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252

AJOY KUMAR BANERJEE & ORS. ETC.

v.·

UNION OF INDIA & ORS. ETC.

12fst March, 1984

[Y.V. CHANDRACHUD C.J., R.S. PATI!AK Al'D SABYASACHI

· MUKHARJI, JJ.)

l

Constitution t>[ India 1950, Artie/~.• 14, I9(1) (g), 'Artie/~ JIB & G•~~trar

!murance Businrss (Natia~tolisQtion) Act 1972 Src. 16, Rixhr ~( Cemrol Gam~

mcnt to from~ Jcht-s under tilt Act-Whtthtr affects fundamrnta/ rifhUof

-rmp/oyeu of companlu constituted unclrr the Act.

1nc/Ju/on of on 1Act In rite Ninth Srltt<lttle dors not prottct ordu at •4

cations luutd undtr the said Act. ·

Schrm~ natifitd undrr Su. 16(1) uhethtr protutrcl.

Introduction of ,.fdrm through ft!litfalion-Law nud Ml ha>t unimsof

oppficotion-Pit<Ymrof mttT.od of introducing r<forms-Whtthtr ptrntiSJib!<­

Srutulory provlsio11 M'htth'r could bt srruck 1/own. 011 viet u/ umltdncllls[on.

. I

huiMifial Disputrs Act

/947-Witetlttr oppficabf~ le> grMral insurQna tom-

.POnln

Crn<ral Insurance lJus/nru (Nationali•atiull) Act 1971, &c. 16(1)/.g).

Grn<ra/ Insurance (Rotlottalisatlon anJ Revision of Pay•Scalu nn:Ji!lhtr

Condt1lon. of'St,lrt of Supervisory, Clerlcul and Subordittot6 Stoff) S~

Amrmlment Schrmc of 19SO-Sclttmt <>f 1980 rrfttllif/1/0 r~vlsioll of pay sralts atJ4

othtr lrrnu ond condillons of service-Whtt!ttr u/11o vlru Sec. /6{2) oud ;,.,JiJ-·

· IVhttlttr suf!rrs from vi" oft.tcuslvc <lt/egatlun of /egis/uti!'<! p'uwtr. • ·

lnttrputotlon of Stotut~s-Couf/t~t b~twet!lt lire statt~tts..:..Ont iptclal othrt'

II • ltntrai-Whlrlr; to prtvnii-TtJI$fur dttamln<ttlon o[. .

/t /"'rrpretat/on of slatttl<s-Not '"~'' exur/u Ill u~l~llllcs-Pro•is!otll ~

trr "''" dtl•flallt!f po~·er-Curmruclion.

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A.K. B:\NERJCE V. UNION . 253

. to !972 tl\cre were over l 00 lnsuranc~ Companies-Indian and

rnor ' · r 1 1

, The conditions of serv1cc o t1e emp oyees of these companies were

(ore•gn. d by the rc.1pectivc contracts of service between th~ companies and the

governc On t3th.May 1971, the Government oflndia a'Sumed manag~ment

' (mploy ~esc.ncral insurance companies under the General Insurance (Emergency

of theseS . . .

Provisions) Act, 1971. Th.e General In~uran;e Busmess ~(Nat•onal 1sation) Act,

1972

nationalised gcneralJnsur~nce busmes5..o ·

Fo;•r merger schemes

~ere

framed in 1973 b>· the Central Gov~rnment in

ercise of the powers contained in s. 16(1) of the Act and four co:np,nies;

~riental Fire and General Insurance Company, Naliolkll Insurance Complny

N•"' India Assurance Compan)' and United India Insurance Company Ltd.,

wm merged into and they. alone "ere allowed to carry OTl the busine.s of

g<ocral insuran~e . The1c comp1nies started functioning from lst.January, 1973

~nd the process of merg~r was completed by 1st January, 1974 when the 8forc­

$3id four schemes came into force.

The Government of India_by a notification dat.:d 27th !>by, 1974, fronted a

'.cheme' called the General Insurance (Rationalisation and Re,·ision of Pay

Sal,. and Other Cond1tions of Service or Supervisory, Clerical and Subordhate

StU!') S:h<me, 1974 in exercise of the powers conferred by s. 16(,)(g) of the Act.

This achcme provided for tbe rationalisation and revisiC>n of pay scales and otbcr

ltrms and condilions of service of employ«s working in sup:rvisory, clericJI and

!llbordioate positions ' and governed the pay scales, dearness atlowanec, other

a!Jowaoces and other t~rms and conditions of the general insurance emp!oyees.

Plroyaph 23 or the Scheme prolrided that the new 'seal~ of pay' shall remain

in force till Decnnber 31, 1976 and thereafter shall continue to be in force

Wll<:!S modified by the Central Go,-emment.

lo 1976, the Board of Directors approved a policy for promotion. On lit .

June,

1976. another

SCheme by Which amendment~ y,·erc made With reg:lrd tO

P~vidtnt Fund, Was Introduced. On 30th July 1977, a Scheme amending pro­

Y~IOfls regarding skk leave was also introduced.

IC I The employees submit!ed a memorandum obj~ti~g to. the revision of pay

1

~t and other cond•tions or service and w~ntcd a n:f~~nc.: to the Industrial

~

1

~n~l. The class IU nod IV emplo~ees .hoWe\·er did oot accept the revision of

rv~ee Condllio • · d · d · 1

di1pufe. The . ns, Pay. ,"C~le-s l!earnes4 allowance, ~tc. ~~d r'IJ~e ~n ustrta

lnll bl ro "'ere conctll~tJon procccdinLS and th~re was la1lurc to b~mg about

ca e scttktnent or dhpute

1

• . · . •

In 1980 the G . . . . f' .

and b

1

• ' overnment introduc~J the General Insurance (Rallona JSatJon.

"'"' lton of p s · · Cl · •

~I and S bo . ay cak, and Other Conditions of Seryice of Supe1 vtsory, <;"·

' was int du rdJnatc Stafl') Second Amendment Scheme, 1980. This Scheme wh1ch

ro Uted b ·d d 'I d ·

lion,"

1

. Y a notifkation date..! Septemtxr 30, 1980 rna c eta1 e provt·

Allowan ° how the adjustment ullowunce iS to be dealt with so far u D:acness

ltti~~· CC. Ovenirnc Allowanc.: Contribution to Provident Fund and other

· ""'at bcneGt "' • 1 ! h • · '

llopufattd ' ere concerned. Paragraph 7 which d:a t w I rettrcmo:nt

· that

•n employee

who was in service of the Corporation b<:for~ lh~

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254

SUPRDIE COUllT REPOilJS •

[19~413 s.c.l\:

. t ' .

com'mencemcnt of the Scheme of 1980 sho~l~ retire fro": service When he auains

the age or

60

yea~. but an employee, who JOinS t~e servoce ?f the Corporation

·. free the commencement of the Scheme would reme on attaoning the a~e or

58

· ~ .. ars. The Fourth·Schedule to the Scheme indicated the revised scales .or pay,.

.. .-.

· The petitionetS in their writ petitio'ns to this Court contended that the te;..

.·nd conditions of service enunciated in 1974 being a result of bilaceral agree men~

could not be changed unilaterally to the detriment of the employees and that the

nolification deprived· the rigllls of the employees to recei,·e dearne•5 al'owallte

ttc. with the rise in the cost of living index. It was furthe ... contended that ohe

Scheme was. violative of•. 16<2 of the Act and ultr:t vires Articles 14, 19(c)r~)

·and Anicle 3112) or the Conscicution, and that the Constitucion ·44ch amendment

. deleting Ankles 31 and 19 cannot sa·,e the Schen1e, since the amendm ent came

into force only 20th June, 1979, whereas the impugned notification a!Toctin11 che

rights ofthe employees to emolumtnts took effect from Jst January, 1979.

The ro<pondents contested the writ petition~ on 'the ground ohot s. 16(6)

authorised . che Ctntro.l Government by notification, 10 odd, to emend ~r t~ v:uy

any scheme framed under •· 16 and consequently rutionaliSllti on or re,·i<ion of

pay scale• was permi-.,bl< by the 19Ril scheme. Moreovtr in compnri.on ll'ith

other employees in governmental or 'public •ector<, the employ= or I he gener•l

in5ur~nce comp3nies were 'High·...,.ase i~!andcrs• and it was consequently nccn­

sary to put A ceiling on illeir emolumtnts and 'ooher amenitie! in ord<r to

facilitale beller functioning or th~ insurance companies:>$ well as to subserve ohe.

object and purpo<c of the nationalisation policy. . •

A!lowine tho..writ pecitions,

· HELD : l. (a) The impugned scheme of 1980 js b;.d os heina beJiund the

scope of the authority or I he Central Government, under tbc Gtneralln>Uroncc

Bu"neu (JIIarlonali<aoion) Act, 1972, and therefor~ quashed. This, however, w!tl

no~ prevens lhe Govtrnment, if it u w advi .. .J, co frame any appropriate lca•s­

lallon or m•ke'any >ppropriote amendomnt ,ivina power to the Central GoVI'rn­

ment

10

frame any scheme as It considers fit and proper.·. (2900 ; :Z'JIA·BI ·

1

· (b) Tht !<:heme of 1980 so far a~ it~~ not relate<! t<' the amalgom•cio~·

~~ mer~r of insur&r~ce COmp•nies, ~~ not 10art301Cd by •uiH. (I) of s<CiiUO lu.

e

$4: com is therefore

bad and beyond authority. · [278Dl

't .• ~.JI. Nodwn~ & Anothtr v, U•rlon of (rodia & Anothtr {1981) 2 S.C.R· p. ~

46

j

,. auon MuhUII l'orlruk U I " 1\J ,n

Tl~t LJ ~. n orr nflndia & Ot1. ~rc ., ! t 1173) 3 s.c.,_. P· • • Cit·

~ IO"J'Itlnr'"'"d"" Curpo•mlull of India" • D.J. Buhoc/u' & OrJ., [198111 S

.... l) • rc crrr 10.

'2. 11~< duty of the Co · . . . • 1 n i$ tO ri•d

lh

• • . Urt In lnltrprrtinll Or construinllll proVO O · (. ...c<>'

• '<•lion 1nd uod d · 1 o • •·

> · ' <man lit mcanina in the contut. Jnterprctal on Ji 'out

"'"" or •~tuae 4 t tO n• ·

lloe me

001

a mtre uerd'e in ~<'mantic$ but an ottcmP

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of the leli;)atioo from the "'Nds ~d, un~, ·rstun<l the ,one«

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---..:.---

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the pul (275C·Dl

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. · --. ·· j ,.h' ~hem~ is an e:tercise of delegated authority. The scope and .ambit

·

3

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1

:ted QUthority must be so comtrucd, if pos~ible, as not to make it

t· · of such e eg of the vice of e:tcessive delegation of legislative power. In order to

• . ••d bce"USC d be '

!: ··"" he power valid, s.16 of the Act shoul 60 corut=d 1n such manner

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makct c h · r d 1 · r · · ·

that it docs not·_ suffer rom t c v.ce o c egauon o excesstve leglSfauvc

~ulltoritf. {275El • .

_ .

..

~_:(b) Unlimi ted right of delegation iS not inherent !n the legislative !)Ower. _

· . . ' [275 F] •

_ G•·a/iar Rayon-Silk Mfg. (Wtog.) Co. Ltd. v. Tlte A;m. CommiJ.Siou<r of Salts

Tax & OrJ., {1974} '2S.C.R. p. 879, referred to. -

' . ·' ' . . . .

-4. Th$ ,rowth of legislat-ive power of th~ executive is a sis~t6cant develop.

m<11t of the 10th ccnrury. The theory of ltJi.rs•:-f<Jir~ hns been given a go-by and

large ~nd comprehensive powers nrc being assumed by the State with a view to

improve social and economic wcJI.being of the people. Most of the modern socio­

economic legislations passed by the lc~i~la ture lay down the guiding principles of

-the legislative policy: The lcgislntures, bccau5e or limitation· imposed upon lhem

and the time factor, hardly can r.o into the matters in detail. The pr.lctice of em­

powerinll the e•ecutive to mul<c-subordinate legisl~tion within the prescribed

sphere has evolved out or practical necessity and pragmatic needs of the modern

··~-

. ~elfare St~tc.. -(275G·216Al • '

S. Rtgarding dclegatc!ilcgislation, the principle which has been well·esta­

bfi•h:d 'ts th>t the lesislature must lay down the guid~lines, the principles of

policy for the authority to whom pow~r to make lUbordi nate leglilation is

mtru ~Jed . The le&itimacy of delegated legislation dop.:nd upon its b<:ing used as

ancill:.ry which the k~islature considers 1.., be nc•"C>Sary for the purpose of e~er~

ci•in& i.s lc~\Siative power .:tfcctively and compktely. Tile l<gislature must n:tain

it its o;oa bnd the es.cntiallcl!tslativc function which consis ts in d.:.:l<~ring the

lr!i>latht po~icy ~nd lay down the standard which i' to be enacted into a rule of

!'""• ar.d ... -h:.t can bedolcgated is the ta1k of subordinate legislation' whkh by

111

\ery nJture is ancillary to the ·~tature which ddcgatcs the power to make it

e!f<e1hc P'ovided the legislative policy i• cnunduted with suOkient clearness or a

'

1

""ilrd !.id down. Tho court,.,nnnot and do not interfere on the discretion

~n.J th<:t ~ndoubtcdly rc.ts with the fe&i>I41Ure itself in dctcrn1ining !he c., tent of

1

e dtk¥O&t<d power in 11 particular case. [.!768-D] · ·

1

or thf.. Th: ~~thorily and scope for • ,ut-onli~alc k.;i•lation can t-e n!~d In either

It-It .c two ~0~ay, ; numcly onel '' hlch ncatc1 wider dd~gltiort :md one which

r>ets tht dclc~;ation, {277El · . . ·

~~ · . .

~Dd . e mstan~ case, the Acl must be read In conjunction ith the Me in~·

•bo~llliJl Claus~ No. 16 of the Dill whi~h Introduced the Ad in qucstjori. But

Ac1,.:~· h mu,t be read in c~nj un.:tion with sub·se.:tion 2 '_'fsection 16 of the -

11.e &; h clearly iodk<Hcd the ob~ct of framing the scheme: Wlder s. 16(1) of

t. l271Dj

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+56 ' Sl1PREME COuRT RI!POR~ [1984] 3 s.e.R~

' . 7. In vi~ of tbe fanauaae of s~~~:'('l ofsection J6 and the memorandu~

to the Bill, the one which restricts t})e.delegation must be preferred to the other.

So read, the. authority aiven um{er s, 16 under the different clauses of sub-section

(l) must·beolo subserv~ tbe object ~s env~aged in ~ub-srction (2) of section 16 or

·the Act, and if it is so read thc_q framjng of a ache me for purposes mentioned i.n · .

different Clauses of sub-sectio,P m of .SI!ctiop.l6 must be. related,to lhe ~malga-

mation or merger of1hp .fusurance comp~nies . as. ·envisaged bO.th in the inenio-

l'tlndum on -delegated lepfation as well as !ub-section,.~) of section 16. · ·

. . . . ' · [217F-G]

.

8. Sometim~ there have been· rise i~ emoluments with the ri~e in the cC,')st

of index in certain t>Ulllic 'Sector. corporations. The: lc«islature h!lWever ,is free to

· · . recognise the d.tgree <Pf harm or evil and to make provisions for the same. In

m'aking di~similar ;pro~isions for one sroup of public sector undertaldng! does -

not pl!r se•make a law discriminatory as. !uch. Courts w!ll not sit as sui>er­

Jegislature and strike down a p.Uticular classifkation on the ground that any

· under-tnctusion namely JtJat some others h~ve been. left untouched so long as

there is ilo ~iolation ofconstitufioilal rtstraints. [~85D~E] ,..

. . '

9.: Pit~e-'mealapproach to a general problem permitted by under-inclusive

classifieations, is ~ometimesjustified when it is considered that· legislatures deal · ·

with

$uch probl~m. ·usually <>n

an expc:rimental basis. It is impossible to' tell how

successf~l a p~rticular Jlpproach might. be, what dislocation might occur~ and

·Situatioii inight develop and what new evil might be generated in the attempt.

7\.dminisl{ative expediettts must· be forged and tested. Legislators recogniziog.

these factors ll)lght wish to proceed cal!,tiously, and courts must allow to do so.

. [286B-C]

Specilil CotJrts Bill, [1978) 2 S.C.R. 'p. 476 at pages 540-541, Stare of Gujorat

m~d'Anr. v. Shri Ambica iJills Limited, Ahmedabad, etc., [1974] 3lS:C.R. p. 760 ·

and f?..K. Garif etc. v. 'U11ion of India ct Ors.!etc., [1982] 1 S.C.R. p. 947, referred

·to. •

In·the'instant case.-as there was no industrial dispute pending, the around

that th~ pe.titioners'have been chosen out of a vast body of workmen to bediscri­

, F . · minatea against and exclu&d from the operation of the Indu~trial Disputes-Act,

is no grounlthat·there has been no violation of Article 14 of the Constitution.

. [2860}

:G

·.u

tO. Differentiation is ttot:a!ways discriminatory. If there is a rational ne~

, orr the basis ()f which differentiation has b~n made with· the object sought' to be

• achieved by particular provision, then such differenti!ltion .is n<>t discriminatory

and does not violate· the principles of Article 14 of the Constitution. There. is

·intelligible basis·

for

differentiation. Whet~er the same result or better result

~outd have been achieved and better basis of differentiation evolveq is within the .

4omain

ofle~islaturl,}and mu!t be

left to the wisdom o_f the legislature. .

· . . · • · · , . [21l8H-:a9Bl

. . .

t t •. Article 14 tloes not prevo11t the Le~h\fure from introducine· a re'ft>rm

i.e. by applying the Ieaislati~n to .some institu~ions or objects· or areas oJ!Ily

.a«ording. to-the-e:ttigency oNh1 situatiol'l ~d further classifi~ation of seliwtmn

. Mn be SU&~incd on historioalreasoas or reasons of admipistrativc exipaey .o•

....

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A.K. BANERJEE v. UNION 257

/

. .

'Piece-meal method of introducing reforms. The law need not apply to' all the·

1lt;rs9Jfs in the sense of having a universal application to all persons. A law can

-~sustained if it deals equally with the people of[ well-defined "Class-employees of

"Insurance Companies as such, and suc}l a law is not open to the charge of'de~ial

··of equal protection on the ground that it had not appliCation to other persons ..

. . ~~~

State of Karnataka & Anr. etc. v. Ranganatha ~eddyf & fAn;. etc. [1978]

I S.C.R. p. 641 at pages 672, 676 & 6~1.., referredlto.

A.

B

To the in~tant case, for the purpose of rationalisation, ·the illsuriince com­

<,panies wanted to curtail the emoluments of class III nnd class IV employees on·

a small scale. It cannot therefore be said that there are no distingui$hing factors

.and that fot choosing a ·particular group for expe.riment, the respondents should · C

be fonnd guilty of treating people differently while they are alike in all material

· respects. [~880] ·

.

12. T~.,.e object of the General Insurance Business (Nationalisation) Act

1972 is to run the business efficiently so that the funds available might be utilised

1'or socially viable and core projects of national importance .. The Nationalised

Banks

and the

Iqsurancc Companies for the purposes· of appftcability. or other-. D

wise of the· provision_s of the Industrial DisputesiAct cannot be treated, as be-.

·longing to one class. Historical reasons provide an intelligible differentia

·<distinguishing Nationalised Insurance Companies from the Nationalised Banks.

The financial resources, structures and functions of the Banks are different from

those of the Insurance Companies. [288A-E]

13. The general rule to be foJJowed in case of conflicfbetweeri twot~tatu(es

.is that the later abrogates the earlier one. A prior special law would 'yield to a

tater general law if eitqer~f these two conditions are satisfied :

. .

(i) The two are inconsistent with each other an'd (ii) there is some express '

Teference in the later to the earlier enactment. [282D-FJ

..

14. (i). The Legislature has the undoubted right to alter a law already pro-

mulgated through subsequent legislation,

(ii) A special law

may be altered,

abrogated or repealed by a later general law by an express provision, (iU).A later

·ce11eral Jaw will override ~prior special law if the two,are so repugn,ent to each ·

other that they,cannot co-exist even though no express provision in that behalf

E

F

. is found in the general law, and'.(iv) It is only in)he absence or a provision to G

the contrary and of a clear inconsistency that a special hiw will remain wholly

. ·upaJfectect by a later general law. {282G-HJ

MaxU>ell--;-:"Interpretation of Statutes" Twelfth Edition pp. 196-198, referred

JX (:ottoo-Spinning ' & Weavint Mills Co: J:.td. v. State of u.P. & , Ors.,

{1961] 3 S.C.R. t>· 185 and U.P. State Electricity Board &: Ors, v. Hari Skankt7

.rtiJA aiul Or:r., U979] 1 .S.C.R. p, il.55, referred to.

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258 '

SUPREME COUR~ RE~ORT~ .

.,

[1984) 3 s.c ·.

. ·R~

. IS. Th~ Gene.,;llruurance Business (Nationalisation) Aci was PU . .

N~th Schedule of the Constitution as ltcm.9S on IOtll Aug~st 1975.

1

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;: 1!1•·

the rights of the petitioners had b«n a~ectcd .by .t~e sch~me of 1980 thea~·

risbts would not enjoy immunity from bemg •crut~nased samply be~use the Act'

uodet ·which the scheme was framed had been put m the N_inth Schedule. In

10

.

event any right which accrued to the persons concerned praor to the plac Y

·

N" 1r Sch

d le c:~n at be ret os~ t" 1 .. Cln<nt:

of the Act in 'the ant e u n • r ,...cave y anccted by th,

impugned pr~visions: [284E·GJ.

Prog Tee &-Oil MJ/11 &: Anr. et~. v. Union of lndid; [1978] 3 S.C.R. p. 29J,.

tderrtd to. ·

In the instant c~se, empowering the-Go\'crnment to frame schemes for·

carrying out the purposes of the Act does not in any way affect or abridge lhe

fundamental tights of the petitioners nod would not attract Artick t9(1)(g). • '

(284H ; 2BlAi

ORIGINAL JURISDICTION : Writ Petition Nos. 5370· 74 of !980.

(Under Art. 32 of the Constitution)

• M.K. Ramamur1M, J. Rama;1111ri/ri nnd Miss R. Vaig11i for the·

petitioners in WPs. 5370-74

R.K. Garg and V.J. Fr;ncis for the petitioners in WP. 5434.

J.P. Coma & Mukuf Mrrcigutfor Intervener in WPs. 5~70·74 .

K, Parasara11, Attorney G~neral, :.K. Bmrn:il:'e, Addition;il

Solicitor General, M1ss A. Sublraahini uotl c. v, Suhba Rua, for lh~

respondent (Union of 1ndi;

1

)

• P.R. Mridul, O.C. Ma!lwr, S. Sukumaran, D.N. Mis/rrcJ & Miss

J.hera Ma1hur for respondent no, 2 in WPs. 5370-74 &. 5434.

· 1/emant Sharma & lmlu Sharma for th~ respondent in Wi'S· ·

5370-74.

l'l!leet Kuma,, Lalit Bhasin Vinay Bhasin & AfiJ's.Arsill Singh,..

for R~spondcot Nos, 3 to 6 in V;'Ps. 5434 & 5370· 74. .

.AmbriJJs Kimlur for lntcr\·eoer iriWP. 5370.

Clsalu/idus Sinhu Intervener-in-person in '~Ps .. 5370· H.

The JuJgment f th C . . .

o. e ourt was delm:rcd by

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A.K BANERJEE: v. U.'fiON (Mukharji, J.) -259

SABYASACHI MuimARJI J. These petitions under Article 32 of

the Comtitution are filed by the employees of the General Insurance

Companies and the • All India Insurance Employeess Association.

· 'the respondents are,. Union of India, the General Insurance

Corporation of InCfia and four General Insurance companies·.

The petitioners chaHenge the Notification dated 30th

September, 1980 of lhe Ministry of Finance (Department of Econo~

rnic Affairs) (Insurance) introducing what is called General lnsu

4

ranee (Rationalisation and. Revision of Pay Scales and Other Con~

dition~ of Service of Supervisory, Clerical .and Subordinate Staff)

Second Amendment Scheme, 1980 as being illegal and violative

of their fundamental rights under Articles 14, 19(1)"(g) and 31 of

the Constitution of India.

Prior to 1972, 1here were 106 General Insurance companies

Indian and foreign. Conditions of service of these employees were

governed

by the respective contracts of service between the

com·

panies and the employees. On 13th May, 1971, the Government of

-India, assumed management of the general insurance companies

under the. General Insurance (Emergency Provisions) Act, 1972.

The general insurance business was nationalised by the General

Insurance Business (Nationalis'ltion) Act, 1972 (Act 57 of 1972).

The _preamble of the Act explains the purpose or'the Act as to

provide for the acquisition and transfer of shares of Indian insu­

rance companies ·and undertakings of other insurers in -order to

serve better the needs of economy in securing development of

general insurance business in the best interest of the community

and to ensure that the operation of the economic system does not

result in the concentration of wealth to the common detriment, for

the regulation and control of such business and for matters connec~

ted therewith or incidental the1eto.

Act 57 of 1972;: by Section 2, declared that it was for giving

effect

to the policy of the State towards securing the principles

specified

in clause (c) of Article 39 of the Constitution.

Under

Section 3(a)·of the Act, 'acquiring company' has been defined as

any Indian insurance COJ!lpany and, where a scheme had been fram·

ed involving the merger of one or more insurance companies in

another or amalgamation of two or moresuch companies, means

the indian insurance company in which any other company has

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2~0 SUPREME COURT REPORTS [1984) 3 S,C.R.

been merged or t~e company. which has been framed as a result of

the amalgama~ion. ·

Section A provides that on the appointed •ctay all the shaies in

. the capital of every Iridian insurance company shall be transferred ·

to and vested in the Central Governmei,J.t free of all trusts, liabilities

· JJ and encumbra~ces affecting these ..

•,

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Section 5 provid-es · for transfer of the undertakings of other .

existing .insurers. -section 6· provides for the effect of transfer of·

undertakings. Section 8 provides for t)le Provident Fund, super­

an'nuation, welfare or any other fund existing. Section 9 stip.ulates

that Central· Government shall form a. Government company in

accordance with the provisions of the Compani~s Act, to be known

as the General Insuranct; Corporation of India for the purpose of

superintending, controlling and carrying on lhe ~usiness of gerieraJ

in$urance:

Section 10 stipulat~s

that all shares in the capital of every

-Indian insurance· company which shall stand transferred to and

vested in the Central Government by virtue of Section 4 shall im­

~ediately after such vesting, stand transferred to and vested in t•l ·

Corporation.

Chapter IV deals with the amounts to be paid for acquisition

and as sucb. we are nof concerned in this case with that chapter in

view of the controversy'involved. ·

Chapter V of the aforesaid Act deals with ''Scheme for re-

• organisation of general insurance business" · Section 16 and.l7 of

:F 'fhe Act in this chapter are as follows.:

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"16. (1) If the Central Government i.s of opipion tha't

for the more efficient carrying on of general insurance busi~

ness it is. necessary so to do, it may, by notification, frame

one or more schemes providing for ail or any of the follow­

ing. matters :·

(a) ' the merger in one Indian insurance company of any

other Indian insurance comp&ny, or the formation of a

~ew company by the amalgamation of two or more .

Indian.

insurance

companfes ; .

i< ...

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(b) the transfer to· and vesting in the acquiring company .;.,

of the undertaking (including all its b~siness~ propertic~,

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A.~. BA.NERJE£ v. UNION (Mukharji, J.)

ttssets and liabilities) of any Indian insurance company

which ceases to exist by reason of the scheme ;

r(c) the constitution, name and registered office and the

capital structure of the acquiring company and the issue

and allotment

of shares ;

Ill,

'(d)· the constitution of a board of management by what-

ever name called for the ~anagement of the acquiring

company;

261

>(e) the alteration of the memorandum and articles. of

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association of the acquiring company for such purposes· 0

as may be necessary to give effect to the sche~e ;

If) the continuance in the acquiring company of the

services of all officers and other em-ployees of the Indian

insurance company which has ceaSJ!e to exist by reason

·Of the ·scheme, on the same · tenns and conditioqs

which they were getting or, as .the case may be, by which

·they were governed immediately before the. commence­

ment of tl~e scheme ;

D

·(g) the rationalisation or revision of pay scales ·and other 11

· terms aqd conditions of service ott officers and other em~

_, ~ .. ployees wherever necessary·;

·(h) the transfer

to the acquiring company of the provi­

·dent, supperannuation, welfare and other funds relating

to

the officers and other employees of the Indian

insurance company which has ceased to

exist by reason

of the scheme ;

, (i) the continuance by or against the acquiring company of

legal proceedings pendin!i.., by .or against any Indian

insurance company which 'bas ceased to exist ·by reason /

of the scheme, and the initiation of such legal proceed-

ings, civil or criminal, as the Indian insurance company

_might have initiated

if it had not ceased to

exist ;

,,,(j) such incidental, consequential and supplemental

matters as are necess;ry to give fuil effect to the

.Sl::heme.

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262 SUEREME COURT RI!PORTS [1984] 3 s.c.R ...

· · (2) :. In framing· schemes under sub-section _(1). the

. . .

object. nf ·'the} ~traF.GnveJD.ment · shall·be·to ensure 1hat

ultimately there are only f,_our companies (excluding the Cor-

/

poration) in existence and that they are so situate as to render

tht:ir combined services effective in all ·parts of India·.

(3) Where a scheme unrler sub-section (1) provides.·.

for the transfrr of any property or liabilities, than, by 'Wrtue

. of th~ scheme,_ the property shall stand tFansferred to and_

vested in, and those liabilities shall be tramferred to and be·

come the Jiabilities of the acquiring company.

(4) If the rationalisation or revision of any pay scales­

or other terms and conditions of service under any scheme

is not acceptable to any officer or other employee, the acquir­

-ing company may terminate his employment by giving him-

compensation equivalent to three months remuneration~· ·. J<

unless the contract M service with such employee provides for-

. a shorter notice of termination.

Explanation.-The compensation payable to ::.n officer~

or other employee under this sub-section shall be in addition

to, and shall not affect, any pension, gratuity, provident fund• · ~

.. of-other benefit to whfh the employee, may be entitled under-

his contra¢t of service. · J

(5) Notwithstanding anything contained in the Indus-.

trial Disputes Act, 1947 or in ~my other Jaw for the time be.;­

ing in force, the transfer of the· services of any officer or­

other employee of an Indian insurance company to the

_acquiring company shall not entitle any such officer or other-

employee to any compensation under that Act or other Jaw, .

and no s11ch claim!'shall be entertained by any court, tribu-· -

nal or oth_e_rl authority.

•·

(6) (.The Central Government may, by notification •.

add to, amend or vary any scheme framed under thi~ ·section.

(7) The provisiqns of this sectjon -and of any scheme­

fntmed tinder it shall have effect notwithstanding anything to,

the contrary contained in any other law or any agreement,.

award or other ·instr~ment for the time being in force.

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-J 1\.1';:. BANERJEe v. UN10N (Afukharji, J.) 263

-(

17. A copy of every scheme . and e-very amendment

"thereto framed under section 16 shall be laid, as soon as

.m:ty be afta it is m:tde, befor.:: each House of Parliament."

The object of any sc1cme undtr this chapter, according to

-the petitioneh, w tS ckar from th~ main p.trt of Section 16(1) ~f the

>;'Said A.ct, i.e. a sc!11!11l; m td~ under this chapter was only for the pur­

pose of provicling fur the· m~rger of Indian insurance companies, and

·this was made Clc . .tr by Section i6(2} of the Act. Section 16(4) oUhe

'Said Act, it was co.1tentkd on· beh'llf of the petitioners, implied that

.any scheme of rationJiisation or revision of ·pay sc.tles and other

·terms could only b~ in the context of merger and amalgamation of

one or more of tbe companies. In this connection mention was

made in the petition ;r the "Memorandum regarding delegated

11egislation" submitted to the Parliament along with the General

Insurance Business (Nationalisation) Bill, 1972 (Bill No. 60 of 1972),

, which later became the aforesaid Act. It was made explicit,

a~cording to the petitioners, that clause ·16 of the Bill, later Section

16 of the Act "empowers the Central Government to frame one .

-or more schemes for the merger of one Indian insurance company

with another

or for the amalgamation of the two or more Indian

;insurance companies and for matter consequential to such

merger

)--or amalgamation, as the case might be." It was in the afore~aid

> -context of merger of companies that Section 16(l)(g) provided for

rationalisation and

revision of pay scales and other terms and

coll­

.Oitions of service of officers and other employees wherever necessary.

· ·In exercise of the powers contained in the aforesaid Section

J6(1) ofthe said Act, four m~rger schemes were framed in 1973 by

--the Central Government and the four companies, Oriental Fire and

r;... ~nd General Insurance Company Ltd., National Insurance Com­

t -.Pany Ltd., New India Assurance CoD)pany Ltd., and United India

,.. Insurance . Company Ltd., into one or the other of which several

_general insurance companies in the country were merged, were

alone allowed to carry-on the business. of genera[ insurance. The

j)reamble of the scheme," called the New India Assurance Company

Limited (Merger) Scheme, 1973, had stated that'the Centntl Govern­

ment was o( the opinion tha_t for the more efficient t;arrying on of

~ ~ihe general insurance business, .it was necessary to frame scheme for

· the merger of certain . Indian Insurance companies in . the New

lnd ia Assurance Company Limited. The preambles Of the merger

~chemes in respect of the other three companies were on similar

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SUPR'EME COURT REPORTS [1984.]3 s.d.R. 1-

lines. These four companies are subsidiaries of the General Insu­

rance Corporation of India. The cotnpanie~ started functioning from

. " 1st January, 1973 and the process of merger of the various com·

panies into one of ,the othef four companies was completed by 1st

January, 1974, when

the said four schemes came into force. The ·said schemes p~ovided for the transfer of officers and employees

of the merged companies to the transferee Company. The memo-x

nindum and the articles of association of the four Companies were. "

. also. suitably altered by the said schemes. Thereafter there had

beeli no merger or an:talgamation of any insurance company. The

petitioners stated that there had been no reorganisation of generat .

insurance business either. This position is not in dispute.

. •·

By a notification dated 27th May, 1974, the Ministry of

Finance (Department of Revnpne l/.nd Insurance), Government of _r

India, framed a 'scheme' called the General Insurance (Rationalis'a-·

tionaild Revision of, Pay Scales and other CondHions of Service of

Supervisory, Clerical and Subordinate Staff) Scheme, 1974, arid the

;reamble of the scheme. stated that "whereas the Central Govern­

ment is of the opinion that fot the mqre efficient carrying on genera!

.t,_suiince business, it is nece~sary to' do~', therefore, in exercise or· .

the.powers conferred by Section 16(l)(g) of the aforesaid Act, the

~

' . . . . .

· Central Government framed the $s~heme' to provide for the -..r· <( ..

rationalisation and revision of pay scales and other terms and ~con­

dition of service of ep}ployees working in supervisory, clerical and

subordinate .position under the insurers. The sai'd scheme governed

the pay scales, dearness allowance, other allowances and other terms

aitd conditions of the general insurance employees. · ·

It dealt, inter aHa, with nature and hours of work, fixation. .

retirement, provident fund

and gratuity.

Paragraph 23 of the 1974 A--

scheme provid~d that the·· 'New scales of pay' shall remain in force. '

initially· up to and inclusive of 31st December, 1976 and thereafter '"'

shall continue to be in force unless modified by the Central Govern~

.. ment. T'he scheme was framed after negotiations with the parties .

~ncerned. The petitionets further state tnat the scheme ·was

J?Brported to have been made· under . Section 16(1)(g) of the said

Acfand· it was treated as one made under Section 16(1) as part of. ·

1

t'h.e four merger schemes. The petitioners state that otherwise, it .

weuld have been invalid. ·

1he petitione~s fur~her state that the employees of the 'in-su.:..

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A.K. BANERJEE v. UNION (Mukharji, J.) . . 265~

ranee companies serving _throughout the country were, however,

subsequently

not satisfied with the pay scales, dearness allowance,

other terms and conditions availab1e to

them on account of several

factors. Through tl\eir associations, they submitted their charters

, oJ demands to the General Insurance Corporation of India in ~ 977

for the revision of terms and conditions of their servi~e. Negotia­

tions were held between the management and the unions for the

upward revision but according to the petitioners, nothing happened.

Industrial dispute was raised between the management

of General

Insurance Corporation

of India and the class

iii and IV employees

on the demand of revi5ion of pay scales, dearness alk>wance and

other allowances and service conditions. The Chief Labour Com­

missioner (Central), Government of India; Ministry of Labour,

issued concifiation notice dated 11th September, 1980 under the

Industrial Disp'utes Act,

1947 to the Chairman of the General

Insurance Corporation and the general secretaries

of the employees'

asso.ciations.

_There were several

meetings·. It was decided, accord·

ing,..t<r the "etitioners, that in . the meanwhile until t~e talks wei.e·

resumed the employe~s would not resort to strike. There was

representation to the respondents not to change the conditions of

service ·pending the conciliation proceed_ings. It is not necessary to

refer in detail to all these, which have been set out in the petition.

But nothing fruitful happened. The Labour Commissioner in the

circumstances sent a failure report under the Industriall2Jsputes

Act, 194 7 to the Secretary, Government of India, Ministry of Labour,

stating that there was failure to bring about amicable settlement of

of disputes. The petitioners con.tend that rio further action was

taken and· according to them the conciliation proceed_ings were

still pending. This, however, is not accepted by th~ respondents,

according to whom there was failure report and the conciliation

proceedings ended thereafter. The scheme m~ntioned hereinbefore,

which is under challenge was issued thereafter. We will have to

deal with the scheme in great detail as the same is the subject

rn1tter of challenge is these petitions under Article 32 of the Cons-

titution. '

After the 1974 scheme,

in 1976, the Board of Directors appro-

ved of promotion policy

.. On 1st June, 1976 another scheme by

c-

'y

whic~ there were amench~ents with regard to Provident Fund, was· '

introduced. As mentioned before in 1977, major unions submitted ll' •

charters of demands to the respondent No. 2, seeking revision in the

terms and conditions of service of the 'employees with retrospective

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'266 SUPR,PM£ COURT REPORTS [l984J 3 S.C.R. .,

-effect: Between lOth. March, 1977 to 30th March,. 1977, memo·

randum was addressed by, the employees of all India Association.t~

the Union Finance Minister.

In the memorandum addressed, it was stated that in the

normal circumstances on the· expiry. of the prescribed period •r

operation of an agreement, settlement of award, the unions usually

submitted charters of demands and. the said charters of demantis .

were settled eithe( through mutu1l neptiations or as a tesult of

award of an inQ.ustrial tribunll, but as ·the . pay scales and other

conditions of service of the .employees· in general insurance industry

were, however, governed oy a scheme or scheme t9 be formulated by

the Central Government and it was the Central· Government which

could amend these, the unions submitted that there was justitlcation

for making upward revisi0n in the scheme and shifting the base year

fro,m 1960 to 1970-7 J for the purpose of prescrib,ing pay scales.·

This point was stressed . by cJunsel appearing fbr the General

J?surance Company, in order to e~phasise thatthe Ut,ions always

accepted the position prior to the present· petition, that t].le govern·

ment had the power to amend or make·furiher schemes under the

provi.sion~ of the N:1tionalisation Act. Qn 30 July, 1977'scheme ·

amending the provisions regarding sick leave was introduced.· In

1978 Promotion Policy was revised by General Insurance Company .

. Between 1979-80, there were di~cussions. between the management

of the Corporation and the representatives of the Trade Unions

which were held on-8th, 9th, lOth October, 1979, 7th,. 8th, 9th,

April, 1980, 12th and 13th June and .1st August 1980. The manage·

ment of the Corporation· after several rounds of discussions with

the Unions sought to narrow down the area of differences and

submitted to the ·Government the demands made by the Unions · ·

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and the managment's recommendations. The General fnsurance

Corporation submitted befc.re us that the Central Government

after finally' considering the demands and recommendations of the

. management of the Corporation framed ~nd notified the scheme

under challenge on 30th September, 1980.

,.

It was contended on behalf of tl1e petitioners that the _said

notification had been issued by the Government suddenly and ·

unilateraiJy, witho.ut any notice to the parties concerned. Th.e em­

ployees were taken unawares. It was contended that from the

provisions of the said notification the service conditions of the em­

ployees including the petitioners employees, particularly with regard.

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A.K. BANERJEE V. UNION (Mukharji, ].)

267

o dear~ess allowance, stagnation increments, retirement age and

· •<lther increments had become worse than before and detrimental

·-to the employees. While the employees were eagerly awaiting

·.improvement in their service copd itions, this notification had

·unilaterally altered the service conditions to their prejudice.

'Pet!tioners in their petitions had alleged certain facts by certaia •

·ilfustrations, which according to them, indicated t~at employees

had been affected adversely, inter alia, in gross sta~ting salary of

-(}ifferent group3 of employe~s, salary on confirmation of assistants

who are graduates etc. It wa<;. further stated .that retirement age

.. was 60 years for all the cmplo~es under the 1974 scheme. But

.under the.new scheme, retirement age was reduced to 58 years for

employees joining on or after ·I st January, 1979. Clause 7 Of the·

impugned notification pre~ribed different ages of retire~ent,

·though the employess were of the same class and 'Similarly situated

·<tccording to the petitioners. Para 12(1) of the impugned schem'e

-provided that an employee who was in service befor~ the commence­

·ment of the said scheme would retire at the age of 60 years but

f'rovided that an employee joining the service on or after the com­

.nencment of the said scheme would retire from service on attainin'g

the ag~ of 58 y.ears. This was. discriminatory, according to the

:'Petitioners, being viola.tive of Article 14 of the Constitution.

It was further alleged that stagnation increments that is

d.ncrements after reaching the maxinium of the grade t~ all cadres up.

to muximum of 3 for every two years of service were given befo.re,

~-but now under the present notification clause 5 substituted para­

;graph 7 and provided for no stagnation increment except only one

increment for two years to the employees ifi record clerk cadre.

:Previously, there was no maximum limit on salary. Now maximum

-ilimit was fixed at Rs. 2750. Earlier, according to the petitioners,

Ho~se Rent. Allowance was given to all employees irrespective o~

·havmg offictal accommodation, under the new scheme, house rent

:.allowance was withdrawn for employees having'offici~!l accommoda­

;tion. E2rned leave earJier could have been accumulated upto 180

·"<lays, but the new scheme lirititcd -the a~cumu!ation of earned leave

•upto 180 day-s for the employees retiring at the age of 58 years and

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120 days for the employees retiring at the age of 60 years. ,U was

:stated in the petitions that this had substantially reduced the emolu­

mients of the general insurance employees, and it had adversely " H

.:affected .thq:mployess throughout the country.

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1he maiQ ground of the challenge is that th~ impugned noti­

fication is illegal as the Central Government has no po\v~r to issue

it under Sectiol). 16 of the said Act and such as the notification

framing the present "scheme" is ultra .vires Section 16(1) of. the

·, ;Generallnsurance Business (Nationalisation) Act 1972. Accordi~ to

. the petitioners, once the . merger of the insurance companies took

place and the process of reorganisation was complete on i lit

January, 1974 as mentioned before by forming the four insurance

companies by the four schemes already framed in 1973,th~re coulcf

be no fur,ther'schemes except in . connection with further reorgani­

sation of general insurance busfness and the merger· of more­

insurance companies as mentioned in sub-section (1) of *Section 1&

''of tEe . said Act. By the present alleged scheme there was no

. merger or reorganisation contemplated,"•unlike 1974 scheme, ~ccord­

ing to the petitioners. The petitioner's contend that merely maki;g:

amendment to the terms and condition iS of service of the employees

. '

unconnect~d with or not necessitated by the reQrganisation· of the-

);>u~iness or merger or ama!g\mation of the companies ~ould n'ot

fall within Section 16(l)(g) of the Act According to· the petitioners.

lhe' only properly called 'schemes'sanctioned under Secflon 16(1) are­

those four· 'merger 'schemes of 1973 as would b'e evident trom the ·

preamble to the Act.

The petitioners further contend tliat under the Life Insurance·

C,orporation Act, Banking Companies· Act, etc. there were po~ers;

to frame regulations independently of reorganisation. But there

is no su~ power, . according 'to the petitioners, under the General'

Jnsural}ce Business (Nationalisation) Act, 1972. The said notification·

therefore is without the authority of law. It is, further, submitted

that the present service conditions .. of the employees unn:Hrted tO<· .

. reorganisation of general insurance business or merger or· ama1ga-

·•mation of insurance companies, could nat form part of any scheme-.

·or notification. und'~ section 1 q of the aforesaid Ac~. Section.1 8(7}

of the Act would not come into play and the pmvisions of the:

Industrial Disputes Act, 1947 rincloding section 94 were applicable-·

. ~ : ~ .

to the general insurance industry. Therefore tf the compantes want-

ed to change the service conditions of their employees affecting:;

them adversely, they should baye given, the petition1:rs· coBtend,.

notice of changes under section. 9A of the Industrial Disputes Act,.

. 1947, negotiated with

the employees and arrived at

some!lettlerrient

or .. had the dispute adjudicated upon l!nder the said Act. Since;

this ha~ not been done, particularlywhen the conciliation· proceed-

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A.K. BANERJEE V. UNION (Mukharji, J.) 269'

ings were still pending in the absence of Government's acknowledge-

, ment of failure report of the conciliation· officer, the action of the

Government in issuing the unilateral notification is bad in law. It

is submitted further that impugned n.otification is ultra vires being

violative of Article 14 of the Co'nstitution because it discriminated

between employees 'similarly situated, ptrticularly in the matter of·

dearness allowance and retirement age.

. ' .

The petitioners contend that under the Sick Textile Under­

takings (Nationalisation) Act, 1974, the Coking Coal Mines·

(Nationalisation) Act, 1972 etc., spearate companies had been formed

on nationafisation. The employees of those companies were entitled

to have their service conditions regulated under Industrial Disputes ,

Act, 1947. In the present case, the employees jhave been deprived :

9f .the existing benefits without following the procedures prescribed

under

the Industrial Disputes Act, 1947. Therefore, there

was·

discrimination and violation of article 14 of the Constiution. The

petitioners therefore contend that the terms and conditions of service

enunciated

in 1974 being as a result of bilateral agreement, could

not be changed unilaterally, to the detriment of

th.e employees'

fundamental rights

to carry on their employment for gain and

as such

-violative or article 19(1) (g) of the Constitution. It js stated that the

notification· was illegal, being ultra vires section· '16 of the 'Act.

Since, according to the petitioners, such notification deprived the

rights of the employees to receive dearness allowance etc. with the

rise in the cost of living index without any limit, it is deprivation of

· property without providing for compensation and is thus also

violative

of article 31(2)

of the ,constitution. The petitioners,

· further, contend that the Constitution 44th amendment deletin/

Articles 31 and I9(t) (f) cannot save the scheme since that Amend~'

ment came into force only on 20th June, 1979, whereas the impugned ·

• notification affecting the fights of the employees to emoluments takes

et.Tect from 1st January, 1979. It was further urged that the protection

of article 31B read with Nineth Schedule of the Constitution was not

available to any scheme or notification much less the present one.

The present notification, according to the petitioners, disregarded

the directive-principles enunciated in Article 43 of the Constitution.

The petitioners therefore ask for quashing the said notification by

these petitions under Article 32 of th~ Constitution.

The second batch of Writ applications ~Writ Petition Nos.

5434-37 of 1980) are on behalf of the employees as well a,s the.

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.270 SUPR.I!MU COUR,T REPORTS

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Gep~ral Insurance EmpJoyees. Ali India Association challenge the

scheme of 1980 more or less on the same· though not)dentical grounds

mentioned in Writ Petition Nos. 5370-74 of 1980. Interim order '

was passed

in the said application regarding

payment of dearness

aUowance as would appear frotri. t)1e Court's ordec dated 25.8.1981.

In the said order, dir,ections were given for payment of dearness

allowance payable under th! old scheme from the beginning of 1981

-with quarter April, as ~ell as quarter beginning from July, 1981

1Within ce'rtain time mentioned_in the said order. It was. further,

·directed that subsequent.dearness allowances' will be paid, in accor­

dance with the directions to be given at the time of disposal of these

writ applications, • .

•• · In the Writ Petitions Nos. 5370-74 of 1980, there is a petition ·

·-on behalf of All India National General Insurance Employees

Association

for intervention. It res presents a Trade Union of

work"""

n. men working in the offices of GeneraOnsurance Corporation of lndi~,

.. Bombay as. well as its subsidiaries. They, inter alia, allege that the

main petitions have challenged the scheme of 1980 op purely techni­

cal grounds and though it would be correct to say that the scheme

--~ ; of 1980 does not meet _the aspirations of the workers wholly as

. reflected in the various charters of .demands submitted to the

.E maMgement, th;y are of the opini~n that the same is not completely

bereft of a~y merit so that the sa)lle may be quashed by this Court. . ·.

· · They menti-oned certain additional benefits available in the said

. scheme of .1980 in paragraphs 15, 16, 17, 18 and 19 of the said

application.· They therefore claim right to intervene in the said Writ ·

F application Nos. 5370-74 of 1980. There is 51lso an· application by

. Senior Assistants of the New India Ass~rance Company Ltd. and

National Confederation of Genera(Insurance Employees, represen­

ted by its Vice-president under Order XLVII Rule 6 of the Supreme

· Court Rules of 1966 praying for" permission to intervene in these ~

petitions. Upon this an Jinterim order was pas~ed on 24.10.1980.

«; staying the operation of the scheme (operation of the Notification

dated 30th September, 1980) and notice was ·issued in the stay

application ..

II

All these will qe'dispos·ed of by this judgment.

It will therefore be nec~ssary, before we examine the conten­

ti.ons raised 'in these p~titions, to briefly consider the scheme of 1980 .

. As mentioned

before,

this scheme is caUe<i the General Insurance

•

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A.K •. BANERJEE v, UNION (Mukharji, J.) 27n

(Rationalisation and Revision of Pay Scales and other Conditions of

.Service 'Of :supervisory,· G:lerical and Subordinate Staff) Second

Amendment Scheme,

1980. Some ·new

definitrons have been

provided

by paragraph 2 of

1980 scheme which included the meaning

of the 'Company' and under the scheme it. mentioned that the

'Company' would mean the four nationalised com~anies, National

Insurance Company Limited, the New India Assuranc~ Company

Limited, the Oriental Fire and General insurance Company Limited

and the United India Insurance Company Limited. Sub paragraph

(ii) of paragraph 2 of the said scheme defines 'Net monthly emolu

4

rrients'. By sub-paragraph (ii), the amended· definition of 'Revised

terms', (Revised Scales of .Pay) was inserted. By paragraph 3, ·

. adjustment of pay was stipulated on ·the coming into effect of

operation of 1980 scheme. How the basic pay is to be fixed is

provided by 1980 scheme. It also makes detailed provision! as to

how the adjustment allowance

is to be

dealt' with so far as Dearness

Allowance, Overtime allowance, Contribution to ~rovident Fund and

other retirement benefits are concerned. Paragraph 5

1

deals with the ·

'Increments'. Paragraph 6 deals with Earned Leave. and other

encashrrient

of

leave at the time of retirement and death. Paragraph

7 deals with 'Retirement' and stipulates that an employee who was

in service of the Corporation before the commencement of the

·I '

scheme of 1980 should retire from service when he attains the age of

60 years .. But an employee, who joins the service of the Corporation

after the commencement

of the

schem~\vill ·retire· on ·his attaining

' ~

the age of 53 years. It further stipulates that an . employee would .

retire on the afternoon of_ the last day of the month in which he

"attains the age of 60 years' o~ 58 years as the case might be. Clause

8 deals with 'Gratuity'. Clause 10 provides the duration of revised

te1ms and stipulates that the revised terms should be continued

to oe in force unless modified by the Central Government. Then

the Second ~chedule of 1974 scheme which dealt with Travelling ·

Allowance category, Travel by Road and different allowances for

the same, transfer grant were amended and the new Fourth Sehedule

included scales of pay to be fixed). on the revised scales of pay

indicated therein.

It is not necessary to set out further details ofthe actual

provisions

of

1980 scheme. While on behalf of the petitioners, it

was contended that the revised .scales· of pay. and the· terms indud ed l

therein were highly detrimental t~ the· employees concerned, on the

0

ther hand; it was contended on behalf of the Union oflndia as well

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1.72 ·, SUPRE¥¥ COURT REl'ORTS [1984] 3 s.c.~.

as the General Insurance Company that on the whole, 'the revised

s

1

c;ales ·of pay provided for better pay. and allowances and better

opportunities to ~he employees concerned. One of the intervener

unions alsO states that the 1980 scheme is not completely .devoid of

merit. Parties pave taken us through in detail by help of charts and

other 'figures in· support' of the' respectiv~ cases and contentions. It

. is not necess.ary, in view of the nature of the contentions raised .

.. " . ' ' ' '

beforC\uS, to express any opinion on the merits or demerits of the

rival c·ontentions :Or the p~rties iti respect of the details of ei{her or

. - . '

both the schemes. · It may. however, be stated that there bas been a

ceiling on increase of pay automatically with the increase of the ries

in the cost of index. The respondents, namely, the union of India

· ·as well as the General Insurance Company, contended that in

com paris( n with other employees is governmental sectors or· public

sector!j, the employees· of. the general insurance companies were

''Hi&h -iage ~landers' and it was necessary to put a ceiling on the

emolunients and other amenites in order to facilitate better function.

ing of

the

ip.surance companies concerned as well as sub~rve the

object and ptiq,~se of the nationalis'ation policy. The . various

defailed

items of the scheme of 1974 and.

1980 have to be viewed in

this background. ..

' - '

The ob~sic and, in our opinion, the main questions are-has the

Government and the respondents power in law to introduce the

19M scheme and if they hav~ that power, have they exercised that

power in any arbitrat)l': and whimsical manner' to deny to the petitio-

.. ners any of the fundamental rights and whether the petitioners. have

been discriminated against? these, therefore, are the questions

an•

it is not

nect;ssary, in our opinion, to detain ourselves with lengthy

. extr~cts from the. scheme of 1974 'and ,1980 to examine w~icl) is

better or ~ich is detrimental and if so, to what extent. On these~

there will be and are divergent' views. ·•

The scheme of 1980 has been framed by the Central· Govern·

ment under the authority given to it by the Aci under General

. Insurance Business (Nationalisation) Act; 1972. The scope of that ·

a)lthority has,· therefore, to be foun<;i u:nder Chapter V t:ontaining

·sections 16 & 17 of the-Act. · We have set out hereinbefore the terms

of Sections

16 & 17. Sub-section (1) of Section 16

·authorises the

Central Government, ~~it is ofthe opinon that ~"for the mote efl--

eiettt carrying or). of .general inmrance business, it is necessary to do

so, may, by notification; fram .. oJie or mOre sc~emes" proV'I.din ,fiDr * ..

•

A.K. BANERJEE v. UNION (Mukha,rji, J.) 273

-all or any of the matters enumerated in the different clauses of

·section 16(1) of the said Act, and the matters have been set out in

the different clauses of the said sub-section. for the· preseot purpose,

.t;lause (g) is t;elevant, which gives authority to the Central Govern-

, ·ment to frame scheme· for rationalisation or revision of. pay· scales

.and other terms and conditions of service of officers and other

.. employees wherever necessary. C!ame (j) of the said sub-section

gives authority to the Central Government also to frame.scheme for

:Such incidental, consequential al)d supplemental matters as are

necessary to give full effect to the scheme. Therefore, the question

th:rt 'is necessary [Jr this purpose to determine, is, whether the power

:given to the Central Government by clause (g) for the rationalisation ,

'()f revision of pay scales and other terms and. conditions of seryice

of officers and other employees, whereyer necessary can be said to

authorise the Centrai!Government t_o frame the present scheme uncter

<Consideration. This must be judged in tconjuction with sub-section

(6) of Section 16 which authorises the Central Governm~nt, by

notification, to add, to amend or to vary any scheme framed under

'Section

16. The point at issue,

is, whether rationalisation or revision

of pay scales and other terms and conditions of service of officers

and other employees wherever necessary can . authorise the Central

Government to frame scheme like the scheme of 1980, which is

unconnected with or unrelated to the merge:r of one Indian insurance

<:oropany with another imurance company or the formation of a new

company by the amalgamation of two or more Indian insurance

companies. In order to find that out, it is necessary to read the

. provisions of this Act as a whole. Primarily, if the words are

intelligible and can be given full meaning, we should not cut down

their amplitude. · Secondly, the purpose!or object of the conferment

of the power J;UUSt be borne in mind. Tne first indication of the said

object in this ·case, as is often in similar istatutes, can be gathered

from the preamble to the Act. We have noticed ·the preamble of

the present Act. This preamble has also to be read in the light of

·sub-section (2) of'Section 16 which provides that lthe object of the

Central Government in framing the schemes under sub-section ( l)

was to give authority to the Centrai Government to frame schemes,

to ensure that ultimately there are only four insurance companies

(excluding the Corporation) in existence and that they are so situate

·as to render their combined services effective in all parts of India.

'Sub-section (2), therefore, to a · large extent circumscribes the

amplitude.of the power given under sub-section (1) of Section 16 of­

.the Act. As framing of the scheme is an exercise of the delegated

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274 SUPREME COURT REPORJ:S · [1984] 3 S.C.R...

authority by the Central Government, the memorandum Fegarding:. ·

delegated legislation· submitted to the Parliament along with the

General Inmranee Business (Nationalisation} BiH, 1972 will provide·

some. guidance also, As we have noticed. that clause 16 of the s,ai<L

Bill Which later on oecame Section 16 of the Act' explained the -needl

for delegated authority and stated the object as .'to frame one or

more scheme for th~nrlerger of one Indian insurance company with

another

or for the amalgamation of the two or more

insurance­

compani(ts and for· matters consequential to such merger or·'

amalgamation as the case might be'. Bearing in mind that t,his is a.

delegated kgislation and keeping in mind that the authority to frame:

the scheme must be found within the object of the power given under­

Chapter V of the Act and'reading the entire connected provisions.

together, it appears tQ us, that the only authority or power to frame

. scheme given was for the purpose of merger of one Indian insurance

compaJ?Y with another for amalgamation of two"br more Indian

insurance companies and for matters consequential to such merger

or amalgamation as the case might be. Any scheme though, it might

come

within the wide expressions used in

su~-section (6) of Section

16 as well as clause (g) or clause (j) of sub--section (1) of Section 16,.

which is unrelated~ or unconnected with the· amalgamation of the

insura·nce companieS or merger consequent upon nationalisation

would be beyond the authority of the Central Government. This.

has to be So if read in conjupction with sub-section (2) of Section

16

ofthe Act. 1t is evident from the scheme of

1980 that it is not

~

connected with ~r is not for the purpose to ensure that ultimately

ther'e are only four insur<,tnce companies existing and they are SOo

.situate as to render comb'ined services effective in all parts oflndia.

It is true that subsequent to the merger of the four insurance compa­

nies, scheme_ as indicated herein-before, dealing with P.rovident

Fund, Gratuity etc. have been framed but these, in our opinion, aFe

irrelevant when judging the question ~f the authority to frame a

' ' '

particular scheme which is impugned. It is also true that the scheme

of 1974 so far as pay scale was concerned as indicl ed in the scheme

as

.we have set .out hereinbefore provided that the

scheme would

remain in force initially for a period upto 31st December, 1976 ~nd

thereafter shall continue to be in force unless modified by the Central

Government. It is also true ~hat the employees themselves, as

indicated hereinbefore, wanted revision of pay scales and claimed

through their n~merous charters of -demands amending or framing

of a fresh scheme by the Government on the basis tlrat the Central

Government alone had the authotity to frame. fhe scheme under the,

Act, Certain amount of revision of pay· scale and· other terms and

•

A.K. BANERJEE V. UNION (Mukharjl~ J;) 27.S

conditions become inevitable. from time to time in all running. busi·

ness or administrations. Clause (g) of sub-section (1) of Section 16

authorises the Central Gove{nment'to frame scheme for ratiol}atisa­

tioh ahd revision of pay scales and other terms and conditions of

serices of officers and other employees wherever necessary. But it

is evid~nt that the ~cheme oJ 1980 impugned 'in these petitions is not

·related to the .object envisaged in sub-section (2) of Section: 16 of

• the Act. In order to be warranted by the object of delegated

legislatibn as explained in the memorandum to . the Bill which

incorporated Section 16 of the Act, read with the preamble of the

Act, unless it can. be said that the scheme is related to sub-sectjon

(2) o0f SeCtion 16 of the Act, it wonld-be an exercise of power beyond

delegation. The duty ·qr ~he Court in interpreting or .coristrubi.g a

pro-visio'n is to read ~the sectipn, ·and understand its meaning in the

:context. Interpretation

of

a provision. or statute . is not a mere

exercise ln sennntics but an attempt to find out the rneani.(lg of the

Iegislati'on fron1 the words use.d. understand the context and the

purpose of the expressions used and then to construe the e~pressions

.sensibly. · ·

There is another aspect .which has to be kept in mind. The

scheme

is an exercise of delegated authority. The scope

anq ambit

of such delegated 'authority must be sp-construed, i( possible, as not

to make it bad because of the vice of excessive delegation of legisia-

. tive power. In order to make the power valid, we should so cosntrue.

the power, if possible, given under Sectioh .16 of the Act in such

. manner that is does not suffer from the vice of delegation of exces

4

' sive le~islative authority.

It is well-settled that unlimited right of delegation is not

. inherent in the legislative power itself. This Court has reiterat~d

the aforesaid. principle in Gwalior R!lyon Silk Mfg. ( Wvg.) co: Ltd.

v. The Asstt. Cammissioner of Sales Tax & Ors.{

1

) The growth of

legislative power of the <h.ecutive is a significant development of the

A.

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, · 20th century. The theory is iaissez-faire has been given a go-by ·and · G

· . large and comptehensive powers are being assumed b)l th'e State

with a view of improve social an~ e~onomic well-being of the '

· people. M~st of the modern socio-economic legislations passed

by the legislature

lay down the guiding principles of the legislative ·policy. The legislatures, because of limitation imposed upon them

(I) [19741 2 S.C.R. P• 879.

•

''276 . SUPREME CO~T REI.'ORTS . [1984] 3 S.C.R~

A r ·~nd the. time factor, hardly 'can·go irito the matters in detail. The

.''practice Of empoweririg the executive to make subordinate legisl~~ron

·within he prescribed sphere h<l;S .~volved OUt of practical neces~ity

8

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·arid pragmatic· needs of the modern welfare State. . .

-··· · Reg.arding delegated l~gislation, the principle.which ~as been

well-established is that legi~laturc must lay down the guidelines, t.he

. principles

of policy for the.

·authority . to whom power t~ make

·suborqinate legislation is entrusted. The legitimacy of delegate.d ·

:legislation deBcnds upon its being used as ancillary which the legis­

.'lature cons!ders to be necessllry for the p~fp ose pf exercising its

. ·I~gislature power effectively and completely .. The 'legislature must

.. ·retain .in. its own 'hand the essential'legislative function which con.:.

· :sists in declaring the l~gislative policy and· lay down the. standarq

:which is to be enacted into a' r~le of law' and what. can be' oelegated

,s the task of subordinat(: iegish1tlon which by' very nature is ancil­

lary to

the st.atute

which delegates the power to make it effective

provided the legislative policy is enunciated with suff'tcierit clear,ness

-or a standard laid down. The courts cannot .and do· not interfere

on the discretion ·that undoubtedly rests with the legislature itself fn

determining the .extent of \he delegated . power in a particular cas~.

It is true that in ~his case. under Section 16(l)(g), rati. on'alisation or

··revision of pay scales and .other terms and conditions of service of

·officers and other ·~mployees wherever necessary is one of the purpos~

for· which scheme can ·be. framed under Se'ction 16(1) of the Act.

:

It is also true that

incid~ptal, co .n ·s~quenlial and supplemenetary

:ill alters as are necessary' to . give full effect to the sche~e are also

authoriseq under clattS9 (j) of sub-section (I) of Se~:tion 16. It bas

also to be borne in mi'nd • that scheme and every' amendment to ·a

scheme framed under. sec.tion . 16 shaH be l~id as soon as may be

after.'it·is made before each H~use of Parliament. The last provi­

sion

is

indicative of the power of superintendence that the legislature

·maintains ovet the subordinate iegislation of scheme fr~med by the .

. delegate under the authority gjven under the Act. ,From that point.

ofview, it is possible to consid.er as indeed it was argued on behalf

. bf the respondents in ihis" case, that having regard to the fa~t that one

. of the objects of the Preai:rj.ble is regulation and control of general

insurance .business and other. mltters connected therewith. or inci·

dental thereto. and having regard to the fact that rationalisation and_·

. revision of .pay scales whenever necessary. was one of the objects'

envisaged under sub-section (1) alongwith clause (j) of sub-section.

(1) of Section 16 of Section 16 read with the safeguards of section

•

.. A..K. BANJ:RJEE v. UNION (Mukharji, J.) . 277

. -~ 17-as·we nave 'Set out hereinbefore in case of revision and rationalisa­

-~. 'tio~ of pay spates whenever it b~comes neces.saryl as· in this case,

~ .accordipg to the respondents, it had become necessary, the scheme·

~ -Qf 1980 wa~ p~rmissible within th~ delegated authority:·. But we

rnust bear in ininc the observatio.ns of Mukhe:rjea, J. iri The Delhi·

Laws'l

1

) case to the following etrect' : ·

''The. essential legislative function consists in the deter­

::.. 'mination or choosing of the legisla~ive policy and .of enact­

/ · ·ing that_ p~licy into a binding rule of conduct. It _is open to

. ~ ·-the legislature to formulate the policy as broadly and with as

8

· little or.as -much 9etails ·as it thinks proper and it may dele. o

·:gate tbe rest of the ·legislative work to a subordinate autho-

-'

tity

who will work out of the details ~ithin ·ihe framework of

·that policy". ' ·

.--. But as explained• befote the Act must be read as a whole.

· _,. 'The Act must be read in conjunction with the preamble to the Act

.and in conjunction .with the memorandum in Clause No. 16 of the

Bill which introdu~ed the Act in questia1_1. But above all it must be ..

read in conjunction with -s~b-·s ·ection (2) of ~ection l6 ·of the Act ·

·which

clearly

indicated the object of framing ·the scheme under

Section 16(1) of the Act. The auth-ority and ~cope for subordinate

legislation

can be read

in either of the two ways ; name'ly one which

.creates wider delegation and one which .res.tricts that delegation. In

1-our opinion, in view of the _language of sub-section (2) of Section 16·

and the memo~andum to the 'Bill, in the peculiar facts of this case·

the one which restricts tlie delegation. must be preferred to the other.

So read, in otir opiniqn, the authority under Section 16 under the

.(fifferent · ciause of sub-section (1) must pet(_) SQbserve the.object

' as envisaged in sub·section (2) of Section 16 of the. Act,_ and

_ ifit is so read than framing of a. scheme for purposes mentioned .

in different clause of 'sub· section (1) . of ·Section 16 must be

4il relat~ tQ the a~algamation or merger of the insurance companies _

as. envisaged ·both in the memorandum pn delegated legis­

lation as well as sub-section (2) Of Section 16, We may mention

'

in this connection that in the case of A.

V. Nachane & Another v.

Unioi, of-India & Aiz(f)ther,(~) this c~n~ention of delegated legislation

was .adverted to. In that case the Court was concerned with Life

~ (1) £l'SlJ S.C.R. 137.

~) (1,12] 2 S.C.R · 246.

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278

$UP.Roi£ coiJ'Rr ilii>oP.is.

[1984j 3 S.C,Jt.

. .

. A - J~surance ~orp .oration (Amendment)·. Act, 1981 where the· P~licy of:

''the Act as stated in the -preamble· ·?f· the· Amendment Act was th '

· "for securing the· intere~ts of ·the Life lnsuram;e Cor~JQrarion :~

India and its policy·holders and to control, the cost of administra·

tion, it is ~ecessary that revision of the terms. and condition o£·

B < • service applicable to the emplorees and agents of the Corporntion:

should be undertahn expendiously. That was the object or the

Act in question. ·.Unfortunately that is not the object indicated:

as the objec:t of the ·power to frame ·sc~eme under Section 16 or the

-present Act.'. In view of that object mentioned in the said decision.

and for other reasons in ·the case of.f.V. Nac!Jane &: Anbtherv

c · Union of /ndi~ & Another (supra), this Court held that the Act;~ ­

question did not suffer from the vice of excessive dekgatioo. In·

. view of what we have stated herdnbefore, the scheme of 1980 so­

far as it is not related to the amalgamation or merger of insuranee

companies, it is !lot 'warranted by sub-section (I) of Section 16. If

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that be 5o, the scheme. must be held to be bad and bcyon~ au tho-

~~· .

This being the position, it is not necessary to e~aminc the vari­

ous other contentions raised in this case. Various contentions have­

been made. Both sides relied on various dcci~ion$ i'n support of their

respective contentions. Both sides relied on the decisi~ns dealing with

the employees of the Life Insurance Corporation and the ,\cts and the

·_amendments in connection with their terms of employment. We

will ju>t note the decisions. Reliance .was placed on the decision ill

~he cas, of MaJmJ Mohan Pathak v. Union of httlia & Or.<, Erc.(ll ,

The question in that decision was that the validity of Section 3 <>fthG

_.Life lrburance Corporation (Modification of Settlement) tiel, 1976. ~ ~

The questions involved in that decision, in the vi~·\\ \l"e htW~ takcn'as--.1

well as in the facL1 of the instant case, arc not relevant. In last

mentioned Ca~e there Was a Writ pdition which was allowed b)'

the learned single Judge of th~ High Cou~t

1111

d appeal was pr- eferred>

from that decision. During the pendency of the appeal, th~r~ ~as·

an amendment to the Act namely, the life Insurance Corpor~uon

(Modificatior of Settlement) Act, 1976. In-the Letters Putent Appeal,

the Corpo~ation stated that in view of the imptlgned Act, there wiiS

no nectbctty f_or procetding with_ the appeal and the Division D~oc~

of Calcutta. H•gh Court made no order. on. the· said npp(l11. ThtS.

,1) (1918]3 S.C.R. 334.

\~:-~~-r .. . ' .

I . . . ;.>.."K. Jl:\~L"RJ~I! v. W!ON (;1/uk/wr}i, J.) . .

2

;

9

· _.· '. rt h~lcl among otb;r things tl;at tlie rights ~r .the ~1rties had

I

.-ccu

11

• ed in· the JUdgment and became the basis of a Mandamus

. ~rysta 11 . .

1

:1 b . .

H

'gh Coutt and 1t cou • not e taken away by mdirect fashion

~fthe I ·

d by the Act undcr. chalknge before this Court. ,

. ·propose · ·

F . ~h-andrachud ,' J .• as th_e l1arn~d . Chief iustice then was, sp~ak­

f. : for himself and F~zal . All and Shanghai, JJ: concurred with the

I' .mg · · 1 h · ·

-majority vJ«:w on the b~sl:i t.J.lt t e tmpugned Act violated Article

j1(2}of

the

Constitu _lion and Wds therefore void. Bhugwati, J. speak-

: · iog for himself and_ on behalf o~ I yer & Desai, J J. was of the view .

\.,··that irr.espective of _wheth_cr the Impugned Act was constitutionally

-, valid or not, the CorporatiOn was bound to obey the writ of Manda­

(·

111

us issued by the High Court· and to p:~y the bonus for the. year

: 1975-76 to class Ill and Cl:m IV em;>loyees. The said. learned

.

~ · judg~s held that writ of Mand .\m~s w:ts !lOt touched by the impugn­

' · ~d Act. The other observations of the said Judges as well as the

'J -~Jlher learned Judges are not r~kvnnt in the view we have taken. In

l

l . instant CJSe before· us we uJ n•lt have any cHe of settlement which

· was the subject matter there bctw<!en the workers and .tbe e.mployers

f .and the rigllls flowing therefrom.

, ..

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Reliance was also placed on th~ decisio.n in the case of Tlte

; lift l·uuran;:e Corpararlon of fndla v. D.J. Baltadur & OTs{

1

). as well

as th~ decision in the case of A. V. N.J.:hane & Allotlter v. Union of. E

.•. lni,!t & Anorltrr . (supra). ·In the view 'we have· taken, it is not · •

-uecessary to examine the se d~~ isions in C:ktail. In those cases, the

question under consideration was the Life Insurance Corporation

. Act, 19_56 and the subs equent am~ndments thereto as well as certain

~;~ -ord~rs _m respect of the same.

i' ~

The basis upon which the aforesaid two decisions proceeded

i, -.ere (a) a right had crystallised by thll directions in · IJJ. Bahadur's

·Ci1$e ( • .

. tf ~pra) and this could not be :dtered. or taken away except by

fur~:h •ndustrial sc:ulemcnt or uward or by relevant t.:gislatlon and ..

in~ •; relevant lcgblation which WJS the subj~ct matt.:r of challenge ·. G

.had · • Noch tm~'j' cas-: (supra) c-Jn not take away th~· rights which

tvid· nctcfrued to the 'emnlove~s with retrospective effect. As. is

•II ro I ,._ . . .·

~ -.liffcr. rn

1

le facts of the case be Tore us, the 'situation is ent1rely

-;,hct~:t. We un: conccrncJ here with the questi'on primarily

r the schc · d 'f · · h ·

,

·.

me 1~ au_thoris.:d by tli.: Act un 1 1t 1s so aut pons-

~ -· ...

. · l] I, S.C.R. 1033.

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[,1984] 3 s.c . .._. 1

_A . ed ·the question is. whether the Act in question ·is consiiiution

1

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280

SUPREMJ! COU~T REPORTS ·

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"alid in the sense it had taken away any ng t_s w 1c had crystal!' :..

ed or whether it infringed Article 1'4 of the Constitu_tion. ·The~~

decisions also deal with the question whether a special legislation

would supersede a general legislation and which legislation co~ld be­

considered. to be a special legislation. It may be noted that we arc

not concerned with any settlement or award. In t_hat view of the-,'

matter, it is not necessary to detain ourselves with the said decisions.

and the various aspect dealt with in the said decisions. .

Another aspect that was canvassed before us was· whether ; ;

Section 16 of the 1972 Act with which we arc concerned in any way ·'I

affected· any ~ndustrial dispute and whether Jhe provisions of sub-·I

section {5) of Section 16 or sub-section (7) of Section 16 in any way

·curtailed any· 'right in respect of any industrial dispute and if so.,.

whether the General Insurance Business (Nationalisation) Act, 1972 ,"j

is a special legislation or whether !he Industrial Disputes Act, 194T

is a special legislation in respect' of adjudication of rights between-.

· the employees and the emplo)'er.

If we bad held that the scheme of 1980 was permissible within,

the power delegated under Section I 6 of the Gcnc:r~l Insurance

E . Business (Nationalisation) Act, 1972, it would have been necessary

for us to discuss whether there is any conflict between the provi~

sions of the said Act and the Industrial Disputes Act, 1947

and if so~ which would prevail. s~ction 16(5) of the 1972 Act, aS:

we have noticed earlier, stipulates that notwithstanding anything

contained in the Industrial Disputes Act, 1947 or iu any other law

l' for the time being in force, the transfer of the services of any officer

or othfr employee of an Indian insurance company to the acquiring

company shall not entitle any such office! or other employee to any·

compensation under thut Act or other law and

00 such claim shall

be entertained by any court, tribunal or ;ther authority. This, to a.

c certain extent• clearly txc!udcs the operation of the Industrial Dis~

put~s Act, 1947 in respect of disputes arising on the tran~fcr of the:

busrncss of g~oeral insurance. There is no such question bef<Jrt us.

Had it been po~siblc to hold that the scheme of 1980 wus v;~lic.l i[).

prop~r c.terche of the authority under Section 16 of the Act. a

q~~stJOn would have ,arisen as to whether the ceiling an_d oth~r con-

8 dillons on emoluments coulc.l be imposed on the employees in the

manner proposed lo be done under the scheme of 1980 without-

1

reference to the procedure for adu}ication of these matters under tbC

.-

,j

A.K. BANERJEE v. UNION (Mukharji, J.) 281'

Industrial Disputes Ac;t, 1947. Then the question had to be judged

by reference to sub-section (5) .·and sub-section (7) of Section 16 of·

the 1972 Act. Section i6.empoweFed the. Goveni.ment by nptification

·to add to, amend or very any scheme framed under Section 16(1 ).

Sub--section (7) provides that the provisions of this section, namely·

Section 16 of the 1972 Act and onmy sch.eme under ~t shall have

effect notwithstanding anything to the contrary contained in any

other law

or any agreement, award or other instrument for

the time

being

iri force.

We have noticed the

scheme of 1980: That schem~ puts·

certain: new conditions abou~ retirement, about emeluments and _

<>tber benefits of the empioyees. It may be noted that the applica-·

tion of Industrial Disputes Act as such in· general is not .abrogated

by the provisions of

1972 Act, nor made wholly inapplicable in

respect of matters not covered . by any provisions of

the. scheme.

This aspect is important and must be borne i~ n1ind.

Wrongful dismi~sal, other disciplinary proceedings, unfair

labour practices, victimization etc. would _still remain unaffected by.

any scheme or. any pfovision of the Act. The only relevant and

material question that would have arisen,

is, whether in

ca?e where a

statutory ceiling whith one ~f the counsel for the petitioners tried

.to describe as "statutory gherao on rise of increase in emoluments

and

o_ther benefits with the rise in the cost of index of

prices" affec­

ted the position _under the ·Industrial Disputes i\ct: 194 7. •It may be

noted as

we have noted before that this. is not

a· case where any

dispute

was pending before any tribunal or before any authority ~under-the Industrial Dis_putes Act, 1947 between the workmen con-

. cerned and ihe insurance companies. Though there was conciliation

proceedings, the conciliation proceedings could not r~ach to any

successful soluti(;m and the Coi1ciliation Officer has mad~ a report

failure of conciliation. The Goverment ·had the report Thereafter

the Government has not referred the dispute

to_

any industrial

tribunal "ut . has framed a scheme which is the subject matter of

challenge before

us. It cannot, in our opinion, be said that concilia-

t '

tion proceedings or any proceeding under the Industrial Disputes

.

Act were pending

·and therefore i.n the middle of the proceedin-gs

under the Industrial Disputes Act,· the Government had acted an_d,

framed the scheme _and as such th" same was bad and i'!Jegal. There.

were no pro·ceediogs pending under _the Industrial Disputes _Act~

1947. With the finding of the Conci_iiatfon Officer, the Government_

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ha(\':t\10. options, either reaching a s-~ttleme1,1t or framiDg a 5cheinc .

1 on the one hand• Of to make a• reference to the tribunal ohhc

dispute. regar~ing the points ·mentioned in the demands ·of the work:-.

men. T:here is .. one factual dispute which, in our opinion, is.. not

v.e~y material. According to the petitioners, the <;Jovernment had·

. not. acknowledged the rec~ipt of the failure report of the Concilia·

tion Officer. Acoording to ~he . r~spop.dent~, the receipt \vas acknow-

ledged ;

the. failure

of the. conciliation proceeding~ however, is

admitted_. ·'No .further steps or pro~eedings were required as such.

The Government had. to assess on the failnre of the conciliation

p~ceedi~gs either io refer the matter to the tribunal or to take such

steps as it consid~red necessary. lf.th~ Go:venunent had not taken

anj! ofthe steps, then it was open, if the employees concerned wero

io.an)cway aggrieved, t~ take appropriate proe<:edings agaJnst the

Gov.erument for doing so. As mentioned hereinbefore if the scheme·

was bel~fto be valid, then the qu.e.stion what is the general law and

what . is the special·law anq which .law in case of conflict would

prevail wou.ld have arisen and that would have necessitated-the.

application of the principle "Generalia s.pl.'~ialibus no1i d1rcgant".

Tfie, general rule .to be fqllow.cd in case of conflict ~etween ,t\vo

statutes. is tliat tbe late; abrogates the eatlter one. In< otber words, ·

a prior spe~ialla.W would yi.~Jd tQ aJa_ter gen~ral law, if e~ther.of the

' . ' . .. . (

two f9Uo.wing c()nditions is satisfied. ~ · . . ·

(i) The two are in<;onsistcnt with each other .

•

•

. . .

(H) There is some express reference in the lat~r to the.

earlier·enactment.

. -

If either of these tWO. conditiOnS is fulfilled, the Jater law, even

though gener~l, would.prevail. . . JJt.

From·the text and the. decision~, four tests. are. deducible and.

G . these ate : (i) The I_egislat1:1re b~s the und~ubted rig lit to a,lt~r a !a~ ..

alre3cdy promulgated through subsequent legislation, ·(ii) A special law

may be. al!erga'ted or repealed '·by a later general bw by a a express.

provision, (iii) A i{l.ter. general law will override ~ prior special law

iftbe two are so repugn·arit to each other that they c_al)not' co-e~ist ·

·even though no express provision in that behalf is found· in th~

li · genc;r~I I~w, and (iv) It is. only in. the ab5encc of a . provision to the

_contrary and of a cle~r inco~sistency that a sp~ciaJlaw wiJrrem~in

· wholly unaffected .by a later gen,eral 1aw. See in this conn~ction .•

tt.

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A.K. BANERJEE Jl, U'NlOJ.~,(Mulfltttrji, J,) 28-3

~~well on "The ~llt~mf~tlltion.<?f~ .~~tutes" Tw~lfth Eqjtion; pages

l~{i-19S. . .

A

The question was posed in the c~se of 'file Life Insutance C<!r~ .

poration of India v. D.J. Bahadur & Ors, (supra) where at page 1125,

Krishna lyer, J. has dealt yvjth the aspect of th~ que~tjon ·. There· B

·the learned Ju9ge pose~ tl').e que!lti}l!l wi1ether the LTC Act was a

• special legislation or a .geQeral legislation. Ref~rence in this. con­

nec~ion may al~o be mad~ on Cra.ies .on "St<J,tute (aw" Seventh

Edition (1971) paras 377~3.8'2,.bp~ it has to be l:)rope in mind that

·-primary intention has .to be given effect to. ·Normally two aspects ·

of the question woyld hav:e uem~nded im~w~r&l if th~ sc;:h~n:ie.of < c

1980 was held to bo valid on the first ground ~s w.e have disclls~;ed,

{)ne is whether the Gel)~:'l..L)n~ural)ce Busin~ ·s.s (Nntionalis~'\on)

Act, 1972 is a speci~l st~tWe ang the Indus~rial Di~put~s Act, 1947 ..

·'~ ·a general Act or vice v.t:rsa, !!.nd secon~ly wh5:tpcr there is a,ny

--express·provision in the General Insurance Business (Nationali~~

1ion) Act, 1972 which deals with the &ubject. Now in.this .case \XC

have categoricalreferenyY to the Industdal Disputes A_ct, 1941 in

'$Ub-section (5) and suq·sectioo (7) of Section 16 9f .the General

Insurance Business (Nationalisat-ion) Act, 1972. There is, however,

one a~peCt where i,t would have bec;:.n neceS,s~uy ha9 Wf( heJd the .

·'Sch~mc to be v~lid o~h~rwise, if there h. ad been no Gener~t· insu-

rance ~~sin·~ss· {N ationalis~tion) Act, 1972, then (he employees

-~ould have been eJ?ti.tled to .ra!~.e a dispute on the question o( in~

·· frease of emoluments and revision of pay scale J¥ith r.ise in the cost

· ()f index • of the prices under the Jndust'rial Disputes Act, 1947 .

. In such -a situation, the Government, after conciliation proceedings,

·.was empower~d to .make a referen~e if it considered so necessary

. having regard to the nit.ure of the disputes raised .. Though it qm­

. not be said that reference was a matter of right but it was within the

~realm of power of tb.e Government ·and the Government has a duty

:to-act with discretion on rele:vai}t coosiderati~ns. to make or ncit to

.make a reference· taking into· consideration the facts and circum­

: ~1ances of ea.ch case .. TQ that limitesl e~te:~H it coul<l h~ve. ~e~n said

, that this right or pow~r l~as be!!n c.u.rtaile9 by the Genera). Ins~ra,nce

. Business (Nation.alisation) Act, ~ 9.72, if tqf! s~l}~me ww; qth.erwi:~~ .

-'"i:lid.

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Having regard to the -context in which the question now arises H

'llefore us, in our opinion, there is no questipn i,s ~o whe -~qer the

'JlrOvisions of Industrial Disputes Act would vre:v~jJ . 9V~f. tqe.'provi-

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SUPREME COURT REPORTS . '[1984] 3 S.C.R~ ·:

sions of General Insurance Business (Nationalisation) ·Act. -:There

is no industrial dispute pending as such. The G~neral lns~ranc~

. Business (Nationalisation) Act, 1972 has not abrt>gated the Indus-­

. trial Disputes Act, 1957 as. such.

The question of the application of the principle of "Gen~raliir

specialibt1s non derogant" has been·. dealt with irt the case of J.K •.

Cotton Spi~ning & Weaving Mills Co. Ltd. v. State of u:P. & Ors.t

1

)'

Some 9f these aspects were also ·discuss_ed in the case of U.P. State:

Electricity Bodrd & Ors;v. Hari Shanker Jain and Ors,(

2

)

Had it been ·possible to. upbold the scheme of 1980 as being:

within the power of 1972.Act, it would have been also.necessary for·

us to consider whether such a scheme or Act would have been cons­

titutionally valid .in the context of fundamental rights under Article-

14, article 19(l)(g) and artiCle 31 of the Const~tution and th~ effect

of the repeal of article 31 by the 44th amendment of the Constitu-·

tion. The General Insurance.· Business (Nationalisation) ·Act was;

put ~n the Nineth Schedule of the Constitution as item.95 orr lOth-

August, 1975. .The effect of putting a particular provision in the:

Nineth Schedule at a particular timy has been considered by thi~

Court in the case of.of Prag fee & Oil Mills & Anr. Etc. v. Uniotl of·

India.<'

3

) It was held by the. learned Chief Justice in the said decisionr. .

that·on a plain reading o( article 31A, it could not. be said that the

protective umbrella

of the Nineth

Schedule took in not only the··

acts and regulation~ specified ·thereiti but also orders and n~tifica-·_

tions issued under those acts and regulations. Theref~re if any·

rights of the. petit.ioners had beeil. affected by the scherne of 198oi

then th,ose.rights would not enjoy immunity from being scrutinised:

simply because t.he Act unaer which the scheme was framed hai­

been put in the .. Nintl1 Schedule. In any event any right whick.

accrued to the porsons concerned prior to the placement of -the

Act in the"Nineth SchedtJfe cannot be retrospectiv_ely affected byr

the impugned pr<)visions. ·

It was contended that the rights of the peritiones under article·

·

19(1

)(g) have been affected by the iml)ugned legislation. and· the: ·

. scheme framed thereunder. Empo)Vering the Government to frame:-

. s~hemes for ·carrying out the purpose of the Act, does not, in our

I H (I) 1961] 3 S.C.R. 185:

(2) .[19791 1 S.C.R. 35S •

. (3) [19781 3. S.C.R 29J.

;

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A.K. BANERJEE v. UNlON (Mukharji, J.) 285

optmon, in the fects an~ circumstances' o( the case, 'in any way, ·A.

affect or abridge the fundamental ,rights of the petitioners anq would

not attract artiqle 19(1) (g). ,

The other aspect 'which was canvas~~d before us. was whether

the Act and the. scheme in question violate9 'article 14 of the.

Constitution: This question has to be understood from two aspectsf

namely whether making a provision for sala'ry and emoluments· of

the petitioners who are the employees of the General Insurance

.Corporation specijicaly and differently from the empwyees of other

})ublic section undertakings is d~criminatory in any. manner or not

and the other question, is,· w~ether making a ·prov.ision. for the

employees of General Insurance Corporat_ion for settlement of their

dues by schemes and not leaving the. question open to the general

provisions

of Industria] Disputes

f'\ct, 19~7 is discriminatory and

·violative of the rights of the employees.

It is true tbat ·sometimes there have. been rise. in emoluments·

with the rise io the cost of.inde~e in certain public sector corporatio~s:

The legislature however is free to recognise the degree of harm or

evil and to make provisions for the same. In making dis-similar

provisions for one group

of public

sect"Or undertakings does not per·

se make a law discriminatory as such.. It is well-settied ·that COtl~ts

· will not sit as super-legislature and strike down a particular classifi­

cation on the ground that any under-inclusion namely that some

others have be~n len untouched so long as there is no vio1ation of

constitutional restraints: It was contended that the application of

• . the Industrial Disputes Act not having been excluded from the

Nationalised Textile Mills, Nationalised Coal

'and Coking Coal

.Mines and Nat'ionalised Banks but if and is so far as it

excluded the

appllcation o.f the Industrial Disputes Act, in case of general insurance

companies,

the same is arbitrary and bad.

· In this· connection

. reliance may be placed on the observations of the learned Chief . ·

Justice in the case of 'Special Courts Bill197~'.(

1

) The same principle

was reiterated b~ this Court in the case of State •of Gujarat and Anr.

v. Sh~i Ambica Mills Limited, Ambedabad etc.(

2

) In that case, this

·'court was of the view that in the matter of economic legislation or

tefo~m, a provision would not be struck down· on the vice of under·

inclusion, inter alia, (or the reasons th~t 'the legisfature could' ~not be

(1) [1979] 2 S.C.R. 476 at pages 540-54.1

·~ (2) [19741 3 S.C.R. 760

"·

(\984] 3. s:c:R~

A . ~;cqair{'.d:to impose \l.POl;l ~dJn~~tr~}ive age~ct~ ta*. ·W}1lc~ . c~u\l,<J

not be<(.)atried .o.ut 01 whic.h m~s.~ be. c~rri,e!,i;~l}.t o.tl a Ia~¥ ~~~~~a

.single 'Stroke. It was further reiterated th~~ piec~~<!-l appr(j)acb to a,

••

· ;geQ.er~l· problem~ permitted by ·under-inclusive classifications, is

·sopletimes juStified when it is considered that legfslatures d'eal with

such pr~blems USU?IIY on an expetimehtat.ba'sis. It is impossible to

. 1ell how successful a particular approacl) trtigfrt be, what disloc-ation .

might occur, and what situa.tion might develop and what· new evil

.J)

. ·. '

·might be generated in. the attempt.· Administrative eJtpedients.

must he· forged and teste~. Le~islators r~cogni.~irJg t!Iese factors

might wish to proceed cautiously, and couJts m1:1st allow thern·to do

s.9.'. This p~inciple was again reiterated. in the Constitution Bench

decision.ofthis Court' in the case· of R.K .. Garg ~~~. v. Union of India·

& Ors. ~tc.(

1

)

As tliere was no ind~strial· dispute· pending, we are of the

opinion .that o~ the ground· that the . petit.ioners b·ave been chosen

out

of a vast body o{ workmen

·to b~ discriminated a~ainst aud

excludin~ them fron;:~ the operatio~ of lndustri~l Disputes A~t, there

ha~ been no viQl\ltion of Article 14 oft.he Copstitution. This question,

however, it "must be. emphasised again, does .not really arise in the

wiew we have taken. .

Before us it was rcontended that sick mills whkh have been

~~ationalised have bee~ tre~ted differently. than general jnsuranee

.employees under 1972 Act ip. Section 16(5) and Section 16(7) and in·

. · the scheme framed under the General Insurance Business (Nation:::-

. lisa~fon) -Act, . 1972. ·The object and .purpose o•f tl;e Sick Textile

Undertakings (Natior;~alisation) Ac.t, 1974, ·was "reorganising a·nd

rehabilitating such sick textile undertakings so as to subset:\'e the·

interest~ of genera) public ·by· :augmentation of the products and

sJistri~ution at fair prices ~f different varities of clo~h and yarn"

7

The basic objective of the .said Act. was rehabilitation of the sick

textile mil!s. Tht~.t was different from the purpose of the present· · ·

Act.• The sick textile units had tinder them the bulk o~ their emplo·

yees as. W9rk1t1el1 tho;e wi10 came under the provisions· of Industrial .

Disput~s Act; Section 14 of.the said Act stjitUtOI:ily recogni9es t~e·

special . position of th~ workmen as contra-distinguished. ffom the

other employees by enacting. seperate. provisions in t:his respe<;t ·

thereon. Further-more it has to be borne in mind that the aforesaid

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(l) [1982] l S C.R-,947 ..

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• A.K. BANE'RJEE v. VNIOi'4 (M'tikh(trji, J.)- 281

At~ was -<::ancerii'hi wftlh the e'Mni.r{n:t att~ntation of production . A

. :and disfflbufum·.Of ·certit1n ·iroth 'and yarn which are commodities.

essential

to

'the ilationa:l economy \iein~ imp.ortant consumer items· ..

Therefore 'the 'case of the t'fnployees of sick textile Ulldleitakings:

.. Whtch ha-s been mflltiorted by the petitioners an'd argued before US;

ciitndt be ~6inpitte~ OJl shni1ar ~anes ;_,n tespect of. this aspect With

tn'e present ptt1tioners. We ''/ould have rejected this subrnission on a

behalf 6f'tlie peti(roners, hM it been necessary fdr us to .do so but in.

tb:'e view that h'a's been tak"e'b, it is not necessary.

Atiott1e'r item mentioned o':!fOre us was tire employees of Coking-.

Coal Mines (Nati&ralisatioh) Act, 1972.· It has to be.borne in mind

' that the object covered by 'the schem! of th:e Act was entirely 'diffe~

rent 'from the General fnsurance Business (Natioballsation) Act,·

19'72. 1'he Coki-rrg Coal Mines (Natiomli'sation) A1::t, 1972 was

. entrcted to provide-for the transfer ol the interest 6f the owners' ~f

such mines ·an(! also the transfer 6f the interest of owners of coke

oven plants with a view 'to "reorg1mising and re·cdnstructi.ng such

cO'al mines and pbnts for the purpose of protecting, serving and

permitting scientific de.velopment of resources of coking coal nee'ded.

to meet the growing requirement of iron & steel industry" .. Accor~

Q

ding to·tbe normal prcv~lent view, the workmen of Cokirig Coal

Mines were sweate~ labour. These \vorkmen constituted very large ·

percentage of the employ~es. The act-in question namely the Coking . E:

Coal M_ines (Nationalisation) Aet· recognised the independent exis·

tence -c,f the said workers as a class. It has also to be kept in mind

that coking coal is a commodity very vital to the national economy

·and prime raw materialS of iron & steel industry which is· a basic

·. industry. The workmen employed ijl. the coal ·mines were also

sweated labour,

Their special position was also

statutorily recognise(

in the said Act: Coal-is also one of. the basic materials required to

sustain

gro:wth. The provisions

of Coking Coal Mines (Nationalisa~

tion) Act have been considered in detail and the special feature has

been taken note of in the case of Tara Prasad Sing(l etc. v. Union

of India &·Ors(

1

). According to the respondents, Class Ill and Class · G;

IV employees of the General Insurance Company are high wage

earners.

They are islanders -by

-themselves-accorqing to the

respondents·. It is true that judges shoul(not bring their pers<;>nal

knowledge into action in deciding. the controversy before the Courts ·

but if common knowledge· is a~y guide, then undoubtedly these

· Hr .

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(1) [1 ,80] 3 S.C.R. 1042.

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~88 .SUPREME .COURT REPORTS (1984) 3 S;C;R.

emptoyeesare·veryhigbly paid in _compa~ison to m~ny ()tbers. The

· object ofthe Gen~r&-1 Insurlmce B.us~ness (Nationalisation) Act, 1972

is to run the busines~ efficiently so that the· funds available might ·be

utilised for socially viable and cor~ project~ of natio~al 'importa~ce.

-From O!le point of yiew the Nationalised Banks and the Insurance ·

Companies for. the purpose·· of. applicability or otherwise of ·the' .

pr~yisions~of t.he Indus~rial · Dl.sputes Act .ca~not' be tre~ted as bel on·

ging, to one· class: . Historical reasons . provide an intelligible ..

differentia distinguishing Nationalis. ed l.Dsurance. Companies 'from,·

.ihe

N~tionalisea

Banks. The reason suggested· by the respondents

·. was that priOT to Banks N~tio -nalisation, . Industrial disputes between

\~orkroen and the Banks .were treated since 1950 on All India· basis

with the totality of the-banks being involved therein. Several awards.

·have. be~n made. treating them_ as su6idik'e Shastri Awar~, 1953.

Shastri ·Award Tribunal was·constituted· witli a :view to settle the·

disputes of the workmen of tbe B~nks with all commercial Banks

(excluding Co-op~rative Banks etc.) on the ope hand and the emplo·

yee~ on the other. Desai Award, 1.962 bipartite settlement between

Indian Banks Association and the Ex.change BatJks Assodati~n on.· .

tb(( one hand and AU India ~ank ·Employees Associatton and AH

lncfta Bank Employees Federation on the other, are· some of ·t.he

examples. As against this·, prio! to· th~ Act in question bef~re us,

disputes between insurance companies arid their. work!Jlen were

. settled on independent company' basis w_ith no All India ·projections

·.involved. It in.aY also be noted th.at unlike the case of some banks, ·

there is no existi!lg award or settlement with the petitioner-6 emplo­

~ees . of the general insurance companies . and .the fo~r insurance

companies.· The financial resources, structures and functions of the

Banks are-different from thqse of the insurance companies. It may

also be noted as was pointed out to us ·on behalf _of the ~espondents

(hat ·Bank's Class III. and IV employees are about. 4,85,000 in 198l.

as compared to irisu~anc e companies which empioy. about ,25,000

·Class

Ill

and ·class IV employees.· Therefore for' the :PUrpose. of

·raiionalisation; the insurance companies . wanted to curtail their

·emoluments _on a small scale. -It cannot be said that there are no·

dist:'ing~i~hing fa~tors and that _for choosing a parti~ular . group for

. e~perirneot, the respondents should be.fourid guilty o£treating people

differently \llhile they' are alik~ in all ni( erial respects. :

' .

·Differentiation· is not always discriminatory. If there· is a

-.•. rationl!l

n~xus

on ·ll1e. basis of which differentiation has· been made

with .the object sought to be acaieved by particular. provision,. then.

.Qlch .differentiation . is noi . discriminatory and does a•t

' "'

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A.K'·. BANERJEE v. UNION (Mukharjil J.) 289

'\'!alate the principles· of article 14 of the Constitution. This principle

:is too well-settlM now to be .reiterated by reference to cases. There

is intelligible basis for differentiation. Whether the same result. or

better result could have been achieved and better basis of differentia-,

A

. ·tion evplved is wit~in the domain of legislature and must be left to

'tpe wisdom ~f the legislatu,re. Had it ~een held that the scheme of ·. B

· 198\l was within the authodty given by· the Act, we would have

rejected the challenge to the Act and the scheme under article 14

·()f the Constitutioil .

It was also urged before us on behalf of the respondents that ·c

the petitioners being employees of public sector undertakings, and

~these are economic instrumentalities pf the State and having regard·

to the contents and .contour of the conc~pt ·of public employment

.as developed 'in the Iridian legal system·, an employee in a public

-sector ·can be approximated with and tre~ted as a government

'l!iervant. Having regard to the principles which govern the employer D

'.and employee relationship in the governmental ·sectors, .the condi­

·.tions of service of employees in public employment should be

-exclusively governed by the statute and by the rules and regulations

'framed thereunder. Predication of such power would necessarily

exclude the provisions oflndustrial . Disputes Act and the principles

of collective bargaining just as these would exclude the principles of E

~o.ntractual relationship in such m~tters. The point is interestitJ.g.

Howe~er, in the view we have taken; we neep p.ot discuss this aspect

:any further. · . ·

It was further submitted on behalf of the respondent that the·

ntionale, justification and the genesis of the law of nationalisation F

being the creation of economic instrumentalities to -subserve the

.constitutional and adfll'tinistrative goals of governance in a social

welfare society, the running of public s.ector undertakings is neither

for profit earn~ng of the management nor for sharing such profits

with the workmen alone but to utilise the investible .funds available

as a result of such ventures and undertakings for socially-oriented

goals laid down

by the

governmental· policies operating on the

said sectors.

In this connection reference was made before us to the

decision in the case. of State'of

Karnataka & Anr. etc.·~. Rangan~tha

.Reddy & Anr. etc.(l)

G

H

J. {191$] 1 S.C.R. 64'1 at pages 672, 676 & 691.

·"-__ .;.·_, . ., __ .

29J SUPRB~IE eouar: REP.ORTS · [193-lj 3· S.C.R~ -

. A·. . . . .>(!~pfoy'fuent in tb(!:pubHc s:ectot .undertakings e·rijoy.s. a statuh ~

·· n·was submitted th. at botlfbistbtically ·as well as a matter of.Hrw, the ~

': publiC"·sectdr utidertakli)gs being the economic . insti:timeritatrties or·

.tlie Stite a~d dischargin~ · the ·obligations which tlie Stafe·have, the·

employees of such undertakings iit principle. cannot be distinguished ~

from the employees in the govetninennervices~ In this c6nnection·

B our.atterition was drawn to the case of Suklulev Singh & Ors. v. Bhagai·.

Ram Sardar Singh .Raghuvanshf & :4nr:e) It \Y3.S urged that in all cons­

-. ' . : .. titutional de_mocracies, the relationship'between· the govemmcnfand.

.· the civil service i~ exciusively gover~ed by the statutory .provisions ..

-.with the power ·in the. Govern~enfto ·unil:Herally alter the condi­

C _ tionsofservice ?~th~ g~v~rnment em.pl9yees. Reference \vas. made't~ -

/ . "The Law of CIVII.Servtce' by Kaplan. It was furtber·subm1tted that.

. .::_ iri-Jndi~ -· the ~aw, js tbat'.origin ·()f the Gover~ment ~ervice might be-

' contractual but once app~inted t~ a post under the Government, the· .

_ gove~riment servant acquires a status ~nd .. the rights and ob"iigations.. .

are no longer dependenf<ln the consent o( both the· parties but by

D

. ·.. . . .

statut •.

We wo.uld have consid ered .th~se aspects had it been ncc~ss~ry ·

for ~s to do so but iUs not nece_ssary in· the ·view· taken. We· may--

reiterate that article ·. 14 does not. prevent legislature from intro~ .

. - . -. . . ',,;

ducing a n;fofm i.e. by applying the legisla.tion to some institutions

E: . . .

_ or· objects_ or areas only according. to the exigency of'the situation· .

.•

_,.

. ..

. . .

and further classification of selection can b:: -~ust~ ined on ·historical: .. -{

. reasons or reasons of administrative. exigency or piece-meal method .

· ..

F

. of introducing reforms. The law need not apply. to au· the persons-

. in · the sense of having a universal application to all peisons. A law

ca~ be sustained if it ueals equally with the people of _,veil-defined ·:

class-employees of insurance c_ompanies as' such and such a law is. ...

not open· to the charge of denial .of equal pro(e<;tion. on the ground ·

. that it had not application to other persons. · ·· · · ·

. . . .. ' . . . . . " .· ~ .

In the view we have taken of the matter •. these· applications.

G succeed and theimpugned·s-cheme of 1980'must be hc:ld to be ·bad

. · as beyond .the scope. of the authority of the ~entral Government,.

under the Generai Insurance Business · (Nationalisation). Act, 1972. . · ..

: The operation of the scheme _has been restrained by the order passed .

. a~ interin · order in._th.ese cases: The impugned scheme is therefore-.

. · . ·quashed~ and· ··will n·o( J>e given effect. to~ . The parties. 'will be at ·

-H ·.. . >.. . . . . . •.

~· [1975]3 S.C.R ~ 619 at page 646.

.. -·_:.-·

·-

,.

. )

A.K. BANERJEE v. UNION • (Mukharji, J.) 291

•

liberty to adjust the if rights as if the scheme had not been framed.

The application for intervention isallowed. Let appropriate writs be

issued quashing the-~tcheme of 1980. This, however, will not prevent

the Government, if it so advised, to' frame any appropriate legis~

1ation or make·any appropriate amendment giving power to Central

A

. Government to frame any .scheme as it considers fit and pre;> per. In

. the facts and circumstances of these cases and specially in view of B

the fact that petitioners

had

themselves' at one point of time wanted

that new 1cheme be framed ·by the Central Government, we direct

that parties will pay and bear theit own costs in all these matters.

The rules are made absolute ~o the extetlt indicated above.

N.V.:K. Petitions allowed.

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