Full Judgment Text
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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-Ã -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