contested on behalf of the
Union of India and the Lire Insurance Corporation by
contending that remuneration that was being paid to Class
III and Class IV employees of the Corporation was far in
excess of what was paid tn similarly situated employees in
other establishments in the public sector, and that the
problem of the mounting cost of administration led to the
making of the ordinance and the Amendment Act As no
improvement in the situation was possible by the process of
adjudication, a policy decision was taken that in the
circumstances the proper course was legislation and that was
why the Amendment Act was passed and the Rules framed. The
Life Insurance Corporation Act as amended and the Rules made
after amendment placed the Corporation
249
in the same position as other undertakings, that the
advantages being enjoyed by the employees of the Corporation
which were not available to similarly situated employees of
other undertakings had been taken away removing the
discrimination in favour of the employees of the Life
Insurance Corporation. Repealing a law was an essential
legislative function which had been delegated to the Central
Government and the delegation was not excessive. It is not
the Rules framed by the Central Government in exercise of
the delegated authority that over-ride the Industrial
Disputes Act or any other existing law, but the power of
abrogating the existing law is in sub-section (2C) of
section 48 which was enacted by Parliament itself.
Allowing the writ petitions in part
^
HELD: [By the Court]
The Life Insurance Corporation (Amendment) Act 1981 can
operate but prospectively in so far as it seeks to nullify
the terms of the 1974 settlements in regard to payment of
bonus. [269 A-C, 271 A-B]
[Per Gupta & Pathak, JJ]
1. (i) Rule 3 operating retrospectively cannot nullify
the effect of the writ issued in D. J. Bahadur’s case which
directed the Life Insurance Corporation to give effect to
the terms of the 1974 settlements relating to bonus until
superseded by a fresh settlement, an Industrial award or
relevant legislation. [269 A]
(ii) The Life Insurance Corporation (Amendment) Act
1981 and the Life Insurance Corporation of India Class 111
and Class IV employees (Bonus and Dearness Allowance) Rules,
1981 are relevant legislation. In view of the decision in
Madan Mohan Pathak’s case these rules in so far as they seek
to abrogate the terms of 1974 settlements relating to bonus,
can operate only prospectively, that is. from February 2,
1981 the date of publication of the Rules. [269 B-C]
(iii) A claim based on the 1974 settlements is not a
fundamental right that could be enforced through this Court.
[259 C]
2. The burden of establishing hostile discrimination
was on the petitioners who challenged the Amendment Act and
the rules. It was for them to show that the employees of the
Life Insurance Corporation and the employees of the other
establishments to whom the provisions of the Industrial
Disputes Act were applicable were similarly circumstanced to
justify the contention that by excluding the employees of
the Corporation from the purview of the Industrial Disputes
Act they had been discriminated against. There is no
material on the basis of which it can be held that the
Amendment Act of 1981 and the rules made on February 2, 1981
infringe Article 14. [260 F-G]
Express Newspapers (Private) Limited and another v.
Union of India, [1959] SCR 12 and Moti Ram Deka etc. v.
General Manager, N.E.F. Railways, Maligaon. Pandu etc.
[1964] 5 SCR 683, held inapplicable.
In the instant case section 48(2C) read with section
48(2) (cc) authorises the Central Government to make rules
to carry out the purposes of the Act notwithstanding the
Industrial Disputes Act or any other law. This means that in
250
respect of the matters covered by the rules, the provisions
of the Industrial Disputes Act or any other law will not be
operative. [262 A-B]
3. The policy as stated in the preamble of the
Amendment Act is that “for securing the interest of the Life
Insurance Corporation of India and policyholders and to
control the cost of administration, it is necessary that
revision of the terms and conditions of service applicable
to the employees and the agents 13 of the Corporation should
be undertaken expeditiously.” The policy offers sufficient
guidance to the Central Government in exercising its powers
under that Act. [265 B-C]
4 Clause (cc) of section 48(2) empowers the Central
Government to make rules with regard to the terms and
conditions of service of the employees and agents of the
Corporation. Sub-section 2(B) of section 48 says that the
power to make rules conferred by clause (cc) of sub-section
(2) shall include the power to add, vary or repeal the
regulations and other “provisions” referred to in subsection
(2A) with retrospective effect from a date not earlier than
June 20, 1979. A writ issued by this Court is not a
regulation nor can it be described as ‘other provisions’
which expression includes circulars and administrative
directions. Sub-section (2C) of section 48 however provided
that any rule made in clause (CC) with retrospective effect
from any date shall be deemed to have had effect from that
date notwithstanding any judgment, decree or order of any
Court, Tribunal or other authority. Rule 3 of the rules
relating to the subject of bonus cannot make the writ issued
by this Court nugatory in view of the decision of this Court
in Madan Mohan Pathak v. Union of India. [265 H-266; 267 A]
5. It is not really the rules framed by the Central
Government that over-ride the Industrial Disputes Act or any
other existing law, but the power of abrogating the existing
laws is in sub-section (2C) of section 48 enacted by
Parliament itself. [264 F]
Hari Shankar Bagla and another v. State of Madhya
Pradesh, [1955] 1 SCR 380, referred to.
[Per Chinnappa Reddy J.]
The effect of the two judgments in Madan Mohan Pathak’s
case and D. J. Bahadur’s case was clear: the settlements of
1974, in so far as they related to bonus, could only be
superseded by a fresh settlement, an industrial award or
relevant legislation. But any such supersession could only
have future effect, but not retrospective effect so as to
disentitle the Class III and Class IV employees of Life
Insurance Corporation from receiving the cash bonus which
had been earned by them, day by day, and which the Life
Insurance Corporation of India was under an obligation to
pay in terms of the writ issued in D. J. Bahadur’s case. The
present attempt made by the 1981 amending Act and the rules
thereunder to scuttle the payment of bonus with effect from
a date anterior to the date of the enactment must,
therefore, fail. The employees are entitled to be paid the
bonus earned by them before the date of publication of the
Life Insurance Corporation of India Class III and Class IV
employees (Bonus and Dearness Allowance) Rules, 1981. [270H-
271 B]
251
JUDGMENT:
ORIGINAL JURISDICTION: Writ Petition Nos. 501, 643-44,
645, 649 and 1866 of 1981.
(Under article 32 of the Constitution of India)
R. K. Garg, V.J. Francis, Sunil Kumar Jain and D. K.
Garg for the Petitioners in WP. 501/81.
M. K Ramamurthi, J. Ramamurthi and Miss R. Vagai for
the Petitioners in WPs. 643-44/81.
Vimal Dave and Miss Kailash Mehta for the Petitioners
in WP. No. 645/81.
A.K. Goel for the Petitioners in WP. 649/81.
Dalveer Bhandari and H. M. Singh for the Petitioners in
WP. 1866/81.
L. N. Sinha, Attorney General, M. K Banerjee, Soliciter
General, Miss A. Subhashini and R P. Singh for Respondent
No. 1 in all the matters.
L. N. Sinha, Attorney General, O.C. Mathur and Sri
Narain, for Respondent No. 2 in all the matters.
P. H. Parekh for the Intervener in WP. 501/81.
Somnath Chaterjee, J. Ramamurthi and Miss R. Vaigai for
the Intervener Ajoy Kumar Banerjee-in WPs. 643-44/81.
The following Judgments were delivered
GUPTA, J. The validity of the provisions of the Life
Insurance Corporation (Amendment) Act, 1981 and the Life
Insurance Corporation (Amendment) ordinance, 1981 which
preceded it is challenged in this batch of writ petitions.
The writ petitions have a history behind them which can be
conveniently divided into three chapters. However, it will
be easier to follow this history if we referred to some of
the provisions of the Life Insurance Corporation Act, 1955
first. The Life Insurance Corporation was constituted under
the Life Insurance Corporation Act, 1956 to provide for the
nationalisation of life insurance business in India ‘by
transferring all
252
such business to the Life Insurance Corporation of India.
Under section 11(1) of the Act the services of the employees
of insurers whose business has vested in the Corporation are
transferred to the Corporation. Sub-section (2) of section
11 provides:
“Where the Central Government is satisfied that
for the purpose of securing uniformity in the scales of
remuneration and the other terms and conditions of
service applicable to employees of insurers whose
controlled business has been transferred to, and vested
in, the Corporation, it is necessary so to do, or that,
in the interests of the Corporation and its policy-
holders, a reduction in the remuneration payable, or a
revision of the other terms and conditions of service
applicable, to employees or any class of them is called
for, the Central Government may, not withstanding
anything contained in sub-section (1), or in the
Industrial Disputes Act, 1947, or in any other law for
the time being in force, or in any award, settlement or
agreement for the time being in force, alter (whether
by way of reduction or otherwise) the remuneration and
the other terms and conditions of service to such
extent and in such manner as it thinks fit; and if the
alteration is not acceptable to any employee, the
Corporation may terminate his employment by giving him
compensation equivalent to three months’ remuneration
unless the contract of service with such employee
provides for a shorter notice of termination.”
There is an explanation to this sub-section which is not
relevant for the present purpose. Section 48 of the Act
empowers the Central Government to make rules to carry out
the purposes of the Act. Sub-section (2) of section 48 in
clauses (a) to (m) specifies some of the matters that the
rules may provide for. Sub-section (3) of section 48 states:
“Every rule made by the Central Government under
this Act shall be laid, as soon as may be after it is
made, before each House of Parliament while it is in
session, for a total period of thirty days which may be
comprised in one session or in two or more successive
session, and if, before the expiry of the session
immediately following the session or the successive
sessions aforesaid, both Houses agree in making any
modification in the rule or both Houses
253
agree that the rule should not be made, the rule shall
A thereafter have effect only in such modified form or
be of no effect, as the case may be; so, however, that
any such modification or annulment shall be without
prejudice to the validity of anything previously done
under that rule.”
Section 49(1) empowers the Life Insurance Corporation of
India to make regulations to provide for all matters for
which provision is expedient for the purpose of giving
effect to the provisions of the Act. Clauses (a) to (m) of
sub-section (2) of section 40 specify some of the matters
the regulations may provide for. The matter referred to in
clause (b) of sub-section (2) is “the method of recruitment
of employees and agents of the Corporation and the terms and
conditions of service of such employees or agents.” Clause
(bb) speaks of the terms and conditions of service of
persons who have become employees of the Corporation under
sub-section (1) of section 11.
Turning now to the history of the litigation, the first
chapter begins with two settlements reached on January 24,
1974 and February 6, 1974 between the Life Insurance
Corporation and its class III and class IV employees. These
were settlements under section 18 read with section 2(p) of
the Industrial Disputes Act, 1947. The settlements were
identical in terms; four of the five unions of workmen
subscribed to the first settlement while the remaining union
was a signatory to the second. The settlements cover a large
ground including the claim for bonus. Clause 8 of each of
the settlements was as follows:
“BONUS:
(i) No profit sharing bonus shall be paid. However,
the Corporation may, subject to such directions as
the Central Government may issue from time to
time, grant any other kind of bonus to its Class
III and IV employees.
(ii) An annual cash bonus will be paid to all Class III
and Class IV employees at the rate of 15% of the
annual salary (i.e. basic pay inclusive of special
pay, if any, and dearness allowance and additional
dearness allow-
254
ance) actually drawn by an employee in respect of
the financial year to which the bonus relates.
(iii) Save as provided herein all other terms and
conditions attached to the admissibility and
payment of bonus shall be as laid down in the
settlement on bonus dated the 26th June, 1972.”
Clause 12 of the settlements inter alia provides: “This
settlement shall be effective from 1st April, 1973 and shall
be for a period of four years. i.e. from 1st April 1973 to
31st March 1977.” In 1975 an ordinance was promulgated
called the Payment of Bonus (Amendment) ordinance which was
subsequently replaced by the Payment of Bonus (Amendment)
Act, 1976. The reference to this ordinance and the Act would
not have been relevant because section 32 (i) of the
original Payment of Bonus Act, 1965 made the said Act not
applicable to the employees of the Life Insurance
Corporation, but the Central Government appears to have
decided also that the employees of establishments not
covered by the Payment of Bonus Act would not be eligible to
get bonus and ex-gratia cash payment in lieu of bonus would
be made. Accordingly payment of bonus for the year 1975-76
to the employees of the Corporation was stopped under
instructions from the Central Government. On a writ petition
filed by the employees of the Corporation in the Calcutta
High Court, a single Judge of that court issued a writ of
mandamus directing the Corporation to act in accordance with
the terms of the settlement. Thereafter the Life Insurance
Corporation (Modification of Settlement) Act, 1976 was
passed. Some of the employees of Corporation challenged the
constitutional validity of the Act by filing writ petition
in this Court. In Madan Mohan Pathak v. Union of India and
Ors.(1) this Court held that the 1976 Act offended Article
31(2) of the Constitution and was as such void and issued a
writ of mandamus directing the Union of India and the Life
Insurance Corporation to forebear from implementing or
enforcing the provisions of the 1976 Act and to pay annual
cash bonus for the , years 1st April, 1975 to 31st March,
1976 and 1st April, 1976 to 31st March, 1977 to Class Ill
and Class IV employees in accordance with the terms of the
settlements.
The second chapter began on March 31, 1978 when the
Corporation issued a notice under section 19(2) of the
Industrial Dis-
255
putes Act declaring its intention to terminate the
settlements on the expiry of the period of two months from
the date the notice was served. On the same day another
notice was issued by the Corporation under section 9A of the
Industrial Disputes Act stating that it proposed to effect a
change in the conditions of service applicable to the
workmen. The change proposed was set out in the annexure to
the notice which reads:
“AND WHEREAS for economic and other reasons it
would not be possible for the Life Insurance
Corporation of India to continue to pay bonus on the
aforesaid basis;
Now, therefore, it is our intention to pay bonus
to the employees of the Corporation in terms reproduced
hereunder:
“No employee of the Corporation shall be
entitled to profit sharing bonus. However, the
Corporation may, having regard to the financial
condition of the Corporation in respect of any
year and subject to the previous approval of the
Central Government, grant non-profit sharing bonus
to its employees in respect of that year at such
rate as the Corporation may think fit and on such
terms and conditions as it may specify as regards
the eligibility of such bonus.”
These notices were followed by a notification issued by the
Corporation under section 49 of the Life Insurance
Corporation Act on May 26, 1978 substituting a new
regulation for the existing regulation No. 58 of the Staff
Regulations. Simultaneously the Life Insurance Corporation
(Alteration of Remuneration and other terms and Conditions
of Service of Employees) order, 1957, called the
Standardisation order, made by the Central Government in
exercise of the powers conferred on it by section 11(2) of
the Life Insurance Corporation Act was amended with effect
from June 1, 1978 substituting a new clause (9) for The
original clause concerning bonus. Clause (9) of the
Standardisation order and Regulation 58 of the Staff
Regulations after amendment read as follows:
“No employee of the Corporation shall be entitled
to profit-sharing bonus. However, the Corporation may,
having regard to the financial condition of the
Corporation in respect of any year and subject to the
previous approval
256
of the Central Government, grant non-profit sharing
bonus to its employees in respect of that year at such
rate as the Corporation may think fit and on such terms
and conditions as it may specify as regards the
eligibility for such bonus..”
The validity of the said two notices and the notification
issued for the purpose of nullifying any further claim of
the workmen to annual cash bonus in terms of the Settlements
of 1974 was challenged by the workmen by filing a writ
petition in the Allahabad High Court. The High Court allowed
the writ petition and the Corporation preferred an appeal to
this Court. Another writ petition which had been filed in
the Calcutta High Court challenging the said notices and the
notification was transferred to this court, and the appeal
and this writ petition were heard and disposed of by a
common judgment. The two cases were Civil Appeal No. 2275 of
1978, (The Life Insurance Corporation of India v. D.J.
Bahadur and others)(1) and Transfer case No. I of 1979
(Chandrashekhar Bose and others v. Union of India and
Ors.)(2). By a majority the appeal preferred by the
Corporation was dismissed and the transfer petition was
allowed and a writ was issued by this Court to the Life
Insurance Corporation directing it “to give effect to the
terms of the settlements of 1974 relating to bonus until
superseded by a fresh settlement, an industrial award or
relevant legislation.” The second chapter closed with this
decision.
The third chapter begins with the promulgation of the
Life Insurance Corporation (Amendment) ordinance, 1981 on
January 31, 1981. The following changes made in the
principal Act by the ordinance are material. In sub-section
(2) of section 48 of the principal Act a new sub-clause (cc)
was inserted with retrospective effect from June 20, 1979.
Clause (cc) relates to “the terms and conditions of service
of the employees and agents of the Corporation, including
those who became employees and agents of the Corporation on
the appointed day under this Act.” Three new sub-sections
(2A), (2B) and (2C) were added to section 48. Sub-section
(2A) says that the regulations and other provisions as in
force immediately before the commencement of the ordinance
with respect to the terms and conditions of service of the
employees and agents of the Corporation shall be deemed to
be rules made under clause (cc) of
257
sub-section (2). Sub-section (2B) provides that the power to
make rules under clause (cc) of sub-section (2) shall
include (i) the power to give retrospective effect to such
rules, and (ii) the power to amend by way of addition,
variation or repeal the regulations and other provisions
referred to in sub-section (2A) with retrospective effect,
but not from a date earlier than June 2(), 1979. Sub-section
(2C) reads as follows:
“The provisions of clause (cc) of sub section (2)
and - sub-section (2B) and any rules made under the
said clause (cc) shall have effect, and any such rule
made with retrospective effect from any date shall also
be deemed to have had effect from that date,
notwithstanding any judgment, decree or order of any
court, tribunal or other authority and notwithstanding
anything contained in the Industrial Disputes Act, 1947
or any other law or any agreement, settlement, award or
other instrument for the time being in force.”
Certain consequential changes were also made in section 49
of the Act. In clause (b) of section 49(2) which has been
quoted above, the words “and the terms and conditions of
service of such employees or agents” were omitted. This was
necessary because the terms and conditions of service of the
employees and the agents with regard to which the
Corporation was empowered to make regulations by section
49(1) of the principal Act is now a matter included in
clause (cc) of section 48(2) as one of the matters covered
by the rule making authority of the Central Government under
section 48(1) of the Act. The ordinance also omits clause
(bb) from section 49(2). Clause (bb) also quoted earlier
included the terms and conditions of the service of the
persons who had become employees of the Corporation under
section 11(1) of The Act. The terms and conditions of
service of such persons are now included in the new clause
(cc) of section 48(2).
By notification dated February 2, 1981 the Central
Government in exercise of the powers conferred by section 48
of the Life Insurance Corporation Act, 1956 made the rules
called the Life Insurance Corporation of India Class III and
IV employees (Bonus and Dearness Allowance) Rules, 1981. The
relevant rule is rule 3 : which has been given retrospective
operation from July 1, 1979. Sub-rule (1) of rule 3
provides; “No Class III or Class IV employee
258
of the Corporation shall be entitled to the payment of any
profit sharing bonus or any other kind of cash bonus.” Sub-
rule (2) of rule 3 states that notwithstanding what sub-rule
(1) provides every Class III and Class IV employee shall be
entitled to a payment in lieu of bonus-(a) for the period
commencing from July 1, 1979 and ending on March 31, 1980 at
the rate of 15 per cent of his salary; and (b) thereafter
for every year commencing on the 1st April and ending on the
31st day of March of the following year, at such rate and
subject to such conditions as the Central Government may
determine having regard to the wage level, the financial
circumstances and other relevant factors. There is a proviso
to this sub-rule which says that (i) no payment in lieu of
bonus shall be made to any employee drawing a salary
exceeding Rs. 1600 per month; and (ii) where the salary of
an employee exceeds Rs. 750 per month but does not exceed
Rs. 1600 per month, the maximum payment to him in lieu of
bonus shall be calculated as if his salary were Rs. 750 per
month. For the purposes of this sub-rule, “salary” was
explained as meaning basic pay, special pay, if any, and
dearness allowance. Sub-rule (3) of rule 3 rescinds
regulation 58 of the Staff Regulations and all other
provisions relating to the payment of bonus to the employee
to the extent they are inconsistent with rule 3
Writ petition No. 501 of 1981 under Article 32 of the
Constitution was filed in this Court on February 5, 1981 by
Shri A.V. Nachane and the All India Life Insurance
Corporation Employees Federation. Bombay, challenging the
validity of the ordinance and the aforesaid rules. Similar
writ petitions by other associations of the employees of the
Corporation followed In the meantime the ordinance was
repealed and replaced on March 17, 1981 by the Life
Insurance Corporation (Amendment) Act, 1981 which received
the assent of the President of India on the same day. The
writ petitions were suitably amended after the Amendment Act
came into force. The provisions of the Act are similar to
those of the ordinance except that the Amendment Act adds a
new sub-section, sub-section (3). to section 49 of the
principal Act. The new sub section (3) which provides that
the regulations made under section 49 shall be laid before
each House of Parliament are similar in terms to sub-section
(3) OF section 48 requiring the rules made by the Central
Government under the Act to be laid before each House of
Parliament. Section 4 of the Amendment Act repeals the
ordinance but provides that “notwithstanding such repeal,
anything done or any action taken under the principal Act as
amended by the said
259
Ordinance shall be deemed to have been done or taken under
the principal Act as amended by this Act
The validity of the Amendment Act and the Life
Insurance Corporation of India Class III and Class IV
Employees (Bonus and Dearness Allowance) Rules, 1981 have
been challenged on several grounds. It was argued that the
Act and the rules were violative of Article 14, 19(1) (g)
and 21 of the Constitution. It was further contended that
the said Act was invalid on the ground of excessive
delegation of legislative functions. Another contention
raised was that in any event sub-section (2C) of section 48
was invalid to the extent it permitted retrospective
operation to rule 3 to override the order of this Court
disposing of D. J. Bahadur’s case. The challenge based on
Article 19(1)(g) and Article 21 does not appear to have any
substance. Apart from anything else, a claim based on the
1974 settlements is certainly not a fundamental right that
could be enforced through this Court. As regards Article 21,
the first premise of the argument that the word ‘life’ in
that Article includes livelihood was considered and rejected
in In re: Sant Ram.
The contention that Article 14 is infringed arises on
the provision of sub-section (2C) of section 48 that any
rule made under clause (cc) of sub-section (2) of that
section touching the terms and conditions of service of the
employees of the Corporation shall have effect
notwithstanding anything contained in the Industrial
Disputes Act, 1947. It is true that after rules are made
regarding the terms and conditions of service, the right to
raise an industrial dispute in respect of matters dealt with
by the rules will be taken away and to that extent the
provisions of the Industrial Disputes Act will cease to be
applicable. It was argued that there was no basis on which
the employees of the Corporation could be said to form a
separate class for denying to them the protection of the
Industrial Disputes Act. The reply on behalf of the Union of
India and the Life Insurance Corporation was that the
remuneration that was being paid to class III and class IV
employees of the Corporation was far in excess of what was
paid to similarly situated employees in other establishments
in the public sector. Some material was also furnished to
support this claim though they were certainly not
conclusive. The need for amending the Life Insurance
Corporation Act, 1956 as appearing from the preamble of the
Amendment Act and the ordinance is as follows: “…for
securing the interests of the Life Insurance Corporation of
India and its policy-holders and
260
to control the cost of administration, it is necessary that
revision of the terms and conditions of service applicable
to the employees and agents of the Corporation should be
undertaken expeditiously.” Referring to the preamble of the
Act the Attorney-General appearing for the Union of India
and the Corporation submitted that the problem of mounting
cost of administration led to the making of in the impugned
law. He added that it was felt that no improvement in the
situation was possible by the process of adjudication and a
policy decision was taken that in the circumstances the
proper course was legislation and that is why the Amendment
Act was passed and the impugned rules were framed. The
learned Attorney General submitted that it was for
Parliament to decide whether the situation was remediable by
adjudication or required legislation. According to him the
Life Insurance Corporation Act as amended and the rules made
after amendment placed the Corporation in the same position
as other undertakings, that the advantages being enjoyed by
the employees of the Corporation which were not available to
similarly situated employees of other undertakings have been
taken away removing what he described as discrimination in
favour of the employees of the Life Insurance Corporation.
We have already said that the material produced on behalf of
the Union of India and the Corporation to show that the
terms and conditions of service of the employees in several
other undertakings in the public sector compared
unfavourably to those of the Corporation employees was not
conclusive. But the burden of establishing hostile
discrimination was on the petitioners who challenged the
Amendment Act and the rules. It was for them to show that
the employees of the Life Insurance Corporation and the
employees of the other establishment to whom the provisions
of the Industrial Disputes Act were applicable were
similarly circumstanced to justify the contention that by
excluding the employees of the Corporation from the purview
of the Industrial Disputes Act they had been discriminated
against. There is no material before us on the basis of
which we can hold that the Amendment Act of 1981 and the
rules made on February 2, 1981 infringe Article 14. We do
not think that on the facts of this Case Express Newspapers
(Private) Limited and another v. Union of India,(1) Moti Ram
Deka etc. v. General Manager N.E.F. Railways, Maligaon,
Pandu etc.,(2) relied on by the petitioners, have any
application.
261
It was contended that sub-section (2C) added to section
48 of the Life Insurance Corporation Act, 1956 by the
Amendment Act of 1981 was invalid because of excessive
delegation of legislative functions and that if sub-section
(2C) which is an integral part of the Amendment Act was
ultra vires, the entire Amendment Act would be
unconstitutional The Amendment Act introduced clause (cc) in
section 48(2) authorising the Central Government to make
rules in respect of the terms and conditions of service of
the employees and agents of the Corporation. Sub-section
(2C) of section 48 provides inter alia that rules made under
clause (cc) shall have effect notwithstanding anything
contained in the Industrial Disputes Act, 1947 or any other
law for the time being in force. The argument is that the
rules made under section 48(2) (cc) can virtually repeal the
Industrial Disputes Act and other laws to the extent they
are inconsistent with these rules. Repealing a law, it was
submitted on the authority of In re Delhi Laws Act,(l) was
an essential legislative function which had been delegated
to the Central Government and that the delegation was
therefore excessive. It is now well settled that it is
competent for the legislature to delegate to other
authorities the power to frame rules to carry out the
purposes of the law made by it (see In re the Delhi Laws
Act,(l) Raj Narain Singh v. The Chairman, Patna
Administration Committee, Patna and another,(2) and D.S.
Garewal v. State of Punjab and another(3) but the essential
legislative functions cannot be delegated. What is essential
legislative function has been explained by Mukerjee., J. in
the Delhi Laws case as follows:
“The essential legislative function consists in
the determination or choosing of the legislative policy
and of formally enacting that policy into a binding
rule of con- duct. It is open to the legislature to
formulate the policy as broadly and with as little or
as much details as it thinks proper and it may delegate
the rest of the legislative work to a subordinate
authority who will work out the details within the
framework of that policy.”
In Raj Narain Singh v. The Chairman, Patna Administration
Committee, Patna, and another(2) a bench of five Judges of
this Court held
262
that an executive authority can be empowered by a statute to
modify either existing or future laws but not in any
essential feature. In the instant case section 48(2C) read
with section 48(2) (cc) authorises the Central Government to
make rules to carry out the purposes of the Act
notwithstanding the Industrial Disputes Act or any other
law. This means that in respect of the matters covered by
the rules the provisions of the Industrial Disputes Act or
any other law will not be operative. The argument is that
sub-section (2C) or any other provision introduced in the
principal Act by the Amendment Act does not lay down any
legislative policy nor supply any guidelines as to the
extent to which the rule-making authority would be competent
to override the provisions of the Industrial Disputes Act or
other laws. Reference was made to Municipal Corporation af
Delhi v. Birla Cotton Spinning and Weaving Mills, Delhi and
another,(l) Gwalior Rayon Silk Manufacturing (Weaving)
Company Limited v. Assistant Commissioner of Sales-tax and
others,(2) for the proposition that unlimited right of
delegation is not inherent in the legislative power itself.
The question therefore is, does the Amendment Act of
1981 lay down no legislative policy or furnish no guidance
to indicate the nature and extent of the modifications that
the rules will be permitted to make in the existing laws to
carry out the purposes of the Life Insurance Corporation
Act, 1956 as amended in 1981 ? Learned Attorney General
relied on the decision of this Court in Harishankar Bagla
and another v. State of Madhya Pradesh (3) This was a case
under the Essential Supplies (Temporary Powers) Act, 1946.
Section 3(1) of that Act says that the Central Government
for maintaining or increasing supplies of any essential
commodity, or for securing their equitable distribution and
availability at fair prices, may by order provide for
regulating or prohibiting the production, supply and
distribution thereof and trade and commerce therein. Sub-
section (2) of section 3 states that without prejudice to
the generality of the powers conferred by sub-section (1),
such an order may provide inter alia for regulating by
licences or permits or otherwise the production or
manufacture and transport, distribution, disposal,
acquisition; use or consumption of any essential commodity.
Section 6 of that Act provides inter alia that any order
made under section 3 shall have effect notwithstanding any-
263
thing inconsistent therewith contained in any enactment
other than A that Act. In exercise of the powers conferred
by section 3 of that Act the Central Government made the
Cotton Textiles (Control of Movement) order, 1948. Clause 3
of the said order requires a person to take a permit from
the Textile Commissioner to enable him to transport cotton
textiles. One of the question that arose in Harishankar
Bagla’s case was whether section 6 of the Essential Supplies
(Temporary Powers) Act permitted rules to be made by the
Central Government repealing by implication an existing law,
which was an essential legislative function and could not
validly be delegated. Mahajan C.J., speaking for the court
said:
“Section 6 does not either expressly or by
implication repeal any of the provisions of pre-
existing laws, neither does not abrogate them. Those
laws remain untouched and unaffected so far as the
statute book is concerned. The repeal of a statute
means as if the repealed statute was never on the
statute book. It is wiped out from the statute book.
The effect of section 6 certainly is not to repeal any
one of those laws or abrogate them. Its object is
simply to by-pass them where they are inconsistent with
the pro visions of the Essential Supplies (Temporary
Powers) Act, 1946, or the orders made thereunder. In
other words, the orders made under section 3 would be
operative in regard to the essential commodity covered
by the Textile Control order wherever there is
repugnancy in this order with the existing laws and to
that extent the existing laws with regard to those
commodities will not operate. By-passing a certain law
does not necessarily amount to repeal or abrogation of
that law. That law remains unrepealed but during the
continuance of the order made under section 3 it does
not operate in that field for the time being.”
We think the Attorney-General was right in his submission
that what has been said of section 6 of the Essential
Supplies (Temporary Powers) Act should hold good for sub-
section (2C) of section 48 of the Life Insurance Corporation
Act which is similar in terms in so far as it authorises the
Central Government to make rules bypassing the existing
laws. Mahajan C.J., also holds that assuming that the rules
framed under the Act had the effect of repealing the l l
existing laws, the power to repeal is exercised not by the
delegate but by the Act itself. This is what he says on this
point:
264
“Conceding, however, for the sake of argument that
to the extent of a repugnancy between an order made
under section 3 and the provisions of an existing law,
to the extent of the repugnancy, the existing law
stands repealed by implication, it seems to us that the
repeal is not by any Act of the delegate, but the
repeal is by the legislative Act of the Parliament
itself. By enacting section 6 Parliament itself has
declared that an order made under section 3 shall have
effect notwithstanding any inconsistency in this order
with any enactment other than this Act. This is not a
declaration made by the delegate but the Legislature
itself has declared its will that way in section 6. The
abrogation or the implied repeal is by force of the
legislative declaration contained in section 6 and is
not by force of the order made by the delegate under
section 3. The power of the delegate is only to make an
order under section 3. Once the delegate has made that
order its power is exhausted. Section 6 then steps in
wherein the Parliament has declared that as soon as
such an order comes into being that will have effect
notwithstanding any inconsistency therewith contained
in any enactment other than this Act. Parliament being
supreme, it certainly could make a law abrogating or
repealing by implication provisions of any pre-existing
law and no exception could be taken on the ground of
excessive delegation to the Act of the Parliament
itself.”
The Attorney General relied strongly on these observations
in submitting that it is not really the rules framed by the
Central Government in exercise of the delegated authority
that override the Industrial Disputes Act or any other
existing law but the power of abrogating the existing laws
is in sub-section (2C) of section 48 enacted by Parliament
itself. The observations quoted above from Harishankar
Bagla’s case which was decided by a bench of five Judges
appear to support the Attorney General’s contention.
The question however remains to be answered, does the
Life Insurance Corporation Act, 1956 as amended in 1981
state any policy to guide the rule-making authority ? We
have earlier referred to the observations of Mukerjea J., in
the Delhi Laws case that the legislature can formulate a
policy as broadly and with as little or as much details as
it thinks proper and may delegate the rest of the
Iegislative work to a subordinate authority who will work
out the details within the framework of the policy. In
Harishanker Bagla’s
265
case one of the questions for decision was whether section 3
of the A Essential Supplies (Temporary Powers) Act, 1946
amounts to delegation of legislative power outside the
permissible limits. It was held that legislature had laid
down a legislative principle which was “maintaining or
increasing supplies of any essential commodity,” and
“securing their equitable distribution and availability at
fair prices.” That statement was held as offering sufficient
guidance to the Central Government in exercising its powers
under section 3. In the instant case the policy as stated in
the preamble of the Amendment Act is that “for securing the
interests of the Life Insurance Corporation of India and its
policy-holders and to control the cost of administration, it
is necessary that revision of the terms and conditions of
service applicable to the employees and agents of the
Corporation should be undertaken expeditiously”. The policy
stated here is at least as clear as the one held in
Harishanker Bagla’s case offering sufficient guidance to the
Central Government in exercising its powers under that Acts
We have referred to section 48(3) of the Life Insurance
Corporation Act which requires that every rule made by the
Central Government under this Act shall be laid before each
House of Parliament and that if both Houses agree in making
any modification in the rule or both Houses agree that the
rule should not be made, the rule shall thereafter have
effect only in such modified form or be of no effect, as the
case may be. This Court in D.S. Grewal v. State of Punjab
and another(supra) observed as follows in respect of a
similar provision requiring the rules made by the delegated
authority to be laid on the table of Parliament and making
the rules subject to modification, whether by way of repeal
or amendment on a motion made by Parliament:
“This makes it perfectly clear that Parliament has
in no way abdicated its authority, but is keeping
strict vigilance and control over its delegate.”
In view of what has been held in Harishanker Bagla and D. S.
Grewal, both of which were decided by a larger bench, we do
not find it possible to accept the contention that the Act
is invalid on the ground of excessive delegation of
legislative functions.
It was contended on behalf of the petitioners that in
any event the provisions of the Amendment Act of 1981 could
not nullify the effect of the writ issued by this Court in
D. J. Bahadur’s case. In our opinion this contention has
substance. Clause (cc) of section 48(2) empowers the Central
Government to make rules with regard
266
to the terms and conditions of service of the employees and
agents of the Corporation. Sub-section (2A) of section 48
provides that the regulations made under section 49 of the
Act and “other provisions’ as in force before the
commencement of the Amendment Act with respect to the said
terms and conditions are to be deemed as rules made under
clause (cc) of section 48(2). Sub-section (2B) of section 48
says that the power to make rules conferred by clause (cc)
of sub-section (2) shall include the power to add, vary or
repeal the regulations and “other provisions” referred to in
sub section (2A) with retrospective effect from a date not
earlier than June 20, 1979. Clearly a writ issued by this
Court is not a regulation nor can it be described as ‘other
provision’ which expression possibly includes circulars and
administrative directions. Sub-section (2C) of section 48
however provides inter alia that any rules made under clause
(cc) with retrospective effect from any date shall be deemed
to have had effect from that date notwithstanding any
judgment, decree or order of any court, tribunal or other
authority. The order disposing of D. J. Bahadur’s case, made
on November 10, 1980 reads:
“In view of the opinion expressed by the majority,
the appeal is dismissed with costs to the first, second
and third respondents, and the Transfer Petition No. 1
of 1979 stands allowed insofar that a writ will issue
to the Life Insurance Corporation directing it to give
effect to the terms of the settlements of 1974 relating
to bonus until superseded by a fresh settlement, an
industrial award or relevant legislation. Costs in
respect of the Transfer Petition will be paid to the
petitioners by the second respondent.”
The Life Insurance Corporation of India Class III and Class
IV Employees (Bonus and Dearness Allowance) Rules, 1981 were
made by the Central Government on February 2, 1981 in
exercise of the powers conferred by section 48 of the Life
Insurance Corporation Act, 1956 as amended by the Life
Insurance Corporation (Amendment) ordinance, 1981. Rule 3 of
these rules relates to the subject of bonus concerning class
III and class IV employees of the Corporation. The substance
of this rule has been set out earlier in this judgment.
Clearly rule 3 seeks to supersede the terms of the 1974
settlements relating to bonus. By virtue of rule 1(2), rule
3 ‘shall be deemed to have come into force on the Ist day of
July, 1979″. The question is, can rule 3 read with rule ](2)
nullify the effect of the writ issued by this Court on
November 10, 1980 in D.J.Bahadur’s case ? In seems to us
rule 3 cannot make the writ
267
issued by this Court nugatory in view of the decision of the
majority in Madan Mohan pathak v. Union of India & ors.
etc.(supra) to which reference has been made earlier. In
Madan Mohan Pathak’s case it was contended that since the
Calcutta High Court had by its judgment dated May 21, 1976
issued a writ of mandamus directing the Life Insurance
Corporation to pay annual cash bonus to class III and class
IV employees for the year April 1, 1975 to March 31, 1976 as
provided by the 1974 settlements and this judgment had
become final, the Life Insurance Corporation was bound to
obey the writ of mandamus and pay as ordered by the High
Court. The court was dealing with the Life Insurance
Corporation ( Modification of Settlement) Act, 1976 in that
case. Section 3 of that Act provided that the terms of the
settlements in so far as they related to the payment of
annual cash bonus to class III and class IV employees would
not have any force or effect and be deemed not to have had
any force or effect from April 1, 1975 Bhagwati J., speaking
also for Iyer and Desai., JJ.. Observed:
“Here, the judgment given by the Calcutta High
Court, which is relied upon by the petitioners, is not
a mere declaratory judgment holding an impost or tax to
be invalid. so that a validation statute can remove the
defect pointed out by the judgment amending the law
with retrospective effect and validate such impost or
tax. But it is a judgment giving effect to the right of
the petitioners to annual cash bonus under the
Settlement by issuing a writ of Mandamus directing the
Life Insurance Corporation to pay the amount of such
bonus. If by reason of retrospective alteration of the
factual or legal situation, the judgment is rendered
erroneous, the remedy may be by way of appeal or
review, but so long as the judgment stands, it cannot
be disregarded or ignored and it must be obeyed by the
Life Insurance Corporation. We are, therefore, of the
view that in any event! irrespective of whether the
impugned Act is constitutionally valid or not, the Life
Insurance Corporation is bound to obey the writ of
Mandamus issued by the Calcutta High Court . ”
Beg. C.J. who delivered a separate but concurring judgment,
after pointing out the “hurdle in the way” of the
petitioner’s claim based on Article 19(1)(f) of the
Constitution, which was that the Act Life Insurance
Corporation (Modification of Settlement) Act, 1976) was
268
passed during the emergency, observed:
“The object of the Act was, in effect, to take
away the force of the judgment of the Calcutta High
Court recognising the settlements in favour of Class
III and Class IV employees of the Corporation. Rights
under that judgement could be said to arise
independently of Article 19 of the Constitution. I find
myself in complete agreement with my learned brother
Bhagwati that to give effect to the judgement of the
Calcutta High Court is not the same thing as enforcing
a right under Article 19 of the Constitution. It may be
that a right under Article 19 of the Constitution
becomes linked up with the enforceability of the
judgment. Nevertheless, the two could be viewed as
separable sets of rights. If the right conferred by the
judgment independently is sought to be set aside,
section 3 of the Act, would in my opinion, be invalid
for trenching upon the judicial power.
I may, however, observe that even though the real
object of the Act may be to set aside the result of the
mandamus issued by the Calcutta High Court, yet, the
section does not mention this object at all Probably
this was so because the jurisdiction of a High Court
and the effectiveness of its orders derived their force
from Article 226 of the Constitution itself. These
could not be touched by an ordinary act of Parliament.
Even if section 3 of the Act seeks to take away the
basis of the judgment of the Calcutta High Court,
without mentioning it, by enacting what may appear to
be a law, yet, I think that where the rights of the
citizen against the State are concerned, we should
adopt an interpretation which upholds those rights.
Therefore, according to the interpretation r prefer to
adopt the rights which had passed into those embodied
in a judgment and became the basis of a Mandamus from
the High Court could not be taken away in this indirect
fashion..’
The Attorney General referred to a number of earlier
decisions of this Court wanting us to infer that the
observations quoted above from the judgment in Madan Mohan
Pathak’s case did not state the correct law hl view of the
said decisions. But these observations expressed the
majority view of a bench of seven judges bearing
269
directly on the point that arises for decision in the
instant case and A are binding on us. We therefore hold that
rule 3 operating retrospectively cannot nullify the effect
of the writ issued in D. J. Bahadur’s case which directed
the Life Insurance Corporation to give effect to the terms
of the 1974 settlements relating to bonus until superseded
by a fresh settlement, an industrial award or relevant
legislation. The Life insurance Corporation (Amendment) Act,
1981 and the Life Insurance Corporation of India Class III
and Class IV Employees (Bonus and Dearness Allowance) Rules,
1981 are relevant legislation. However in view of the
decision in Madan Mohan Pathak’s case, these rules, in so
far as they seek to abrogate the terms of the 1974
settlements relating to bonus, can operate only
prospectively, that is, from February 2, 1981, the date of
publication of the rules. The petitions are allowed to this
extent only.
In the circumstances of the case we make no order as to
costs.
CHINNAPPA REDDY, J. I have had the advantage of
perusing the opinion of my brother Gupta J., I agree with
his conclusion that the Life Insurance Corporation
(Amendment) Act I of 1981 can operate but prospectively in
so far as it seeks to nullify the terms of the 1974
settlements in regard to the payment of bonus. On some of
the other questions I have certain reservations. I do not,
however, desire to express any opinion on those questions as
my brother Pathak J., has indicated that he is inclined to
agree with Gupta J., on those questions. Perhaps I will do
well to add a few words of my own on the question of
retrospectivity. I am spared the necessity of stating the
facts as those that are necessary have been stated by my
brother Gupta J.
The 1974 settlements provided, among various other
matters, for the payment of annual cash bonus (not a profit
sharing bonus) to their Class Ill and Class IV employees at
the rate of 15 per cent of the annual salary. The
settlements were to be operative from 1st April 1973 to 31st
March 1977. That the settlements were to be operative from
1st April 1973 to 31st March 1977 did not mean that the
settlements would cease to be effective peremptorily from 1-
4-1977 and, therefore, the annual cash bonus stipulated
under the settlements would cease to be payable from that
date onwards. The settlements would continue to be binding
even after 31-3.1977 and would not be liable to be
terminated by the issuance of a unilateral notice by the
employer purporting to terminate the settlements. The
settlements would cease to be effective only when they were
replaced
270
by ‘a fresh settlement, an industrial award or relevant
legislation’. This is the law and this was what the law was
pronounced to be in Life Insurance Corporation of India v.
D. J Bahadur(1) on a consideration of the relevant
provisions and precedents.
The attempt made to supersede the settlements, in so
far as they related to the payment of bonus, by enacting the
Life Insurance Corporation (Modification of Settlement) Act
1976 failed, firstly because the Act was held to violate the
provisions of Article 31(2) of the Constitution and secondly
because the Act could not have retrospective effect so as to
absolve the Life Insurance Corporation from obeying the writ
of mandamus issued by the Calcutta High Court, which had
become final and binding on the parties. This was the
decision of this Court in Madan Mohan Pathak v. Union of
India(a), all the seven judges who constituted the Bench
agreeing that the Act violated the provisions of Article
31(21 and four out of the seven judges, namely, Beg C. J.,
Bhagwati, Krishna Iyer and Desai JJ., taking the view that
the Act did not have the effect of nullifying the writ of
mandamus issued by the Calcutta High Court and the other
three Judges, Chandrachud, Fazal Ali and Shinghal JJ,
preferring not to express any view on that question.
The second attempt to nullify the 1974 settlements in
regard to payment of bonus, by issuing notices under section
19(2) and Section 9-A of the Industrial Disputes Act and by
amending the Standardization order and the Staff
Regulations, was frustrated by the judgment of this Court in
Life Insurance Corporation of India v. D.A.. Bandar, the
Court taking the view that the two settlements could only be
superseded by ‘a fresh settlement, an industrial award or
relevant legislation’. In this case, the Court issued a writ
to the Life Insurance Corporation “to give effect to the
terms of the settlements of 1974 relating to bonus until
superseded by a fresh settlement, an industrial award or
relevant legislation”.
The effect of the two judgments in Madan Mohan
Pathak’s case and D. J, Bahadhur’s case was clear: the
settlements of 1974, in so far as they related to bonus
could only be superseded by a fresh settlement. an
industrial award or relevant legislation. But any such
supersession could only have future effect, but not
retrospective effect so as to dissentient the Class III and
Class IV employees of the Life Insurance Corporation from
receiving the cash bonus which had been earned by them, day
by
271
day and which the Life Insurance Corporation of India was
under an obligation to pay in terms of the writ issued in D.
J. Bahadur’s case. The present attempt made by the 1981
amending Act and the rules thereunder to scuttle the payment
of bonus with effect from a date anterior to the date of the
enactment must, therefore, fail. The employees are entitled
to be paid the bonus earned by them before the date of
publication of the Life Insurance Corporation of India Class
III and Class IV Employees (Bonus and Dearness Allowance)
Rules, 19 81.
N.V.K. Petitions partly allowed.
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