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CASE NO.:

Writ Petition (civil) 3815-19 of 1978

PETITIONER:

KISHAN PRAKASH SHARMA & ORS.

Vs.

RESPONDENT:

UNION OF INDIA & ORS.

DATE OF JUDGMENT: 19/03/2001

BENCH:

G.B. Pattanaik, S. Rajendra Babu, D.P. Mohapatra,Doraiswamy Raju & Shivaraj V. Patil.

JUDGMENT:

L...I...T.......T.......T.......T.......T.......T.......T..J [WITH W.P.(C) NOS. 8

00-01/1980, 15210-13/1984,

15209/1984, 3394/94A/1985, 15435/1984 and T.C. (C) NO.

5/1981]

J U D G M E N T

RAJENDRA BABU, J. :

The genesis of dispute in these matters is embedded in

the various schemes framed under the General Insurance

Business (Nationalisation) Act, 1972 (Act 57 of 1972) as

amended from time to time (hereinafter referred to as the

Act).

The Preamble to the Act explains the purpose of the Act

as to provide for the acquisition and transfer of shares in

the Indian insurance companies and undertakings of other

insurers in order to serve better the needs of the 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

concentration of wealth to the common detriment for the

regulation and control of such business and for matter

connected therewith or incidental thereto. Section 2

declared that it was for giving effect to the policy of the

State towards securing the principles specified in Article

39(c) of the Constitution and under Section 3(a) acquiring

company has been defined as any Indian insurance company

and where a scheme had been framed involving the merger of

one or more insurance companies in another or amalgamation

of two or more such companies means the Indian insurance

company in which any other company has been merged or the

company which has been framed as a result of amalgamation.

Section 4 provides that on the appointed day all the shares

in the capital of every Indian insurance company shall be

transferred to and vested in the Central Government free of

all trusts, liabilities and encumbrances affecting these.

Section 5 provides for transfer of the undertakings of other

existing insurers. Section 6 provides for the effect of

transfer of undertakings. Section 8 provides for provident

fund, superannuation, welfare or any other fund existing.

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Section 9 stipulates that Central Government shall form a

Government company in accordance with the provisions of the

Companies Act to be known as General Insurance Corporation

of India for the purpose of superintending, controlling and

carrying on the business of general insurance. Section 10

stipulates 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 immediately on such vesting, stand transferred to and

vested in the Corporation. Chapter 4 deals with the amounts

to be made for acquisition. Chapter 5 of the Act deals with

scheme for re- organisation of general insurance business.

Sections 16 and 17 are important, to which we will advert to

later and by amendment of the Act by an Ordinance issued in

1984 and subsequently replaced by an Act in 1985, the said

provisions have been amended and a fresh provision was

introduced as Section 17-A to which we will advert later in

detail. After the Act came into force, several schemes have

been framed by the Board of Directors and two schemes one

dated July 30, 1977 amending the provisions regarding sick

leave and another scheme pertaining to the payments to be

made to the provident fund were challenged before this Court

in the case of Ajay Kumar Banerjee v. Union of India, which

resulted in a reported decision in 1984(3) SCR 252. The

main ground of attack in that writ petition is that the

amended notification altering the conditions of service is

illegal as the Central Government has no power to issue it

under Section 16 of the Act and as such the notification

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

It was contended that once the merger of the Indian

companies had taken place and the process of re-organisation

was complete on 1st January, 1974 as stated before by

forming the 4 insurance companies by 4 schemes framed in

1973, there could be no further re-organisation of the

general insurance business and the merger of more insurance

companies inasmuch as in the amended scheme there was no

merger or re- organisation contemplated unlike the 1974

scheme. Mere amendment of the terms and conditions of

service of the employees unconnected with or not

necessitated by re- organisation of the business or merger

or amalgamation of the companies could not fall within

Section 16(1)(g) of the Act. It was also noticed by this

Court that under the Life Insurance Corporation Act and

Banking Companies Act provisions have been made to frame

regulations independently of the re-organisation and there

is no such comparable power under the Act and, therefore,

the schemes impugned herein are made without authority of

the law. This contention found favour with this Court. On

interpretation of the provisions it was held that the power

under Section 16(1)(g) to frame scheme for rationalising the

provisions regarding pay-scales and other terms and

conditions of service of officers and other employees

wherever necessary if unrelated to the object envisaged in

sub-section (2) of Section 16 of the Act will not fall

within the scope of exercise of powers and it would fall

outside the same if the power exercised is beyond delegation

and in view of the fact that the scheme of 1980 so far as it

does not relate to the amalgamation or merger of the

insurance company is not warranted by Section 16(1) of the

Act. Ultimately, this Court held that the amended scheme of

1980 was bad as beyond the scope of the authority of the

Central Government under the Act. Further it was also made

clear that the parties will be at liberty to adjust their

rights as if the scheme had not been framed and it was

further made clear that this order will not prevent the

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Government, if so advised, to frame any appropriate

legislation or make any appropriate amendment giving power

to the Central Government to frame any scheme as it

considers fit and proper.

However, in that batch of petitions, out of several of

the cases that were disposed of by this Court in Ajay Kumar

Banerjees case [supra], two matters [W.P.(C) Nos.

800-801/80] have remained undisposed of. In these two

matters, a challenge is to the schemes framed in 1976 and

1977 by which the basis for contribution to provident fund

had stood varied by changing it from 8 per cent of basic

salary, dearness allowance and personal pay to 10 per cent

of basic salary and personal pay and special pay, if any.

The other amendment scheme effected certain changes in

relation to sick leave. While it is the contention of the

Petitioners that these two petitions have to be allowed, it

is the stand of the respondents that in view of the changes

that have been effected and the validation made thereto to

the respective schemes these petitions will have to be

dismissed. Inasmuch as the fate of these two petitions will

depend on the view we take in the main matter, it would be

appropriate to proceed to examine the other petitions that

have been filed.

In WP(C) No.15209/84, All India Insurance Employees

Association is the Petitioner, while Ummed Singh and another

workman are the Petitioners in WP(C) Nos.15210-13/84. WP(C)

No.15209/84 has been filed in challenging the Ordinance,

which effected the changes to the Act in question. Inasmuch

as the said Ordinance has been replaced by the Act, we must

hold that these petitions have become infructuous and shall

stand disposed of accordingly.

As stated already, by the Act, nationalisation of

general insurance business was effected by notification made

on September 20, 1972, which brought the Act into force with

2.1.1973 as the appointed date. On 27.9.1974, the scheme of

1974 was issued by the Central Government purported to have

been issued under Section 16(1)(g) of the 1972 Act after

discussions and negotiations with the employees under the

Industrial Disputes Act. On 1.6.1976, another scheme was

issued by the Central Government, stated to be unilaterally,

under which the Provident Fund benefit granted to the

employees under the 1974 scheme was modified. The 1974

scheme granted contribution of 8 per cent based on basic

salary, dearness allowance and the personal pay and this was

substituted with 10 per cent of basic salary and personal

pay. The Provident Fund Act has been made applicable to the

workmen of the GIC from 1970 onwards. On 30.7.1977, another

scheme was published purportedly under Section 16(1)(g) of

the 1972 Act amending the provisions regarding sick leave.

The sick leave was available with full pay, but by the new

scheme the same was reduced to only half pay. On 30.9.1980,

the Central Government published another scheme to amend the

1974 scheme by which the existing employees would retire at

the age of 60 years and those who joined the service after

1980 will retire at the age of 58 years. The ceiling on

salary including basic, dearness allowance and special pay,

if any, was imposed on Class III employees at Rs.2,750/- per

month and on Class IV employees at Rs.1,600/- p.m. The

graduation increment was withdrawn. Subsequently, the

ceiling was increased to Rs.3,500/- p.m. Class III

employees and to Rs.2117/- p.m. Class IV employees.

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However, there is no ceiling at all at present. After the

decision in Ajay Kumar Banerjees case [supra] Ordinance

10/84 was promulgated to amend the 1972 Act by introducing

Section 17A, retrospectively and modification of Section 16

of the 1972 Act. On 21.9.1984, the Central Government

issued the Amendment Scheme of 1984 purportedly under

Section 17A of the 1972 Act by reviving the 1980 scheme. It

also imposed a condition of compulsory retirement on

completion of 55 years of age. The Petitioners have

challenged the vires of the Act as well as the schemes in

these proceedings.

At this stage, we may notice the following amendments

effected to the Act :

a. In the definition clause in Section 3(o), the

expression scheme was altered to mean not only one framed

under Section 16(1) but also a scheme framed under Section

17A.

b. Section 16 of the Principal Act was amended by

introducing an additional sub-section (8) after sub-section

(7) to the effect that the power to frame a scheme under

sub-section (1), and the power conferred under sub-section

(6) to add to, amend or vary any scheme framed under this

section, shall include the power to frame such scheme with

retrospective effect from a date not earlier than the

appointed day.

c. Section 17A is introduced in which a validation

clause and some consequential amendments have been added

which we reproduce hereunder:

17-A. (1) The Central Government may, by notification

in the Official Gazette, frame one or more schemes for

regulating the pay scales and other terms and conditions of

service of officers and other employees of the Corporation

or of any acquiring company.

(2) A scheme framed under sub-section (1) may add to,

amend or vary any scheme framed under section 16 [including

any addition, amendment or variation made therein by

notification under sub-section (6) of section 16] with

respect to rationalisation or revision of pay scales and

other terms and conditions of service of officers and other

employees of the Corporation or of any acquiring company, to

provide for further rationalisation or revision of such pay

scales and other terms and conditions of service

notwithstanding that such further rationalisation or

revision is unrelated to, or unconnected with, the

amalgamation of insurance companies or merger consequent on

nationalisation of general insurance business.

(3) The Central Government may, by notification, add to,

amend or vary any scheme framed under this section.

(4) The power to frame a scheme under sub-section (1),

and the power conferred by sub-section (3) to add to, amend

or vary any scheme, or, as the case may be, to make such

addition, amendment or variation in any scheme framed under

this section, with retrospective effect from a date not

earlier than the appointed day.

(5) A copy of every scheme, and every amendment thereto,

framed under this section shall be laid, as soon as may be

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after it is made, before each House of Parliament.

(6) The provisions of this section and of any scheme

framed under it shall have effect notwithstanding anything

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

award or other instrument for the time being in force.

(7) (1) Notwithstanding anything contained in any

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

authority or in any other law, agreement, award or other

instrument for the time being in force, every scheme framed

or purporting to have been framed with retrospective effect

under sub-section (1) of section 16 of the principal Act and

every notification made or purporting to have been made with

retrospective effect under sub-section (6) of that section

before the commencement of the General Insurance Business

(Nationalisation) Amendment Ordinance, 1984 shall be, and

shall be deemed always to have been, for all purposes, as

valid and effective as if the amendment made in the said

section 16 by section 3 of this Ordinance had been part of

that section and had been in force at all material times.

(2) Notwithstanding anything contained in any judgment,

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

in any other law, agreement, award or other instrument for

the time being in force,-

(a) every scheme framed, or purporting to have been

framed, by the Central Government under sub-section (1) of

section 16 of the principal Act: and

(b) every notification made, or purporting to have been

made by the Central Government under sub-section (6) of the

said section 16,

before the commencement of the General Insurance

Business (Nationalisation) Amendment Ordinance, 1984, in so

far as such scheme or notification provides (whether with or

without retrospective effect) for any rationalisation or

revision of pay scales or other terms and conditions of

service of officers and other employees of the Corporation

or of any acquiring company, otherwise than in relation to,

or in connection with, amalgamation of insurance companies

of merger consequent on nationalisation of general insurance

business shall be, and shall be deemed always to have bee,

for all purposes, as valid and effective as if section 17A,

as inserted in the principal Act by section 4, of this

Ordinance had been part of the principal Act, and had been

in force at all material times and such schemes or

notification in so far as it provides as aforesaid had been

framed or made, under the said section 17A:

Provided that nothing in this section shall apply to, or

in relation to, the notification dated the 30th day of

September, 1980, framing the General Insurance

(Nationalisation and Revision of Pay Scales and other

Conditions of Service of Supervisory, Clerical and

Subordinate Staff) Second Amendment Scheme, 1980.

Explanation.-In this section, the expressions acquiring

company and Corporation shall have the meanings

respectively assigned to them in the principal Act.

Shri P.P.Rao, learned senior counsel for the

Petitioners, submitted that :

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1. The schemes of 1976 and 1977 are illegal being ultra

vires the Nationalisation Act of 1972 for reasons given in

Ajay Kumar Banerjees case [supra].

2. The said schemes being void ab initio when they were

made could not be revived by giving retrospective effect to

the Amendment Act of 1985.

3. The 1985 Amendment Act is unconstitutional being

violative of Articles 14, 19 and 21 of the Constitution

inasmuch as it confers unreasonable and unguided power on

the Central Government to frame schemes affecting the

conditions of service of the workmen without any scope for

collective bargaining.

4 . In any event the retrospective effect given to the

1985 Amendment with effect from 2.1.1973 is arbitrary and

violates Articles 14, 19 and 21 of the Constitution as it

takes away vested rights.

5. Vide proviso to Section 17-A(7)(2), the Act makes

discrimination vis-à-vis the amendments to the Schemes made

in 1976 and 1977 by specifically excluding the 1980 Scheme

from the retrospective operation given to the 1985 Act.

6. The applicability of the Industrial Disputes Act to

the workmen of the General Insurance Business is not

excluded by the Nationalisation Act of 1972. Consequently,

the view taken by the Industrial Tribunal in its award dated

1.8.1980 in ID No.17 of 1980 is liable to be reversed and

the civil appeal remanded to the Industrial Tribunal for

disposal in accordance with law.

In elaboration of these submissions and in challenging

the validity of Section 17A of the 1972 Act, he further@@

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submitted as follows :@@

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1. Nature of power claimed to impose schemes without

adjudication and or immunity from judicial examination is in

the nature of crown prerogative not to be accountable in

courts of law. It is not admissible under the Constitution.

2. The inevitable consequence of such power is total

destruction of GIC Workers substantive right to collective

bargaining, even though Banks employees are fully competent

to negotiate and enter into binding agreement. For the

exercising this right both are similarly situate.

3. It also destroys the right to procedural safeguards

of conciliation, arbitration and adjudication. Only in case

of the General Insurance Employees, although in case of bank

employees, with no rational differentia, the right to

collective bargaining is recognised and not disturbed and

the right to adjudication was recognised in Bharat Bank case

in 1950 has resulted in Shastry Award and long line of other

awards under the Industrial Disputes Act. Settlement with

the Bank employees are cited by respondents to justify

unilateral arbitrary changes imposed by impugned schemes

under invalid Section 17A.

4. Discrimination against GIC employees, in matters of

social and economic justice and fair play, is writ large on

the face of Section 17A. The GIC employees have been

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singled out for denial of their dignity as equal partners,

and the constitutional right to participate in the

management of insurance industry and to take away the

safeguards of a just, fair and reasonable procedure with

well defined necessary safeguards against arbitrary changes

in wage structures and other terms and conditions of service

with retrospective effect to make lawless schemes lawful.

Injustice is thereby aggravated. Article 14 is flagrantly

overtaken in all its dimensions.

5. This ignores the role of workers who produce wealth

and services for the community. The history of evolution of

industrial jurisprudence and fundamental constitutional

commitments are replaced by unguided executive fiat. The

workers are trusted to build Modern India but Section 17A

imposes avoidable humiliation of imposing wage slavery in

sensitive fiscal public sector undertaking where justice and

fair play must be the sole concern.

It blatantly makes Central Government a substitute for

industrial Tribunals but lays down no guidelines for

exercise of powers in fields where binding principles of

industrial law declared by this Court are the law of the

land. The procedural and substantive benefits of this law

cannot be taken away to throw the GIC employees at the mercy

of the executive.

6. The Central Government is obliged to act on relevant

facts ascertained in a fair enquiry or principles of law

which are available to the employees in other industries,

with guaranteed protection of binding law and justice from

this Court under Article 136 of the Constitution.

7. Section 17A cannot be read down to control the

powers of the Central Government not to violate the binding

principles of relevant law enacted or declared by this

Court.

8. The artificial classification of GIC employees has

no rational differentia nor does it reasonable nexus with

any constitutionally permissible object to justify the

amendment in the GIC Nationalisation Act.

9. After nationalisation all industrial disputes can

and must be dealt with under relevant industrial laws, and

not in exercise of absolute power conferred on the

Government. Section 17A imposes hostile discrimination on

GIC employees singled out to be subjected to wage slavery.

10. This amendment paralyses the Trade unions in

insurance industry and also the courts and Tribunals for no

constitutionally permissible object. The existence of power

and its exercise both are, therefore, unconstitutional and

hit by Article 14, 19(1)(c) and (g) and also 21 of the

Constitution of India.

Shri Harish N. Salve, learned Solicitor General

appearing for the Central Government, submitted that the

background, in which the schemes have been framed and the

modifications thereto have been effected, has to be borne in

mind.

Prior to 1972, there were about 106 general insurance

companies both of Indian and foreign origin. The conditions

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of service of the employees of the said insurance companies

were governed by the respective contracts of service between

the companies and the employees. The set-up, working,

management and employment of staff by the erstwhile

insurance companies showed no uniformity. The erstwhile

companies were managed in diverse managerial systems and no

uniform pattern of management could be discovered by the

Central Government after the nationalisation. There was a

pronounced disparity between one company and the other at

all levels in the matter of remuneration and designations

for similar posts. Employees of different companies were

holding different designations and were paid differently for

the same kind of work at the same station. Some companies

gave very high sounding designations and paid salaries,

which were not commensurate with the work. So the necessity

for rationalisation of the entire structure of general

insurance business, including designations, pay scales and

other conditions of service arose.

On May 13, 1971, the Government of India assumed the

management of the general insurance companies under the Act

pursuant to an Ordinance issued at that time. The preamble

of the Act explains the purpose of the said Act as to

provide for the acquisition and transfer of shares of Indian

insurance companies and undertakings of other insurers in

order to serve better the needs of the economy in securing

the development of general insurance business in the best

interest if the community and to ensure that the operation

of the economic system does not result in concentration of

wealth to the common detriment, for the regulation and

control of such business and for matters connected therewith

or incidental thereto. The said Act also deals with the

scheme for reorganisation of general insurance business in

Chapter V.

The first step the Central Government took in this

direction was to reduce the number of companies carrying on

general insurance business, which was also the main object

of Section 16(2). With this object in view, the Government

decided to retain four companies and all other companies

were merged into one or the other of the said four

companies. To achieve this end, four merger schemes were

framed and promulgated. All these schemes came into force

with effect from the 1st day of January, 1974. Prior to the

coming into force of the aforesaid schemes, the different

companies, pending formal merger, had been merged into one

or the other of the said four companies.

Thereafter, the Government of India in exercise of

powers under Section 16(1)(g) framed a scheme called the

General Insurance (Rationalisation and Revision of Pay

Scales and other Conditions of Service of Supervisory,

Clerical and Subordinate Staff) Scheme, 1974. As per this

scheme, contribution to the provident fund was to be at the

rate of 8 per cent of the basic salary and dearness

allowance with an equal contribution by the General

Insurance Corporation or any of its subsidiaries, while, at

the same, time, they had maintained parity with other

institutions such as LIC and the nationalised banks and for

this purpose they had amended the notification issued on

1.6.1976 to provide that provident fund shall be contributed

by every employee at the rate of ten per cent of the basic

pay plus personal pay and special pay, if any, in place of 8

per cent of the basic salary and dearness allowance. It was

also provided that any period of sick leave on half pay may

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be converted into sick leave on half pay at the option of

the employees but in such cases twice the amount of sick

leave was to be debited against the leave account of the

employee. Provision was also made for the grant of special

sick leave for serious ailments like cancer, leprosy, T.B.,

polymylitis and other serious diseases.

It is the stand of the respondents that these amendments

were made while the process of rationalisation of pay scales

and other service conditions were still in progress and the

process had not been finally completed to achieve uniformity

and inter-se rationalisation in terms and conditions of

service of different categories of employees of merged

companies.

The second amendment to the scheme was effected in 1980.

This Court in Ajay Kumar Banerjees case [supra] quashed the

scheme merely on the ground that the Central Government had

no power under Section 16 of the Act to frame the scheme.

However, this Court rejected the contentions of the

Petitioners that the scheme was violative of Articles 14, 16

and 19 of the Constitution of India. While explaining the

scope of Section 16(1)(g) of the Act, this Court found that

the same gives powers to the Central Government to frame

schemes, to regulate terms and conditions and pay scales of

the employees and also to amend and vary the said schemes

from time to time. However, it was held that such powers

can be exercised only once. By virtue of the amending Act,

now the Central Government has been empowered to amend and

vary the said schemes from time to time bringing the same in

conformity with the other institutions such as LIC and the

nationalised banks enactment.

It is submitted that so far as the question relating to

the fixation of age of retirement is concerned, it is clear

from the provisions made that the age of retirement for the

existing employees has been retained at 60 years and so far

as the employees to be recruited after the notification are

concerned, the retirement of age has been fixed at 58 years.

Therefore, the alteration made does not take away any right

of the existing employees and the Petitioners cannot make a

grievance of the same in respect of the persons who have not

yet been taken in employment of any of the insurance

companies and the new recruits will be aware of the

conditions of the service prevailing in the companies and

will take up the employment subject to those conditions. So

far as the ceiling on the maximum salary is concerned, it is

submitted that the wage structure in the entire industry has

become lopsided and has brought about grave inter se wage

distortions reaching grave dimensions. For example, the

emoluments (basic pay plus DA) on 1st July, 1984 of a

Superintendent in Class III employed at the maximum of his

grade, amounted to Rs. 4,082/- and this, if allowed to

continue, would create further distortions while emoluments

of a General Manager, amounted to Rs.3,950/- and Rs.4,450/-

per month at the minimum and maximum of his grade

respectively and the General Manager is seven steps above a

Superintendent. It is submitted that if the ceiling had not

been imposed, even the emoluments of a Superintendent would

have overtaken those of the Chairman-cum-Managing Director

of a Subsidiary company. This would not be conducive to the

smooth functioning of the organisation and would lead to

distortions. These ceilings were, however, thereafter

revised upwards and have since been removed altogether

during subsequent revisions in the pay scales, allowance and

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other benefits payable to employees in the General Insurance

companies. The provisions regarding graduation benefits

were subsequently amended and graduation

increments/allowance are now available to graduate employees

in the general insurance companies.

The challenge now to the enactment is that this Court

having held, the expression scheme for reorganisation of

general insurance business will not include a scheme made

after the reorganisation, is complete; that no further

schemes, except in connection with the reorganisation of the

general insurance business and merger of more insurance

companies could be effected and the impugned scheme did not

involve any such merger; that therefore, this scheme is

ultra vires the Act; that the provision enabling the

Central Government to frame the scheme is bad and the

provision which gives retrospectivity to the said enactment

is equally bad as there are no guidelines in Section 17A.

Though there can be no limitation regarding providing better

terms and conditions of service the same cannot be modified

to the detriment of the workmen. The power that has been

conferred upon the Central Government to frame the scheme

without guidelines is bad and the guidelines have to be read

into the provisions in such a manner that the benefit which

is already given to the workmen should not be taken away and

there should be enough scope for collective bargaining

particularly in the absence of consultation and when there

is no limitation on upward revision, the conferment of the

power upon the authority concerned is bad.

So far as the delegated legislation is concerned, the

case law will throw light as to the manner in which the same

has to be understood and in each given case we have to

understand the scope of the provisions and no uniform rule

could be laid down. The legislatures in India have been

held to possess wide power of legislation subject, however,

to certain limitations such as the legislature cannot

delegate essential legislative functions which consist in

the determination or choosing of the legislative policy and

of formally enacting that policy into a binding rule of

conduct. The Legislature cannot delegate uncanalised and

uncontrolled power. The Legislature must set the limits of

the power delegated by declaring the policy of the law and

by laying down standards for guidance of those on whom the

power to execute the law is conferred. Thus the delegation

is valid only when the legislative policy and guidelines to

implement it are adequately laid down and the delegate is

only empowered to carry out the policy within the guidelines

laid down by the Legislature. The Legislature may, after

laying down the legislative policy, confer discretion on an

administrative agency as to the execution of the policy and

leave it to the agency to work out the details within the

framework of the policy. When the Constitution entrusts the

duty of law-making to Parliament and the Legislatures of

States, it impliedly prohibits them to throw away that

responsibility on the shoulders of some other authority. An

area of compromise is struck that Parliament cannot work in

detail the various requirements of giving effect to the

enactment and, therefore, that area will be left to be

filled in by the delegatee. Thus, the question is whether

any particular legislation suffers from excessive delegation

and in ascertaining the same, the scheme, the provisions of

the statute including its preamble, and the facts and

circumstances in the background of which the statute is

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enacted, the history of the legislation, the complexity of

the problems which a modern State has to face, will have to

be taken note of and if, on a liberal construction given to

a statute, a legislative policy and guidelines for its

execution are brought out, the statutes, even if skeletal,

will be upheld to be valid but this rule of liberal

construction should not be carried by the Court to the

extent of always trying to discover a dormant or latent

legislative policy to sustain an arbitrary power conferred

on the executive. These very tests were adopted in Ajay

Kumar Banerjees case [supra] also to examine whether there

is excessive delegation in framing schemes and reading the

preamble, the scheme and the other provisions of the

enactment taking note of the general economic situation in

the country, the authorities concerned had to frame

appropriate schemes. Therefore, it is not open to the

Petitioners to contend that there is excessive delegation in

relation to the enactment to frame schemes.

In Ajay Kumar Banerjee case (supra), this Court after

holding that there is no excessive delegation observed that

the scheme framed was ultra vires the enactment for the

scheme could only be framed once. Now the argument is that

once a scheme is framed no further scheme should be allowed

to be framed. If the legislature recognizes the fact the

rationalisation resulting from the mergers of several

companies are not yet over and on that basis enacts a law to

enable the Government to frame appropriate schemes, we do

not think that such step by the legislature is arbitrary or

irrational as to be violative of Article 14 of the

Constitution. In Ajay Kumar Banerjee case (supra), this

Court pointed out that though there is power in the

Government to revise the pay scales it cannot exercise the

power more than once at the time of merging different

companies for the purpose of rationalisation this power

could have been exercised and for no further. But now the

enactment itself specifically provides that every scheme

framed or purporting to have been framed by the Central

Government under Section 16(1) of the Principal Act and

every notification made or purporting to have been made

thereunder in so far as such scheme or notification provides

for rationalisation or revision of pay scales or other terms

and conditions of the officers and other employees of the

Corporation are deemed always to have been for all purposes

as valid and effective as made under Section 17A of the Act.

The retrospective effect given to the scheme is only to

overcome the difficulty pointed out by this Court in Ajay

Kumar Banerjees case. That lacuna having been overcome it

is not open to the Petitioners to contend that retrospective

effect given is violative of Articles 14, 19 and 21 of the

Constitution. Validation of invalid rule by amending the

main enactment under which it is made is a well known

legislative device approved by this Court.

We may now consider whether in any event the

retrospective effect given to the 1985 Amendment Act with

effect from 2.1.1973 is arbitrary and violates Articles 14,

19 and 21 of the Constitution? The Legislature is given the

power to make laws not only prospectively but also

retrospectively. If in exercise of those powers the

Legislature makes an enactment the same cannot be held to be

invalid for want of competence. But the grounds urged in

the present petitions are arising under Article 14, 19 and

21 of the Constitution. The appointed date fixed for coming

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into force of the Amendment Act is 2.1.1973. It is clear

that the scheme for reorganisation of the general insurance

business were to come into effect from that date.

Therefore, necessarily effect should have been given from

that date. It is difficult to envisage that the rights

arising under Article 14, 19 and 21 are affected. Vide

proviso to Section 17-A(7)(2) amendments are made to the

Schemes framed in 1976 and 1977 by specifically excluding

the 1980 Scheme from the retrospective operation given to

the 1985 Amendment Act. When different patterns in

different companies existed necessarily rationalisation had

to be effected and the position obtaining in several

institutions such as the Life Insurance Corporation and the

nationalised banks had been taken note of and a common

pattern had been adopted. Different patterns were operating

in different companies earlier and the area where the

adjustment had been made is a small area. When the

provision, which enables the schemes to be modified from

time to time retrospectively is being subject to several

controls and as such schemes have to be approved by

high-powered officer and ultimate control is exercised by

Parliament, the action is good. It is only in particular

cases if the schemes framed are discriminatory or otherwise

arbitrary, the same could be challenged under Articles 14

and 16 of the Constitution.

This Court in A.V. Nachane & Anr. v. Union of India &

Anr., 1982 (1) SCC 205, considered similar contentions that

have been raised in this case. It was noticed therein that

Section 48(2)(c) of the LIC Act provided that no rule made

under clause 2(cc) of that scheme touching the terms and

conditions of service of the employees of the Corporation

shall have effect notwithstanding anything contained in the

Industrial Dispute Act. 1947. It was explained that the

rules framed thereunder regarding 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. Thus a separate class was

sought to be made and having kept them out of the scheme

their claims would be considered under the Industrial

Disputes Act. It was noticed that the LIC 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 was

described as discrimination in favour of the employees of

the LIC. Therefore, it was accepted that in the special

features of the matter provision made therein cannot be

stated to infringe Article 14 of the Constitution. Applying

the same logic to the present case by reason of the impugned

rules all that have been made is to achieve certain

rationalisation. Thus the contention advanced by Shri Rao

either as to retrospective application of the amendment or

otherwise does not stand to reason.

In the original Scheme issued under Section 16(1)(g) of

the Act in 1974, there is an indication that the same has

been issued after discussion and negotiations with the

employees under the Industrial Disputes Act, 1947. On

1.6.1976, another Scheme under Section 16(1)(g) of the Act

was issued by the Central Government unilaterally under

which the provident fund benefits granted to the employees

under the 1974 scheme was modified. The 1974 Scheme granted

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contributions of 8% based on basic salary dearness allowance

and personal pay, and substituted the same with 10% of basic

salary and personal pay. The calculations based on dearness

allowance were subsequently denied. The Provident Fund Act

was applicable to GIC employees from 1970. On 30.7.1977,

another scheme was published purportedly under Section

16(1)(g) of the 1972 Act amending the provisions regarding

sick leave. The sick leave was available with full pay, but

by the new scheme the same was reduced to only half pay. On

30.9.1980, the Central Government published another scheme

to amend the 1974 scheme by which the existing employees

would retire at the age of 60 years and those who joined the

service after 1980 will retire at the age of 58 years. The

ceiling on salary including basic, dearness allowance and

special pay, if any, was imposed on Class III employees at

Rs.2,750/- per month and on Class IV employees at Rs.1,600/-

p.m. The graduation increment was withdrawn. Subsequently,

the ceiling was increased to Rs.3,500/- p.m. Class III

employees and to Rs.2117/- p.m. Class IV employees.

However, there is no ceiling at all at present. We have

already adverted to the various provisions relating to the

issue of the Ordinance X of 1984 replaced by the Amendment

Act. If that is the stand of the Petitioners, the stand of

the respondents is that on May 13, 1971, the Government of

India took over the management of the companies engaged in

general insurance business in India under the General

Insurance Business Act, 1971. Prior to nationalisation,

there were nearly 106 general insurance companies both of

Indian and foreign origin. The conditions of service of the

employees of the said insurance companies were governed by

the respective contracts of service between the companies

and the employees. The set- up, working, management and

employment of staff by the erstwhile insurance companies

showed no uniformity. The erstwhile companies were managed

in diverse managerial systems and no uniform pattern of

management could be discovered by the Central Government

after the nationalisation. There was a pronounced disparity

between one company and the other at all levels in the

matter of remuneration and designations for similar posts.

Employees of different companies were holding different

designations and were paid differently for the same kind of

work at the same station. Some companies gave very high

sounding designations and paid salaries, which were not

commensurate with the work. So the necessity for

rationalisation of the entire structure of general insurance

business, including designations, pay scales and other

conditions of service arose.

Section 16 of the Act dealt with this aspect of the

matter. In framing schemes under Section 16(1) thereof, the

object of the Central Government should be to ensure that

ultimately there are only four companies [excluding the

Corporation] in existence and that they are so situate as to

render their combined services effective in all parts of

India. If the rationalisation or revision of any pay scale

or other terms and conditions of service under any scheme is

not acceptable to any officer or other employee, the

acquiring company may terminate his employment by giving him

compensation equivalent to three months remuneration, unless

the contract of service with such employee provides for a

shorter notice of termination. The preliminary step the

Central Government took in this direction was to reduce the

number of companies carrying on the general insurance

business and decided to retain four companies and all other

companies were merged into one or the other of the said four

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companies and they are as under :

1. The New India Assurance Company Ltd. (Merger)

Scheme, 1973

2. The United India Fire & General Insurance Company

Ltd. (Merger) Scheme, 1973

3. The Oriental Fire & General Insurance Company Ltd.

(Merger) Scheme, 1973

4. The National Insurance Company Ltd. (Merger)

Scheme, 1973.

All these schemes came into force on 1.1.1974.

The Central Government, in exercise of the powers

conferred under Section 16(1)(g) of the Act, framed three

schemes for three different categories of employees relating

to (i) supervisory, clerical and subordinate staff; (ii)

officers; and (iii) development staff. The schemes also

provided, inter alia, various provisions like fixation of

pay on promotion, increments, provident fund and gratuity,

etc. When the process of categorisation and rationalisation

was in progress, it was noticed that as per the 1974 scheme,

contribution to the provident fund was @ 8 per cent of the

basic salary and dearness allowance with an equal

contribution of GIC or any of its subsidiaries. However,

LIC and nationalized banks were giving provident fund at

different rates. So as to keep parity with other similar

organisations, the scheme was corrected by an amending

notification issued on 1.6.1976 and it was provided that the

provident fund shall be contributed by every employee at the

rate of 10% of the basic pay plus personal pay and special

pay, if any, in place of 8% of the basic salary and dearness

allowance.

The original scheme of 1974 was silent about the payment

of salary during sick leave. For that reason, an addition

was made by the amendment notified on 30.7.1977 in para 10

of the original scheme providing that the employees would be

entitled to draw, while on sick leave, salary equal to half

the aggregate of basic pay, special pay, personal pay and

that, in addition thereto, he shall also draw dearness

allowance, house rent allowance, CCA and hill-station

allowance, wherever admissible, appropriate to half the

aggregate of such basic pay, special pay and personal pay.

It was also provided that any period of sick leave on half

pay may be converted into sick leave on half pay at the

option of the employees but in such cases twice the amount

of sick leave was to be debited against the leave account of

the employee. Provision was also made for the grant of

special sick leave for serious ailments like cancer,

leprosy, T.B., polymylitis and other serious diseases.

The stand of the respondents is that amendments were

made while the process of rationalisation of pay scales and

other service conditions were still in progress and the

process had not been finally completed to achieve uniformity

and inter-se rationalisation in terms and conditions of

service of different categories of employees of merged

companies. In 1977 various labour unions presented a

charter of demands in relation to revision of pay scales and

service conditions. The scheme of 1974 contained a

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provision to the effect that the provisions of the scheme

relating to scales of pay, dearness allowance etc. will

continue to be in force till the Government modified the

same. After considering the demands of the unions and the

view of the management, the Government formulated guidelines

and requested the management to hold consultations and

discussions with the unions so that final views of the

unions may be known and may be taken into account by the

Government before modifying the pay scales, etc. But this

course will not indicate that there was an obligation cast

on the Government to formally negotiate with the unions.

However, in keeping with the democratic tradition and to

maintain harmonious industrial relations the management had

several rounds of discussions with the four major registered

unions. The procedure of consultations and discussions was

adopted in order to narrow down the differences to the

minimum and to ensure that the viewpoint of the employees

was kept in mind before any scheme was finalized by the

Government.

In 1980, the said scheme was amended providing for

revision of pay scales, allowances, etc. for the betterment

of the employees and notified the scheme on 30.9.1980. The

employees, however, challenged the said amendment. But this

Court, in Ajay Kumar Banerjees case [supra], rejected the

contention of the Petitioners that the scheme was violative

of Articles 14, 16 and 19 of the Constitution of India.

However, the scheme of 1980 was quashed making it clear to

frame any appropriate legislation or to make appropriate

amendment giving power to the Central Government to frame

any scheme as it considers fit and proper. Thereafter, the

Act was amended to remove the lacuna and to promulgate the

said provision retrospectively from the date originally it

was introduced. On that aspect of the matter, we have

already adverted to the various challenges and rejected each

one of them. Though the nationalisation process commenced

some time in 1973 the process of merger was not over even in

the year 1978. The contention that the Petitioners are

subjected to hostile discrimination by reason of exclusion

of the GIC employees from the Industrial Disputes Act being

made applicable to them is also rejected. While dealing

with the question of similar nature with reference to

Section 48 of the Life Insurance Corporation Act, 1956 which

by sub-section (2-C) provided that the rules made thereunder

shall have effect notwithstanding anything contained in the

Industrial Disputes Act, 1947 or any other law for the time

being in force similar to Section 16(5) of the Act, this

Court in A.V.Nachanes case [supra] noticed the effect of

the same. It was stated that Section 48(2-C) 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

provision of the Industrial Disputes Act or any other law

will not be operative. The argument advanced is that this

provision introduced in the Principal Act does not lay down

any legislative policy or supply any guidelines as to the

extent to which rule-making authority would be competent to

override the provisions of the Industrial Disputes Act or

other laws. This Court answered this question by stating

that there are sufficient guidelines in the Act and an

executive authority can be empowered by the statute to

modify either existing or future laws but not in any

essential feature and relied upon the decision in Rajnarain

Singh vs. Chairman, (1955) 1 SCR 290. Though certain

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doubts have been expressed in Ajay Kumar Banerjees case as

to the effect of the said provision that if there is any

industrial dispute pending the same may be affected but in

the event that there is no such industrial dispute pending

the amendment of the rules will not come in the way and,

therefore, it was held that it would not amount to excessive

delegation. Therefore, the contention that the Industrial

Disputes Act is abrogated is not correct and what was done

was to regulate the working of the provisions of the scheme

in the larger interest of the insurance business.

The Government, which framed the scheme, has neither

consulted any of the parties nor is there any obligation to

do so under the Act. It is only the General Insurance

Corporation which supplied the information to the Government

of India or consultation with its employees in certain

matters. But that will not confer on the parties to demand

such consultation each time there is any change in the

scheme. Moreover, in matters of legislative nature

consultation is not required unless the law requires the

same to be done. The contention that the exclusion of the

Industrial Disputes Act will affect their rights under

Article 19(1)(c) of the Constitution and thereby to their

right to collective bargaining is not justified. The right

to form union is still available as provided under Article

19(1)(c) of the Constitution and collective bargaining as

such is not barred. It is not as though the Industrial

Disputes Act is applicable to every industry. The

Industrial Disputes Act itself makes several exemptions.

The statute as such does not exclude collective bargaining.

Therefore, we find no substance in that contention also.

All the schemes framed by the Corporation must be taken as a

composite whole and the several schemes framed will modify

the rights of the parties and this Court took notice of this

position in New Bank of India Employees Union v. Union of

India [supra] and was of the view that in achieving parity

in pay scales in different organisations several adjustments

have to be made and in ironing the differences, some may be

at greater advantage than the other and that circumstance

itself may not be taken note of in invalidating such a

scheme.

So far as modification of some of the benefits granted

as to the extent of the gratuity whether it may be based on

10% of the basic and personal pay or some other amount at 8%

is too small an area which on rationalisation would not

affect the rights of the parties. Broadly looked at, we do

not think that it is justifiable for the Petitioners to

contend that the modification of the scheme in this regard

will seriously or at all affect their rights.

The scheme provides for the sickness leave but certain

adjustments have been made in the manner it is made

available. This modification has been made to bring out

uniformity in service conditions in similar institutions.

Such adjustment cannot seriously affect the Petitioners.

Now we may briefly refer to some of the decisions

adverted to by the learned counsel.@@

JJJJJJJJ

(1) Shri Rao relied upon a decision of this Court in

Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir &

Anr., 1980 (3) SCR 1338, to contend that the Directive

Principles of State Policy in the Constitution had to be

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advanced or implemented with a view not to earn revenue but

for the purpose of carrying out welfare scheme particularly

for those deserving it. We fail to understand as to how

this decision would be of any help to the learned counsel.

Undoubtedly, constitutional scheme and, in particular the

Directive Principles of State Policy provides for protection

of the workers to the extent indicated in the Directive

Principles of State Policy, that is, participation of

workmen in the management of the undertaking. We do not

think that principle is in any manner attracted to the

present case. So is the position in regard to the decision

in National Textile Workers Union Etc. v. P.R.

Ramkrishnan & Ors. 1983 (1) SCR 922.

(2) Reliance was placed on the decision in Jyoti Pershad

v. The Administrator for the Union Territory of Delhi, 1962

(2) SCR 124, to contend that in cases of delegated

legislation when clear guidance in the enactment is made,

the guidance could be derived from the enactment and that it

bears a reasonable and rational relationship to the object

to be attained by the Act. We do not know, how this

decision can be of any assistance to the petitioner.

(3) In Hindustan Antibiotics Ltd. v. the Workmen &

Ors., 1967

(1) SCR 652, a situation where the service conditions of

the employees in public sector undertakings were not similar

to those of government employees, there was no security of

service, the fundamental rules did not apply to them and

there was no constitutional protection, no pension, they

were covered by standing orders, their service conditions

were more similar to those of employees in the private

sector was considered. In that case, it was found that

industrial adjudication could be appropriate and wages could

be properly revised. That situation is entirely different

from the one with which we are dealing. We are not

comparing conditions of service in different sectors but in

similar sectors like GIC and LIC, which are common to

nationalised banks, the conditions of service should at any

rate be akin or similar. Therefore, the considerations that

applied in Hindustan Antibiotics Ltd. v. the Workmen &

Ors. case (supra) cannot be applied to the present case.

(4) When a law is made with retrospective effect to

change the character of the earlier statute or statutory

rules so that the court would not have rendered a decision

had the changed situation prevailed at that time would not

mean suppression of the judicial power by Legislation but

only the decision stands nullified because the basis of that

decision is taken away. This aspect was examined in detail

by this Court in S.S. Dola and Ors. v. B.D.Sardana &

Ors., 1997 (8) SCC 522. Applying the same principles to the

present case, the action of the State is only to enact the

law to give effect to its policy by rectifying the defect

pointed out by the court with retrospective effect.

(5) In cases where amalgamations or mergers take place

question relating to manner in which the service rendered in

the transferor bank for the purpose of promotions, seniority

in the transferee bank which was fixed in the ratio of 2:1

were all challenged before this Court in New Bank of India

Employees Union & Anr. v. Union of India & Ors., 1996 (8)

SCC 407, and the scheme framed was held to be legislative in

character. Contrary view of such provision had to be made

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when the entire matter was in the state of efflux for the

purpose of rationalisation. Therefore, we find no substance

in this argument.

(6) This Court in Process Technicians and Analysts

Union v. Union of India & Ors., 1997 (10) SCC 142, has

taken the view that the scheme as amended by the Bharat

Petroleum Corporation Limited (Determination of Conditions

of Service of Employees) was valid though made retrospective

in effect. The challenge was that it had conferred upon the

Government unguided powers. It was held that this power

enabled the Government to make conditions of service of the

employees comparable with those of other private sector

companies. Therefore, it was held that it was not an

unguided power. In the present case, the position is not

different. Thus none of the contentions raised on behalf of

the petitioners can be accepted. Therefore, these petitions

deserve to be dismissed. No costs.

G.B.PATTANAIK

[

S. RAJENDRA BABU

D.P. MOHAPATRA

DORAISWAMY RAJU

SHIVARAJ V. PATIL

March 19, 2001