Full Judgment Text
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PETITIONER:
LIFE INSURANCE CORPORATION OF INDIA
Vs.
RESPONDENT:
SUNIL KUMAR MUKHERJEE & ORS.
DATE OF JUDGMENT:
22/11/1963
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
WANCHOO, K.N.
GUPTA, K.C. DAS
CITATION:
1964 AIR 847 1964 SCR (5) 528
CITATOR INFO :
E&D 1970 SC1244 (26,31)
D 1971 SC1828 (11)
RF 1973 SC 855 (24,47)
E 1975 SC1331 (26,29,178)
R 1976 SC 888 (31)
RF 1980 SC2181 (115)
ACT:
Life Insurance Corporation-Employees-Termination of service
-Non-compliance with the provisions of the Act and order-
Terminalion if, valid-Life Insurance Corporation Act, 1956
(11 of, 1956). ss. 7, 11 (1) (2) and 49-Life Insurance
Corporation Field Officers (Alteration of Remuneration and
other terms and Conditions of Service) Order, 1957, cls. 10,
II-Life Insurance Corporation 1958, cls.. 4 and. 5.
HEADNOTE:
One of the respondents Mr. S.K. Mukherjee was an employee of
the Metropolitan Insurance Co. Ltd., and had been working as
an Inspector when the appellant took over the company There-
after, in February 1958, he was directed to work as a field
officer. By the order dated, October 16, 1958 his services
were terminated with immediate effect and he was informed
that he would be paid.-his emoluments up to the current
month and one month’s salary in lieu, of notice. He was not
given. an opportunity to show cause against this
termination. His petition before the High Court under Art.
226 of the Constitution challenging the vatidity of this
order was allowed by ’the learned single Judge. After
appealing ,,to a Division Bench without success the
appellant came in appeal
529
to this Court with a certificate granted by the High Court.
It was urged on behalf of the appellant that by the
application of the principle contained in paragraph 4(h) of
the Circular issued by the Managing Director under cl. 4(3)
of the Life Insurance Corporation Regulation 1958, it was
competent to the corporation to terminate the services of
the respondents. It was contended that where cases are
dealt with under paragraphs 4(h) and 5 of the Circular,
there can be no question of the application of cl. 10 of the
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Life Insurance Corporation Field Officers Order, 1957, which
empowers the appropriate authority to reduce the
remuneration of the Development Officer or to terminate his
services and in either case, an opportunity of showing cause
against the action proposed to be taken has to be given to
him. The contention of -the-respondents was that the
termination of their services can be brought about only
under cl. 10(a) or 10(b) of the order, and since it has not
been so brought about, the impugned orders are invalid.
Held: (i) The power of the corporation to make
Regulations is burdened with the condition that these
Regulations must not be inconsistent with the Act and the
rules framed thereunder , so that if any of the provisions
contained in the Regulations made by the corporation under
s. 49 of the Act are found to be inconsistent either with s.
11(2) or with the order made by the Central Government under
s. 11(2) of the Act, they would be invalid.
(ii) Paragraph 4(h) means that in cases falling under it,
the services of the officers concerned would be liable to be
terminated, and that means that the termination of the
services, of the said officers must be effected in the
manner prescribed by cl. 10 of the Order. That is how
paragraph 4(h) of the Circular and cl. 10 of the Order can
be reasonably reconciled. This applies equally to paragraph
5 of the Circular.
(iii) It was competent to the corporation to adopt the
Circular, and in consequence, lay down the principles which
should be followed in fitting individual officers into the
scheme prescribed by cl. 5 of the order. The total amount
of remuneration would undoubtedly be determined in the light
of the principles prescribed by the Circular, but under the
guise of fitting in a particular officer in the light of the
said principles it would not be open to the corporation to
demote the officer from the grade of Development Officer to
a lower grade; that would be beyond the competence of the
Regulations.
(iv) Since the orders terminating the services of the
respective respondents have not been passed in accordance
either with cl. 10(a) or (b), they must be held to be
invalid.
(v) An employee whose performance is poor is liable to be
dealt with under cl. 10 of the order. But it is not open to
the corporation to require that person to accept an
assignment in a lower or different category. What the
Regulations are authorised to do is merely to determine his
salary in the category of develop-
1/SCI/64-34
530
ment officers, and so, an order terminating his service on
the ground that he refused to take an assignment in a lower
category cannot be justified.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 909 to 923
of 1963.
Appeals from the judgment and orders dated July 26, and
August 1, 1962, of the Calcutta High Court in Appeals from
Original Orders Nos. 288 and 274-276, 278, 280, 279, 281,
273, 272, 271, 270, 269, 282 and 292 of 1961.
H.N. Sanyal, Solicitor General, S.J. Banaji, Prasanta Kumar
Ghose and K.L. Hathi, for the appellants.
B. Sen, Salil Kumar Datta and Sukumar Ghose, for the
respondents Nos. 1 to 5.
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November 22, 1963. The Judgment of the Court was delivered
by
GAJENDRAGADKAR, J.-This is a group of 15 appeals which raise
a common question about the validity of the orders passed by
the appellant Life Insurance Corporation of India
terminating the services of its employees who are the
respondents in these appeals. The facts which give rise to
the present disputes between the parties in all the 15 cases
are substantially similar, and so, it would be enough if we
state the relevant facts in one of these cases. One of the
respondents is Sunil Kumar Mukherjee. He was in the
insurance line since June, 1941 and had been confirmed in
his service by the Metropolitan Insurance Co. Ltd. in March,
1950. Since about 1953, he had been working as Inspector of
the said Company, and since March 18, 1955, he was holding
the appointment as Inspector at Barrackpore. The appellant
which took over the controlled business of the Metropolitan
Insurance Co. Ltd., terminated the services of Mukherjee by
an order passed on the 16th October, 1958. The respondent
then- moved the Calcutta High Court under Art. 226 of the
Constitution and prayed for a writ of certiorari or other
appropriate writ or order quashing the said impugned
531
order of discharge passed against him. Sinha J. who heard
the writ petition allowed the petition and directed that a
writ in the nature of certiorari quashing and/or setting
aside the impugned order be issued. A further writ in the
nature of mandamus was also issued directing the respondents
to the writ petition not to give effect to the said impugned
order. To the petition filed by the respondent, he had
impleaded eight respondents, the principal amongst them
being the appellant Corporation and the Union of India.
Aggrieved by the decision of Sinha J. the appellants
preferred an appeal under the Letters Patent before a
Division Bench of the said High Court. Bose C.J. and
Debabrata Mokerjee J. who heard the Letters Patent appeal
substantially agreed with the view taken by Sinha J. and
confirmed the order passed by him. The appellants then
applied for and obtained a certificate of fitness from the
said High Court and it is with the said certificate that
they have come to this Court in appeal. On similar facts,
the appellants have brought to this Court the other fourteen
appeals, and a common question which has been raised by the
learned Solicitor-General on behalf of the appellants is
that the High Court was in error in holding that the orders
of discharge passed respectively against the respondents in
these appeals were invalid.
Before dealing with the points raised by the appellants in
the present appeals, it would be convenient to set out the
relevant orders passed in respect of the appointment and
discharge of the respondent Mr.Mukherjee. When Mr.Mukherjee
was appointed a whole-time Inspector by the Metropolitan
Insurance Co. Ltd. on the 18th or 19th March, 1955, the
terms and conditions of his employment were communicated to
him by a document which contained 14 clauses (Annexure A to
the W.P.). Clause 13 of this document provided that the
appointment was subject to termination without notice in
case he was found guilty of fraud, misappropriation, breach
of discipline, insubordination, acting detrimental to the
interests of the company, disloyalty or gross neglect
532
of duty: provided, however, that he would be entitled to 30
days’ notice if his services were terminated for any other
reason. It is thus clear that under the terms and
conditions of Mr. Mukherjee’s original appointment with the
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Insurance Co., he was liable to be dismissed for misconduct
and was entitled to receive 30 days’ notice if his services
were terminated for reasons other than misconduct.
When the Life Insurance Corpn. took over the business of the
Metropolitan Insurance Co. Ltd., an order was issued in
favour of Mr. Mukherjee on the 14th February, 1958. By this
order it was stated that in terms of Government Order No.
53(1) I.S.N. (1) 57 dated 30th December, 1957, he was
required to work as a Field Officer. It was also added that
he would continue to be attached to Barrackpore Branch
Office until further orders. This order was issued by the
Divisional Manager. Thus, it appears that after this order
was given to Mr. Mukherjee, he began to work as a Field
Cfficer by virtue of his appointment under the relevant
Government Order. One of the points which we have to
consider in the present appeal is : what is the effect of
this order of appointment?
On the 16th October, 1958, the impugned order terminating
Mr. Mukherjee’s services was passed. This order said that
in terms of section 5 of the Categorisation circular of the
2nd December, 1957, Mr. Mukherjee’s case was examined by the
Special Committee appointed by the Board of the Corporation
to review the cases of Ex-Branch Secretaries etc., and it
was added that in accordance with the recommendations of the
Committee which had been accepted by the Corporation, it had
been decided to terminate his services with immediate
effect. Mr. Mukherjee was also told that he would be paid
his emoluments up to the current month and one month’s
salary in lieu of notice. It is the validity of this order
which has been successfully challenged by Mr. Mukherjee
before the Calcutta, High Court, and the learned Solicitor-
General contends that the High Court was in error in
upholding Mr. Mukherjee’s plea.
533
The history of the nationalisation of the Life Insurance
business in this country is well-known. On the 19th
January, 1956, the Life Insurance (Emergency Provisions)
Ordinance (No. 1 of 1956) was promulgated by the President
for the purpose of taking over, in the public interest, the
management of the life insurance business, pending
nationalisation of such business. In due course, Act No. 9
of 1956 was passed which took the place of the original
Ordinance and it came into effect on the 21st March, 1956.
This Act was followed by Act 31 of 1956 (hereinafter called
’the Act’) which was published on the 1st of July, 1956.
The appointed date under s.3 of this Act was the 1st of
September,1956. Section 7 of the Act provides that on the
appointed day there shall be transferred to and vested in
the Corporation all the assets and liabilities appertaining
to the controlled business of all insurers. That is how the
Life Insurance Corporation took over all the assets and
liabilities appertaining to the controlled business of all
the insurers in this country. As a result of this taking
over, s. II proceeded to make a provision for the transfer
of service of existing employees of insurers to the
Corporation. For the purpose of these appeals, it is
necessary to set out sec. 11 (1) & (2).
These sub-sections read as under:---
"(1) Every whole-time employee of an insurer
whose controlled business has been transferred
to and vested in the Corporation and who was
employed by the insurer wholly or mainly in
connection with his controlled business
immediately before the appointed day shall, on
and from the appointed day, become an employee
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of the Corporation, and shall hold his office
therein by the same tenure, at the same
remuneration and upon the same terms and
conditions and with the same rights- and
privileges as to pension and gratuity and
other matters as he would have held the same
on the appointed day
534
if this Act had not been passed, and shall
continue to do so unless and until his em-
ployment in the Corporation is terminated or
until his remuneration, terms and conditions
are duly altered by the Corporation:
Provided that nothing contained in this sub-
section shall apply to any such employee who
has, by notice in writing given to the Central
Government prior to the appointed day,
intimated his intention of not becoming an
employee of the Corporation.
(2) Where the Central Government is
satisfied that for the purpose of securing
uniformity in the scales of remuneration and
the other terms and conditions of service
applicable to employees of insurers whose
controlled business has been transferred to,,
and vested in, the Corporation, it is
necessary so to do, or that, in the interests
of the Corporation and its policy-holders, a
reduction in the remuneration payable, or a
revision of the other terms arid-conditions of
service applicable, to employees or any class
of them is called for, the Central Government
may, notwithstanding any thing contained in
sub-
section (1), or in the Industrial Disputes
Act, 1947, or in any other law for the time
being in force, or in any award, settlement or
agreement for the time being in force, alter
(whether by way of reduction or otherwise) the
remuneration and the other terms & conditions
of service to such extent and in such manner
as it thinks fit, and if the alteration is not
acceptable to any employee, the Corporation
may terminate his employment by giving him
compensation equivalent to three months’
remuneration unless the contract of service
with such employee provides for a shorter
notice of termination."
535
Then follow an explanation and sub-sections (3) and (4)
which are not relevant for our purpose. It would thus be
seen that under s. 11(1), persons who were employed by an
insurer wholly or mainly in, connection with his controlled
business before the appointed day, became the employees of
the Corpora-, tion as from the appointed day. After they
thus became the employees of the Corporation, they held
their offices by the same tenure, at the same remuneration
and upon the same terms and conditions and with the same
rights and privileges. In other words, on the taking over
of the controlled business by the Corporation, the employees
of the insurers to whom s. 11 (1) applied became the
employees of the Corporation, but their employment continued
to be on the same terms and conditions as before. This
state of affairs was to continue until the employment of the
employee was brought to an end or until his remuneration,
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terms and conditions were duly altered by the Corporation.
The scheme of s. 11(1) is thus clear. With the transfer of
the controlled ’business from the insurer to the
Corporation, the employees of the former became the
employees of the latter, but they were governed by the same
terms and conditions until they were altered by the latter.
The proviso to s. II (1) shows that if any employee had, by
notice in writing, conveyed to the Central Government prior
to the appointed day his intention not to become an employee
of the Corporation, his case was outside S. 11 (1) In other
words, such an employee would not become the employee of the
Corporation and his case would have to be dealt with apart
from s. II (1) & (2).
Section 11 (2) as it originally stood was substantially
modified in 1957, and the plain effect of the provisions
contained in the said sub-section as modified, is that the
Central Government. is given the power to alter (whether by
way of reduction or otherwise) the remuneration and the
other terms and conditions of service to such extent and in
such manner as it thinks fit. It is significant that this
power can
536
be exercised by the Central Government notwithstanding
anything contained in sub-section (1) or in the Industrial
Disputes Act, 1947, or in any other law, or in any award,
settlement or agreement for the time being in force. It was
thought that for a proper functioning of the Corporation it
was essential to confer upon the Central Government an over-
riding power to change the terms and conditions of employees
who were wholly or mainly employed by the insurers prior to
the appointed day. Having conferred such wide power on the
Central Government, s. 11 (2) further provides that if the
alteration made by the Central Government in the terms and
conditions of his service is not acceptable to any
employee, the Corporation may terminate his employment by
giving him compensation equivalent to three months’
remuneration unless the contract of service with such
employee provides for a shorter notice of termination. It
is thus clear that in regard to cases which fall under s. 11
(2) if as a result of the alteration made by the Central
Government any employee does not want to work with the
Corporation, he is given the option to leave its employment
on payment of compensation provided by the last part of s.
11 (2). Thus, the scheme of the two sub-sections of s. II
is clear. The employees of the insurers whose controlled
business has been taken over, become the employees of the
Corporation, then their terms and conditions of service
continue until they are altered by the Central Government,
and if the alteration made by the Central Government is not
acceptable to them, they are entitled to leave the
employment of the Corporation on payment of compensation as
provided by s. 11(2).
After the Corporation took over the controlled business of
insurers under the Act, two circulars were issued by the
Managing Director, the first on the 30th September, 1957 and
the second on the 2nd December, 1957. These circulars need
not detain us at this stage, because, by themselves, they
were without any authority in law. However, we would have
occasion to refer to the second circular later on.
537
On the 30th December, 1957, an order was issued by the
Central Government in exercise of the powers conferred on it
by s. 11(2) of the Act. This order was issued on blue paper
and has been described by the High Court as the ’blue
order’. We will refer to this order as ’the order’ in the
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course of this judgment. This order was issued because the
Central Government was satisfied that for the purpose of
securing uniformity, in the scales of remuneration and the
other terms and conditions of service applicable to certain
classes of employees of insurers, it, was necessary to
clarify the position by making specific and clear provisions
in that behalf. The object of the order was to secure the
interests of the Corporation and its policy-holders by
making a reduction in the remuneration payable to the
employees governed by the order, and effecting a revision of
the other terms and conditions applicable to them. This
order was confined in its operation to the officers of the
insurers who were known as ’Field Officers’, and so, the
order was named as the Life Insurance Corporation Field
Officers’ (Alteration of Remuneration and other Terms and
Conditions of Service) Order, 1957. It consists of 12
clauses. Clause 2 defines, inter alia, a Field Officer. In
1962, the designation ’Field Officer’ was changed into a
"Development Officer", though curiously enough the title of
the Order still refers to the Field Officer and does not
incorporate a consequential amendment in the said
designation. The definition of the "Development Officer"
shows that it takes in a person however he was designated
before the appointed day if he was wholly or mainly engaged
in the development of new life insurance business for the
insurer by supervising, either directly or through one or
more intermediaries, the work of persons procuring or
soliciting new life insurance business, and who was
remunerated by a regular monthly salary, and who has become
an employee of the Corporation under s. 11 of the Act. This
definition excludes certain categories of employees to which
it is not necessary to refer. It is thus clear that the
Order was intended to prescribe the terms and conditions of
service in respect of Development Officers who had become
employees of the Corporation under s. 11 (1) of the Act.
Clause 3 of the Order prescribes the duties of the
Development Officer. Clause 4 prohibits the Development
Officers from engaging themselves in certain activities.
Clause 5 provides for the scales of pay and allowances .
Clause 6 deals with the matter of leave and retirement, and
provides that in the matter of leave and retirement,
Development Officers shall be governed by the Life Insurance
Corporation (Staff) Regulations, 1960, as amended from time
to time.’ Clause 7 provides for increments, and clause 8
deals with new business bonus, while clause 9 refers to
promotion of Development Officers. Clause 10 is relevant
for our purpose and must be set out in full:
"10. Penalties and termination of service:
(a) In case of unsatisfactory performance of
duties by a Development Officer or if a
Development Officer shows negligence in his
work or is guilty of misconduct or is
otherwise incapable of discharging his duties
satisfactorily, his remuneration may be
reduced or his services may be terminated,
after giving him an opportunity of showing
cause against the action proposed to be taken
in regard to him and after conducting such
enquiry as the Corporation thinks fit.
(b) The services of any Development Officer
may, with the prior approval of the Chairman
of the Corporation, be terminated without
assigning any reason after giving the
Development Officer three months’ notice
thereof in writing."
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Clause 11 prescribes that the actual pay and allowances
admissible to any Development Officer under the scale of pay
specified in paragraph 5 shall be determined in accordance
with such principles as may be laid down by the Corporation
by regulations made in this behalf under sec. 49 of the Act.
The last clause lays down that if a doubt arises as to the
interpretation of any of the provisions of the Order, the
matter will be decided by the Central Government.
539
It is thus clear that in regard to the Field Officers
subsequently designated as Development Officers who became
the employees of the Corporation after the appointed day the
Order provides a self-contained with the material terms and
conditions of service of the said Officers. In regard to
the scales of pay and. allowances which have been prescribed
by clause 5, clause 11 contemplates that the actual pay and
allowances admissible to any Development Officer will have
to be determined in accordance with the principles which the
relevant regulation would in that behalf lay down, and so,
in the matter of scales of pay and allowances clause 5 read
with clause 11 has to be co-related with the relevant
regulation which had to be subsequently framed. In regard
to the other terms and conditions of service, however, the
Order makes specific and clear provisions. That being so,
there can be no doubt that in regard to the Officers to whom
the Order applies, if any action is intended to be taken for
the termination of their services, it has to be taken under
clause 10(a) or (b). Clause 10 (a) deals with two
alternatives; it empowers the appropriate authority to
reduce the remuneration of the Development Officer or to
terminate his services; in either case, an opportunity of
showing cause against the action proposed to be taken has to
be given to him, and an enquiry has to be conducted in the
manner which the Corporation may think fit. If the
Development Officer shows negligence in his work, or is
guilty of misconduct, or is otherwise incapable of
discharging his duties satisfactorily, the Corporation may
reduce his remuneration or may terminate his service ; but
that can be done only after complying with the conditions
prescribed by clause 10(a).
Clause 10(b) empowers the Corporation to terminate the
services of the Development Officer without assigning any
reason and without holding any enquiry or giving him an
opportunity to show cause, provided, of course, the order
terminating his services is passed with the prior approval
of the Chairman of the Corporation. is power can be
exercised without complying
540
with clause 10(a) and is independent of it. Thus, in the
matter of penalties and termination of service, two
alternative powers are conferred on the authority and they
are contained in the sub-clauses (a) and (b) of clause 10.
As envisaged by clause 11 of the Order, Regulations were
framed in 1958 by the Life Insurance Corporation under s. 49
of the Act read with clause 11 of the Order. These
Regulations contain five Clauses; the first gives the title
of the Regulations; the 2nd defines the "Categorisation
Order" which is the same as the blue Order, as well as the
"Corporation" and the "Field Officer". Regulation 3 deals
with the conveyance allowance. Regulation 4 provides for
the manner of fixing the pay of the Development Officer.
Regulation 4 (1) lays down that the basic pay in the scale
of pay prescribed for Field Officers by the Order shall be
so fixed that the said pay together with the dearness
allowance and conveyance allowance is not less than the
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total monthly remuneration to which the Officer was entitled
before the 31st August, 1956. Regulation 4(2) provides that
where the work of the Field Officer has been either below or
above the adequate standard, the Corporation may fix his
basic pay at such stage in the scale as it may think fit.
Regulation 4(3) prescribes that in judging a Field Officer’s
work, the Corporation shall observe the principles contained
in the circular issued by the Managing Director on the 2nd
December, 1957. Regulation 5 provides for the computation
of total monthly remuneration which was paid to the Officer
on the 31st August, 1956. It will be noticed that clause
4(3) of the Regulations makes the circular issued by the
Managing Director on the 2nd December, 1957 a part of the
regulation by treating it as its annexure and referring to
its provisions for the purpose of determining the
remuneration payable to the Development Officer. That is
how the said circular which, when it was issued, had no
legal authority, has now become valid as a part of the
Regulations issued by the Corporation under s. 49 of the Act
read with clause 11 of the Order.
541
This circular contains five paragraphs. The object of the
material provisions of this circular is to determine the
quality of the work which the Development Officer puts in
which would afford a basis for fixing his remuneration.
Paragraph 4 of this circular deals with the problem of
fitting in the respective Development Officers in the pay
scales provided by clause 5 of the Order. It consists of
eight clauses (a) to (h). In the present appeals, we are
concerned with the last of these clauses. Paragraph 4,
clause (h) reads thus:-
"If the actual performance is less than 50of
the revised quota, the cases of such Field
Officers will be referred to a Committee to be
specially appointed in each Zone. The
Committee will go through the past records of
such Field Officers and decide whether they
could be continued as Field Officers either as
Probationers or on substantially reduced
remunerations. In the case of those who
cannot be continued as Field Officers, the
Committee will examine whether any of them
could be absorbed in administration and where
this is possible, the Committee will fix the
remuneration in accordance with the rules to
be prescribed. Where the Committee decides
that the poor performance of a Field Officer
was not due to circumstances beyond his
control or that he has made no efforts and not
shown inclination or willingness to work,’ the
services of such Field Officers will be
terminated."
It is clear that paragraph 4(h) deals with the cases of
persons whose actual performance is less than 50 % of the
revised quota, and as such, who are re-: garded as
ineligible for fitting in the employment of the Corporation.
Their cases are required to be referred to the Committee
specially appointed in each Zone, and on examining the
record -of these Officers, if the Committee comes to the
conclusion that some of them cannot be continued as Field
Officers it may enquire whether any of them could be
absorbed
542
in administration, and if yes, their remuneration may be
suitably fixed: if the Committee thought that the poor
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performance was not due to circumstances beyond his control,
or that he made no efforts or showed no inclination or
willingness to work, the services of such Field Officer will
be terminated. Paragraph 5 deals with the question of ex-
Branch Secretaries and Supervisory Officers, and it provides
that if their work is found to be unsatisfactory, the
Committee may recommend termination of the services of the
officers concerned. In other cases, the Committee will make
recommendations as to whether they should continue such
Inspectors as Field Officers and if yes, on what
remuneration; or whether their services could be utilised in
any other capacity in the Corporation, and if yes, on what
remuneration?
The learned Solicitor-General has contended that when the
Corporation took over the controlled business of insurers in
this country on the appointed day, it was found that a large
number of employees in the category of Field Officers were
either incompetent or unwilling to work efficiently, and so,
it was thought desirable, in the interests of the
Corporation itself and in the interests of the policy-
holders, to terminate their services. That is why a well-
devised scheme was framed by the circular and adopted in the
Regulations laying down principles for determining the effi-
ciency of the work done by the said Officers. He urges that
by the application of’ the principle laid down by paragraph
4 (h) of the circular, it was competent to the Corporation
to terminate the services of the respondents, and that is
what in fact has been done in each of the cases- before us.
In support ot this plea, he has relied on the fact that
paragraph 4 (h) empowers the Corporation to terminate the
services of incompetent officers and paragraph 5 also gives
the same power in respect of ex-Branch Secretaries and
Supervisory Officers. The argument is that where cases are
dealt with under the provisions of paragraph 4 (h) or
paragraph 5 of the circular, there can be no question of
applying the provisions of clause 10 of the Order.
543
it is common ground that before terminating the services of
the respective respondents in the group of appeals before
us, no enquiry has been held and no opportunity has been
given to the said officers as required by clause 10(a) of
the Order. It is also common ground that the impugned
termination of their services has not been effected under
clause 10(b) of the Order. The respondents’ contention is
that the termination of their services can be brought about
only under clause 10(a) or 10(b) of the Order, and since it
has not been so brought about, the impugned orders are
invalid. On the other hand, the learned Solicitor-General
contends that the power to terminate services conferred by
paragraph 4 (h) of the circular is independent of clause 10
of the Order, and the same can be, and has been, validly
exercised in the present cases.
In considering the validity of these rival contentions, it
is necessary to bear in mind the true legal position about
the character of the relevant statutory provisions. It is
plain that the provisions contained in s. 11(2) of the Act
are paramount and would override any contrary provisions
contained in. the Order or the Regulations. Subject to the
provisions of s. 11(2), the provisions of’ the Order will
prevail, because the Order has been issued by the Central
Government by virtue of the powers conferred on it by s.
11(2) itself The provisions of the Order in law partake of
the character of the rules framed under s. 48 of the Act.
Thus next to the provisions of s. 11(2) of the Act will
stand the provisions of the Order. Then we have the
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Regulations issued by the Corporation under s. 49(1) of the
Act. But it must be borne in mind that the power of the
Corporation to make Regulations is burdened with the
condition that these regulations must not be inconsistent
with the Act and the rules framed thereunder, so that if any
of the provisions contained in the Regulations made by the
Corporation under s. 49 are found to be inconsistent either
with s. 11( 2) or with the Order made by the Central
Government -under s. 11(2), they would be
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invalid. It is in the light of this legal position that the
problem posed before us in the present appeals must be
decided.
We have already noticed that as soon as the Field Officers
or the Development Officers became the employees of the
Corporation on the appointed day under s. 11 (1), they
initially carried with them their original terms and
conditions of service, and this state of affairs continued
until the Order was issued on the 30th December, 1957. As
we, have already seen, the provisions of this Order provide
for the terms and conditions of service in matters covered
by the Order. In regard to remuneration, the Order did not
completely resolve the problem, but it left the
determination of the scale of pay and allowances payable to
each employee in the light of the Regulations which would be
framed by the Corporation in pursuance of the authority
conferred on it by clause 11 of the Order; but in regard to
the termination of services of the employees, clause 10 has
made a specific provision, and wherever the Corporation
wants to terminate the services of any Development Officer,
clause 10 -has to be complied with. It is true that
paragraph 4(b) of the circular purports to say that in cases
falling -under the last part of the said paragraph, the
services of the Field Officers will be terminated. If the
said portion of paragraph 4 (h) is interpreted to mean that
it confers on the Corporation an authority to terminate the
services of the Development Officer independently of clause
10 of the Order, it would be inconsistent with the said
clause and would, therefore, be invalid. We are, however,
satisfied that the said portion of para 4 (h) really means
that in cases falling under it, the services of the officers
concerned would be liable to be terminated, and that means
that the termination of the services of the said officers
must be effected in the manner prescribed by clause 10 of
the Order. That is how paragraph 4(h) and clause 10 can be
reasonably reconciled. What we have said about para 4(h) is
equally true about paragraph 5 of the circular.
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in regard to the fixation of remuneration, however, the
position is that clause 5 of the Order fixes the scales of
pay and allowances and leaves it to the regulations to lay
down the principles in the light of which each individual
case should be judged. It was, therefore, perfectly
competent to the Corporation to adopt the circular issued by
the Managing Director, and in consequence, lay down the
-principles which should be followed in fitting individual
officers into the scheme prescribed by clause 5 of the
Order. But it is necessary to emphasise that the scope and
purpose of fitting the officers obviously is to treat the
officers as continuing to remain in the category of
Development Officers and prescribe their remunerations
accordingly. The total amount of remuneration would
undoubtedly be determined in the light of the principles
prescribed by the circular, but under the guise of fitting
in a particular officer in the light of the said principles
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it would not be open to the Corporation to demote the
officer from the grade of Development Officer to a lower
grade, that would be beyond the competence of the
regulations. All that the Regulations can purport to do is
to lay down principles for fixing the actual pay and
allowances admissible to the Development Officers. That is
the direction contained in clause II of the Order and it is
within the limits of the said direction that the principles
can be validly laid down by the Regulations. After the
remuneration is determined in the light of the principles
laid down by the Regulations, if any officer is not inclined
to accept the said altered remuneration, occasion may arise
for the Corporation to exercise its power under s. 11(2) of
the Act and pay him compensation as therein contemplated.
That, however, is a matter with which we are not concerned
in the present appeals. What we are concerned with in the
present appeals is the validity of the orders terminating
the services of the officers on the ground that they are
found to be incompetent. If the officers were found to be
incompetent in the light of the pro-visions of paragraph
4(h) of the circular, their services could no doubt be
terminated, but such termination of services must
1/SCI/64-35
546
conform to the requirements of clause 10(a) or (b) of the
Order. As we have already seen, it is common ground that
the impugned orders terminating the services of the
respective respondents have not been passed in accordance
either with clause 10(a) or 10(b), and so, they must be held
to be invalid.
It is true that in the present proceedings the respondents
had claimed relief under Art. 311(2) of the Constitution and
had in their writ petitions challenged the validity of the
Order and the Regulations. That, however, does not dis-
entitle the respondents from claiming the same relief on the
alternative basis that though the Order and the Regulations
may be valid, the impugned orders whereby their services
have been terminated are invalid for the reason that they do
not comply with clause 10 of the Order. Therefore, we are
satisfied that the learned Solicitor-General is not
justified in contending that the impugned orders can be
sustained under paragraph 4(b) of the Circular which has
been adopted by the Regulations as annexure thereto.
There is one more point which has yet to be examined. In
regard to the case of Haridas Roy who is the respondent in
C.A.No. 917 of 1963, the learned Solicitor-General has
contended that the order terminating his services is valid
either under para 4(h) of the circular or under s. 11(2) of
the Act. Haridas Roy was originally employed by the
Hindustan Co-operative Insurance Society Ltd., before the
appointed day as an Inspector of Agents. After the
Corporation took over the controlled business of the said
Insurance Co., he was appointed as a Field Officer under the
Order, and the order of his appointment was communicated to
him on the 15th February, 1958. It appears that on the 9th
August, 1958, he was told that his case had been considered
by the Zonal Committee and it had been decided to absorb him
in the office as an Assistant on the emoluments mentioned in
the order. Haridas Roy declined to accept this assignment
and stated that he wanted to continue as a Field Officer as
before. Thereupon,
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his services were terminated by an order dated the 18th
September, 1958. In this letter, Roy was told that his case
had been carefully considered by the Zonal Committee and he
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was offered ex-gratia to be absorbed on the administrative
side as an Assistant; since he refused to accept that
assignment, his services were terminated on payment of one
month’s salary in lieu of notice less deductions, if any.
This letter also told Roy that there were no extenuating
circumstances in his case and his work was found to be of
very poor quality. It would be noticed that the Corporation
presumably examined the performance of Roy in the light of
the principles laid down by the relevant provisions in the
circular and held that his case fell under the last part of
paragraph 4(h) of the said circular. That only means that
having regard to his poor -performance Roy became eligible
to be dealt with under clause 10 of the Order. It was not
open to the Corporation to require Roy to accept an
assignment in a lower or different category. What the
regulations are authorised to do is merely to determine his
salary in the category of Development Officers, and so, we
do not see how the order terminating his services because he
refused to take an assignment as an Assistant can be
justified. It would have been open to the Corporation to
fix Roy’s salary at the minimum in the grade prescribed by
clause 5 of the Order and if he had refused to take it, an
occasion may have arisen for the operation of s. 11(2) of
the Act. Therefore, we are satisfied that the case of Roy
cannot be distinguished from the cases of other respondents
in the present group of appeals.
The result is, the orders passed by the High Court are
confirmed, and the appeals are dismissed with costs. One
set of hearing fees.
Appeals dismissed.
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