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PETITIONER:

A.V. NACHANE & ANOTHER

Vs.

RESPONDENT:

UNION OF INDIA & ANOTHER

DATE OF JUDGMENT28/12/1981

BENCH:

REDDY, O. CHINNAPPA (J)

BENCH:

REDDY, O. CHINNAPPA (J)

GUPTA, A.C.

PATHAK, R.S.

CITATION:

1982 AIR 1126 1982 SCR (2) 246

1982 SCC (1) 205 1981 SCALE (4)1959

CITATOR INFO :

F 1983 SC 173 (22)

RF 1984 SC1130 (20,33,34)

D 1985 SC 218 (15)

RF 1986 SC 847 (12)

RF 1991 SC 101 (32)

ACT:

Life Insurance Corporation (Amendment) Act 1981, Life

Insurance Corporation (ordinance) 1981, and Life Insurance

Corporation of India Class III and Class IV Employees (Bonus

and Dearness) Allowance Rules.

Act and ordinance whether ultra vires Articles 19(1)(g)

and 21 of the Constitution-Act whether suffers from

excessive delegation of powers.

Rule 3 of the Rules-Cannot make the writ issued by the

Supreme Court nugatory-Can operate only prospectively.

Constitution of India 1950:

Article 14-Hostile discrimination-Burden of proof-On

whom lies.

Article 21 'life'-Whether includes 'livelihood'

Article 32-Claim based on industrial settlement-Whether

a fundamental right and enforceable.

Administrative Law-Delegated legislation-Statutory rule

over-riding existing law-Validity of.

HEADNOTE:

The Life Insurance Corporation was constituted under

the Life Insurance Corporation Act 1956, to provide for the

nationalisation of life insurance business in India by

transferring all such business to the Life Insurance

Corporation of India. Under Section 11(1) of the Act the

services of the employees of the insurers whose business had

vested in the Corporation were transferred to the

Corporation. Section 49(1 ) empowered the Life Insurance

Corporation of India to make regulations for the purpose of

giving effect to the provisions of the Act.

Two settlements were reached on January 24, 1974 and

February 6, 1974 between the Life Insurance Corporation and

its Class III and Class IV employees. These settlements

covered a large ground including the claim for bonus. These

were settlements under section 18 read with section 2(p) of

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the Industrial Disputes Act 1947. Under clause 12 of the

settlements, the settlements were to be effective from 1st

April, 1973 for a period of four years that is, from 1st

April, 1973 to 31st March, 1977. In 1975, the Payment of

Bonus (Amendment) ordinance was promulgated which was

subsequently replaced by the Payment of Bonus (Amendment)

Act 1976. The Central Government decided that the employees

of establishments not covered by the Payment of Bonus Act

would not be liable

247

to get bonus and ex-gratia payment in lieu of bonus. Payment

of Bonus for the A year 1975-1976 to the employees of the

Corporation was stopped under instructions from the Central

Government.

A writ petition filed by the employees of the

Corporation in the Calcutta High Court was allowed, and the

Corporation was directed to act in accordance with the terms

of the settlement. In Madan Mohan Pathak v. Union of India

and Ors. [1978] 3 SCR 334, the Supreme Court held that the

1976 Act offended Article 31(2) of the Constitution and was

void, and directed the Union of India and the Life Insurance

Corporation to forbear from implementing or enforcing the

provisions of the 1976 Act and to pay annual cash bonus for

the years 1st April, 1975 to 31st March, 1976 and 1st April

1976 to 31st March, 1977, to Class III and Class IV

employees in accordance with the settlements.

On March 31, 1978, the Corporation issued a notice

under section 19(2) of the Industrial Disputes Act declaring

its intention to terminate the settlements on the expiry of

two months from the date of notice. On the same day another

notice was also issued by the Corporation under section 9A

of the Industrial Disputes Act stating that it proposed to

effect a change in the conditions of service applicable to

the workmen. These notices were followed by a notification

issued by the Corporation under section 49 of the Life

Insurance Corporation Act on May 26, 1978 substituting 2 new

regulation for the existing regulation No. 58 of the Staff

Regulations. Simultaneously the Life Insurance Corporation

(Alteration of Remuneration and other Terms and Conditions

of Service of Employees) order, 1957, was amended by the

Central Government, substituting a new clause (9) for the

original clause concerning bonus, to take effect from June

1, 1978, to provide that the employees of the Corporation

shall not be entitled to profit-sharing bonus.

The validity of the aforesaid two notices and the

notification issued for the purpose of nullifying any

further claim to annual cash bonus was challenged by the

workmen in a writ petition in the Allahabad High Court. The

High Court allowed the writ petition. In the appeal by the

Corporation to this Court the Life Insurance Corporation of

India v. D.J. Bahadur [1981] 1 SCR 1083 and the writ

petition filed in the Calcutta High Court transferred to

this Court, Chandrasekher Bose and others v. Union of India

and Ors. [1960] 3 SCR 499, a writ was issued to the

Corporation directing it "to give effect to the terms of the

settlements of 1974 relating to bonus until superseded by a

fresh settlement, an industrial award or relevant

legislation".

On January 31, 1981, the Life Insurance Corporation

(Amendment) ordinance, 1981 was promulgated. A new sub-

clause(c) was inserted with retrospective effect from June

20, 1979 in sub-section (2) of section 48 of the Principal

Act. Three new sub-sections (2A), (2B) and (2C) were also

added to section 48. Sub-section (2A) provided that the

regulations and other provisions with respect to the terms

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and conditions of service of the employees and agents of the

Corporation at The commencement of the ordinance shall be

deemed to be rules made under clause (cc) of sub-section (2)

. Sub-section ! (2B) provided that the power to make rules

under clause (cc) of sub-section (2) shall include (i) the

power to give retrospective effect to such rules, and (ii)

the power to amend by way of addition, variation or repeal

the regulations and other provisions referred to in sub-

section (2A) with retrospective effect, but not from a date

earlier than

248

June 20. 1979. Sub-section (2C) provided that provisions of

clause (cc) of sub-section (2) and sub-section (2B) and any

rule made under clause (cc) shall have effect,

notwithstanding any judgment, decree, or order of any court,

tribunal or other authority, the Industrial Disputes Act

1947, any agreement, settlement, award or other instrument.

The Central Government by a notification dated February

2, 1981 made the Life Insurance Corporation of India Class

III and Class IV Employees (Bonus and Dearness Allowance)

Rules 1981. Rule 3 which had been given retrospective

operation with effect from July 1, 1979 provided by sub-rule

(1) that: "No Class Ill or Class IV employee of the

Corporation shall be entitled to the payment of any profit

sharing bonus or any other kind of cash bonus", and sub-

rule(2) of rule 3 provided that notwithstanding sub-rule

(1), every Class 111 and Class IV employee shall be entitled

to a payment in lieu of bonus (a) for the period commencing

from July 1, 1979 and ending on March 31, 1980 at the rate

of IS per cent of his salary, and (b) thereafter for every

year commencing from 1st April and ending on the 31st day of

the March of the following year at such rate and subject to

conditions which the Central Government may determine. Sub-

rule (3) of rule 3 rescinded regulation 58 of the Staff

Regulations and all other provisions relating to the payment

of bonus to the extent they were inconsistent with rule 3.

The petitioners in their writ petitions to this Court

challenged the validity of the Life Insurance Corporation

(Amendment) ordinance, 1981, the Life Insurance Corporation

(Amendment) Act, 1981 and the Life Insurance Corporation of

India. Class III and Class IV Employees (Bonus and Dearness

Allowance) Rules, 1981 contending that: (1) the Act and the

Rules were violative of Articles 14, 19(1)(g) and 21(2) of

the Constitution: (2) the Act was invalid on the ground of

excessive delegation of legislative functions; (3) sub-

section (2C) of section 48 was invalid to the extent it

permitted retrospective operation to rule 3 to over-ride the

order of this Court in D.J. Bahadur's case; (4) Article 14

was infringed because the provisions of sub-section (2C) of

section 48 provided that any rule under Clause (cc) of sub-

section (2) of that section touching the terms and

conditions of service of the employees of the Corporation

shall have effect notwithstanding anything contained in the

Industrial Disputes Act, 1947; (S) sub section (2C) added to

section 48 of the Life Insurance Corporation Act, 1956 by

the Amendment Act of 1981 was invalid because of excessive

delegation of legislative functions and if sub-section (2C)

which was an integral part of the Amendment Act was ultra

vires, the entire Amendment Act would be unconstitutional.

and (6) the provisions of the Amendment Act of 1981 could

not nullify the effect of the writ issued by this Court in

D.J. Bahadur's case.

The writ petitions were contested on behalf of the

Union of India and the Lire Insurance Corporation by

contending that remuneration that was being paid to Class

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III and Class IV employees of the Corporation was far in

excess of what was paid tn similarly situated employees in

other establishments in the public sector, and that the

problem of the mounting cost of administration led to the

making of the ordinance and the Amendment Act As no

improvement in the situation was possible by the process of

adjudication, a policy decision was taken that in the

circumstances the proper course was legislation and that was

why the Amendment Act was passed and the Rules framed. The

Life Insurance Corporation Act as amended and the Rules made

after amendment placed the Corporation

249

in the same position as other undertakings, that the

advantages being enjoyed by the employees of the Corporation

which were not available to similarly situated employees of

other undertakings had been taken away removing the

discrimination in favour of the employees of the Life

Insurance Corporation. Repealing a law was an essential

legislative function which had been delegated to the Central

Government and the delegation was not excessive. It is not

the Rules framed by the Central Government in exercise of

the delegated authority that over-ride the Industrial

Disputes Act or any other existing law, but the power of

abrogating the existing law is in sub-section (2C) of

section 48 which was enacted by Parliament itself.

Allowing the writ petitions in part

^

HELD: [By the Court]

The Life Insurance Corporation (Amendment) Act 1981 can

operate but prospectively in so far as it seeks to nullify

the terms of the 1974 settlements in regard to payment of

bonus. [269 A-C, 271 A-B]

[Per Gupta & Pathak, JJ]

1. (i) Rule 3 operating retrospectively cannot nullify

the effect of the writ issued in D. J. Bahadur's case which

directed the Life Insurance Corporation to give effect to

the terms of the 1974 settlements relating to bonus until

superseded by a fresh settlement, an Industrial award or

relevant legislation. [269 A]

(ii) The Life Insurance Corporation (Amendment) Act

1981 and the Life Insurance Corporation of India Class 111

and Class IV employees (Bonus and Dearness Allowance) Rules,

1981 are relevant legislation. In view of the decision in

Madan Mohan Pathak's case these rules in so far as they seek

to abrogate the terms of 1974 settlements relating to bonus,

can operate only prospectively, that is. from February 2,

1981 the date of publication of the Rules. [269 B-C]

(iii) A claim based on the 1974 settlements is not a

fundamental right that could be enforced through this Court.

[259 C]

2. The burden of establishing hostile discrimination

was on the petitioners who challenged the Amendment Act and

the rules. It was for them to show that the employees of the

Life Insurance Corporation and the employees of the other

establishments to whom the provisions of the Industrial

Disputes Act were applicable were similarly circumstanced to

justify the contention that by excluding the employees of

the Corporation from the purview of the Industrial Disputes

Act they had been discriminated against. There is no

material on the basis of which it can be held that the

Amendment Act of 1981 and the rules made on February 2, 1981

infringe Article 14. [260 F-G]

Express Newspapers (Private) Limited and another v.

Union of India, [1959] SCR 12 and Moti Ram Deka etc. v.

General Manager, N.E.F. Railways, Maligaon. Pandu etc.

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[1964] 5 SCR 683, held inapplicable.

In the instant case section 48(2C) read with section

48(2) (cc) authorises the Central Government to make rules

to carry out the purposes of the Act notwithstanding the

Industrial Disputes Act or any other law. This means that in

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respect of the matters covered by the rules, the provisions

of the Industrial Disputes Act or any other law will not be

operative. [262 A-B]

3. The policy as stated in the preamble of the

Amendment Act is that "for securing the interest of the Life

Insurance Corporation of India and policyholders and to

control the cost of administration, it is necessary that

revision of the terms and conditions of service applicable

to the employees and the agents 13 of the Corporation should

be undertaken expeditiously." The policy offers sufficient

guidance to the Central Government in exercising its powers

under that Act. [265 B-C]

4 Clause (cc) of section 48(2) empowers the Central

Government to make rules with regard to the terms and

conditions of service of the employees and agents of the

Corporation. Sub-section 2(B) of section 48 says that the

power to make rules conferred by clause (cc) of sub-section

(2) shall include the power to add, vary or repeal the

regulations and other "provisions" referred to in subsection

(2A) with retrospective effect from a date not earlier than

June 20, 1979. A writ issued by this Court is not a

regulation nor can it be described as 'other provisions'

which expression includes circulars and administrative

directions. Sub-section (2C) of section 48 however provided

that any rule made in clause (CC) with retrospective effect

from any date shall be deemed to have had effect from that

date notwithstanding any judgment, decree or order of any

Court, Tribunal or other authority. Rule 3 of the rules

relating to the subject of bonus cannot make the writ issued

by this Court nugatory in view of the decision of this Court

in Madan Mohan Pathak v. Union of India. [265 H-266; 267 A]

5. It is not really the rules framed by the Central

Government that over-ride the Industrial Disputes Act or any

other existing law, but the power of abrogating the existing

laws is in sub-section (2C) of section 48 enacted by

Parliament itself. [264 F]

Hari Shankar Bagla and another v. State of Madhya

Pradesh, [1955] 1 SCR 380, referred to.

[Per Chinnappa Reddy J.]

The effect of the two judgments in Madan Mohan Pathak's

case and D. J. Bahadur's case was clear: the settlements of

1974, in so far as they related to bonus, could only be

superseded by a fresh settlement, an industrial award or

relevant legislation. But any such supersession could only

have future effect, but not retrospective effect so as to

disentitle the Class III and Class IV employees of Life

Insurance Corporation from receiving the cash bonus which

had been earned by them, day by day, and which the Life

Insurance Corporation of India was under an obligation to

pay in terms of the writ issued in D. J. Bahadur's case. The

present attempt made by the 1981 amending Act and the rules

thereunder to scuttle the payment of bonus with effect from

a date anterior to the date of the enactment must,

therefore, fail. The employees are entitled to be paid the

bonus earned by them before the date of publication of the

Life Insurance Corporation of India Class III and Class IV

employees (Bonus and Dearness Allowance) Rules, 1981. [270H-

271 B]

251

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JUDGMENT:

ORIGINAL JURISDICTION: Writ Petition Nos. 501, 643-44,

645, 649 and 1866 of 1981.

(Under article 32 of the Constitution of India)

R. K. Garg, V.J. Francis, Sunil Kumar Jain and D. K.

Garg for the Petitioners in WP. 501/81.

M. K Ramamurthi, J. Ramamurthi and Miss R. Vagai for

the Petitioners in WPs. 643-44/81.

Vimal Dave and Miss Kailash Mehta for the Petitioners

in WP. No. 645/81.

A.K. Goel for the Petitioners in WP. 649/81.

Dalveer Bhandari and H. M. Singh for the Petitioners in

WP. 1866/81.

L. N. Sinha, Attorney General, M. K Banerjee, Soliciter

General, Miss A. Subhashini and R P. Singh for Respondent

No. 1 in all the matters.

L. N. Sinha, Attorney General, O.C. Mathur and Sri

Narain, for Respondent No. 2 in all the matters.

P. H. Parekh for the Intervener in WP. 501/81.

Somnath Chaterjee, J. Ramamurthi and Miss R. Vaigai for

the Intervener Ajoy Kumar Banerjee-in WPs. 643-44/81.

The following Judgments were delivered

GUPTA, J. The validity of the provisions of the Life

Insurance Corporation (Amendment) Act, 1981 and the Life

Insurance Corporation (Amendment) ordinance, 1981 which

preceded it is challenged in this batch of writ petitions.

The writ petitions have a history behind them which can be

conveniently divided into three chapters. However, it will

be easier to follow this history if we referred to some of

the provisions of the Life Insurance Corporation Act, 1955

first. The Life Insurance Corporation was constituted under

the Life Insurance Corporation Act, 1956 to provide for the

nationalisation of life insurance business in India 'by

transferring all

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such business to the Life Insurance Corporation of India.

Under section 11(1) of the Act the services of the employees

of insurers whose business has vested in the Corporation are

transferred to the Corporation. Sub-section (2) of section

11 provides:

"Where the Central Government is satisfied that

for the purpose of securing uniformity in the scales of

remuneration and the other terms and conditions of

service applicable to employees of insurers whose

controlled business has been transferred to, and vested

in, the Corporation, it is necessary so to do, or that,

in the interests of the Corporation and its policy-

holders, a reduction in the remuneration payable, or a

revision of the other terms and conditions of service

applicable, to employees or any class of them is called

for, the Central Government may, not withstanding

anything contained in sub-section (1), or in the

Industrial Disputes Act, 1947, or in any other law for

the time being in force, or in any award, settlement or

agreement for the time being in force, alter (whether

by way of reduction or otherwise) the remuneration and

the other terms and conditions of service to such

extent and in such manner as it thinks fit; and if the

alteration is not acceptable to any employee, the

Corporation may terminate his employment by giving him

compensation equivalent to three months' remuneration

unless the contract of service with such employee

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provides for a shorter notice of termination."

There is an explanation to this sub-section which is not

relevant for the present purpose. Section 48 of the Act

empowers the Central Government to make rules to carry out

the purposes of the Act. Sub-section (2) of section 48 in

clauses (a) to (m) specifies some of the matters that the

rules may provide for. Sub-section (3) of section 48 states:

"Every rule made by the Central Government under

this Act shall be laid, as soon as may be after it is

made, before each House of Parliament while it is in

session, for a total period of thirty days which may be

comprised in one session or in two or more successive

session, and if, before the expiry of the session

immediately following the session or the successive

sessions aforesaid, both Houses agree in making any

modification in the rule or both Houses

253

agree that the rule should not be made, the rule shall

A thereafter have effect only in such modified form or

be of no effect, as the case may be; so, however, that

any such modification or annulment shall be without

prejudice to the validity of anything previously done

under that rule."

Section 49(1) empowers the Life Insurance Corporation of

India to make regulations to provide for all matters for

which provision is expedient for the purpose of giving

effect to the provisions of the Act. Clauses (a) to (m) of

sub-section (2) of section 40 specify some of the matters

the regulations may provide for. The matter referred to in

clause (b) of sub-section (2) is "the method of recruitment

of employees and agents of the Corporation and the terms and

conditions of service of such employees or agents." Clause

(bb) speaks of the terms and conditions of service of

persons who have become employees of the Corporation under

sub-section (1) of section 11.

Turning now to the history of the litigation, the first

chapter begins with two settlements reached on January 24,

1974 and February 6, 1974 between the Life Insurance

Corporation and its class III and class IV employees. These

were settlements under section 18 read with section 2(p) of

the Industrial Disputes Act, 1947. The settlements were

identical in terms; four of the five unions of workmen

subscribed to the first settlement while the remaining union

was a signatory to the second. The settlements cover a large

ground including the claim for bonus. Clause 8 of each of

the settlements was as follows:

"BONUS:

(i) No profit sharing bonus shall be paid. However,

the Corporation may, subject to such directions as

the Central Government may issue from time to

time, grant any other kind of bonus to its Class

III and IV employees.

(ii) An annual cash bonus will be paid to all Class III

and Class IV employees at the rate of 15% of the

annual salary (i.e. basic pay inclusive of special

pay, if any, and dearness allowance and additional

dearness allow-

254

ance) actually drawn by an employee in respect of

the financial year to which the bonus relates.

(iii) Save as provided herein all other terms and

conditions attached to the admissibility and

payment of bonus shall be as laid down in the

settlement on bonus dated the 26th June, 1972."

Clause 12 of the settlements inter alia provides: "This

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settlement shall be effective from 1st April, 1973 and shall

be for a period of four years. i.e. from 1st April 1973 to

31st March 1977." In 1975 an ordinance was promulgated

called the Payment of Bonus (Amendment) ordinance which was

subsequently replaced by the Payment of Bonus (Amendment)

Act, 1976. The reference to this ordinance and the Act would

not have been relevant because section 32 (i) of the

original Payment of Bonus Act, 1965 made the said Act not

applicable to the employees of the Life Insurance

Corporation, but the Central Government appears to have

decided also that the employees of establishments not

covered by the Payment of Bonus Act would not be eligible to

get bonus and ex-gratia cash payment in lieu of bonus would

be made. Accordingly payment of bonus for the year 1975-76

to the employees of the Corporation was stopped under

instructions from the Central Government. On a writ petition

filed by the employees of the Corporation in the Calcutta

High Court, a single Judge of that court issued a writ of

mandamus directing the Corporation to act in accordance with

the terms of the settlement. Thereafter the Life Insurance

Corporation (Modification of Settlement) Act, 1976 was

passed. Some of the employees of Corporation challenged the

constitutional validity of the Act by filing writ petition

in this Court. In Madan Mohan Pathak v. Union of India and

Ors.(1) this Court held that the 1976 Act offended Article

31(2) of the Constitution and was as such void and issued a

writ of mandamus directing the Union of India and the Life

Insurance Corporation to forebear from implementing or

enforcing the provisions of the 1976 Act and to pay annual

cash bonus for the , years 1st April, 1975 to 31st March,

1976 and 1st April, 1976 to 31st March, 1977 to Class Ill

and Class IV employees in accordance with the terms of the

settlements.

The second chapter began on March 31, 1978 when the

Corporation issued a notice under section 19(2) of the

Industrial Dis-

255

putes Act declaring its intention to terminate the

settlements on the expiry of the period of two months from

the date the notice was served. On the same day another

notice was issued by the Corporation under section 9A of the

Industrial Disputes Act stating that it proposed to effect a

change in the conditions of service applicable to the

workmen. The change proposed was set out in the annexure to

the notice which reads:

"AND WHEREAS for economic and other reasons it

would not be possible for the Life Insurance

Corporation of India to continue to pay bonus on the

aforesaid basis;

Now, therefore, it is our intention to pay bonus

to the employees of the Corporation in terms reproduced

hereunder:

"No employee of the Corporation shall be

entitled to profit sharing bonus. However, the

Corporation may, having regard to the financial

condition of the Corporation in respect of any

year and subject to the previous approval of the

Central Government, grant non-profit sharing bonus

to its employees in respect of that year at such

rate as the Corporation may think fit and on such

terms and conditions as it may specify as regards

the eligibility of such bonus."

These notices were followed by a notification issued by the

Corporation under section 49 of the Life Insurance

Corporation Act on May 26, 1978 substituting a new

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regulation for the existing regulation No. 58 of the Staff

Regulations. Simultaneously the Life Insurance Corporation

(Alteration of Remuneration and other terms and Conditions

of Service of Employees) order, 1957, called the

Standardisation order, made by the Central Government in

exercise of the powers conferred on it by section 11(2) of

the Life Insurance Corporation Act was amended with effect

from June 1, 1978 substituting a new clause (9) for The

original clause concerning bonus. Clause (9) of the

Standardisation order and Regulation 58 of the Staff

Regulations after amendment read as follows:

"No employee of the Corporation shall be entitled

to profit-sharing bonus. However, the Corporation may,

having regard to the financial condition of the

Corporation in respect of any year and subject to the

previous approval

256

of the Central Government, grant non-profit sharing

bonus to its employees in respect of that year at such

rate as the Corporation may think fit and on such terms

and conditions as it may specify as regards the

eligibility for such bonus.."

The validity of the said two notices and the notification

issued for the purpose of nullifying any further claim of

the workmen to annual cash bonus in terms of the Settlements

of 1974 was challenged by the workmen by filing a writ

petition in the Allahabad High Court. The High Court allowed

the writ petition and the Corporation preferred an appeal to

this Court. Another writ petition which had been filed in

the Calcutta High Court challenging the said notices and the

notification was transferred to this court, and the appeal

and this writ petition were heard and disposed of by a

common judgment. The two cases were Civil Appeal No. 2275 of

1978, (The Life Insurance Corporation of India v. D.J.

Bahadur and others)(1) and Transfer case No. I of 1979

(Chandrashekhar Bose and others v. Union of India and

Ors.)(2). By a majority the appeal preferred by the

Corporation was dismissed and the transfer petition was

allowed and a writ was issued by this Court to the Life

Insurance Corporation directing it "to give effect to the

terms of the settlements of 1974 relating to bonus until

superseded by a fresh settlement, an industrial award or

relevant legislation." The second chapter closed with this

decision.

The third chapter begins with the promulgation of the

Life Insurance Corporation (Amendment) ordinance, 1981 on

January 31, 1981. The following changes made in the

principal Act by the ordinance are material. In sub-section

(2) of section 48 of the principal Act a new sub-clause (cc)

was inserted with retrospective effect from June 20, 1979.

Clause (cc) relates to "the terms and conditions of service

of the employees and agents of the Corporation, including

those who became employees and agents of the Corporation on

the appointed day under this Act." Three new sub-sections

(2A), (2B) and (2C) were added to section 48. Sub-section

(2A) says that the regulations and other provisions as in

force immediately before the commencement of the ordinance

with respect to the terms and conditions of service of the

employees and agents of the Corporation shall be deemed to

be rules made under clause (cc) of

257

sub-section (2). Sub-section (2B) provides that the power to

make rules under clause (cc) of sub-section (2) shall

include (i) the power to give retrospective effect to such

rules, and (ii) the power to amend by way of addition,

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variation or repeal the regulations and other provisions

referred to in sub-section (2A) with retrospective effect,

but not from a date earlier than June 2(), 1979. Sub-section

(2C) reads as follows:

"The provisions of clause (cc) of sub section (2)

and - sub-section (2B) and any rules made under the

said clause (cc) shall have effect, and any such rule

made with retrospective effect from any date shall also

be deemed to have had effect from that date,

notwithstanding any judgment, decree or order of any

court, tribunal or other authority and notwithstanding

anything contained in the Industrial Disputes Act, 1947

or any other law or any agreement, settlement, award or

other instrument for the time being in force."

Certain consequential changes were also made in section 49

of the Act. In clause (b) of section 49(2) which has been

quoted above, the words "and the terms and conditions of

service of such employees or agents" were omitted. This was

necessary because the terms and conditions of service of the

employees and the agents with regard to which the

Corporation was empowered to make regulations by section

49(1) of the principal Act is now a matter included in

clause (cc) of section 48(2) as one of the matters covered

by the rule making authority of the Central Government under

section 48(1) of the Act. The ordinance also omits clause

(bb) from section 49(2). Clause (bb) also quoted earlier

included the terms and conditions of the service of the

persons who had become employees of the Corporation under

section 11(1) of The Act. The terms and conditions of

service of such persons are now included in the new clause

(cc) of section 48(2).

By notification dated February 2, 1981 the Central

Government in exercise of the powers conferred by section 48

of the Life Insurance Corporation Act, 1956 made the rules

called the Life Insurance Corporation of India Class III and

IV employees (Bonus and Dearness Allowance) Rules, 1981. The

relevant rule is rule 3 : which has been given retrospective

operation from July 1, 1979. Sub-rule (1) of rule 3

provides; "No Class III or Class IV employee

258

of the Corporation shall be entitled to the payment of any

profit sharing bonus or any other kind of cash bonus." Sub-

rule (2) of rule 3 states that notwithstanding what sub-rule

(1) provides every Class III and Class IV employee shall be

entitled to a payment in lieu of bonus-(a) for the period

commencing from July 1, 1979 and ending on March 31, 1980 at

the rate of 15 per cent of his salary; and (b) thereafter

for every year commencing on the 1st April and ending on the

31st day of March of the following year, at such rate and

subject to such conditions as the Central Government may

determine having regard to the wage level, the financial

circumstances and other relevant factors. There is a proviso

to this sub-rule which says that (i) no payment in lieu of

bonus shall be made to any employee drawing a salary

exceeding Rs. 1600 per month; and (ii) where the salary of

an employee exceeds Rs. 750 per month but does not exceed

Rs. 1600 per month, the maximum payment to him in lieu of

bonus shall be calculated as if his salary were Rs. 750 per

month. For the purposes of this sub-rule, "salary" was

explained as meaning basic pay, special pay, if any, and

dearness allowance. Sub-rule (3) of rule 3 rescinds

regulation 58 of the Staff Regulations and all other

provisions relating to the payment of bonus to the employee

to the extent they are inconsistent with rule 3

Writ petition No. 501 of 1981 under Article 32 of the

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Constitution was filed in this Court on February 5, 1981 by

Shri A.V. Nachane and the All India Life Insurance

Corporation Employees Federation. Bombay, challenging the

validity of the ordinance and the aforesaid rules. Similar

writ petitions by other associations of the employees of the

Corporation followed In the meantime the ordinance was

repealed and replaced on March 17, 1981 by the Life

Insurance Corporation (Amendment) Act, 1981 which received

the assent of the President of India on the same day. The

writ petitions were suitably amended after the Amendment Act

came into force. The provisions of the Act are similar to

those of the ordinance except that the Amendment Act adds a

new sub-section, sub-section (3). to section 49 of the

principal Act. The new sub section (3) which provides that

the regulations made under section 49 shall be laid before

each House of Parliament are similar in terms to sub-section

(3) OF section 48 requiring the rules made by the Central

Government under the Act to be laid before each House of

Parliament. Section 4 of the Amendment Act repeals the

ordinance but provides that "notwithstanding such repeal,

anything done or any action taken under the principal Act as

amended by the said

259

Ordinance shall be deemed to have been done or taken under

the principal Act as amended by this Act

The validity of the Amendment Act and the Life

Insurance Corporation of India Class III and Class IV

Employees (Bonus and Dearness Allowance) Rules, 1981 have

been challenged on several grounds. It was argued that the

Act and the rules were violative of Article 14, 19(1) (g)

and 21 of the Constitution. It was further contended that

the said Act was invalid on the ground of excessive

delegation of legislative functions. Another contention

raised was that in any event sub-section (2C) of section 48

was invalid to the extent it permitted retrospective

operation to rule 3 to override the order of this Court

disposing of D. J. Bahadur's case. The challenge based on

Article 19(1)(g) and Article 21 does not appear to have any

substance. Apart from anything else, a claim based on the

1974 settlements is certainly not a fundamental right that

could be enforced through this Court. As regards Article 21,

the first premise of the argument that the word 'life' in

that Article includes livelihood was considered and rejected

in In re: Sant Ram.

The contention that Article 14 is infringed arises on

the provision of sub-section (2C) of section 48 that any

rule made under clause (cc) of sub-section (2) of that

section touching the terms and conditions of service of the

employees of the Corporation shall have effect

notwithstanding anything contained in the Industrial

Disputes Act, 1947. It is true that after rules are made

regarding the terms and conditions of service, the right to

raise an industrial dispute in respect of matters dealt with

by the rules will be taken away and to that extent the

provisions of the Industrial Disputes Act will cease to be

applicable. It was argued that there was no basis on which

the employees of the Corporation could be said to form a

separate class for denying to them the protection of the

Industrial Disputes Act. The reply on behalf of the Union of

India and the Life Insurance Corporation was that the

remuneration that was being paid to class III and class IV

employees of the Corporation was far in excess of what was

paid to similarly situated employees in other establishments

in the public sector. Some material was also furnished to

support this claim though they were certainly not

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conclusive. The need for amending the Life Insurance

Corporation Act, 1956 as appearing from the preamble of the

Amendment Act and the ordinance is as follows: "...for

securing the interests of the Life Insurance Corporation of

India and its policy-holders and

260

to control the cost of administration, it is necessary that

revision of the terms and conditions of service applicable

to the employees and agents of the Corporation should be

undertaken expeditiously." Referring to the preamble of the

Act the Attorney-General appearing for the Union of India

and the Corporation submitted that the problem of mounting

cost of administration led to the making of in the impugned

law. He added that it was felt that no improvement in the

situation was possible by the process of adjudication and a

policy decision was taken that in the circumstances the

proper course was legislation and that is why the Amendment

Act was passed and the impugned rules were framed. The

learned Attorney General submitted that it was for

Parliament to decide whether the situation was remediable by

adjudication or required legislation. According to him the

Life Insurance Corporation Act as amended and the rules made

after amendment placed the Corporation in the same position

as other undertakings, that the advantages being enjoyed by

the employees of the Corporation which were not available to

similarly situated employees of other undertakings have been

taken away removing what he described as discrimination in

favour of the employees of the Life Insurance Corporation.

We have already said that the material produced on behalf of

the Union of India and the Corporation to show that the

terms and conditions of service of the employees in several

other undertakings in the public sector compared

unfavourably to those of the Corporation employees was not

conclusive. But the burden of establishing hostile

discrimination was on the petitioners who challenged the

Amendment Act and the rules. It was for them to show that

the employees of the Life Insurance Corporation and the

employees of the other establishment to whom the provisions

of the Industrial Disputes Act were applicable were

similarly circumstanced to justify the contention that by

excluding the employees of the Corporation from the purview

of the Industrial Disputes Act they had been discriminated

against. There is no material before us on the basis of

which we can hold that the Amendment Act of 1981 and the

rules made on February 2, 1981 infringe Article 14. We do

not think that on the facts of this Case Express Newspapers

(Private) Limited and another v. Union of India,(1) Moti Ram

Deka etc. v. General Manager N.E.F. Railways, Maligaon,

Pandu etc.,(2) relied on by the petitioners, have any

application.

261

It was contended that sub-section (2C) added to section

48 of the Life Insurance Corporation Act, 1956 by the

Amendment Act of 1981 was invalid because of excessive

delegation of legislative functions and that if sub-section

(2C) which is an integral part of the Amendment Act was

ultra vires, the entire Amendment Act would be

unconstitutional The Amendment Act introduced clause (cc) in

section 48(2) authorising the Central Government to make

rules in respect of the terms and conditions of service of

the employees and agents of the Corporation. Sub-section

(2C) of section 48 provides inter alia that rules made under

clause (cc) shall have effect notwithstanding anything

contained in the Industrial Disputes Act, 1947 or any other

law for the time being in force. The argument is that the

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rules made under section 48(2) (cc) can virtually repeal the

Industrial Disputes Act and other laws to the extent they

are inconsistent with these rules. Repealing a law, it was

submitted on the authority of In re Delhi Laws Act,(l) was

an essential legislative function which had been delegated

to the Central Government and that the delegation was

therefore excessive. It is now well settled that it is

competent for the legislature to delegate to other

authorities the power to frame rules to carry out the

purposes of the law made by it (see In re the Delhi Laws

Act,(l) Raj Narain Singh v. The Chairman, Patna

Administration Committee, Patna and another,(2) and D.S.

Garewal v. State of Punjab and another(3) but the essential

legislative functions cannot be delegated. What is essential

legislative function has been explained by Mukerjee., J. in

the Delhi Laws case as follows:

"The essential legislative function consists in

the determination or choosing of the legislative policy

and of formally enacting that policy into a binding

rule of con- duct. It is open to the legislature to

formulate the policy as broadly and with as little or

as much details as it thinks proper and it may delegate

the rest of the legislative work to a subordinate

authority who will work out the details within the

framework of that policy."

In Raj Narain Singh v. The Chairman, Patna Administration

Committee, Patna, and another(2) a bench of five Judges of

this Court held

262

that an executive authority can be empowered by a statute to

modify either existing or future laws but not in any

essential feature. In the instant case section 48(2C) read

with section 48(2) (cc) authorises the Central Government to

make rules to carry out the purposes of the Act

notwithstanding the Industrial Disputes Act or any other

law. This means that in respect of the matters covered by

the rules the provisions of the Industrial Disputes Act or

any other law will not be operative. The argument is that

sub-section (2C) or any other provision introduced in the

principal Act by the Amendment Act does not lay down any

legislative policy nor supply any guidelines as to the

extent to which the rule-making authority would be competent

to override the provisions of the Industrial Disputes Act or

other laws. Reference was made to Municipal Corporation af

Delhi v. Birla Cotton Spinning and Weaving Mills, Delhi and

another,(l) Gwalior Rayon Silk Manufacturing (Weaving)

Company Limited v. Assistant Commissioner of Sales-tax and

others,(2) for the proposition that unlimited right of

delegation is not inherent in the legislative power itself.

The question therefore is, does the Amendment Act of

1981 lay down no legislative policy or furnish no guidance

to indicate the nature and extent of the modifications that

the rules will be permitted to make in the existing laws to

carry out the purposes of the Life Insurance Corporation

Act, 1956 as amended in 1981 ? Learned Attorney General

relied on the decision of this Court in Harishankar Bagla

and another v. State of Madhya Pradesh (3) This was a case

under the Essential Supplies (Temporary Powers) Act, 1946.

Section 3(1) of that Act says that the Central Government

for maintaining or increasing supplies of any essential

commodity, or for securing their equitable distribution and

availability at fair prices, may by order provide for

regulating or prohibiting the production, supply and

distribution thereof and trade and commerce therein. Sub-

section (2) of section 3 states that without prejudice to

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the generality of the powers conferred by sub-section (1),

such an order may provide inter alia for regulating by

licences or permits or otherwise the production or

manufacture and transport, distribution, disposal,

acquisition; use or consumption of any essential commodity.

Section 6 of that Act provides inter alia that any order

made under section 3 shall have effect notwithstanding any-

263

thing inconsistent therewith contained in any enactment

other than A that Act. In exercise of the powers conferred

by section 3 of that Act the Central Government made the

Cotton Textiles (Control of Movement) order, 1948. Clause 3

of the said order requires a person to take a permit from

the Textile Commissioner to enable him to transport cotton

textiles. One of the question that arose in Harishankar

Bagla's case was whether section 6 of the Essential Supplies

(Temporary Powers) Act permitted rules to be made by the

Central Government repealing by implication an existing law,

which was an essential legislative function and could not

validly be delegated. Mahajan C.J., speaking for the court

said:

"Section 6 does not either expressly or by

implication repeal any of the provisions of pre-

existing laws, neither does not abrogate them. Those

laws remain untouched and unaffected so far as the

statute book is concerned. The repeal of a statute

means as if the repealed statute was never on the

statute book. It is wiped out from the statute book.

The effect of section 6 certainly is not to repeal any

one of those laws or abrogate them. Its object is

simply to by-pass them where they are inconsistent with

the pro visions of the Essential Supplies (Temporary

Powers) Act, 1946, or the orders made thereunder. In

other words, the orders made under section 3 would be

operative in regard to the essential commodity covered

by the Textile Control order wherever there is

repugnancy in this order with the existing laws and to

that extent the existing laws with regard to those

commodities will not operate. By-passing a certain law

does not necessarily amount to repeal or abrogation of

that law. That law remains unrepealed but during the

continuance of the order made under section 3 it does

not operate in that field for the time being."

We think the Attorney-General was right in his submission

that what has been said of section 6 of the Essential

Supplies (Temporary Powers) Act should hold good for sub-

section (2C) of section 48 of the Life Insurance Corporation

Act which is similar in terms in so far as it authorises the

Central Government to make rules bypassing the existing

laws. Mahajan C.J., also holds that assuming that the rules

framed under the Act had the effect of repealing the l l

existing laws, the power to repeal is exercised not by the

delegate but by the Act itself. This is what he says on this

point:

264

"Conceding, however, for the sake of argument that

to the extent of a repugnancy between an order made

under section 3 and the provisions of an existing law,

to the extent of the repugnancy, the existing law

stands repealed by implication, it seems to us that the

repeal is not by any Act of the delegate, but the

repeal is by the legislative Act of the Parliament

itself. By enacting section 6 Parliament itself has

declared that an order made under section 3 shall have

effect notwithstanding any inconsistency in this order

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with any enactment other than this Act. This is not a

declaration made by the delegate but the Legislature

itself has declared its will that way in section 6. The

abrogation or the implied repeal is by force of the

legislative declaration contained in section 6 and is

not by force of the order made by the delegate under

section 3. The power of the delegate is only to make an

order under section 3. Once the delegate has made that

order its power is exhausted. Section 6 then steps in

wherein the Parliament has declared that as soon as

such an order comes into being that will have effect

notwithstanding any inconsistency therewith contained

in any enactment other than this Act. Parliament being

supreme, it certainly could make a law abrogating or

repealing by implication provisions of any pre-existing

law and no exception could be taken on the ground of

excessive delegation to the Act of the Parliament

itself."

The Attorney General relied strongly on these observations

in submitting that it is not really the rules framed by the

Central Government in exercise of the delegated authority

that override the Industrial Disputes Act or any other

existing law but the power of abrogating the existing laws

is in sub-section (2C) of section 48 enacted by Parliament

itself. The observations quoted above from Harishankar

Bagla's case which was decided by a bench of five Judges

appear to support the Attorney General's contention.

The question however remains to be answered, does the

Life Insurance Corporation Act, 1956 as amended in 1981

state any policy to guide the rule-making authority ? We

have earlier referred to the observations of Mukerjea J., in

the Delhi Laws case that the legislature can formulate a

policy as broadly and with as little or as much details as

it thinks proper and may delegate the rest of the

Iegislative work to a subordinate authority who will work

out the details within the framework of the policy. In

Harishanker Bagla's

265

case one of the questions for decision was whether section 3

of the A Essential Supplies (Temporary Powers) Act, 1946

amounts to delegation of legislative power outside the

permissible limits. It was held that legislature had laid

down a legislative principle which was "maintaining or

increasing supplies of any essential commodity," and

"securing their equitable distribution and availability at

fair prices." That statement was held as offering sufficient

guidance to the Central Government in exercising its powers

under section 3. In the instant case the policy as stated in

the preamble of the Amendment Act is that "for securing the

interests of the Life Insurance Corporation of India and its

policy-holders and to control the cost of administration, it

is necessary that revision of the terms and conditions of

service applicable to the employees and agents of the

Corporation should be undertaken expeditiously". The policy

stated here is at least as clear as the one held in

Harishanker Bagla's case offering sufficient guidance to the

Central Government in exercising its powers under that Acts

We have referred to section 48(3) of the Life Insurance

Corporation Act which requires that every rule made by the

Central Government under this Act shall be laid before each

House of Parliament and that if both Houses agree in making

any modification in the rule or both Houses agree that the

rule should not be made, the rule shall thereafter have

effect only in such modified form or be of no effect, as the

case may be. This Court in D.S. Grewal v. State of Punjab

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and another(supra) observed as follows in respect of a

similar provision requiring the rules made by the delegated

authority to be laid on the table of Parliament and making

the rules subject to modification, whether by way of repeal

or amendment on a motion made by Parliament:

"This makes it perfectly clear that Parliament has

in no way abdicated its authority, but is keeping

strict vigilance and control over its delegate."

In view of what has been held in Harishanker Bagla and D. S.

Grewal, both of which were decided by a larger bench, we do

not find it possible to accept the contention that the Act

is invalid on the ground of excessive delegation of

legislative functions.

It was contended on behalf of the petitioners that in

any event the provisions of the Amendment Act of 1981 could

not nullify the effect of the writ issued by this Court in

D. J. Bahadur's case. In our opinion this contention has

substance. Clause (cc) of section 48(2) empowers the Central

Government to make rules with regard

266

to the terms and conditions of service of the employees and

agents of the Corporation. Sub-section (2A) of section 48

provides that the regulations made under section 49 of the

Act and "other provisions' as in force before the

commencement of the Amendment Act with respect to the said

terms and conditions are to be deemed as rules made under

clause (cc) of section 48(2). Sub-section (2B) of section 48

says that the power to make rules conferred by clause (cc)

of sub-section (2) shall include the power to add, vary or

repeal the regulations and "other provisions" referred to in

sub section (2A) with retrospective effect from a date not

earlier than June 20, 1979. Clearly a writ issued by this

Court is not a regulation nor can it be described as 'other

provision' which expression possibly includes circulars and

administrative directions. Sub-section (2C) of section 48

however provides inter alia that any rules made under clause

(cc) with retrospective effect from any date shall be deemed

to have had effect from that date notwithstanding any

judgment, decree or order of any court, tribunal or other

authority. The order disposing of D. J. Bahadur's case, made

on November 10, 1980 reads:

"In view of the opinion expressed by the majority,

the appeal is dismissed with costs to the first, second

and third respondents, and the Transfer Petition No. 1

of 1979 stands allowed insofar that a writ will issue

to the Life Insurance Corporation directing it to give

effect to the terms of the settlements of 1974 relating

to bonus until superseded by a fresh settlement, an

industrial award or relevant legislation. Costs in

respect of the Transfer Petition will be paid to the

petitioners by the second respondent."

The Life Insurance Corporation of India Class III and Class

IV Employees (Bonus and Dearness Allowance) Rules, 1981 were

made by the Central Government on February 2, 1981 in

exercise of the powers conferred by section 48 of the Life

Insurance Corporation Act, 1956 as amended by the Life

Insurance Corporation (Amendment) ordinance, 1981. Rule 3 of

these rules relates to the subject of bonus concerning class

III and class IV employees of the Corporation. The substance

of this rule has been set out earlier in this judgment.

Clearly rule 3 seeks to supersede the terms of the 1974

settlements relating to bonus. By virtue of rule 1(2), rule

3 'shall be deemed to have come into force on the Ist day of

July, 1979". The question is, can rule 3 read with rule ](2)

nullify the effect of the writ issued by this Court on

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November 10, 1980 in D.J.Bahadur's case ? In seems to us

rule 3 cannot make the writ

267

issued by this Court nugatory in view of the decision of the

majority in Madan Mohan pathak v. Union of India & ors.

etc.(supra) to which reference has been made earlier. In

Madan Mohan Pathak's case it was contended that since the

Calcutta High Court had by its judgment dated May 21, 1976

issued a writ of mandamus directing the Life Insurance

Corporation to pay annual cash bonus to class III and class

IV employees for the year April 1, 1975 to March 31, 1976 as

provided by the 1974 settlements and this judgment had

become final, the Life Insurance Corporation was bound to

obey the writ of mandamus and pay as ordered by the High

Court. The court was dealing with the Life Insurance

Corporation ( Modification of Settlement) Act, 1976 in that

case. Section 3 of that Act provided that the terms of the

settlements in so far as they related to the payment of

annual cash bonus to class III and class IV employees would

not have any force or effect and be deemed not to have had

any force or effect from April 1, 1975 Bhagwati J., speaking

also for Iyer and Desai., JJ.. Observed:

"Here, the judgment given by the Calcutta High

Court, which is relied upon by the petitioners, is not

a mere declaratory judgment holding an impost or tax to

be invalid. so that a validation statute can remove the

defect pointed out by the judgment amending the law

with retrospective effect and validate such impost or

tax. But it is a judgment giving effect to the right of

the petitioners to annual cash bonus under the

Settlement by issuing a writ of Mandamus directing the

Life Insurance Corporation to pay the amount of such

bonus. If by reason of retrospective alteration of the

factual or legal situation, the judgment is rendered

erroneous, the remedy may be by way of appeal or

review, but so long as the judgment stands, it cannot

be disregarded or ignored and it must be obeyed by the

Life Insurance Corporation. We are, therefore, of the

view that in any event! irrespective of whether the

impugned Act is constitutionally valid or not, the Life

Insurance Corporation is bound to obey the writ of

Mandamus issued by the Calcutta High Court . "

Beg. C.J. who delivered a separate but concurring judgment,

after pointing out the "hurdle in the way" of the

petitioner's claim based on Article 19(1)(f) of the

Constitution, which was that the Act Life Insurance

Corporation (Modification of Settlement) Act, 1976) was

268

passed during the emergency, observed:

"The object of the Act was, in effect, to take

away the force of the judgment of the Calcutta High

Court recognising the settlements in favour of Class

III and Class IV employees of the Corporation. Rights

under that judgement could be said to arise

independently of Article 19 of the Constitution. I find

myself in complete agreement with my learned brother

Bhagwati that to give effect to the judgement of the

Calcutta High Court is not the same thing as enforcing

a right under Article 19 of the Constitution. It may be

that a right under Article 19 of the Constitution

becomes linked up with the enforceability of the

judgment. Nevertheless, the two could be viewed as

separable sets of rights. If the right conferred by the

judgment independently is sought to be set aside,

section 3 of the Act, would in my opinion, be invalid

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for trenching upon the judicial power.

I may, however, observe that even though the real

object of the Act may be to set aside the result of the

mandamus issued by the Calcutta High Court, yet, the

section does not mention this object at all Probably

this was so because the jurisdiction of a High Court

and the effectiveness of its orders derived their force

from Article 226 of the Constitution itself. These

could not be touched by an ordinary act of Parliament.

Even if section 3 of the Act seeks to take away the

basis of the judgment of the Calcutta High Court,

without mentioning it, by enacting what may appear to

be a law, yet, I think that where the rights of the

citizen against the State are concerned, we should

adopt an interpretation which upholds those rights.

Therefore, according to the interpretation r prefer to

adopt the rights which had passed into those embodied

in a judgment and became the basis of a Mandamus from

the High Court could not be taken away in this indirect

fashion..'

The Attorney General referred to a number of earlier

decisions of this Court wanting us to infer that the

observations quoted above from the judgment in Madan Mohan

Pathak's case did not state the correct law hl view of the

said decisions. But these observations expressed the

majority view of a bench of seven judges bearing

269

directly on the point that arises for decision in the

instant case and A are binding on us. We therefore hold that

rule 3 operating retrospectively cannot nullify the effect

of the writ issued in D. J. Bahadur's case which directed

the Life Insurance Corporation to give effect to the terms

of the 1974 settlements relating to bonus until superseded

by a fresh settlement, an industrial award or relevant

legislation. The Life insurance Corporation (Amendment) Act,

1981 and the Life Insurance Corporation of India Class III

and Class IV Employees (Bonus and Dearness Allowance) Rules,

1981 are relevant legislation. However in view of the

decision in Madan Mohan Pathak's case, these rules, in so

far as they seek to abrogate the terms of the 1974

settlements relating to bonus, can operate only

prospectively, that is, from February 2, 1981, the date of

publication of the rules. The petitions are allowed to this

extent only.

In the circumstances of the case we make no order as to

costs.

CHINNAPPA REDDY, J. I have had the advantage of

perusing the opinion of my brother Gupta J., I agree with

his conclusion that the Life Insurance Corporation

(Amendment) Act I of 1981 can operate but prospectively in

so far as it seeks to nullify the terms of the 1974

settlements in regard to the payment of bonus. On some of

the other questions I have certain reservations. I do not,

however, desire to express any opinion on those questions as

my brother Pathak J., has indicated that he is inclined to

agree with Gupta J., on those questions. Perhaps I will do

well to add a few words of my own on the question of

retrospectivity. I am spared the necessity of stating the

facts as those that are necessary have been stated by my

brother Gupta J.

The 1974 settlements provided, among various other

matters, for the payment of annual cash bonus (not a profit

sharing bonus) to their Class Ill and Class IV employees at

the rate of 15 per cent of the annual salary. The

settlements were to be operative from 1st April 1973 to 31st

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March 1977. That the settlements were to be operative from

1st April 1973 to 31st March 1977 did not mean that the

settlements would cease to be effective peremptorily from 1-

4-1977 and, therefore, the annual cash bonus stipulated

under the settlements would cease to be payable from that

date onwards. The settlements would continue to be binding

even after 31-3.1977 and would not be liable to be

terminated by the issuance of a unilateral notice by the

employer purporting to terminate the settlements. The

settlements would cease to be effective only when they were

replaced

270

by 'a fresh settlement, an industrial award or relevant

legislation'. This is the law and this was what the law was

pronounced to be in Life Insurance Corporation of India v.

D. J Bahadur(1) on a consideration of the relevant

provisions and precedents.

The attempt made to supersede the settlements, in so

far as they related to the payment of bonus, by enacting the

Life Insurance Corporation (Modification of Settlement) Act

1976 failed, firstly because the Act was held to violate the

provisions of Article 31(2) of the Constitution and secondly

because the Act could not have retrospective effect so as to

absolve the Life Insurance Corporation from obeying the writ

of mandamus issued by the Calcutta High Court, which had

become final and binding on the parties. This was the

decision of this Court in Madan Mohan Pathak v. Union of

India(a), all the seven judges who constituted the Bench

agreeing that the Act violated the provisions of Article

31(21 and four out of the seven judges, namely, Beg C. J.,

Bhagwati, Krishna Iyer and Desai JJ., taking the view that

the Act did not have the effect of nullifying the writ of

mandamus issued by the Calcutta High Court and the other

three Judges, Chandrachud, Fazal Ali and Shinghal JJ,

preferring not to express any view on that question.

The second attempt to nullify the 1974 settlements in

regard to payment of bonus, by issuing notices under section

19(2) and Section 9-A of the Industrial Disputes Act and by

amending the Standardization order and the Staff

Regulations, was frustrated by the judgment of this Court in

Life Insurance Corporation of India v. D.A.. Bandar, the

Court taking the view that the two settlements could only be

superseded by 'a fresh settlement, an industrial award or

relevant legislation'. In this case, the Court issued a writ

to the Life Insurance Corporation "to give effect to the

terms of the settlements of 1974 relating to bonus until

superseded by a fresh settlement, an industrial award or

relevant legislation".

The effect of the two judgments in Madan Mohan

Pathak's case and D. J, Bahadhur's case was clear: the

settlements of 1974, in so far as they related to bonus

could only be superseded by a fresh settlement. an

industrial award or relevant legislation. But any such

supersession could only have future effect, but not

retrospective effect so as to dissentient the Class III and

Class IV employees of the Life Insurance Corporation from

receiving the cash bonus which had been earned by them, day

by

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day and which the Life Insurance Corporation of India was

under an obligation to pay in terms of the writ issued in D.

J. Bahadur's case. The present attempt made by the 1981

amending Act and the rules thereunder to scuttle the payment

of bonus with effect from a date anterior to the date of the

enactment must, therefore, fail. The employees are entitled

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 20

to be paid the bonus earned by them before the date of

publication of the Life Insurance Corporation of India Class

III and Class IV Employees (Bonus and Dearness Allowance)

Rules, 19 81.

N.V.K. Petitions partly allowed.

272