AJOY Kumar Banerjee & Ors. Etc. v. Union Of Indla & Ors. Etc.

—_

+ seen ae ee ae a sec: sinc io ce: pe kta npg ni i gn i a ni rei ii

"952

. AJOY KUMAR BANERJEE & ORS, ETC.

“UNION OF INDIA & ORS. ETC.

(24st March, 1984 [Y.V. Cuanpracnup C.J., R.S. PaTItAK AND SABYASACHI Muxuaral, JJ.J

Constitution oe India 1950, Articles 14, 191) (g), Article 31B & Genera . Insurance Business (Nationalisation) Act 1972 Sec. 16, Right of Central Govem

“ment to frame schemes under the Act—Whether affects fundaniental rights of employees of companies constituted under the Act. —,

Inclusion of antAct in the Ninth Schedule does not protect order or notificatlons issued under the said Act, :

, Scheme notified under Sec. 16(1) whether protected.

Introduction of reform through legislation—Law need not have universal application—Piecemeal method of introducing reforms—Whether permissible Statutory provision whether could be struck down on vice of underinclusion- sient Disputes Act 1947—1Vhether gpplicable to general insurance Com- _ panes.

General Insurance Business (Nationalisation) Act 1972, Sec. 16M g)-

Ci General Insurance (Rationalisation and Revision of Pay*Scales and other onditions of ‘Service of Supervisory, Clerical and Subordinate Staff) S Amendment Scheme of 1980--Scheme of 1980 relating to revision of pay scales other terms and conditions of service Whether ultra vires Sec, 16(2) and invalid ;

Whether suffers from vice of excessive delegation of legislative power.

Administrative La

Ww-—-Dele . Pee ee of. subur dinate Solis eeated legislation Principles af—Scopt of

; Interpretation of Statutes~Conflict between the statutes—One special seneral—Which’ to prevail—T; , ests for determination of.

Interpretatio ; jstons CO ferrle a of statittes~Not mere exercise in semantics —Provisio

'® oF delegating power Construction.

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A.K. BANERJEE v. UNION o 1972, there were over 100 Insurance Companies—Indian and conditions of service of the employees of these companies were he respective contracts of service between the companies and the

Prior t foreign. The governed byt

* employees: On of these genera: provisions) Act, 1972 nationalised

] insurance companies under the General Insurance (Emergency 1971, The General Insurance Business-(Nationalisation) Act, general insurance business’ .

Four merger schemes were framed in 1973 by the Central Government in exercise of the powers contained ins. 16({) of the Act and four companies; Oriental Fire and General Insurance Company, National Insurance Company New India Assurance Company and United India Insurance Company LtJ., were merged into and they alone were allowed to carry on the business of general insurance. These companies started functioning from IstJanuary, 1973 and the process of merger Was completed by Ist January, 1974 When the dforesaid four schemes came into force. , .

The Government of India by a notification dated 27th May, 1974, framed a ‘scheme’ called the General Insurance (Rationalisation and Revision of Pay

Scales and Other Conditions of Service of Supervisory, Clerical and Subordiaate ~

Staff) Scheme, 1974 in exercise of the powers conferred by s- 16(:g) of the Act. This scheme provided for the rationalisation and revision of pay scales and other terms and conditions of service of employees Working in supervisory, clerical and subordinate positions and governed the pay scales, dearness allowance, other allowances and other terms and conditions of the general insurance employees. Paragraph 23 of the Scheme provided that the new ‘scales of pay’ shall remain in force 1i!l December 31, 1976 and thereafter shall continue to be in force unless modified by the Ceatral Government. y * ¢ , .

In 1976, the Board of Directors approved a policy for promotion. On Ist.

rte 1976 another scheme by which amendments Were made with regard to ae Fund, Was introduced. On 30th July 1977, a Scheme amending pro- ‘SSions regarding sick leave was also introduced. :

frie ait submitted a memorandum objecting to the ‘revision of pay Tribunal Th cr Conditions of service and wanted a reference to the Industrial Service Co ei II and IV employees however did not accept the revision of dispute, The 'Wons, pay scales dearnesy allowance, etc. and raised industrial a Milcable Settlement of disputes.

I ~, . and Kena the Government introduced (he General Insurance (Rationalisation . Sal and Suby Of Pay Scales and Other Conditions of Service of Supetvisory, Cleri- "83 introgy dinate Stal) Second Amendment Scheme, 1980, This Scheme Which HONS ag ‘é ced by a Notification dated September 30, 1980 made detailed provi- Allowa W the adjustment allowance i8 to be dealt with so faras Dzarness Tetirg Yertime Allowance, Contribution to Provident Fund and other Nidutated th eGts Were concerned, Paragraph 7 Which dealt with ‘retirement’ ‘Mt an employee who was in service of the Corporation befure the

’

“253.

13th May 1971, the Government of India assumed management .

re Were conciliation proceedings and there was failure to bring about ad . ' J 1 itis snap nea ne eaten ene aS t.

a ae ‘ i IE -

’ be : i i iH af M al te } ‘i Di: i$ + | ne 5 ‘ : G { { : Hi i

. 254 SUPREME COURT REPORTS’ =, [1984] 3 g.0 9°

. fhe commencement of the Scheme would retire on attaining the age of 5g ¥ vine ‘The Fourth Schedule to the Scheme indicated the revised scales of pay, -

~ "and Article 31(2) of the Constitution, and that the Constitution 44th amendment commencement of the Scheme of 1980 should retire from: service When he Attaing “the age of 60 years, but an employee, Who joins the service of the Corporation a ‘ 4

” she petitioners in their writ petitions t0 this Court contended that the terms and conditions of service enunciated in 1974 being a result of bilateral agreement -». * could not be changed unilaterally to the detriment of the employees and that the notification deprived: the rights of the employees, to receive dearness allowame etc, with the rise in the cost of living index. It was further contended that the Scheme was. violative of s. 16(2) of the Act and ultra vires Articles 14, 19(1)fs)

deleting Articles 31 and 19 cannot save the Scheme, since the amendment came into force only 20th June, 1979, whereas the impugned notification affecting the rights of the employees to emoluments took effect from Ist January, 1979.

The respondenis contested the writ petitions on the ground thats, 16/6) authorised the Central Government by notification, to add, to amend or to vary any scheme framed under s..16 and consequeritly rationalisation or revision of . pay scales Was permissible by the 1980 scheme. Moreover in comparison with other employees in governmental or public sectors, the employees of the general insurance companies were ‘High-wage istanders’ and it was consequently necessary to put a ceiling on iheir emoluments and other amenities in order to facilitate better functioning of the insurance companies as Well as to subserve the, object and purpose of the nationalisation policy. - .

Allowing the.writ Petitions, |

- HELD: 1, (a) The impugned scheme of 1980 is bad as being beyond the scops of the authority of the Central Government, under the General Insurance

Business (Nationalisation) Act, $972, and therefore quashed. This, however, wm hot prevent the Government, if it is so advised, to frame any appropriate les ation or make‘any appropriate amendment giving power to the Central Govern ment to frame any scheme as it considers fit and proper.-, [290G 5 21A-8]

1. {b) The scheme of 1980 so far as it is not selated to the arnalgamaur' = merger of insurances companies, is not warranted by sub-s. (1) of aa ¢ scheme is therefore bad and beyond authority, '(278D]

A.V. Nachane & Another v, Union of India & Another (1982) 2 S.C.R P- os

: 2 ad fet Mohan Pathok v. Union of India & Ors, ete., {\9T8| 3 S-CR- P» ack he Life Insurance Corporation of India ¥, DJ. Buhadur & Ors-, fisetd t

P. 1083, referred to, ee

; a ag ead ie i a ps of the Court in interpreting of construing a provision v4 o Whe oe a ind understand its Meaning in the context. Interpretation © out Woes tute fs fot a mere exercise in semantics but an attempt ext ® aning of the legislation from the words used, understand the cont

" of such delesat "bad because

ARTY ET. — aR NINE | welfare State. -[275G-276A] . : a ®

Oe geet Ae ES Ts Charmane, rinlacaieamauaiee eee ide

| -A.K, BANERJEE », UNION . 255 ; spose of the expressions used and thn to construe the expressions te PIsGDI] Po. ory, . . gs eas The scheme is an exercise of delegated authority. The scope and avibie “* ed authority must be so construed, if possible, as not to make it of the vice of excessive delegation of legislative power, In order to make the power valid, 5.16 of the Act should be so construsd in such manner at it docs not-suffer from the vice of delegation of excessive legislative ~ tha : : authority (275E] ez F , . .

3, (b) Unlimited right of delegation is not inherent in the legislative power.

[275F] * .

+

: Gwalior Rayon Silk Mfg. (Wvg.) Co, Ltd. v. The Asstt, Commissioner of Sales Tax & Ors, (1974) 2S.C.R. p. 879, referred to, — : ;

4. Th growth of legislative power of the executive isa significant develop ment of the 20th century. The theory of laissez-faire has been given a go-by and large and comprehensive powers are being assumed by the State with a view to improve social and economic well-being of the people. Most of the modern socioeconomic Icgislations passed by the legislature lay down the guiding principles of

* the legislative policy. The legislatures, because of limitation’ imposed upon them and the time factor, hardly can go into the matters in detail. The practice of empowering the executive to make subordinate legislation within the prescribed sphere has evolved out of practical necessity and pragmatic needs of the modern id

5. Regarding delegated legislation, the principle which has been well-established is that the legislature must lay down the guidelines, the principles of policy for the autherity to whom power to muke subordinate legislation is - entrusted. The legitimacy of delegated Ivgislation depend upon its being used as ancillary which the legislature considers tu be necessary for the purpose of exer- Coing is legislative power elfectively and completely. The legislature must retain tits Ova hand the essential legislative function which consists in declaring the legislative poticy and lay down the standard which is to be enacted into a rule of law, asd what can be delegated is the task of subordinate legislation which by yo Very bature fs ancillary to the statute which delegates the power to make it tllective Provided the legislative policy is enunciated with sufficient clearness or a an laid down. The courtscannot and do not interfere on the discretion Mat wy

E.

mi undoubtedly rests with the legislature itself in determining the extent of 5. 3 e delegated power in a particular case. [276B-D] i - = The authority and scope for subordinate tegislation can be read In either 6 TWO Ways > hamely oneYwhich creates wider delegation and one which ‘at delegation. {277E} -

Ja the instan um in Clay Ye all, it mu Which clea

(297

Kase, the Act must be read in conjunction with the Memotty se No. 16 of the Bill which introduced the Act in questjon, But indicated the object of framing the scheme under s. 16(1) of

« * st bs read in conjunction with sub-section 2 of section 16 of the

Pe eee ae alla ee at SET A ESS NNT ITTY cae ee Ne EA OE A, LOO oe eta te weragedines Sonam te mee

60~—CO - SUPREME COURT REPORTS «ss “#—Sts«*[ 1984] 3 SCR.

‘7, In-view of the fanguage of sub-s..42) of section 16 and the memorandum t. to the Bill, the one which restricts the delegation must be preferred to the other.

- So read, the authority given under s, 16 under the different clauses of sub-section — (1) nist be to subserve the objest as envisaged in sub-section (2) of section 16 of

“the Act, and if it is so read then framing of a scheme for purposes ‘mentioned in different clauses of sub-section (1) of séction 16 must be, related-to the amaiga- mation or merger of the insurance companies as envisaged both in the memo- os

_,B. _—_ randum on delegated legislation as well as sub-section ‘t2) of section 16.. -

‘ :

8. Sometimes there have been rise ig emoluments with the risein the cost == _ Of index.in certain public sector. corporations. The legislature however is free to - recognise the degreé of harm or evil and to make provisions for the same. In . “making dis-similar provisions for one group of public sector undertakings does ~ C —s not: per se make a law discriminatory as such, Courts will not: sit as*super- ‘ legislature and strike down a particular classification on the ground that any “under-inclusion namely that some others have been. left untouched so long as i — - there is no violation ofconstitutional restraints. [285D-E] ° - o> Piece-meal approach to a general problem permitted by under-inclusive ~ s classifications, is sometimes justified when if is considered that’ legislatures deal ° ; : Pp. with such problem, usually on an experimental basis. It is impossible to tell how “ "* “ suecessful'a particular approach might be, what dislocation might occur, and . . ‘situation might develop and what new evil might be generated in the attempt. Administrative expedients must be forged and tested. Legislators recognizing : these factors might wish to proceed cautiously, and courts must allow to do so. oe ‘ , 7 " [286B-C]

“E “Special Conrts Bill, {1978] 2 S.C.R. p. 476 at pages 540-541, State of Gujarat Oo and’ Anr.¥. Shri Ambica Milly Limited, Ahmedabad, etc., [1974] 338:C.R. p. 760° x: ; and. RK. Garg ete. v. Union of India & OrsZetc., [1982] 1 S.C.R. p. 947, referred ei § . | Sane , = . ‘to. ; . 1 - ‘¢ ‘ ‘

Fe : . e x

Inthe instant case, as ‘there was no industrial dispute pending, the ground that the petitioners’ have been chosen out of @ vast body of workmen to be discri- | .E. - minated against 'and extluded from the operation of the Industrial Disputes Act, * 4g no ‘ground that‘there has been no violation of Article 14 of the Constitution. : ‘ , x [286D] “10. Differentiation is not:always discriminatory. If there is a rational nexus . & , om the basis of which differentiation has been made with the object sought to be ve - . ¢ achieved by particular provision, then such differentiation is not disctiminatory . ‘G and does not violate the principles of Article 14 of the Constitution. There is + intelligible ‘basis’ Yor differentiation. Whether the same result or better result ¢goutd have been achieved and better basis of differentiation evolved is within the domain of legislature and must be left to the wisdom of the legislature. ES - wg . - (288-289B} om: aan: i

"41... Article 14 does not prevent the Legislature from introducing: a reform 7 w ie. by applying the legislation to some institutions or objects or areas only *. ? according to-the exigency. ofthe situation and further classification of selaction

-gen be sustained on historical. reasous OF reasons of administrative exigency OF |

2 % : . . ‘ ‘ "

ae iece-meal method of introducing reforms. The law need not apply to ‘all the’ } »persoris in the sense of having a universal application to all persons. A law can ‘he sustained if it deals-equally with the people of {well-defined ‘class-employees of @asurance Companies as such, and such a law is not open to the charge of denial of equal protection on the eagponrad that it had not appl ication to other persons.

; : EI t

“State of Karnataka & Anr. etc, v. Ranganatha Reddy] & PAnr. ete. [1978] 1 S.C.R. p. 641 at t pages sa 676 & 8, + referredlto. :

ys In the instant case, for the purpose of rationalisation, the iwsurance com- 4 spanies wanted to curtail the emoluments of class III nnd class IV employees on: a small scale. It cannot therefore be said that there are no distinguishing factors and that for choosing a ‘particular group for experiment, the respondents should -

‘be found guilty of treating people differently while they’ are alike in all material * wespects, ‘[288G] ‘ . . 4

12. The object | of the General Insurance Business (Nationalisation) Act

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

; ® for socially viable.and core projects of national importance. The Nationalised

Banks and the Insurance Companies for the purposes of applicability or other- © wise of the provisions of the Industrial Disputes{Act cannot be treated, as be- ~ donging to one class. Historical reasons provide an intelligible differentia ‘distinguishing Nationalised Insurance Companies from the Nationalised Banks. The financial resources, structures and functions of the Banks are different from those of the Insurance Companies. [288A-E] 13.. The general rule to be followed in case of conflict between two statutes . Teo as that the jater abrogates the earlier dne. A prior special law would Yield to a tater general aw if cuher gt these two conditions are satisfied : i): The two are inconsistent with each other and {ii) there is some express reference in the iater to the earlier enactment. [282D-F]

14. (i) The Legislature has the undoubted right to alter a law sirendy. promulgated through subsequent legislation, (ii) A special law may be altered, abrogated or repealed by a Jater general law by an express provision, (iii). A later ‘general law will override a prior special Jaw if the two.are so repugnent to each - * - other that they.cannot co-exist even though no express provision in that behalf ' . ig found in the general law, and‘ (iv) It is only in’the absence’of a provision to the contrary and of a clear inconsistency that a special law will remain wholly . -ynaffected by a later general law. (282G-H]

A Maxivell—* Interpretation of Statutes” Twelfth Baten pp. 196-198, referred

. JX. Cotten” Spinning "de Weaving Mills Co: aid. v. State of U.P. & Ors., * 11961]3 S.CR. p. 185 and U.P. State Electricity Board & Ors, v. Hexl Shanker Jain and Ors., [1979] 18.C.R. p. 335, voles to.

oe A.K. BANERJEE V. UNION « -- 257 re

CRRA ERE SS QO he be. { eh ; ’ ] i

. 7 ee : 5 : : 258 . SRIPREME: GRUB IRSEREDS, L984) 3Sop | eneral Insurance Business (Nationalisation) Aci was in the. aaa Constitution as Item.95 on 10th August 1975, it Po te: the rights of the petitioners had been affected by the scheme of 1989 then bese rights would not enjoy immunity from being scrutinised simply because the Ac under which the scheme was framed had been put in the Ninth Schedule, Ip an event any right which accrued to the persons concerned prior to the placement,

‘

” of the Act in ‘the Ninttr Schedule cannot be retrospectively affected by thy impugned provisions. [284E-G] ;

Prog Ice & Oil Mills & Ant. ete. v. Union of India, (1978) 3 S.C.R. p, 293 referred to. : ‘i ‘ .

In the instant case, empowering the Government to frame schemes forcarrying out the purposes of the Act does not in any way affect or abridge the, fundamental rights of the petitioners and would not attract Article 19(1}(g), ° i F ; : ~ [284H 5 295A]

* — ORIGINAL JuRISDICTION ; Writ Petition Nos. 5370-74 of 1980, (Under Art. 32 of the Constitution)

| i |i et !

, MAK. Ramamurtht, J. Ramanurthi and Miss R. Vaigai for the: petitioners in WPs. 5370-74. . . ;

R.K. Garg and V.J. Francis for the petitioners in WP. 5434.

JP. Cama & Mukuj Mudgatfor ntervener iti WPs. 5370-74. ——— K, Parasaran, Attorney General, MK. Banerjve, Additional Solicitor General, Miss A. Subhashiné und CV, Subba Rao, for the respondent (Union of Indiv)

- PR. Mridul, 0.C, Mathur, S. Sukumaran, D.N. Mishra & Miss Meera Mathur for respondent no, 2 in WPs. 5370-74 & 5434.

_ [pia Sharma & Indu Sharma for thé respondent in Wee

4 - , if Ay ; Vineet Kumar, Lalit Bhasin, Vinay Bhasin & Miss Arshl Sing for Respondent Nos, 3 to 6 in WPs, $434 & 5370-74,

Ambrish Kumar for Totervener ig WP, 5370. Chandidss Sinha Intervener-in-person in WPs. 5370-74

The Judgment of the Court was delivered by ‘

A.K. BANERJEE ¥. UNION (Mukharji, J.) 259

SABYASACHI MUKHARII J. These petitions under Article 32 of — the Constitution are filed by the employees of the General Insurance Companies and the-All India Insurance Employeess Association.

* The respondents are,, Union of India, the General Insurance

’

Corporation of India and four General Insurance companies.

The petitioners ‘challenge the’ Notification dated 30th September, 1980 of Ihe Ministry of Finance (Department of Economic Affairs) (Insurance) introducing what is called General Insu-

_ ance (Rationalisation and Revision of Pay Scales and Other Con- ditions of Service of Supervisory, Clerical and Subordinate Staff) Second Amendment Scheme, 1980 as being illegal and violative of their fundamental rights under Articles 14, 19(1)(g) and 31 of | the Constitution of India. . ;

Prior to 1972, there were 106 General Insurance companies Indian and foreign. Conditions of service of these employees were governed by the respective contracts of service between the companies and the employees. On 13th May, 1971, the Government of India, assumed management of the general insurance companies under the. General Insurance (Emergency Provisions) Act, 1972. The general insurance business was nationalised by the General Insurance Business (Nationalisation) Act, 1972 (Act 57 of 1972). The preamble of the Act explains the purpose of the Act as to provide for the acquisition and transfer of shares of Indian insu- rance companies ‘and undertakings of other insurers in order to.

serve better the needs of economy in securing development of general insurance business in the best interest of the community and to ensure that the operation of the economic system does not result in the concentration of wealth to the common detriment, for the regulation and control of such business and for matters -connected therewith or incidental thereto. :

Act 57 of 1972, by Section 2, declared that it was for giving effect to the policy of the State towards securing the principles specified in clause (c)of Article 39 of the Constitution. Under

. Section 3(ayof the Act, ‘acquiring company’ has been defined as any Indian insurance company and, where a scheme had been framed involving the merger ofone 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

F-

260 "SUPREME COURT REPORTS . ' [1984] 3 s.o.r.

been merged or the: company which has been framed as a result of the amtalguesfion

” Section 4 provides that on the appointed ‘day all the shages in

-the capital of every Indian insurance company shall be transferred ° to and vested in the Central Government free of all trusts, Habitities and qosumbisiens 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 the Provident Fund, superannuation, welfare or any other fund existing. Section 9 stipulates that Central Government shall form a Government company in accordance with the provisions of the Companies Act, to be known as the General Insurance Corporation of India for the purpose of supérintending, controlling and carrying on fhe 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 after such vesting, stand transferred to and vested in ta”

Corporation.

Chapter IV deals with the amounts to be paid for acquisition and as such we are not concerned in this case with that chapter in view of the controversy involved.

Chapter V of the aforesaid ‘At deals with “Scheme for re- .

organisation of general insurdncé business” Section 16 and.17 of

‘the Act in this chapter are as follows ; 4 og

“16, (1) If the Central Government is of opinion that for the more efficient carrying on of general insurance busi- _ ness it is necessary so todo, it may, by notificatios, frame one or more Ralieras Broviding for all or any of the follow- ing. mates

”

(a) ‘ the merger in one Indian insurance company of any other Indian insurance company, or the formation of a new company by the amalgamation of two or more

~ - Indian insurance companies ;

(b) the transfer to'and vesting in the acquiring company of the undertaking (including all its business, propertiess -

~

A.K. BANERJEE ¥. UNION (Mukharji, J.) 261 assets and liabilities) of any Indian insurance company which ceases to exist by reason of the scheme ;

Ac) the constitution, name and registered office and the capital structure of the acquiring company and the issue and allotment of shares ;

‘(d) the constitution of a board of management by what- ever name called for the management of the acquiring company ; :

e) the alteration of the memorandum. and articles. of association of the acquiring company for such purposes: as may be necessary to give effect to the scheme ;

‘(f) the contigudhés in the acquiring company of the , services of all officers and other employees of the Indian insurance company which has ceased to exist by reason

. of the scheme, on the same terms and conditions ‘which they were getting or, as the case may be, by which ‘they were governed immediately before the commencement of the scheme ;

48) the rationalisation or revision of pay scales and other terms and conditions of service of officers and other em .<ployete wherever necessary;

“(h) the transfer to the acquiring company of the provi-

_ ‘dent, supperannuation, welfare and other funds relating to the officers and other employees of the Indian insurance company which has ceased to exist by reason of the scheme ;

“@) the continuance by or against the acquiring company of legal proceedings pending by .or against any Indian insurance company which has ceased to exist ‘by reason of the scheme, and the initiation of such legal proceedings, civil or criminal, as the Indian insurance company might have initiated ifit had not ceased to exist ;

~G) such incidental, consequential and supplemental | matters as are sali id to give full effect to the stheme.

262° SUPREME COURT REPORTS [1984] 3 s. C. Re

- 2) “In framing schemes under nibs section (1), the © object of the} Gentral“Government shall-be-to ensure that ultimately there-are only four companies’ (excluding the Cor- ‘poration) in existence and that they are so situate as to render: their combined services effective in all parts of India.

(3) Wherea scheme under sub-section (1) provides:

for the transfer of any property or liabilities, than, by wirtue

_of the scheme, the property shall stand transferred to and. vested in, and those liabilities shall be transferred to and ae ‘ come the liabilities of the acquiring company.

(4) Ifthe rationalisation or revision of any pay scales.

‘or other terms and conditions of service under any scheme

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

“ing company may terminate his employment by gtving him.

compensation equivalent to three months remuneration,’ unless the contract of service with such employee provides for:

a shorter notice of termination.

‘

Fxplanation.—The —- payable to an officer:

or other employee under this sub-section shall be in addition to, and shall not affect, any pension, gratuity, provident fund. - _ of other benefit to which the employee. may be entitled under- his contract of service.

(5) Notwithstanding anything contained in the Indus-. trial. Disputes Act, 1947 or in any other law for the time be-ing in force, the transfer of the: services of any officer orother employee of an Indian insurance company to the: ~ acquiring company shall not entitle any such officer or other employee to any compensation under that Act or other Jaw, . and no such claim{shall be entertained by any court, tribu-- - nal or other authority.

(6) [The Central Government may, by notification, . add to, amend or uae any scheme framed under this section, .

(7) The provisions of sis s 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.

=f . ‘AK, BANERJEE vy. UNION (Afukharji, J.) 263

17. Acopy of every scheme .and every amendment ’ ‘thereto framed under section 16 sha{l be laid, as soon as may be after it is made, before each House of Parliament.’”

The object of any scheme under this chapter, according to “the petitionefs, wis clear from the main part of Section 16(1) of the said Act, i.e. a schem: mid2 under this chapter was only for the purpose of providing for the merger of Indian insurance companies, and ‘this was made Clear by Section 16(2) of the Act. Section 16(4) of the said Act, it was coateaded on behalf of the petitioners, implied that sany scheme of rationalisation or revision of ‘pay scales and other ‘terms could 6aly bs in the context of merger and amalgamation of one or more of the companies. In this connection mention was made in the petition of the “Memorandum regarding delegated *y fegislation” submitted to the Parliament along with the General Insurance Business (Nationalisation) Bill, 1972 (Bill No. 60 of 1972), - -which later became the aforesaid Act. It was made explicit, according to the petitioners, that clause 16 of the Bill, later Section 16 of the Act “empowers the Central Government to frame one . <r More schemes for the merger of one Indian insurance company with another or for the amalgamation of the two ‘or more Indian ansurance companies and for matter consequential to such merger -or amalgamation, as the case might be.” It was in the aforesaid context of merger of companies that Section 16(1)(g) provided for rationalisation and revision of pay scales and other terms and cop- — ditions of service of officers and other emplceyees wherever necessary.

»

>

'- Inexercise of the powers contained in the aforesaid Section

-16(1) of the said Act, four merger schemes were framed in 1973 by “the Central Government and the four companies, Oriental Fire and es.qnd General Insurance Company Ltd., National Insurance Com- > pany Ltd., New India Assurance Company Ltd., and United India - , Insurance Company Ltd., into one or the other of which several general insurance companies in the country were merged, were alone allowed to’carry on the business. of general insurance. The ‘preamble of the scheme,'called the New India Assurance Company ‘Limited (Merger) Scheme, 1973, had stated that the Central Government Was of the opinion that for the more efficient carrying on of

» the general insurance business, it was necessary to frame scheme for . ‘the merger of certain Indian Insurance companies in .the New India Assurance Company Limited. The preambles of the merger schemes in respect of the other three companies were on similar

-”~ : ¥ é ’ ‘

264 | SUPREME COURT REPORTS . [11984] 3 s.c.n.. t- lines, These fourcompanies are subsidiaries of the General Insu-. -tance Corporation of India. The companies started functioning from at ist January, 1973 and the process of merger of the various com- panies into one of the other four companies was completed by Ist _ January, 1974, when the said four schemes came into force. The

- said schemes provided for the transfer of officers and employees _ of the merged companies to the . transferee Company. The memorandum and the articles of association of the four Companies were

_ also. suitably altered by the said schemes. Thereafter there had been no merger or amalgamation of any insurance company. The petitioners stated that there had been no reorganisation of general . insuranice business either. This position is not in dispute.

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

India, framed a ‘scheme’ called the Genefal Insurance (Rationalisa-. tion and Revision of Pay Scales and other Conditions of Service of |

- Supervisory, Clerical and Subordinate Staff) Scheme, 1974, and the preamble of the scheme stated that “whereas the Central Government is of the opinion that fot the more efficient carrying on generat Apsurince business, it is necessary to do”, therefore, in exercise of the powers conferred by Section 16(1)(g) of the aforesaid Act, the Central Government framed the ‘scheme’ to provide for the * rationalisation and revision of pay scales and other térms and ‘condition of service of employees working in supervisory, clerical and subordinate position under the insufers. The said scheme governed the pay scales, dearness allowance, other allowances and other terms . and conditions of the general i insurance employees.

Tt dealt, inter alia, with nature and hours of work. fixation,

_ Tetirement, provident fund and gratuity. Paragraph 23 of the 1974 - scheme provided that the ‘New scales of pay’ shall remain in force, initially upto and inclusive of 31st December, 1976 and thereafter ~< shall continue to be in force‘unless modified by the Central Govern-

- ment. The scheme was framed after negotiations with the parties — concerned. The petitioners further state that the scheme-was purported to have been made’ under Section 16(1)(g) of the said Act and. it was treated as one made under Section 16(1) as part of + the four merger schemes. The petitioners state that oes it, weuld have been invalid.

The petitioners further state that the employees of the ‘insu~

_ Finance (Department of Revnyne and Insurance), Government of F -

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rance companies serving throughout the country were, however, subsequently not satisfied with the pay scales, dearness allowance, other terms and conditions available to them on account of several factors. Through their associations, they submitted their charters of demands to the General {nsurance Corporation of India in 1977 or the revision of terms and conditions of their service. Negotiations were held between the management and the unions for the upward revision but according to the petitioners, nothing happened. Industrial dispute was raised between the management of General Insurance Corporation of India and the class III and IV employees on the demand of revision of pay scales, dearness allowance and other allowances and service conditions. The Chief Labour Commissioner (Central), Government of India, Ministry of Labour, issued conciliation notice dated 11th September, 1980 under the Industrial Disputes Act, 1947 to the Chairman of the General Insurance Corporation and the general secretaries of the employees’ associations. There were several meetings. {t was decided, according tothe betitionérs, that in the meanwhile until the talks were. resumed the employees would not resort to strike. There was representation to the respondents not to change the conditions of service pending the conciliation proceedings. It is not necessary to refer in detail to-all these, which have been set out in the petition. But nothing fruitful happened. The Labour Commissioner in the circumstances sent a failure report under the Industrial Disputes Act, 1947 to the Secretary, Government of India, Ministry of Labour, stating that there was failure to bring about amicable settlement of of disputes. The petitioners contend that no further -action was taken and ‘according to them the conciliation proceedings were still pending. This, however, is not accepted by the respondents, according to whom there was failure report and the conciliation proceedings ended thereafter. The scheme mentioned hereinbefore, which is under challenge was issued thereafter. We will have to deal with the scheme in great detail as the same ‘is the subject matter of challenge is these petitions under Article 32 of the Constitution.

After the 1974 scheme, in 1976, the Board of Directors approved of promotion policy. On Ist June, 1976 another scheme by which there were amendments with regard to Provident Fund, was introduced. As mentioned before in 1977, major unions submitted charters of demands to the respondent No. 2, seeking revision in the terms and conditions of service of the ‘employees with retrospective

AK. BANERJEE v. UNION (Mukharji, J.) - 7 265° sos

266° SUPREME COURT REPORTS {1984] 3 s.c.R.

effect: Between AQth March, 1977 to 30th March,- 1977, memorandum was addressed by. the employeés of all India Association. te iis Union Paine Minister.

‘Inthe memorandum addressed, it was stated that in the normal circumstances on the expiry. of the prescribed period @f operation of an agreement, settlement of award, the unions usually submitted charters of demands and’ the said charters of demands were settled either through mutual negotiations or as a result of award of an industrial tribunal, but as the. pay scales and other conditions of service of the employees in general insurance industry were, however, governed by a scheme or scheme to be formulated by the Central Government and it was the Central’ Government which could amend these, the unions submitted that there was justification for making upward revision in the scheme and shifting the base year from 1960-to 1970-71 for the purpose of prescribing pay scales.’

This point was stressed by counsel appearing for the General Ansurance Company, in order to emphasise that the unjons always accepted the position prior to the present petition, that the government had the power to amend or make‘further schemes under the

, provisions of the Nationalisation Act. On 30 July, 1977'scheme: _ amending the provisions regarding sick leave was introduced. In

1978 Promotion Policy was revised by General Insurance Company.

_ Between 1979-80, there were discussions. between the management ofthe Corporation and the representatives of the Trade Unions which were held on 8th, 9th, 10th October, 1979, 7th, 8th, 9th, April, 1980, 12th and 13th June and Ist August 1980. The management of the Corporation: aftet several rounds of discussions with the Unions sought to narrow down the area of differences and submitted to the Government the demands made by the Unions © and the. managment’s recommendations. The General Insurance Corporation submitted before us that the Central Government after finally’ considering the demands and recommendations of the

_management of the Corporation framed end notified the scheme under challenge on 30th September, 1980.

. Itwas contended on behalf of the petitioners that the said’ Notification had been issued’ by the Government suddenly and- unilaterally, without any notice to the parties concerned. The em-

_ ployees were taken unawares. It was contended that from the provisions of the said notification the service conditions of the em- ployees includin g the petitioners employees, particularly with regard.

ad

A.K, BANERJEE ¥. UNION (Mukharji, J.) 267

0 dearness allowance, stagnation increments, retirement age and

‘ «other increments had become worse than before and detrimental

‘to the employees. While the employees were eagerly awaiting ‘improvement in their service conditions, this notification had ‘unilaterally altered the service conditions to their prejudice. "Pefftioners in their petitions had alleged certain facts by certaime lfustrations, which according to them, indicated that employees ‘ had been affected adversely, inter alia, in gross starting salary of . different groups of employees, salary on confirmation of assistants -who are graduates etc. It was further stated .that retirement age “was 60 years for all the employees under the 1974 scheme. But under the.new scheme, retirement age was reduced to 58 years for employees joining on or after Ist January, 1979. Clause 7 of the ‘impugned notification prescribed different ages of retirement, ‘though the employess were'of the same class and similarly situated according to the petitioners. Para 12(1) ofthe impugned scheme “provided that an employee who was in service befor€ the commence- ‘ment of the said scheme would retire at the age of 60 years but rrovided that an employee joining the service on or after the commencment of the said scheme would retire from service on attaining the age of 58 years. This was. discriminatory, according to the ‘petitioners, being violative of Article 14 of the Constitution.

+,

It was further alleged that stagnation increments that is ‘increments after reaching the maxinium of the grade to all cadres upto muximum of 3 for every two years of service were given before, out now under the present notification clause 5 substituted para- :graph 7 and provided for no stagnation increment except gnly one increment for two years to the employees ifi record clerk cadre. ‘Previously, there was no maximum limit on salary. Now maximum Simit was fixed at Rs. 2750, Earlier, according to the petitioners, House Rent Allowance was given to all employees irrespective o ‘having official accommodation, under the new scherte, house rent -allowance was withdrawn for employees having official accommoda- <tion. Earned leave earlier could have been accumulated upto 180 -days, but the new scheme limited “the accumulation of earned leave rupto 180 days for the employees retiring at the age of 58 years and 120 days for the employees retiring at the age of 60 years. It was ‘Stated in the petitions that this had substantially reduced the emolu- ‘ments of the general insurance employees, and it had adversely zaffected the.employess throughout the country.

ow

268 ‘ _ SUPREME COURT REPORTS ~ iT he main ground of the challenge i is that the impugned noti- fication is illegal as the Central Government has no power to issue it under Section 16 of the said Act and such as the notification framing the present “scheme” is ultra vires Section 16(1) of.the , General Insurance Business (Nationalisation) Act 1972. According to

* the petitioners, once the merger of the insurance companies took place and the process of reorganisation was complete on ist January, 1974 as mentioned before by forming the four insurance companies by the four schemes already framed in 1973, there could .

be no further schemes except in connection with further reorganisation of general insurance busfness. and the merger of more insurance companies as mentioned in sub-section (1) of Section 16

“of the said Act. By the present alleged scheme. there was no merger Or reorganisation contemplated,-unlike 1974 scheme, according to the petitioners. The petitioners contend that merely making amendment to the terms and conditions of service of the employees unconnected with or not necessitated by the reorganisation of the - “business or merger or amalg mation of the companies would not

‘fall within Section 16(1)(g) of the Act: According to the petitioners,. the. only properly called’schemes sanctioned under Section 16(1) are those four ‘merger ‘schemes of 1973 as would be evident trom the - _ preamble to'the Act. :

The petitioners further. contend that under the Life Insurance: *

- Corporation Act, Banking Companies - Act, etc. there were powers: to frame regulations independently of reorganisation. But there isno such power, -according’to the petitioners, under the Generat Insurance Business (Nationalisation) Act, 1972. The said notification:

“therefore is without the authority of law. It is, further, submitted that the present service conditions of the employees unrelated to:

reorganisation of general insurance business or merger or amalga- mation of i insurance companies, could nat form part of any scheme-. ‘or notification under section 16 of the aforesaid Act. Section. 16(7} _of the Act would not come into play and the provisions of the: Industrial Disputes Act, 1947 Kincluding section 94 were applicable- to the general insurance industry. Therefore if the companies want- ed to change the servite conditions of their employees affecting: | them adversely, they should have given, the petitioners. contend,.

_ notice of changes under section 9A of the Industria] Disputes Act,.

1947, negotiated with the employees and arrived at some. settiement: or. had the dispute adjudicated upon under the said Aet. Since this has not been done, particularly when the conciliation proceed-

“« [1984]3s.cr. ¢ 7]

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A.K. BANERJEE p. UNION (Mukhariji, J.) 269 aad ings were still pending in the absence of Government’s acknowledge-

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

Government in issuing the unilateral notification is bad in law. It is submitted further that impugned notification is ultra vires being violative of Article 14 of the Constitution because it discriminated — between employees similarly situated, pgrticularly in the miatter of dearness allowance and retirement age.

The petitioners contend that under the Sick Textile Undertakings (Nationalisation) Act, 1974, the Coking Coal Mines: (Nationalisation) Act, 1972 etc., spearate companies had been formed on nationalisation. The employees of those companies were entitled to have their service conditions regulated under Industrial Disputes . Act, 1947. In the present case, the employees ;have been deprived . of the existing benefits without following the procedures prescribed under the Industrial Disputes Act, 1947. Therefore, there was discrimination and violation of article 14 of the Constiution. The petitioners therefore contend that the terms and conditions of service enunciated in 1974 being as a result of bilatera] agreement, could not be changed unilaterally, to the detriment of the employees’ fundamental rights to carry on their employment for gain and as such

. violative of article 19(1) (g) of the Constitution. It js stated that the notification was illegal, being ultra vires section 16 of the‘Act.— Since, according to the petitioners, such notification deprived the rights of the eniployees to receive dearness allowance etc. with the rise in the cost of living index without any limit, .it is deprivation of

- property without providing for compensation and is thus also violative of article 31(2) of the ‘Constitution. The petitioners,

“further, contend that the Constitution 44th amendment deleting

Articles 31 and: 19(1) (f) cannot save the scheme since that Amendment came into force only on 20th June, 1979, whereas the impugned ° notification affecting the rights of the employees to emoluments takes effect from Ist January, 1979. It was further urged that the protection. of article 31B read with Nineth Schedule of the Constitution was not

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

The present notification, according to the petitioners, disregarded the directive-principles enunciated in Article 43 of the Constitution. The petitioners therefore ask for quashing the said notification by these petitions under Article 32 of th: Constitution. ‘

_ The second batch of Writ applications (Writ Petition Nos.

5434-37 of 1980) are on behalf of the employees as well as the

, of fi, j . ‘: . ¥ es . ; fe

= 97 | SUPREME couRT REPORTS’ - [1984] 3 s.c.R.

General Insurance Employees - All India Association challenge the’

scheme of 1980 more or less on the same though not identical grounds _ mentioned in Writ Petition Nos. 5370-74 of 1980.

was passed in the said application regarding payment of dearness allowance as would appear from the Court’s order dated 25.8.1981.

‘In the said order, directions were given for payment of dearness’

‘allowance payable under th® old scheme from the beginning of 1981 -with quarter April, as well as quarter beginning from July, 198! within certain time mentioned in the said order. It was, further, directed that subsequent.dearness allowances will be paid,in accor-

' dance with the directions to be given at the time of disposal of these writ applications. ‘ :

eo. “on behalf of All India National General Insurance Employees . Association for intervention. It respresents a Trade Union of work men working in the offices of General’Insurance Corporation of India, Bombay as well as its subsidiaries. They, inter alia, allege that the main petitions have challenged the scheme of 1980 on purely. techni- ‘cal grounds and though it would be correct to say that the scheme of 1980 does not meet the aspirations of the workers wholly as : reflected in the. various charters of demands submitted to the management, they are of the Opinion that the same is not completely bereft of amy merit so that the same may be quashed by this Court.

They mentioned certain additional benefits available in the said

- scheme of 1980 in paragraphs 15, 16, I7, 18 and 19 of the said application. They therefore claim right to intervene in the said Writ -

_ application Nos, 5370-74 of 1980. There is also an application by Senior Assistants of the New India Assurance Company Ltd. and National Confederation of General Insurance Employees, represented by its Vice-president under Order XLVIf Rule 6 of the Supreme

Court Rules of 1966 praying for permission to intervene in these

- petitions. Upon this an Jinterim order was passed on 24.10.1980"

staying the operation of the scheme (operation of the Notification dated 30th September, 1980) and notice was issued in the stay) ~ application. .

r

All these will be disposed of by this judgment.

it will, therefore, be necessary, before we examine the conten- tions raised in these petitions, to briefly consider the scheme of 1980. - As mentioned before, this scheme is called the General Insurance sal

Interim order '

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

a?

+.

’ AK. BANERJEE v, UNION (Mukharji, J.) 271

{Rationalisation and Revision of Pay Scales and other Conditions of

Service-of ‘Supervisory,’ @lerical and Subordinate Staff) Second

Amendnorent Scheme, 1980. Some new definitfons have been provided by paragraph 2 of 1980 scheme which included the meaning of the ‘Company’ and under the scheme it mentioned that the Company’ would mean the four nationalised companies, National] Insurance Company Limited, the New India Assurance Company

Limited, the Oriental Fire and General {nsurance Company Limited — and the United India Insurance Company Limited. Sub paragraph (ii) of paragraph 2 of the said scheme defines ‘Net monthly emoluments’. By sub-paragraph (ii), the amended ‘definition of ‘Revised terms’, (Revised Scales of Pay) was inserted. By paragraph 3, - adjustment of pay: was stipulated on the coming into effect of operation of 1980 scheme. How the basic pay is to be fixed is

- provided by 1980 scheme. It also makes detailed provision as ‘to how the adjustment allowance is to be dealt with so far as Dearness Allowance, Overtime allowance, Contribution to Erovidedt Fund and other retirement benefits are concerned. Paragraph 5' deals with the |

‘Increments’, Paragraph 6 deals with Earned Leave.and other encashment of leave at the time of retirement and death. Paragraph 7 deals with ‘Retirement’ and stipulates that an employee who was in service of the Corporation before the commencement of the scheme of 1980 should retire from service when he attains the age of

60 years.. But an employee, who joins | the service of the Corporation after the commencement of the scheme ‘will retire on his attaining the age of 58 years. It further stipulates that an. employee would Tetire on the afternoon of the last day of the month in which he

“attains the age of 60 years or 58 years as the case might be. Clause 8 deals with ‘Gratuity’, Clause 10 provides the duration of revised terms and stipulates that the revised terms should be continued to be in force unless modified by the Central Government. Then ~ the Second Schedule of 1974 scheme which dealt with Travelling ©

Allowance category, Travel by Road and different allowances for the same, transfer grant were amended and the new Fourth Sehedule included scales of pay to be fixed, on the revised scales of pay indicated therein. ,

It is not necessary to set out further details of the actual provisions of 1980 scheme. While on behalf of the petitioners, it was contended that the revised scales of pay. and the terms included | therein were highly detrimental to the’ employees concerned, on the other hand, it was contended on behalf of the Union of India as well

7 oO _ SUPREME couRT REPORTS ° [1984] 3 s.cR. - as the. — Insurance Company that on ‘the whole, [the revised

; scales « ‘of pay provided for better pay, and allowances and better — opportunities to the employees concerned. One of the intervener unions als6'states that the 1980 scheme is not completely devoid of merit. Parties have taken us through in detail by help of charts and other figures in support of the respective cases and contentions, It

_is not necessary, in view of the nature of the contentions raised .

beforews, to express any opinion dn the merits or demerits of the rival contentions of the parties in respect of the details of eifher or

_ both the schemes. It may, however, be stated that there has been a ceiling on increase of pay automatically with the increase of the ries in the cost of index. The respondents, namely, the union of India

“cas welt as the General Insurance Company, contended that in compariscn with other employees is governmental sectors or public sectory, the employees: of . the general insurance companies were . “High wage islanders’ and it was necessary to put a ceiling on the emoluments and other amenites. in order to facilitate better function.

_ ing of the insurance companies concerned as well as substrve the object and purpose of the nationalisation policy. The -yarious defailed items of the scheme of 1974 and 1980 have to be viewed in this background.

Fe

The-basic and, in our opinion, the main questions are—has the Government and the respondents power in law to introduce the 1980 scheme and if they have that power, have they exercised that power in any arbitratyand whimsical manner to deny to the petitio-

-ners any of the fundamental rights and whether the petitioners. have been discriminated against? These, therefore, are the questions an@ it is not necessary, in our opinion, to detain ourselves with lengthy extracts from the scheme of 1974 ‘and , 1980 to examine which is better or which is detrimental and ifso, to what extent. On these, — ” there will be and are divergent views. _ “4

The — of 1980 has been framed by the Central . Govern:

: ment under the authority given to it by the Act under General — "Insurance Business (Nationalisation) Act; 1972. The scope of that ~ authority has, therefore, to be found under Chapter V containing

‘Sections 16 & 17 of the Act. We have set out hereinbefore the terms . of Sections 16 & 17. Sub-section (1) of Section 16 authorises the _ Central Government, if it is of the opinon that \“‘for the more effl- . . ‘eient carrying on of general inSurance business, it is necessary to do so, may, by notification, frame one OF more schemes” providin for

\ af

“!

A.K. BANERJEE yp. UNION (Mukharji, J.) | > 273 all or any of the matters enumerated in the different clauses of “Section 16(1) of the said Act, and the matters have been set out in the different clauses of the said sub-section. For the’present purpose, clause (g) is relevant, which gives authority to the Central Govern-

“ ‘ment to frame scheme for rationalisation or revision of pay’ scales and other terms and conditions of service of officers and other

-employees wherever necessary. ‘Clause (j) of the said sub-section gives authority to the Central Government also to frame scheme for ‘such incidental, consequential and supplemental matters as are necessary to give full effect to the scheme. Therefore, the question that is necessary for this purpose to determine, is, whether the power given to the Central Government by clause (g) for the rationalisation , or revision of pay scales and other terms and. conditions of service of officers and other employees, wherever necessary can be said to authorise the Central]Government to frame the present scheme under consideration. This must be judged in fconjuction with sub-section:

(6) of Section 16 which authorises the Central Government, by notification, to add, to amend or to vary any scheme framed under - . Section 16. The point at issue, is, whether rationalisation or revision of pay scales and other terms and conditions of service of officers’

and other employees wherever necessary can .authorise the Central —

Government to frame scheme like the scheme of 1980, which is unconnected with or unrelated to the merger of one Indian insurance company with another insurance company or the formation of anew company by the amalgamation of two or more Indian insurance companies. In order to find that’ out, it is necessary to read the provisions of this Act as a whole. Primarily, if the words-.are intelligible and can be given full meaning, we should not cut down their amplitude. - Secondly, the purposefor object of the conferment of the power must be borne in mind. The first indication of the said object in this case, as is often in similar jstatutes, can be gathered - from the preamble to the Act. We have noticed ‘the preamble of the present Act. This preamble has also to be read in the light of ‘sub-section (2) of Section 16 which provides that [the object of the ‘Central Government in framing the schemes under sub-section (1) was to give authority to the Central Government to frame schemes, to ensure that ultimately there are only four insurance companies (excluding the Corporation) in existence and that they are so situate ‘as to render their combined services effective in all parts of India,

‘Sub-section (2), therefore, to a large extent circumscribes the | amplitude of the power given under sub-section (1) of Section.16 of.

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

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274 =>. s SUPREME COURT REPORTS - , 11984]3 sor.

authority by the Central Government, the memorandum Fegarding. — delegated legislation submitted to the Parliament along with the

General Insurance Business (Nationalisation) Bill, 1972 will provide- some guidance also. As we have noticed that clause 16 of the said: Bill which later on became Section 16 of the Act ‘explained the need:

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

B _ more scheme for the merger of one Indian insurance company with.

another or for the amalgamation of the two or more insurance companies and for’ matters consequential to such merger or amalgamation as the case might be’, Bearing in mind that this is a delegated legislation and keeping in mind that the authority to frame: the scheme must be found within the object of the power given under- Chapter V of the Act and ‘reading the entire connected -provisions.

together, it appears to us, that the only authority of power to frame scheme given was for the purpose of merger of one Indian insurance company with another for amalgamation of two Sr more Indian insurance companies and for matters consequential to such merger or amalgamation as the case might be. Any scheme though, it might come within the wide expressions used in sub- section (6) of Section 16 as well as clause (g) or clause (j) of sub-section (1) of Section 16, which is unrelated % or unconnected with the’ amalgamation of the © ” insurance companies or merger consequent upon nationalisation would be beyond the authority of the Central Government. This has to be so if read in conjunction with sub-section (2) of Section 16 of the Act. It is evident from the scheme of 1980 that it is not connected with or is not for the purpose to ensure that ultimately there are only four insurance companies existing and they are so

~ siuate as to render combined services effective in all parts of India.

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

.. Dies, scheme_as indicated herein-before, dealing with Provident

Fund, Gratuity etc. have been framed but these, in our opinion, are irrelevant when judging the question ofthe authority to frame a particular scheme which is impugned.. It is also true that the scheme of 1974 so far as pay scale was concerned as indicated in the scheme as we have set .out hereinbefore provided that the scheme would remain in force initially for a period upto 31st December, 1976 and theréafter shall continue to be in force unless modified by the Central Government. It is also true that the employees themselves, as indicated hereinbefore, wanted revision of pay scales and claimed through their numerous charters of demands amending or framing of a fresh scheme by the Government on the basis that the Central

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

Act, Certain amount of revision of pay scale and: other terms and’

vy af

AK. BANERIEE > UNION (Mukharji, Ji) oo RAS conditions become inevitable.from time to time in all running businéss of administrations, Clause (g) of sub-section (1) of Section 16 authorises the Central Government | to frame scheme for rationalisa- _ tion and revision of pay scales and other terms and conditions of services of officers and other.employees wherever necessary. But it is evident that the scheme of 1980 impugned in these petitions is not

_ related to thé object envisaged in sub-section (2) of Section. 16 of the Act. In order to be warranted by the object of delegated legislation as explained in the memorandum to. the Bill which incorporated Section 16 of the Act, read with the preamble of the Act, unless it can. be said that the scheme is related to sub-section

' (2) of Section 16 of the Act, it wonld.be an exercise of power beyond delegation. The duty of the Court in interpreting or construing a provision is to read the section, and understand its meaning in the ‘context. Interpretation of a provision or statute is not a mere exercise in semantics but an attempt to find out the meaning of the legislation from the words used, understand the context and the purpose of the expressions used and then to construe the expressions sensibly. :

There’ is another aspect which has to be kept i in hud, The

’ scheme is an exercise of delegated authority. The scope and ambit of such delegated authority must be so~ construed, if possible, as not to make it bad because of the vice of excessive delegation of legisla- -tive power. In order to make the power valid, we should so cosntrue. the power, if possible, given under Section 16 of the Act in such

. manner that is does not suffer from the vice of delegation of exces- sive legislative authority.

It is well-settled that unlimited right of delegation is not inherent in the legislative power itself. This Court has reiterated the aforesaid principle in Gwalior Rayon Silk Mfg. (Wyvg.) Co. Ltd. v. The Assit. Commissioner of Sales Tax & Ors.) The growth of legislative power of the éxecutive is a significant development of the

‘, 20th century. The theory is iaissez-faire has been given a go-by and _large and comprehensive powers are being assumed ‘by the State with a view of improve social and economic well-being of the

“people. Most of the modern socio-economic legislations passed by the legislature lay down the guiding principles of the icgislative ‘policy, The legislatures, because of limitation. imposed upon them

(1) [1974] 2 S.CR. p. 879.

retain in, its own hand the essential legislative function which con-" ‘sists in declaring the legislative policy and- lay down the standard “which is to be enacted iato a rule of law, and what. can be’ delegated 4s the task of subordinate legislation which by very nature is ancil-

: 276 ~~, SUPREME COURT REPORTS : [1984] 3s.cRr. _

‘and the time factor, hardly ‘Can’go into thé matters in detail. The ‘practice of empowering the executive to make subordinate legislatron “within he prescribed sphere has evolved out of practical Heceenly ‘and pragmatic —— of the modern wellae State.

Regarding delegated legislation, the principle. which flas been

_ well-established is that legislature must lay down the guidelines, the principles of policy for the authority to whom power to make

‘subordinate legislation is entrusted. The legitimacy of delegated : ‘legislation depends upon its being used as anciJlary which the legis- ‘ature considers to be necessary for the purpose of exercising its

Jegislature power effectively and: completely. The legislature must

Jary to the statute which delegates the power to make it effective provided the legislative policy is enunciated with sufficient clearness.

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

. on the discretion ‘that undoubtedly rests with the legislature itself in determining the extent of the delegated . power in a particular case. It is true that in this case under Section 16(1)(g), rationalisation or

-revision of pay scales and other terms and conditions of service of

‘officers and other employees wherever necessary is one of the purpose for-which scheme can be framed under Section 16(1) of the Act. Itis also true that incidental, consequential and supplemenetary

‘matters as are necessary to give full effect to the scheme are also

- authorised under clause (j) of sub-section (1) of Section 16. It has also to be borne in mind , that, scheme and every “amendment toa

_ scheme framed under section 16 shall be laid as soon as may be :

after.it'is made before each House of Parliament. The last provi-

~ sion is indicative of the power of superintendence that the legislature . maintains over the subordinate legislation of scheme framed by the.

. delegate under the authority given under the Act. From that point of view, it is possible to consider as indeed it was argued on behalf

: ofthe respondents in this case, that having regard to the fact that one ”

of the objects of the Preamble is regulation and contro] of generat insurance business and other, matters connected therewith or incidental thereto and having regard to the fact that rationalisation and

. tevision of pay scales whenever necessary was one of the objects envisaged under sub-section (1) alongwith clause (j) of sub-section (1) of Section 16 of Section 16 read with the safeguards of section

OAK. BANERJEE y. UNION (Mulharji, a 277

> TT-as we have set out hereinbefore i in case of revision and rationalisa- . ‘tion of pay. scales whenever it becomes necessary} as-in this case, gecording to the respondents, ithad become necessary, the scheme of 1980 was permissible within the delegated authority.” But we must bear in mind the observations of Mukherjea, J. in The Dethi- Laws’) case to the following effect’:

“The essential regitenivs function consists in the deter- |

+ ‘mination or choosing of the legislative policy and of enact- 4 ing that policy into a binding rule of conduct. It is open to - ‘the legislature to formulate the policy as broadly and with as little or.as-much details as it thinks proper and it may dele. ':gate the rest of the legislative work to a subordinate autho- . ~ rity who will work out of the details within’ the framework of

‘that policy”.

But as explained’ befote the Act must be reid as a saints. a7 The Act must be read in conjunction with the preamble to the Act — and in conjunction with the memorandum in Clause No. 16 of the Bill which introduced the Act in questidn. But above alt it must be read in conjunction with sub-section (2) of Section 16 ofthe Act ' ayhich cléarly indicated the object of framing -the scheme uader Section 16(1) of the Act. The authority and scope for subordinate legislation can be read in either of the two ways ; namely one which <teates wider delegation and one which restricts that delegation. In “> our opinion, in view of the language of sub-section (2) of Section 16° and the memorandum to the Bill, in the peculiar facts of this case’ the one which restricts the delegation must be preferred to the other. So read, in our opinion, the authority under Section 16 under the different clause of sub-section (1) must be to subserve the object aS envisaged in sub-section(2) of Section 16 of the Act, and aft is so read than framing of a. scheme for pufposes mentioned in different clause of sub-section (1) of Section 16 must be a related to the amalgamation or merger of the insurance companies a8. envisaged ‘both in the memorandum on delegated legislation as well as-sub-section (2) of Section 16. We may mention | in this connection that in the case of A.V. Nachane & Another Vv. Union of India & Another,@) this contention of delegated legislation

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

@ 4) [19StS.CR. 737.

@Q) [1982] 2S.C.R + 246.

ef ri i $ i : ¥ \ ‘ i } a - SUPREME COURT REPORTS. (198413 sey . . , ry

és ss Insurance Corporation (Amendment) Act, 1981 where the poticy of

- “the Act as stated in the preamble -of” the’ Amendment Act was that _. “for securing the interests of ‘the Life Insurance Corporation -~ +. India and its policy-holders and to control the cost of administration, it is necessary that revision of the terms and condition of" service applicable to the employees and agents of the Corporation. should be undertaken expendiously. That was the object of the Act in question. '. Unfortunately that is not the object indicateg: as the object of the power to frame scheme under Scction 16 of the present Act... In view of that object’ mentioned in the said decision, .’ and for other reasons in -the case of AV, Nachane & Another y. C° Union of India & Another (supra), this Court held that the Actin: question did not suffer from the vice of excessive delegation. In. view of what we have stated hereinbefore, the scheme of 1980 so. far as it is not related to the amalgamation or merger of insurance companies, it is not warranted by sub-section (1) of Section 16. If that be so, the scheme. must be held to be bad and beyond authority.” = ;

This being the position, it is not necessary to examine the various other contentions raised in this case. Various contentions have been made, Both sides relied on various decisions in support of their

_£ respective contentions. Both sides relied on the decisigns dealing with the employces of the Life Insurance Corporation and the Acts and the ‘amendments in connection with their terms of employment. We will just note the decisions. Reliance was placed on the decision in the case of Madan Mohan Pathak y. Union of India & Ors, Etc.) The question in that decision was that the validity of Section 3 of the F - Life Insurance Corporation (Modification of Settlement) Act, 1976. - The questions involved in that decision, in the view we have taken a well asin the facts of the instant case, are not relevant. In last mentioned case there was a ¥rit petition which was allowed b¥ the learned single Judge of the High Court and appeal was preferred

G from that decision. During the pendency of the appeal, there Was an amendment to the Act namely, the Life Insurance Corporation (Modificatior 6f Settlement) ‘Act, 1976. In the Letters Patent Appel the Corporation stated that in view of the impugned Act, there 3 no necesscity for proceeding with the appeal and the Division Beach of Calcutta High Court made no order on. the: said appeal. bd

— oJ) [1978] 3 S-C.R 334.

| | | es .

” ‘ . ,

[. (gk. BANERIEB UNION (Mukhufi, 2). agg

La rt held among other things that the rights of the parties had : Oe ioe in’ the judgment and became the basis of a Mandamus A | = High Court and it could not be taken away by indirect fashion : he Act under-challenge before this Court. ;

- enys at th -proposed byt

} ~ Chandrachud, J., as the learned Chief Justice then was, speak-

\* ing for himself and Fazal Ali and Shinghal, JJ. concurred with the B

* majority view on the basis that the impugned Act violated Article «

4{(0) of the Constitution and was therefore void. Bhagwati, J. speak- jog for himself and on behalf of Iyer & Desai, JJ. was of the view . “that irrespective of whether the impugned Act was constitutionally ¢ -yalid or not, the Corporation was bound to obey the writ of Mandaf° sus issued by thé High Court and to pay the bonus for the year

| 4975-76 to class Iff and Class [V employees. The said learned

| judges held that writ of Mandamus was not touched by the impugn-

4 “ed Act. The other observations of the said Judges as well as the

> other learned Judges are not relevant in the view we have taken. In

{ _ instant case before'us we d2 not have any case of settlement which py was the subject matter there between the workers and the employers i and the rights flowing therefrom. ‘

'e

_ Reliance was also placed on thedecision in the case of The Life fusurance Corporation of India y, D.J. Bahadur & Ors(). as well 13 the decision in the case of A.V. Nachane & Another v. Union of, E 3 fedia & Another (supra). ‘In the view we have taken, it isnot . + ; BECessary to examine these decisions in detail. In those cases, the “Westion under consideration was the Life Insurance Corporation Att, 1956 and the subsequent amendments thereto as well as certain ‘ “orders in respect of the same. a E

Tn = enone

» bi iy : * basis upon which the aforesaid two decisions proceeded * ies - a right had crystallised by the directions in DJ. Bahadur’s ates, a and this could not be altered or taken away except by b) the ese seitiement or award or by relevant legislation and |. : ing, 4% = legislation which was the subject matter of challenge «6s. ad eal Case (supra) can not take away the rights which “ident from Da the ‘employees with retrospective effect. As is. @ ‘Werene ¢ facts of the case before us, the situation is entirely *" ure concerned here with the question primarily

*hethe 1, ME Scheme is authorised by thie Act and if it is so authporis- t) 11981), S.C.R i083 ae + ay, ‘ a 8 TN . RR ek ee Sr enamaaanaet nee £0.

Se aD BTS DED PM ele ards Pee et een te Ae |

AS ee SS

280 °° SUPREME COURT REPORTS - _ 11984] 3 scQ.

- ed, the question is. whether the Act in question is constitutionalt 4 valid in the sense it had taken away any rights which had crystalli a ed or whether it infringed Article 14 of the Constitution, These ! decisions also deal with the question whether a special legislation *’ would supersede a general legislation and which legislation could te: considered to be a special legislation. It may be noted that we ape not concerned with any settlement or award. In that view of the, matter, it is not necessary to detain ourselves with the said decisions, and the various aspect dealt with in the said decisions.

Another aspect that was canvassed before us was whether Section 16 of the 1972 Act with which we are concerned in any way affected any industrial dispute and whether the provisions of sub~ | section (5) of Section 16 or sub-section (7) of Section 16 in any way

“curtailed any’ right in respect of any industrial dispute and if so,. whether the General Insurance Business (Nationalisation) Act, 1972 «

. is a special legislation or whether the Industrial Disputes Act, 1947 is a special legislation in respect of adjudication of rights between.

the employees and the employer.

tS .

If we had held that the scheme of 1980 was permissible withim the power delegated under Section 16 of the General Insurance _ Business (Nationalisation) Act, 1972, it would have been necessary for usto discuss whether there isany conflict between the provisions of the said Act and the Industrial Disputes Act, 1947 and if 80, which would prevail. Section 16(5) of the 1972 Act, a& we have noticed earlier, Stipulates that notwithstanding anything contained in the Industrial Disputes Act, 1947 or in any other law for the time being in force, the transfer of the services of any officer or other employee of an Indian insurance company to the acquiring + company shall not entitle any such officer or other employee to any compensation under that Act or other law, and no such claim shall be entertained by any court, tribunal or other authority. This, to certain extent, clearly excludes thé operation of the Industrial Dis™ putes Act, 1947 in respect of disputes arising on the transfer of the business of general insurance. There is no such question before us- Had it been possible to hold that the scheme of 1980 was valid it Proper exercise of the authority under Section 16 of the Ach 4 question would have arisen as to whether the ceiling and other 6° ditions on emoluments could be imposed on the employees it the manner proposed to be done under the scheme of 1980 withoot reference to the proceduré for adujication of these matters under the wad

A.K. BANERJEE y. ‘UNION (Mukharji, J. ) 28h

Industrial Disputes Act, 1947. Then the exestion had to be judged by reference to sub-section (5) and sub-section (7) of Section 16 of. the 1972 Act. Section 16.empowered the Government by notification

‘toadd to, amend or very any scheme framed under Section 16(1). Sub-section (7) provides that the provisions of this section, namely’

Section 16 of the 1972 Act and of any scheme under :t shall have. effect notwithstanding anything to the contrary contained in any other law or any agreement, award or other instrument for the time

- being in force.

We have nofived the scheme of 1980: That scheme puts’ certain’ new conditions about retirement, about emoluments and other benefits of the employees. It may be noted that the applica- - | tion of Industrial Disputes Act as such in general is not abrogated by the provisions of 1972 Act, nor made: wholly inapplicable in respect of matters not covered .by any provisions of the. scheme.

This aspect is important and must be borne in mind.

Wrongful dismissal, other disciplinary proceddings, unfair labour practices, victimization etc. would still remain unaffected by: any scheme or.any provision of the Act. The only relevant and material question that would have arisen, is, whether in case where a statutory ceiling which one of the counsel for the petitioners tried to describe as “statutory gherao on rise of increase in emoluments and other benefits with the rise in the cost of index of prices’ affected the position under the Industrial Disputes ‘Act, 1947. *It may be

Noted as we have noted before that this is not a case where any - dispute was pending before any tribunal or before any authority

‘under the Industrial Disputes Act, 1947 betsveen the workmen con- - cerned and the insurance companies. Though there was conciliation proceedings, the conciliation proceedings could not reach to any

_ successful solution and the Conciliation Officer has made a report — failure of conciliation. The Goverment had the report. Thereafter the Government has not referred the dispute to. any industrial tribunal but has framed a scheme which is the subject matter of challenge before us. It cannot, in our opinion, be said that concilia~.

tion proceedings orany proceeding under the Industrial Disputes

. Act were pending ‘and therefore in the middle of the proccedings under the Industrial Disputes Act,’ the Government had acted and, framed the scheme and as such the same was bad and illegal. There. were no proceedings pending under the {ndustrial Disputes Act, 1947. With the finding of the Conciliation. Officer, the Government,

282 >. SUPREME COURT REPORTS _ [1984] 3s, CR.

had: two. options; either reachinga settlement or. framing @-scheme on the oné hand: or to make. a: reference to the tribunal of the dispute. regarding: ‘the points ‘mentioned in the demands ‘of the work- men. Theré is “one factual dispute which, in our opinion, ‘is not “Very: material. According to the petitioners, the Government hadnot. acknowledged the receipt of the failure report of the Conciliation Officer. Acoording to the.respondents, the receipt “was acknowledged ; the failure of the. conciliation proceedings, however, is admitted, “No further steps or proceedings were required as such. The Government had to assess on ‘the failnre of the conciliation proceedings either to refer.the matte? to the tribunal or to take such steps as it considered necessary. If-the Government had not taken any of the steps, then it was open, if the employees concerned were ib.any way aggrieved, to take appropriate proccedings against the Government for doing so. As mentioned hereinbefore if the scheme was. held: ‘to be valid, then the question what is the general law and what - is the special “jaw and which law in case of conflict would prevail would have arisen and, that would have nécessitated’the application of the principle ‘“‘Generalia spegialibus non dcrogant”’. The. general. rule to be followedin case of conflict hetween two statutes, is that the later abrogates the eatlier one. In. other words, a prior special law would yield to a later general a if either. ¢ the two following conditions i is satisfied.

(i) The {wo are inconsistent with each other.

(i) There i is some ‘express reference in the later to the. earlier ‘enactment. ,

If either of these two ‘dnantiag | is fulfilled, fhe later. law, even though general, would prevail.

‘Eri: the text and thes decisions, four tests are. deducible and .

these are : (i) The legislature has the undoubted. right to alter a law.

already promulgated through subsequent: legislation, Gi) A. special law may be altergated or repealed “by a later general law by am express. provision, (iii) A later. general law will override a prior special law: if the two are so repugnant to each other that they cannot co-exist ¢

‘even though no express provision in that behalf is found’ in the general law, and (iv) It is only in the absence ofa . provision to the ”, contrary and of a clear inconsistency that a a special law will’ remain.

: wholly unaffected by a later general law. -See in this connéction., ss

“oh he

" A.K. BANERJEE ¥. UNION, (Mukharji, J, —* 283

Maxwell on “The Interpretation. of Statutes” Twelfth Edition, pages

_ 296-198.

The question was posed in the case of Fhe Life Insurance Cor: . . poration of India v. D.J. Bahadur & Ors, (supra) where at page 1125, Krishna Iyer, J. has dealt with the aspect of the questjon. There -

“the learned Judge posed the question whether the LTC Act was a

- Special legislation or a general legislatidn. ‘Reference in this connection may also be made on Craies on “Statute Law’? Seventh Edition (1971) paras 377-382, ‘but it has to be brone in mind that “primary intention has to-be given effect to. ‘Normally two aspects © ofthe question woyld have demanded answers, if the schenic.of . 1980 was held to bo valid on the first ground as we have discussed,

- one is whether the General. Insurance Business (Nationalisation)

Act, 1972 is a special statute and the Industrial Disputes Act, 1947. “48 a general Act or vice versa, and secondly whether there is any “express ’provision in the General Insurance Business (Nationalisa- ‘tion) Act, 1972 which deals with the subject. Now in.this case we ‘have categorical referenge to the Industrial Disputes Act, 1947 in sub-section (5) and sub-section (7) .of Section 16 of the General

Insurance Business (Nationalisation) Act, 1972. There is, however, one aspect where it would have been necessary had we held the © “Scheme to be valid otherwise, if there had been no General insurance Business: (Natioualisation) Act, 1972, then the employees “would have been entitled to .raise a dispute on the question of ingrease of emoluments and revision of pay scale with rise-in the cost of index*of the prices under the Industrial Disputes Act, 1947. In such a situation, the Government, after conciliation proceedings, “was empowered to make a reference if it considered so necessary -having regard to the nature. of the disputes raised. Though it cannot be said that reference was a matter of right but it was within the :fealm of power of the Government and the Goverament has a duty ‘to act with discretion on relevant considefations to make or not to -make a reference taking into’ consideration the facts and circum- * : stances of each case, . Tq that limited extent it could have. been said that this right or power has. been curtailed by the General Insurance

Business (Nationalisation) Act, 1972, if the scheme was otherwise Having regard to the context in which the question now arises

Hefore us, in our opinion, there is no question ‘as to whether the provisions of Industrial Disputes Act would prevail: overt the’ provi-

\

H-

2 288 - , SUPREME COURT REPORTS 7 ~Li984] 3 S.C.Re sions of Genera Insurance Business (Nationalisation) Act.- "There: is no industrial dispute pending as such. The General Insurance

_ Business (Nationalisation) Act, 1972 has not abrogated the Indus- ' trial Disputes Act, 1957 as such.

‘The question of the application of the prin ciple of “‘Generalia:

specialibus non derogant” has been: dealt with im the case of J.K.

Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P. & Ors.cy

Some of these aspects were also’ discussed in the case of U.P. State: .

Electricity Board & Ors. v. Hart Shanker Jain and Ors.@)

Had it been’ possible to uphold the scheme of 1980 as é being : : within the power of 1972 Act, it would have been also.necessary for us to consider whether such a scheme or Act would have been cons- titutionally valid in the context of fundamental rights utider ‘Article 14, article 19(1)(g) and article 31 of the Constitution and the effect of the repeal of article 31 by the 44th amendment of the Constitu--

‘ tion. The General Insurance: Business (Nationalisation) ‘Act wase - put in the Nineth Schedule of the Constitution as item 95 on 10th: August, 1975. .The effect of putting a. particular provision in the:

Nineth Schedule at a particular time has been considered by this: -

Court in the case of of Prag Ice & Oil Mills & Anr. Etc. v. Union of

India.@) It was held by the learned Chief Justice in the said decision: _ .

that ‘on a plain reading of article 31A, it could not be said that the: protective umbrella of the Nineth Schédule took in not only the- acts and regulationg -specified ‘therein but also orders and notifica~ tions issued under those acts and regulations. Therefore if any rights of the’ ‘petitioners had been affected by the scheme of 1980 then those rights would not enjoy immunity from being scrutinised:

' simply because the Act under which thé scheme was framed has- been put in the Ninth Schedule. In any event any right which accrued to the porsons concerned prior to the placement of the

Act in the Nineth Schediffe cannot be eanosgpictiagly affected by? the impugned pravisians,

- Tt was-contended that the rights of the petitiones under article-

19008) have -been affected by the intpugned legislation, and the: - “scheme framed thereunder. Empowering the Government to frame: . schemes for carrying out the purpose of the Act, does not, in our

Q) 196113 S.C.R, 185. (2) 11979] 1S.C.R. 355. m6) [1978] 3.8,C,R 293,

> ond

“a a?

A.K, BANERJEE vy. UNION (Mukharji, J.) 285

_ Opinion, in the fects and circumstances of the case, In any way, affect or abridge the fundamental ,rights of the petitioners and would not attract article 19(1) (g).

The other aspect which was canvassed before us, was whether the Act and the scheme in question violated article 14 of the Constitution. This question has to be understood from two aspects,

“ namely whether making a provision for salary and emoluments’ of the petitioners who are the employees of the General Insurance

‘Corporation specificaly and differently from the employees of other public section undertakings i is discriminatory in any. manner or not and the other question, is, whether making a ‘provision for the employees of General Insurance Corporation for settlement of their dues by schemes and not leaving the.question open to the general provisions of Industrial Disputes Act, 1947 is discriminatory and

‘violative of the waits of the enaployers.

iti is true that sometimes there have. been rise. in emoluments:

with the rise ia the cost of index in certain public sector corporations.

. Fhe legislature however is free to recognise the degree of harm or evilandto make provisions for the same. In making dis-similar provisions for one group of public sector undertakings does not per se make a law discriminatory as such. It is well-settled” that courts

’ will not sit as super-legislature and strike down a particular classifi- _ cation on the ground that any under-inclusion namely that some others have been left untouched so long as there is no violation of constitutional restraints. It was contended that the application of

-the Industrial Disputes Act not having been - excluded from the

Nationalised Textile Mills, Nationalised Coal ‘and Coking Coal

‘Mines and Nationalised Banks but if and is so far as it excluded the application of the Industrial Disputes Act, in case of general insurance companies, the same is arbitrary and bad. In this connection

Justice in the case of ‘Special Courts Bill 1978’.@) The same principle

-was reiterated by this Court in the case of State *of Gujarat and Anr. NV. Shri Ambica Mills Limited, Ambedabad etc.@) In that case, this

Court was of the view that in the matter of economic legislation of reform, a provision would not be struck down on the vice of underinclusion, inter alia, for the reasons that the’ legislature could not be

(1) [1979] 2 S.C.R. 476 at pages 540-54), 4 (2) [1974] 3 S.C.R. 760

_reliance may be placed on the observations.of the learned Chief . .

might be generafed in. the attempt.: Administrative expedients. - must be- forged and tested. Legislators recognizing these factors

284 = SUPREME COURT REPORIS. «= [1984] 3. ic-R.

fequired ta impose upon administrative agencies task -which could not be-varried out or which must be, carried out ona large scale at a ‘Single ‘stroke. It was further reiterated that piecemeal approach to a

: ‘general -problemspermitted by .under-inclusive classifications, is

‘sometimes justified when it is considered that legislatures deal with such problems usually on an experimehtat basis. It is impossible to

"tell how successful'a particular approach might be, what dislocation .

might occur, and what situation might develop and what- new evil might wish to proceed cautiously, and counis must allow. them to do so. This principle was again reiterated in the Constitution Bench decision.of this Court i in the case’ of R. K. Garg etc. . Union n of India

& Ors. ete.C)

. >

As there was no industrial- - apiate “pending, we are of the opinion ; that on the ground that. the petitioners | have been chosen out of a vast body of workmen “to be discriminated against aud

‘excluding them from the operation of: Industrial Disputes Act, there .

has been no violation of Article 14 of the Constitution. This question, however, it must be emphasised again, does ‘not really arise in the wiew we have taken,

‘Before us twas contended that sick mills which have been | nationatised have been treated differently than general insurance employees under 1972 Act in Section 16(5) and Section 16(7) and in” _- the scheme framed under the General Insurance Business (Nations-

Tisatfon) | Act, .1972. ‘The object and purpose of the: Sick Textile Undertakings (Nationalisation) Act, 1974, was “reorganising and

_ rehabilitating such sick textile undertakings so as to subserve the:

interests of general public -by ‘augmentation of the products and distribution at fair prices of different varities ‘of cloth and yarn’’.

The basic objective of the said Act.was rehabilitation of the sick. - textile mills. That was different from the purpose of the present —

Act. The sick textile units had undér. them the bulk of their emplo- yees as. workmen those who came under the provisions: of Industrial _ Disputes Act. Section 14 of the said Act statutorily recognises the special position of the workmen as contra-distinguished from the other employees by enacting: seperaté. provisions in this respect

. thereon. Furthersmore it has to be borne in mind that the aforesaid

*. \

(4) [1982] 1S C.R-.947 bo

~ ALK. BANERJEE ¥. UNION (Muakharji, J.) «287

Att was converted with the etisuiring ‘augmentation of production

‘and distribution-of certain loth ‘and yarn which are commodities essential to the national economy being important consumer ‘items. Therefore the ‘case of the employees of sick textile undertakings:

‘which fias been mtntioned by the petitioners and argued. before us:

cannot be coimpared on Similar Jinés in respect of this aspect with. the present petitioners. We.would have rejected this submission on behalf of ttie petitroners, had it been necessary for us to do so but in, the view that has been taken, it is not necessary. .

Anottier item pucinshed Before us Was thre ennpifinghe of Coking. , Coal Mines (Natigtralisation) Act, 1972. It has to be’borne in mind ‘that the object covered by the scheme of the Act was entirely different from the Getiéral Insurance Business (Nationalisation) Act, ’ 1972, The Coking Coal Mines (Nationalisation) Act, 1972 was _ enactéd to provide-for the transfer of the interest of the owners of such mines and also the transfer of the interest of owners of coke © oven plants with a view to “reorganising and re- -constructing such coal naines and plants for the purpose of protecting, serving and

= permitting scientific development of resources-of coking coal needed:

to meet the growing requirement of iron & steel industry’. . According to‘the normal prevalent view, the workmen of Coking Coal

. Mines were sweated Jabour. These workmen constituted very large :

percentage of the employees. The-actin question namely the Coking.

Coal Mines (Nationalisation) Aet recognised the independent existence of the said workers as a class, It has also to be kept in mind that coking coal is a commodity very vital to the national economy

‘and prime raw materials of iron & steel industry which is-a basic «industry. The workmen employed ia the coal ‘mines. were also sweated labour, ‘Their special position was also statutorily recognised in the said Act. Coals also one of-the basic materials required to sustain growth. The provisions of Coking Coal Mines (Nationalisation) Act have been considered in detail and the special feature has. been taken note of in the case of Tara Prasad Singh etc. v. Union of India &-Ors®), According to the respondents, Class III and Class

- IVemployees of the General Insurance Company are high wage earners. They are islanders: by themselves—according to the respondents. It is true that judges should, not bring their personal knowledge into action in deciding. the controversy before the Courts but if common knowledge: is any guide, thén undoubtedly these:

(1) [1:80} 38.C.R, 1042.

- 288 SUPREME COURT REPORTS - [1984] 3 s.c.r. .. employees are very highly paid in comparison to many others, The "object of the General Insurance Business (Nationalisation) Act, 1972 is to rum the business efficiently. so that the funds available might be utilised for socially viable anid corg projects of national importance.

"From one point of view the Nationalised Banks and the Insurance »

Companies for. the purpose of applicability or. otherwise of the provisions “of the Industrial Disputes Act cannot be treated as belon- ging, to one’ class: _ Historical reasons provide an intelligible. differentia distinguishing Nationalised Insurance. Companies from.:

the Nationalised Banks. The reason suggested by the respondents was that prior to Banks Nationalisation, Industrial disputes between workmen and the Banks-were treated since 1950 on All India basis with the totality of the banks being involved therein. Several awards. ‘have. been made. treating them. as such like Shastri Award, 1953. Shastri Award Tribunal was constituted with a view to settle the disputes of the workmen of the Banks with all commercial Banks _ (excluding Co-operative Banks etc.) on the one hand and the emplo- yees on the other. Desai Award, 1962 bipartite settlement between

Indian Banks Association and the Exchange Bagks Associatign on. .

the one hand and All India Bank ‘Employees Associatton and All - India Bank Employees Federation on the othér, are some of the examples. As against this, prior tothe Act in question before us, disputes bétwetn insurance companies and their workmen were settled on independent company basis with fo All India projections involved. It may also be noted that unlike the case of some banks, there is no existing award or settlement with the petitioners emplo- - yees of the general insurance companies and the four insurance companies. The financial resources, structures and functions of the Banks are different from those of the insurance companies. It may also be noted as was pointed out to us on behalf of the respondents that Bank’s Class TL and IV employees are about 4 585, 000 in 1982.

as-compared to insurance companies which employ about 25,000 ‘Class Wl and Class. 1V employees.: Therefore for the purpose of ‘rationalisation, the insurance companies wanted to curtail their

‘emoluments on a small scale. ‘It cannot be said that there are no- distinguishing factors and that for choosing a particular . group for experiment, the respondents should be found guilty of treating people differently while they’ are alike in all materia! respects.

“Differentiation -is not always discriminatory. If there is a rational nexus on ‘the basis of which differentiation has been made with the object sought to be achieved by particular. provision, then such differentiation is not discriminatory and does net

A.K\ BANERJEE ¥. UNION (Mukharji; J.) 289

~wiolate the principles of article 14 of the Constitution. This principle ds too well-settled now to be reiterated by reference to cases. There is intelligible basis for differentiation. Whether the same result - or better result could have been achieved and better basis of differentia- tion evolved i is within the domain of legislature and must be left to

‘the wisdom of the legislature. Had it been held that the scheme of ©

$980 was within the authority given by’ the Act, we would have

‘rejected the cha!lenge to the Act and the Scheie under article 14 -of the Constitution.

It was also urged before us on behalf of the respondents that

' :the petitioners being employees of public sector undertakings, and

“these are economic instrumentalities of the State and having regard ° to the contents and contour of the concept of public employment as developed in the Indian legal system, an-employee in a public ‘sector ‘can be approximated with and treated asa government © servant. Having regard to the principles which govern the employer

- and employee relationship in the governmerital sectors, the condi- -

‘tions of service of employees in public employment should be exclusively governed by the statute and by the rules and regulations framed thereunder. Predication of such power would necessarily exclude the provisions of Industrial Disputes Act and the principles of collective bargaining just as these would exclude the principles of contractual relationship in such matters. The point is interesting. . However, in the. view we have taken, we need not discuss this aspect any further, ‘ it was further submitted on behalf of the respondent that the. sationale, justification and the genesis of the law of nationalisation being the creation of economic instrumentalities to subserve the constitutional and adfMinistrative goals of governance in a social welfare society, the running of public sector undertakings is neither for profit earning of the management nor for sharing such profits with the workmen alone but to utilise the investible funds available as a result of such ventures and undertakings for socially-oriented goals laid down by the governmental: policiés operating on the said sectors. In this connection reference was made before us to the decision in the case-of State of Karnataka & Anr, ete. v. Ranganatha Reddy & Anr. ete. &

J. 11978] 1S.C.R. 641 at pages 672, 676 & 691.

"299 a "SUPREME court: Reoats: vg _ [1934] 3 S.C.R..

‘A. _LEmptoyfaent i in the: public Sector gidertakings enjoys.a statuh. ~ : It'y was submitted that both’ historically ‘as Well as a matter of law, the: a public ‘sector undertakings being the économic - instruimentalities of” . the State arid discharging the ‘obligations which the State’ have, theemployees of such undertakings iit principle cannot be distinguished: from the employees in the government ’services. ‘In this connection.

. B our attention was drawn to the case of Sukhdev Singh & Ors. v. Bhagat ° Ram Sardar Singh Raghuvanshi & Anr.¢) It was urged that in all cons— . titutional democracies, the relationship’ between the government ‘and. ~ » the civil service is exclusively governed by the statutory provisions. . ~* - with thé power in the Government to: unilaterally alter the condi- - . >

Cc. ‘tions of service of the government employees. Reference was made to- “The Law of Civil Service” by Kaplan. It was further submitted that. ~ jn-India the law i js that origin of the Government service might be- - contractual but once appointed to a post under the Government, the: . ' government servant acquires a status and ‘the rights and obligations. - are no longer dependent’ on the consent of both the’ H Basis a if PO , oD statut. en Seer ee . By <3

We “egal have considered these: aspect had it _ necessary for us to do so but it.is not necessary in. the view: taken’ We may” reiterate that article 14 does not’ prevent legislature from intro-,_ ducing a reform i.e. by applying the legislation to some institutions _* » or objects | or areas only according. to the exigency ofthe situation , and further classification of selection can be ‘sustained on historical: _reasons or reasons of administrative exigency or piece-meal method ° of introducing reforms. The law necd not apply to all the persons. ‘in the sense of having a universal application to all persons. A law : F can be sustained if it deals equally with the people of well-defined: © class-employees of insurance companies as'such and such a law i ig ee! not open to the charge of denial of equal profection on the ground. | - that it had not “agElipateR to other PRR Rs ode 4 m4 "In the view we have taken of the matter,. these. applications i a ; G_ succeed and the impugned” scheme of 1980’must be held to be bad “as beyond the scope of the authority of the Central Government, oe “* under the General Insurance Business” (Nationalisation). Act, 1972. as * The operation of the scheme has been restrained by the order passed . ‘as interin order in these cases. The impugned scheme is therefore _ H: eae and will not. be given effect. to. The parties will be at.

1, [1975] 3 S.CR. 619 at page 646, : * we .

_< mt ad

A.K. BANERJEE V. UNION (Mukharji, 0) 291 liberty to adjust their rights as if the scheme had not been framed. The application for intervention is allowed. Let appropriate writs be issued quashing the scheme of 1980. This, however, will not prevent .

the Government, if it so advised, to’ frame any appropriate legis-

“lation or make‘any Appropriate amendment giving power to Central Government to frame any scheme as it considers fit and proper. In _the facts and circumstances of these cases and specially in view of the fact that petitioners had themselves at one point of time wanted that new scheme ‘be framed by the Central Government, we direct that parties will pay and’ bear theif own costs in all these matters, The rules are made absolute to the extent indicated above.

_NV.RK. | . Petitions allowed.

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