ns Nos 108 and 174 177 of 1976
Under Article 32 of the Constitution of India
R K Garg section C Agarwala  Aruneshwar Gupta for the petitioners in WP 108 Somnath Chatterjee P K Chatterjee  Rathin Das for the petitioners in 174 77 section V Gupte Attorney Genl U R Lalit R N Sacluhey  A Subhashini for r 2 in all the WPs
section V Gupte Attorney Gent  D N Mishra for rr 2  3 in WP 108 and rr
2 4 in WP 174 77
P section Khera for the Intervener AIN LIC Employees Federation The following Judgments were delivered BEG CJ The Life Insurance Corporation was constituted under the Life Insurance Corporation Act 31 of 1956 hereinafter to be referred to as the Act
On 1 6 1957 the Central Government issued under section 11 1 of the Act an order prescribing the Pay scales dearness allowance and conditions of service applicable to Class III and IV employees
Among these conditions it is stated that no bonus would be paid but amenities like insurance and medical treatment free of cost would be provided
On 26 6 1959 an order was passed by the Central Government under section 112 of the Act amending para 9 of the 1957 Order inasmuch as it was provided that bonus other than profit sharing bonus would be paid to the employees drawing the salary not exceeding Rs 5001 per month
On 2nd of July 1959 there was
a settlement between the LIC and the employees providing for payment of cash bonus at the rate of one and a half month s basic salary which was to be effective from 1 9 1956 and valid upto 31 12 1961
In July 1960 regulations were framed under section 49 to regulate the conditions of service of classes of employees and regulation 58 provided for payment of non profit sharing bonus to the employees
Orders were again passed on 14 4 1962 and 3rd August 1963 the effect of which was to remove the restriction of Rs 5001 for eligibility for payment of bonus
On 29th January 1963 another settlement was arrived at between the LIC and its employees for payment of cash bonus at the rate of one and a half month s basic salary
This was to continue in operation until 31st March 1969
On 20th June 1970 a third settlement was reached for payment of cash bonus at the same rate which was to be effective upto 31st March 1972
On 26 6 1972 a fourth settlement for payment of cash bonus at the rate of 10 per cent of gross wages basic and special pay and dearness allowance was made effective from 1st April 1972 to 1973
On 21st January 1974 and 6th February 1974 settlements for payment of cash bonus at 15 per cent of gross wages valid for four years from 1st April 1973 to 31st March 1977 were reached
It is clear that this so called bonus did not depend upon profits earned but was nothing short of increas 340 ed wages
The settlements were approved by the Board of Directors of the LIC and also by the Central Government
On 29th March 1974 a circular was issued by the LIC for payment of bonus in accordance with the settlement along with the salary in April
In April 1974 the payment of bonus for the year 1973 74 was actually made in accordance with the settlement
Again in April 1975 bonus for the year 1974 75 was made in accordance
with the settlements
On 25th September 1975 however a Payment of Bonus Amendment Ordinance was promulgated
On 26 9 1975 the LIC issued a circular stating that as the payment of bonus was being reviewed in the light of the Ordinance and on 22nd of March 1976 payment of bonus for the year 1975 76 was to be withheld until a final decision was taken
Against this a writ petition was filed in the High Court of Calcutta
On 21st May 1976 the Calcutta High Court passed an order recognising the right of petitioners to payment of bonus for the year 1975 76 which had become payable along with the salary in April 1976 and ordered that it must be paid to the employees
Apparently bonus was treated as part of the right of the petitioners to property protected by Article 19 and 311 of the Constitution
On 29th May 1976 the Life Insurance Corporation Modification of Settlement Act 1976 was enacted by Parliament denying to the petitioners the right which had been recognised by the settlements approved by the Central Government and acted upon by the actual payment of bonus to the employees and finally converted into right under the decision of the Calcutta High Court on 21st May 1976
Provisions
of section 1 1 2 may read as follows 2 Where the Central Government is satisfied that for the purpose of securing uniformity in the scales of remuneration and the other terms and conditions
of service applicable to employees of insurers whose controlled busi ness has been transferred to and vested in the Corporation it is necessary so to do or that in the interests of the Corporation and its policy holders a reduction in the remuneration payable or a revision of the other terms and conditions of service applicable to employees or any class of them is called for the Central Government may notwithstanding anything contained in sub section 1 or in the  or in any other law for the time being in force or in any award settlement or agreement for the time being in force alter whether by way of reduction or otherwise the remuneration and the other terms and conditions
of service to such extent and in such manner as it thinks fit and if the alteration is not acceptable to any employee the Corporation may terminate his employment by giving him compensation equivalent to three months  remuneration unless the contract of service with such employee provides for a shorter notice of termination
Explanation  The compensation payable to an employee under this sub section shall be in addition to and shall not affect any pension gratuity provident fund money 341 or any other benefit to which the employee may be entitled under his contract of service
 Section 1 1 2 of the Act shows that the Central Government had ample power to revise the scales of remuneration and other terms and conditions of service if it was satisfied that the interest of the Corporation or the policy holders demanded this
Of course such orders had to be passed as a result of satisfaction upon material placed before the Central Government relating to the interests of the Corporation or its policy holders
But no such order was passed
What was actually done was that the Act was passed to set aside the terms of the settlements which had been incorporated in the Judgment inter parties of the Calcutta High Court
The objects and reasons of the Act were set out as follows The provisions of the do not apply to the employees employed by the Life Insurance Corporation of India
However the Corporation has as a matter of practice been paying bonus to its employees
The bonus to Class I and Class II employees is being paid in pursuance of agreements between the Corporation and such employees
The bonus to Class III and Class IV employees is being paid under the terms of settlement arrived at between the Corporation and such employees from time to time
In terms of the settlement arrived at between the Corporation and its Class III and class IV employees on 24th January 1974 under the  which is in force upto the 31st March 1977 bonus is payable by the Corporation to its Class III and Class IV employees at the rate of fifteen per cent of their annual salary without any maximum limit
It is proposed to set aside with effect from the 1st April 1975 these provisions of the settlement arrived at between the Corporation and its Class III and Class IV employees on 24th January 1974 to enable the Corporation to make ex gratia payments to such employees at the rates determined on the basis of the general Government policy for making ex gratia payments to the employees of the non competing public sector undertakings
The bill seems to achieve the above object
 The statement of objects and reasons discloses that the purpose of the impugned Act was to undo settlements which had been arrived at between the Corporation and Class III and Class IV employees on January 24 and February 6 1974 and actually recognised by the order of the Calcutta High Court
The question could well arise whether this was really the exercise of a legislative power or of a power comparable to that of an appellate authority considering the merits of what had passed into a right to property recognised by the This Court has decided in Shrimati Indira 342 Narain1 that even a constitutional amendment cannot authorise the assumption of a judicial power by Parliament
One of the tests laid down there was whether the decision is of a kind which requires hearing to be given to the parties or in other words involves at least a quasi judicial procedure which the Parliament does not in exercise of its legislative power follow
A decision reached by the Central Government under section 112 of the Act is the result of a satisfaction on matters stated there and would imply quasi judicial procedure where the terms of a settlement had to be reviewed or revised
But the legislative procedure followed here does not require that to be done
It would in any event be unfair to adopt legislative procedure to undo such a settlement which had become the basis of a decision of a High Court
Even if legislation can remove the basis of a decision it has to do it by an alteration of general rights of a class but not by simply excluding two specific settlements between the Corporation and its employees from the purview of the section 18 of the  which had been held to be valid and enforceable by a High Court
Such selective exclusion could also offend Article 14
If Parliament steps in to set aside such a settlement which the Central Government could much more reasonably have examined after going into the need for it or for its revision the question also arises whether it violates the fundamental right to property guaranteed under Article 19 1  f  of the Constitution inasmuch as the right to get bonus is part of wages and by its deprivation a judicially recognised right to property is taken away and not saved by the provisions of Article 19 6 of the Constitution A restriction upon a right may even cover taking away of the right to increased remuneration in the interests of the general public
Where was the question of any restriction here in the interests of the general public  it seems a pure and simple case of a deprivation of rights of Class III and Class TV employees without any apparent nexus with any public interest
The first hurdle in the way of this attack upon the Act undoing the settlement under Article 19 1 f of the Constitution placed before us what that the Act of 1976 notified on 29 5 1976 was passed during the emergency
Hence it was submitted that Article 358 of the Constitution is an absolute bar against giving effect to any right arising under Article 19 of the Constitution
Furthermore it was submitted that the effect of the Act was to wash off
the liability altogether after 1 4 1975 so that nothing remained to be enforced after 1 4 1975
The Act is a very short one of 3 sections
After defining the settlement as the one which was arrived at between the Corporation and their workers on 24 1 1974 under section 18 read with clause p of section 2 of the and the similar further settlement of 6 2 1974 section 3 lays down 1 19762SCR347
343 Notwithstanding anything contained in the  the provisions of each of the settlements in so far as they relate to the payment of an annual cash bonus to every Class III and Class IV employees of the Corporation at the rate of fifteen per cent of his annual salary shall not have any force or effect and shall not be deemed to have any force or effect on and from 1st day of April 1975
 The object of the Act was in effect to take away the force of the judgment of the Calcutta High Court recognising the settlements in favour of Class III and Class IV employees of the Corporation
Rights under that judgment could be said to arise independently of Article 19 of the Constitution
I find my self in complete agreement with my learned brother Bhagwati that to give effect to the judgment of the Calcutta High Court is not the same thing as enforcing a right under Article 19 of the Constitution
It may be that a right under Article 19 of the Constitution becomes linked up with the enforceability of the judgment
Nevertheless the two could be viewed as separable sets of rights
If the right conferred by the judgment independently is sought to be set aside section 3 of the Act would in my opinion be invalid for trenching upon the judicial power
I may however observe that even though the real object of the Act may be to set aside the result of the mandamus issued by the Calcutta High Court yet the section does not mention this object at all
Probably this was so because the jurisdiction of a High Court and the effectiveness of its orders derived their force from Article 226 of the Constitution itself These could not be touched by an ordinary act of Parliament
Even if section 3 of the Act seeks to take away the basis of the judgment of the Calcutta High Court without mentioning it by enacting what may appear to be a law yet I think that where the rights of the citizen against the State are concerned we should adopt an interpretation which upholds those rights
Therefore according to the interpretation I prefer to adopt the rights which had passed into those embodied in a judgment and became the basis of a Mandamus from the High Court could not be taken away in this indirect fashion
Apart from the consideration mentioned above there are also other considerations put forward with his usual vehemence by Mr R K Garg who relies upon the directive principles of the State Policy as part of the basic structure of our Constitution
At any rate he submits that in judging the reasonableness of a provision the directive principles of State policy can be used as this Court has repeatedly done as criteria of reasonableness and therefore of validity
Garg bad relied strongly upon the provisions of Article 43 of the Constitution which says  43
The State shall endeavour to secure by suitable legislation or economic Organisation or in any other way to all workers agricultural industrial or otherwise work a living wage conditions of work ensuring a decent standard 344 of life and full enjoyment of leisure and social and cultural opportunities and in particular the State shall endeavour to promote cottage industries on an individual or co operative basis in rural areas
 He submits that Article 43 casts an obligation on the State to secure a living wage for the workers and is part of the principles declared fundamental in the governance of the country
In other words he would have us use Article 43 as conferring practically a fundamental right which can be enforced
I do not think that we can go so far as that because even though the directive principles of State policy including the very important general ones contained in Article 38 and 39 of the Constitution give the direction in which the fundamental policies of the State must be oriented yet we cannot direct either the Central Government or Parliament to proceed in that direction
Article 37 says that they shall not be enforceable by any court but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws Thus even if they are not directly enforceable by a court they cannot be declared ineffective
They have the life and force of fundamentals
The best way in which they can be without being directly enforced given vitality and effect in Courts of laws is to use them as criteria of reasonableness and therefore of validity as we have been doing
Thus if progress towards goals found in Articles 38 and 39 and 43 are desired there should not be any curtailment of wage rates arbitrarily without disclosing any valid reason for it as is
the case here
It is quite reasonable in my opinion to submit that the measure which seeks to deprive workers of the benefits of a settlement arrived at and assented to by the Central Government under the provisions of the  should not be set at naught by an Act designed to defeat a particular settlement
If this be the purpose of the Act as it evidently is it could very well be said to be contrary to public interest and therefore not protected by Article 196 of the Constitution
Furthermore I think that the principle laid down by this Court in Union of India  Ors
vs Ms Indo Afghan Agencies Ltd1 can also be taken into account in judging the reasonableness of the provision in this case
It was held there at p 385  Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen 1 1968 2SCR365
34 5 In that case equitable principles were invoked against the Government
It is true that in the instant case it is a provision of the Act of Parliament and not merely a governmental order whose validity is challenged before us
Nevertheless we cannot forget that the Act is the result of a proposal made by the Government of the day which instead of proceeding under section 112 of the Life Insurance Corporation Act chose to make an Act of Parliament protected by emergency provisions
I think that the prospects held out the representations made  the conduct of the Government and equities arising therefrom may all be taken into consideration for judging whether a particular piece of legislation initiated by the Government and en acted by Parliament is reasonable
Mr Garg has also strongly attacked section 3 of the Act as violative of Article 14 of the Constitution which was also not available to the petitioners during the emergency
He alleges that the Corporation has been making very handsome profits so that the question of jeopardising the interests of the Corporation or Policyholders could not arise
He submits that the Act is nothing more than selective discrimination practised against the lower levels of the staff of the Life Insurance Corporation
I do not think that these contentions are devoid of force
I am sorry that due to the very short interval left for me to dictate my opinion in this case I have not been able to fully set out the reasoning or to cite all the authorities I would have liked to have done
The pressure of work on hand is too great
I have several judgments to pronounce tomorrow the last day on which I shall have the authority to participate as a Judge in the decisions of this Court
I have however thought it to be my duty to indicate my line of thinking briefly as I have my doubts whether Article 312A is not an effective answer to complete reliance upon Article 312 of the Constitution
It is true that the right to receive bonus which had been recognised by the Central Government both by its orders and conduct under a settlement is a right to property
Nevertheless since acquisition is defined by Article 312A of the Constitution I seriously doubt whether that definition of acquisition really satisfied by the facts in the case before us
The provision reads as follows  312A Where a law does not provide for the transfer of the ownership or right to possession of any property to the State or to a Corporation evened or controlled by the State it shall not be deemed to provide for the compulsory acquisition or requisitioning of property notwithstanding that it deprives any person of his property
 I have however no doubt that the conclusion reached by my learned brother Bhagwati is quite correct inasmuch as the benefits of the rights recognised by the judgment of the Calcutta High Court could not be indirectly taken away by section 3 of the Act selectively directed against specified settlements only
346 I think that section 3 of the impugned Act is struck by the provisions of Article 191 f of the Constitution and not saved by Article 196 of the Constitution
It is also struck by Article 14
If the fundamental rights guaranteed by Articles 14 and 19 are not suspended but their operation is only suspended a view which I expressed in A D M Jabalpur vs Shivkant Shukla1 the effect of the suspension is to restore the status quo ante
Would this not mean that only the validity of an attack based on Articles 14 and 19 is suspended during the Emergency  But once this embargo is lifted Articles 14 and 19 of the Constitution whose use was suspended would strike down any legislation which would have been bad
In other words the declaration of invalidity is stayed during the emergency
Both Articles 358 and 3591A provide that as soon as a proclamation of emergency ceases to operate the effect of suspension must vanish except as respects things done or omitted to be done before the law so ceases to have effect
The things done or omitted to be done could certainly not mean that the rights conferred under the settlements were washed off completely as the learned Attorney General suggested
To hold that would be to convert the suspension of invalidity into a validation of law made during the emergency
If the law was not validated but only its invalidation was suspended we should not give any wider effect to the suspension
I think we should interpret things done or omitted to be done very narrowly
If this be so it means that the settlements are not to be deemed to be wiped off
No doubt payments under them were temporarily suspended
This must obviously mean that no payment could be demanded under them during the emergency but as soon as the emergency was over the settlements would revive and what could not be demanded during the emergency would become payable even for the period of emergency for which payment was suspended
Otherwise the enactment will have effect even after the emergency had ceased
This would clearly be contrary to the express provisions of Article 358 and 3591A
In other words valid claims cannot be washed off by the emergency per se
They can only be suspended by a law passed during the operation of Article 358 and 3591A of the Constitution
For the reasons given above I reach the same conclusion as my learned brother Bhagwati although perhaps by a difference route
concur in the final order made by my learned Brother Bhagwati
BHAGWATI J
These writ petitions are filed by employees of the Life Insurance Corporation challenging the constitutional validity of the Life Insurance Corporation Modification of Settlement Act 1976
This unusual piece of legislation was enacted by Parliament during the emergency at a time when there could hardly be any effective debate or discussion and it sought to render ineffective a solemn and deliberate Settlement arrived at between the Life Insurance Corporation and four different associations of its employees for payment of cash bonus
It is necessary in order to appreciate the various 1 ATR Suppl
SCR 172
347 contentions arising in the writ petitions to recapitulate briefly the facts leading up to the enactment of the Life Insurance Corporation Modification of Settlement Act 1976 hereinafter referred to as the impugned Act
The Life Insurance Corporation is a statutory authority established under the and under section 6 it is the general duty of the Life Insurance Corporation to carry On life insurance business whether in or outside India and it is required to so exercise its powers as to secure that life insurance business is developed to the best advantage of the community
It is not necessary to refer to the various provisions of the which define the powers duties and functions of the  since we are not concerned with them in these writ petitions
It would be enough to refer to section 49 which confers power on the Life Insurance Corporation to make regulations Sub section 1 of that section provides that the Life Insurance Corporation may
with the previous approval of the Central Government make regulations not in consistent with the Act to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of the Act and sub section 2 enacts that in particular and without prejudice to the generality of the power conferred under sub section 1 such regulations may provide for b the method of recruitment of employees and agents of the Corporation and the terms and conditions of service of such employees or agents bb the terms and conditions of service of persons who have become employees of the Corporation under subsection 1 of section 11 The Life Insurance Corporation has in exercise of the power conferred under clauses b and bb of sub section 2
of section 49 and with the previous approval of the Central Government made the Life Insurance Corporation Staff Regulations 1960 defining the terms and conditions of service of its employees
There is only one Regulation which is material for our purpose and that is Regulation 58 which is in the following terms The Corporation may subject to such directions as the Central Government may issue grant non profit sharing bonus to its employees and the payment thereof including conditions of eligibility for the bonus shall be regulated by instructions issued by the Chairman from time to time
 We have set out Regulation 58 in its present form as that is the form in which it stood throughout the relevant period
It will be a matter for consideration as to what is the effect of this Regulation on the Settlement arrived at between the Life Insurance Corporation and its employees in regard to bonus
348 It appears that right from 1959 Settlement were arrived at between the Life Insurance Corporation and its employees from time to time in regard to various matters relating to the terms and conditions of service of Class III and Class IV employees including bonus payable to them
The last of such Settlement dated 20th June 1970 as modified by the Settlement dated 26th June 1972 expired on 31st March 1973
Thereupon four different associations of employees of the Life Insurance Corporation submitted their charter of demands for revision of scales of pay allowances and other terms and conditions of service on behalf of Class III and Class IV employees
The Life Insurance Corporation carried on negotiations with these associations
between July 1973 and January 1974 at which there was free and frank exchange of views in regard to various matters including the obligation of the Life Insurance Corporation to the policy holders and
the community and ultimately these negotiations culminated in a Settlement dated 24th January 1974 between the Life Insurance Corporation and these associations
The Settlement having been arrived at other wise than in the course of conciliation proceeding was binding on the parties under section 18 sub section 1 of the and since the four associations which were parties to the
employees the Settlement was binding on the Life Insurance Corporation and all its Class III and Class IV employees
The Settlement provided for various matters relating to the terms and conditions of service but we are concerned only with Clause 8 which made provision in regard to bonus
That clause was in the following terms i No profit sharing bonus shall be paid
However the Corporation may subject to such directions as the Central Government may issue from time to time grant any other kind of bonus to its Class III  IV employees
ii An annual cash bonus will be paid to all Class III and  Class IV employees at the rate of 15 of the annual salary ie basic pay including ofspecial pay if any and dearness allowance and additional dearness allowance actually drawn by an employee in respect of the financial year to which thebonus relates
iii Save as provided herein all other terms and conditions attached to the admissibility and payment of bonus shall be as laid down in the Settlement on bonus dated tile 26th June 1972
 It is also necessary to reproduce here Clause 12 as that has some bearing on the controversy between the parties PERIOD OF SETTLEMENT 1 This Settlement shall be effective from 1st April 1973 and shall be for a period of four years ie from 1st April 1973 to 31st March 1977
349 2 The terms of this Settlement shall be subject to the approval of the Board of the Corporation and the Central Government
3 This Settlement disposes of all the demands raised by the workmen for revision of terms and conditions of their service
4 Except as otherwise provided or modified by this Settlement the workmen shall continue to be governed by all the terms and conditions of service as set forth and regulated by the Life Insurance Corporation of India Staff Regulations 1960 as also the administrative instructions issued from time to time and they shall subject to the provisions thereof including any period of operation specified therein be entitled to the benefits thereunder
 It was common ground between the parties that the Settlement was approved by the Board of the Life Insurance Corporation as also by the Central Government and the Chief of Personnel by his Circular dated 12th March 1974 intimated to the Zonal and Divisional Managers that the approval of the Central Government to the Settlement having been received the Life Insurance Corporation should proceed to implement the terms of the Settlement
The Executive Director also issued a circular dated 29th March 1974 containing administrative instructions in regard to payment of cash bonus under clause 8 ii of the Settlement
These administrative instructions set out directions in regard to Various matters relating to payment of cash bonus and of these two are material
One was that in case of retirement or death salary up to the date of cessation of service shall be taken into account for the purpose of determining the amount of bonus payable to the employee or his heirs and the other was that the bonus shall be paid along with the salary for the month of April but in case of retirement or death payment will be made soon after the contingency
There was no dispute that for the first two years 1st April 1973 to 31st March 1974 and 1st April 1974 to 31st March 1975 the Life Insurance Corporation paid bonus to its Class III and Class IV employees in accordance with the provisions of Clause 8ii of the Settlement read with the administrative instructions dated 29th March 1974
But then came the declaration of emergency on 26th June 1975 and troubles began for Class III and Class IV employees of the Life Insurance Corporation
On 25th September 1975 an Ordinance was promulgated by the President of India called the Payment of Bonus Amendment Ordinance 1975 which came into force with immediate effect
Subsequently this Ordinance was replaced by the Payment of Bonus Amendment Act 1976 which was brought into force with retrospective effect from the date of the Ordinance namely 25th September 1975
This amending law considerably curtailed the rights of the employees to bonus in industrial establishments but it had no impact so far as the employees of the Life Insurance Corporation were concerned since the original was not applicable to the life Insurance Corporation by reason of section 32 which exempted the Life Insurance L5 277SCI78 350 Corporation from its operation
The Central Government however decided that the employees of establishments which were not covered by the would not be eligible for payment of bonus but ex gratia cash payment in lieu of bonus would be made as may be determined by the Government taking into account the wage level financial circumstances etc
in each case and such payment will be subject to a maximum of 10 and pursuant to this decision the Life Insurance Corporation was advised by the Ministry of Finance that no further payment of bonus should be made to the employees without getting the same cleared by the Government
The Life Insurance Corporation thereupon by its Circular dated 26th September 1975 informed all its offices that since the question of payment of bonus was being reviewed in the light of the Bonus Ordinance dated 25th September 1975 no bonus should be paid to the employees under the existing provisions until further instructions
The  All India Insurance Employees  Association protested against this stand taken by the Life Insurance Corporation and pointed out that the Life Insurance Corporation was bound to pay bonus in accordance with the terms of the Settlement and the direction not to pay bonus was clearly illegal and unjustified
The Life Insurance Corporation conceded that payment of bonus was covered by the settlement but contended that it was subject to such directions as the Central Government might issue from time to time and since the Central Government had advised the Life Insurance Corporation not to make any payment of bonus without their specific approval the Life Insurance Corporation was justified in not making payment to the employees
This stand was taken by the Life Insurance Corporation in its letter dated 7th February 1976 addressed to the All India Insurance Employees  Association and this was followed by a Circular dated 22nd March 1976 instructing all the offices of the Life Insurance Corporation not to make payment by way of bonus
The All India Insurance Employees  Association and some others thereupon filed writ petition No 371 of 1976 in the High Court of Calcutta for a writ of Mandamus and Prohibition directing the Life Insurance Corporation to act in accordance with the terms of the Settlement dated 24th January
1974 read with the administrative instructions dated 29th March 1974 and to rescind or cancel the Circulars dated 26th September 1975 7th February 1976 and 22nd March 1976 and not to refuse to pay cash bonus to Class III and Class IV employees along with their salary for the month of April 1976 as provided by the Settlement read with the administrative instructions
The writ petition was resisted by the Life Insurance Corporation on various grounds to which it is not necessary to refer since we are not concerned with the correctness of the judgment of the Calcutta High Court disposing of the writ petition
Suffice it to state and that is material for our purpose that by a judgment dated 21st May 1976 a Single Judge of the Calcutta High Court allowed the writ petition and issued a writ of Mandamus and Prohibition as prayed for in the writ petition
The Life Insurance Corporation preferred a Letters Patent Appeal against the judgment of the learned Single Judge but in the mean time the impugned Act bad already come into force and it was therefore stated on behalf of the Life Insurance Corporation before the Division Bench that there was 351 no necessity for proceeding with the appeal and hence the Division Bench made no order in the appeal
The result was that the judgment of the learned Single Judge remained intact  with what effect is a matter we shall presently consider
On 29th May 1976 Parliament enacted the impugned Act providing inter alia for modification  of the Settlement dated 24th January 1974 arrived at between the Life Insurance Corporation and its employees
The impugned Act was a very short statute consisting only of three sections
Section 1 gave the short title of the impugned Act section 2 contained definitions and section 3 which was the operative section provided as follows  Notwithstanding anything contained in the  the provisions of the settlement in so far as they relate to the payment of an annual cash bonus to every Class III and Class IV employees of the Corporation at the rate of fifteen per cent of his annual salary shall not have any force or effect and shall not be deemed to have had any force or effect on and from the 1st day of April 1975
 Since the impugned Act did not set at naught the entire settlement dated 24th January 1974 but merely rendered without force and effect the provisions of the Settlement in so far as they related to payment of annual cash bonus to Class III and Class IV employees and that too not from the date when the Settlement became operative but from 1st April 1975 it was said to be a statute modifying the pro visions of the Settlement
The plain and undoubted effect of the impugned Act was to deprive Class III and Class IV employees of the annual cash bonus to which they were entitled under clause 8ii of the Settlement for the years 1st April 1975 to 31st March 1976 and 1st April 1976 to 3 1 St March 1977 and therefore two of the associations along with their office bearers field the present writ peti tions challenging the constitutional validity of the impugned Act
There were two grounds on which the constitutionality of the impugned Act was assailed on behalf of the petitioners and they were as follows  A
The right of Class III and Class TV employees to annual cash bonus for the years 1st April 1975 to 31st March 1976 and 1st April 1976 to 31st March 1977 under clause 8ii of the Settlement was property and since the impugned Act provided for compulsory acquisition of this property without payment of compensation the impunged Act was violative of Article 312 of the Constitution and was hence null and void
B The impugned Act deprived Class III and Class IV employees of the right to annual cash bonus for the years 1st April 1975 to 31st March 1976 and 1st April 1976 to 31st March 1977 which was vested in them under clause 8ii of the Settlement and there was therefore clear infringement of their fundamental right under Article 3 52 191 f and since this deprivation of the right to annual cash bonus which was secured under a Settlement arrived at as a result of collective bargaining and with full and mature deliberation on the part of the Life Insurance Corporation and the Central Government after taking into account the interests of the policy holders and the community and with a view to approximating towards the goal of a living wage as envisaged in Article 43 of the Constitution amounted to an unreasonable restriction the impugned Act was not saved by Article 195 and hence it was liable to be struck down as invalid
We shall proceed to consider these grounds in the order in which we have set them out though we may point out that if either ground succeeds it would be unnecessary to consider the other
But before we proceed further it would be convenient at this stage to refer to one other contention of the petitioner based on the judgment of the Calcutta High Court in Writ Petition No 371 of 1976
The contention was that since the Calcutta High Court had by its judgment dated 21st May 1976 issued a writ of Mandamus directing the Life Insurance Corporation to pay annual cash bonus to Class III and Class IV employees for the year 1st April 1975 to 31st March 1976 along with their salary for the month of April 1976 as provided by the Settlement and this judgment had be come final by reason of withdrawal of the Letters Patent Appeal preferred against it the Life Insurance Corporation was bound to obey the writ of Mandamus and to pay annual cash bonus for the year 1st April 1975 to 31st March 1976 in accordance with the terms of clause 8ii of the Settlement
It is no doubt true said the petitioners that the impugned Act if valid struck at clause 8ii of the Settlement and rendered it ineffective and without force with effect from 1st April 1975 but it did not have the effect of absolving the Life Insurance Corporation from its obligation to carry out the writ of Mandwnus
There was according to the petitioners nothing in the impugned Act which set at naught the effect of the judgment of the Calcutta High Court or the binding character of the writ of Mandamus issued against the Life Insurance Corporation
This contention of the petitioners requires serious consideration and we are inclined to accept it
It is significant to note that there was no reference to the judgment of the Calcutta High Court in the Statement of Objects and Reasons nor any non obstante clause referring to a judgment of a court in section 3 of the impugned Act
The attention of Parliament does not appear to have been drawn to the fact that the Calcutta High Court had already issued a writ of Mandamus commanding the Life Insurance Corporation to pay the amount of bonus for the year 1st April 1975 to 31st March 1976
It appears that unfortunately the judgment of the Calcutta High Court remained almost unnoticed and the impugned Act was passed in ignorance of that judgment
Section 3 of the impugned Act provided that the provisions of the Settlement in so far as they relate to payment of annual cash bonus to Class III 353 and Class IV employees shall not have any force or effect and shall not be deemed to have had any force or effect from 1st April 1975
But the writ of Mandamus issued by the Calcutta High Court directing the Life Insurance Corporation to pay the amount of bonus for the year 1st April 1975 to 31st March 1976 remained untouched by the impugned Act
So far as the right of Class III and Class IV employees to annual cash bonus for the year 1st April 1975 to 31st March 1976 was concerned it became crystallised in the judgment and thereafter they became entitled to enforce the writ of Mandamus granted by the judgment and not any right to annual cash bonus under the settlement
This right under the judgment was not sought to be taken away by the impugned Act
The judgment continued to subsist and the Life Insurance Corporation was bound to pay annual cash bonus to Class III and Class IV employees for the year 1st April 1975 to 31st March 1976 in obedience to the writ of Mandamus
The error committed by the Life
Insurance Corporation was that it withdrew the Letters Patent Appeal and allowed the judgment of the learned Single Judge to become final
By the time the Letters Patent Appeal came up for hearing the impugned Act had already come into force and the Life Insurance Corporation could therefore have successfully contained in the Letters Patent Appeal that since the Settlement in as far as it provided for payment of annual cash bonus was annihilated by the impugned Act with effect from 1st April 1975 Class III and Class IV employees were not entitled to annual cash bonus for the year 1st April 1975 to 31st March 1976 and hence no writ of Mandamus could issue directing the Life Insurance Corporation to make payment of such bonus
If such contention had been raised there is little doubt subject of course to any constitutional challenge to the validity of the impugned Act that the judgment of the learned Single Judge would have been upturned and the Writ petition dismissed
But on account of some inexplicable reason which is difficult to appreciate the Life Insurance Corporation did not press the Letters Patent Appeal and the result was that the judgment of the learned Single Judge granting writ of Mandamus became final and binding on the parties
It is difficult to see how in these circumstances the Life Insurance Corporation could claim to be absolved from the obligation imposed by the judgment to carry out the Writ of Mandamus by relying on the impugned Act
The Life Insurance Corporation leaned heavily on the decision of this Court in Shri Prithvi Cotton Mills Ltd vs Broach Borough Municipality   in support of its contention that when the settlement in so far as it provided for payment of annual cash bonus was set at naught by the impugned Act with effect from 1st April 1975 the basis on which the judgment proceeded was fundamentally altered and that rendered the judgment ineffective and not binding on the parties
We do not think this decision lays down any such wide proposition as is contended for and on behalf of the Life Insurance Corporation
It does not say that whenever any actual or legal situation is altered by retrospective legislation a judicial decision rendered by a court on the basis of such factual or legal situation prior to the alteration would 1 19701 SCR 388
354 straightaway without more cease to be effective and binding on the parties
It is true that there are certain observations in this decision which seem to suggest that a court decision may cease to be binding when the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances
But these observations have to be read in the light of the question which arose for consideration in that case
There the validity of the Gujarat Imposition of Taxes by Municipalities Validation Act 1963 was assailed on behalf of the petitioners
The Validation Act had to be enacted because it was held by this Court in Patel Gordhandas Hargovindas vs Municipal Commissioner Ahmedabad1 that since section 73 of the Bombay Municipality Boroughs Act 1925 allowed the Municipality to levy a rate on buildings or lands and the term rate was confined to an imposition on the basis of annual letting value tax levied by the Municipality on lands and buildings on the basis of capital value was invalid
Section 3 of the Validation Act provided that notwithstanding anything contained in any judgment decree or order of a court or tribunal or any other authority no tax assessed or purported to have been assessed by a municipality on the basis of capital value of a building or land and imposed collected or recovered by the municipality at any time before the commencement of the Validation Act shall be deemed to have invalidly assessed imposed collected or recovered and the imposition collection or recovery of the tax so assessed shall be valid and shall be deemed to have always been valid and shall not be called in question merely on the ground that the assessment the tax on the basis of capital value of the building or land was not authorised by law and accordingly any tax so assessed before the commencement of the Validation Act and leviable for a period prior to such commencement but not collected or recovered before such commencement may be collected or recovered in accordance with the relevant municipal law
It will be seen that by section 3 of the impugned Act the Legislature retrospectively imposed tax on building or land on the basis of capital value and if the tax was already imposed levied and collected on that basis made the imposition levy collection and recovery of the tax valid notwithstanding the declaration by the Court that as rate the levy was incompetent
This was clearly permissible to the Legislature because in doing so the Legislature did not seek to reverse the decision of this Court on the interpretation of the word rate but retrospectively amended the law by providing for imposition of tax on land or building on the basis of capital value and validated the imposition levy collection and recovery of tax on that basis
The decision of this Court holding the levy of tax to be incompetent on the basis of the unamended law therefore became irrelevant and could not stand in the way of the tax being assessed collected and recovered on the basis of capital value under the law as retrospectively amended
That is why this Court held that the Validation Act was effective to validate imposition levy collection and recovery of tax on land or building on the basis of capital value
It is difficult to see bow this decision given in the context of a validating statute can be of any help to the life Insurance Corporation
Here the judgment given by the 1 1964 2SCR608
355 Calcutta High Court which is relied upon by the petitioners is not a mere declaratory judgment holding an impost or tax to be invalid so that a validation statute can remove the defect pointed out by the judgment amending the law with retrospective effect and validate such impost or tax
But it is a judgment giving effect to the right of the petitioners to annual cash bonus under the Settlement by issuing a writ of Mandamus directing the Life Insurance Corporation to pay the amount of such bonus
If by reason of retrospective alteration of the factual or legal situation the judgment is rendered erroneous the remedy may be by way of appeal or review but so long as the judgment stands it cannot be disregarded or ignored and it must be obeyed by the Life Insurance Corporation
We are therefore of the view that in any event irrespective of whether the impugned Act is constitutionally valid or not the Life Insurance Corporation is bound to obey the writ of Mandamus issued by the Calcutta High Court and to pay annual cash bonus for the year 1st April 1975 to 31st March 1976 to Class III and Class IV employees
Now to the grounds of constitutional challenge Re Ground A  This ground raise  the question whether the impugned Act is violative of clause 2 of Article 31
This clause provides safeguards against compulsory acquisition or requisitioning of property by laying down conditions subject to which alone property may be compulsorily acquired or requisitioned and at the date when the impugned Act was enacted it was in the following terms No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of a law which provides for acquisition or requisitioning of the property for an amount which may be fixed by such law or which may be determined in accordance with such principles and given in such manner as may be specified in such law and no such law shall be called in question in any court on the ground that the amount so fixed or determined is not adequate or that the whole or any part of such amount is to be given otherwise than in cash Clause 2 in this form was substituted in Article 31 by the Constitution Twenty fifth Amendment Act 1971 and by this amending Act clauses 2A and 2B were also introduced in Article 31 and they read as follows  2A Where a law does not provide for the transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State it shall not be deemed to provide for the compulsory acquisition or requisitioning of Property notwithstanding that it does any person of his property
2B Nothing in sub clause f of clause 1 of Article 19 shall effect any such law as is referred to in clause 2 356 The argument of the petitioners was that the right of Class III and Class IV employees to annual cash bonus  for the years 1st April 1975 to 31st March 1976 and 1st April 1976 to 31st March 1977 under Act provided for Insurance Corporation 12 it was a law providing for compulsory acquisition of property as contemplated under clause 2A of Article 31 and it was therefore required to meet the challenge of Article 31 clause 2
The compulsory acquisition of the right to annual cash bonus  sought to be effectuated by the impugned Act said the petitioners was not supported by public purpose nor did the impugned Act
provide for payment of any compensation for the same and hence the impugned Act was void as contravening clause 2 of Article 21
The first question which arises for consideration on this
contention is whether the right of Class III and Class IV employees to annual cash bonus  for the years 1st April 1975 to 31st March 1976 and 1st April 1976 to 31st March 1977 under the Settlement was property so as to attract the inhibition of Article 31 clause 2
The Life Insurance Corporation submitted that at the date when the impugned Act was enacted Class III and Class IV employees had no absolute right to receive annual cash bonus  either for the year 1st April 1975 to 31st March 1976 or for the year 1st April 1976 to 31st March 1977 and there was therefore no property which could be compulsorily acquired under the impugned Act
The argument of the Life Insurance Corporation was that the Life Insurance Corporation Staff Regulations 1960 which laid down the terms and conditions of services inter alia of Class III and Class IV employees did not contain any provision for payment of bonus except Regulation 58 and since under this Regulation grant of annual cash bonus by the life Insurance Corporation was subject to such directions as the Central Government might issue the right of Class III and Class IV employees to receive annual cash bonus could not be said to be an absolute right
It was a right which was liable to be set at naught by any directions that might be issued by the Central Government and in fact the Central Government did issue a direction to the life Insurance Corporation not to make payment of bonus to the employees without getting the same cleared by the Government and consequently Class III and Class IV employees had no absolute right to claim bonus
The result according to the Life Insurance Corporation also followed on a proper interpretation of clauses 8 i and 8ii of the Settlement for it was clear on a proper reading of these two clauses that annual cash bonus payable to Class III and Class IV employees under clause 8 ii was by reason of clause 8 i  subject to such directions as the Central Government might issue from time to time and the Central Government having directed that no further payment of bonus should be made to the employees Class III and Class TV employees were not entitled to claim annual cash bonus from the Life Insurance Corporation
This argument of the Life Insurance Corporation is plainly erroneous and it is not possible to accept it
Regulation 58 undoubtedly says that non profit sharing bonus may be granted by the Settlement was property and since the impugned transfer of the ownership of this right to the Life which was State  within the meaning of Article 35 7 the Life Insurance Corporation to its employees subject to such directions as the Central Government may issue and therefore if the Central Government issues a direction to the contrary nonprofit sharing bonus cannot be granted by the Life Insurance Corporation to any class of employees
But here in the present case grant of annual cash bonus by the Life Insurance Corporation to Class III and Class IV employees under clause 8ii of the Settlement was approved by the Central Government as provided it clause 12 and the direction contemplated by Regulation 58 was given by the Central Government that annual cash bonus may be granted as provided in clause 8ii of the Settlement
It was not competent to the Central Government thereafter to issue another contrary direction which would have the effect of compelling the Life Insurance Corporation to commit a breach of its obligation under section 18 sub section 1 of the to pay annual cash bonus in terms of clause 8 ii of the Settlement
Tumina to clause 8i of the Settlement it is true that under this clause non profit sharing bonus could be granted by the Life Insurance Corporation subject to such directions as the Central Government may issue from time to time but these words giving overriding power to the Central Government to issue directions from time to time are conspicuously absent in clause 8ii and it is difficult to see bow they could be projected or read into that clause
Clauses 8i and 8ii are distinct and independent clauses and while clause 8i enacts a general provision that non profit sharing bonus may be paid by the Life Insurance Corporation to Class III and Class IV employees subject to such directions as the Central Government might issue from time to time clause 8ii picks out one kind of non profit sharing bonus and specifically provided that annual cash bonus shall be paid to all Class III and Class IV employees at the rate of 15 per cent of the annual salary and this specific provision in regard to payment of annual cash bonus is made subject to only the approval of the Central Government which was admittedly obtained
It is therefore clear that Class III and Class IV employees had absolute right to receive annual cash bonus from the Life Insurance Corporation in terms of clause 8ii of the Settlement and it was not competent to the Central Government to issue any directions to the Life Insurance Corporation to refuse or withhold payment of the same
It is true that under clause 8ii of the Settlement the annual cast bonus for a particular year was payable at the rate of 15 per cent
of the annual salary actually drawn by the employee in respect of the financial year to which the bonus related and it would therefore seem that the bonus was payable at the end of
the year and not before but it was not disputed on behalf of the Life Insurance Corporation that even an employee who retired or resigned before the expiration of that year as also the heirs of a deceased employee who died during the currency of the year were entitled to receive proportionate bonus and the Life Insurance Corporation in fact recognised this to be the correct position in its administrative instructions dated 29th March 1974 and actually paid proportionate bonus to the retiring or resigning employee and the heirs of the deceased employee
The annual cash bonus payable under clause 8ii of the Settlement therefore accrued 358 from day to day though payable in case of retirement resignation or death on the happening of that contingency and otherwise on the expiration of the year to which the bonus related
There was thus plainly and unquestionably a debt in respect of annual cash bonus accruing to each Class III or Class IV employees from day to day and consequently on the expiration of the year 1st April 1975 to 31st March
1976 the annual cash bonus payable under clause 8ii of the Settlement was a debt due and owing from the Life Insurance Corporation to each Class III or Class IV employee and so also at the date when the impugned Act came into force each Class III or Class IV employee was entitled to a debt due and owing to him from the Life Insurance Corporation in respect of the annual cash bonus from 1st April 1976 upto that date
The question is whether these debts due and owing from the Life Insurance Corporation were property of Class III and Class IV employees within the meaning of Article 312
So also was the right of each Class III and Class IV employee to receive annual cash bonus for the period from the date of commencement of the impugned Act upto 31st March 1977 property for the purpose of Article 312  These questions we shall now proceed to consider for on the answer to them depends the applicability of Article 312
It is clear from the scheme of fundamental rights embodied in Part III of the Constitution that the guarantee of the right to property is contained in Article 19 1  f and clauses  1  and 2 of Article 31
It stands to reason that property  cannot have one meaning in Article 191 f another in Article 31 clause 1 and still another in Article 31 clause 2
Property  must have the same connotation in all the three Articles and since these are constitutional provisions intended to secure a fundamental right they must receive the widest interpretation and must be held to refer to property of every kind
While discussing the scope and content of Entry 42 in List III of the Seventh Schedule to the Constitution which confers power on Parliament and the Legislatures to legislate with respect to acquisition and requisitioning of property It was J speaking on behalf of the majority in R India1 that property which can be compulsorily aquired by legislation under this Entry means the highest anything being that right which one has to with respect to acquisition and requisition of property it was pointed out by Shah C Cooper vs Union of acquired by legislative a man can have to lands or tenements goods or chattels which does not depend on another s courtesy  it includes ownership estates and interests in corporeal things and also rights such as trade marks copyrights patents and even rights in persona capable of transfer or transmission such as debts and signifies a beneficial right to or a thing considered as having a money value especially with reference to transfer or succession and to their capacity of being injured
It would therefore seem that according to the decision of the majority in R C Cooper s case debts and other rights in personam capable of transfer or transmission are property which can form the subject matter of compulsory acquisition
And this would seem to be unquestionable on principle since even jurisprudentially debts and other rights of action are property and there is no 1  359 reason why they should be excluded from the protection of the constitutional guarantee
Hidayatullah CJ had occasion to consider the true nature of debt in H H Maharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur  Ors
vs Union of India1 where the question was whether the Privy Purse payable to the Ruler was property of which he could be said to be deprived by the Order of the President withdrawing his recognition as Ruler
The learned Chief Justice making a very penetrating analysis of the jural relationship involved in a debt pointed out that  a debt or a liability to pay money passes through four stages
First there is a debt not yet due
The debt has not yet become a part of the obliger s things  because
no net liability has yet arisen
The Second stage is when the liability may have arisen but is not either ascertained or admitted
Here again the amount due has not become a part of the obligor s things The third stage is reached when the liability is both ascertained and admitted
Then it is property proper of the debtor in the creditor s hands
The law begins to recognise such property in insolvency in dealing with it in fraud of creditors fraudulent preference of one creditor against another subrogation equitable estoppel stoppage intransitive etc
A credit debt is then a debt fully provable and which is fixed and absolutely owing
The last stage is when the debt becomes a judgment debt by reason of a decree of a Court and apply ing this test concluded that the Privy Purse would be property and proceeded to add  As soon as an Appropriation Act is passed there is established a credit debt and the outstanding Privy Purse becomes the property of the Ruler in the hands of Government
It is also a sum certain and absolutely payable Since the effect of the Order of the President was to deprive the Ruler of his Privy Purse which was his property the learned Chief Justice held that there was infringement of the fundamental right of the Ruler under Article 3 1 2
Hegde J also pointed out in a separate but concurring judgment that since the right to get the Privy Purse was a legal right enforceable through the courts it was undoubtedly property and its deprivation was sufficient to found a petition based on contravention of Article 312
It was also held by this Court in State of Madhya Pradesh vs Ranajirao Shinde  Anr
2 that a right to receive cash grant annually from the State was property within the meaning of that expression in Article 191f and clause 2 of Article 31
The right to pension was also regarded as property for the purpose of Article 191 f by the decisions of this Court in Deokinanda Prasad vs State of Bihar1 and State of Punjab vs K R Erry  Sobhag Rai Mehta4
This Court adopted the same line of reasoning when it said in State of Gujarat and Anr
vs Shri Ambica Mills Lid
 Ahmedabad5 that unpaid accumulations represent the obligation of the employers to the employees and they are the property of the employees
Mathew J speaking on behalf of the Court observed that the obligation to the employees owned by the employers was 1  3 1971 Supp
SCR 634
4  5  2 360 property from the standpoint of the employees
It would therefore be seen that Property within the meaning of Article 191f and clause 2 of Article 31 comprises every form of property tangible or intangible including debts and chooses in action such as unpaid accumulation of wages pension cash grant and constitutionally protected Privy Purse
The debts due and owing from the Life Insurance Corporation in respect of annual cash bonus were therefore clearly property of Class III and Class IV employees within the meaning of Article 31 clause 2
And so also was their right to receive annual cash bonus for the period from the date of commencement of the impugned
Act upto 31st March 1977 for that was a legal right enforceable through a court of law by issue of a writ of Mandamus Vide the observation of Hegde J at page 194 in the Privy Purse case
But a question was raised on behalf of the Respondents whether debts and choses in action though undoubtedly property could form the subject matter of compulsory acquisition so as to attract the applicability of Article 31 clause 2
There is divergence of opinion amongst jurists in the United States of America on this question and though in the earlier decisions of the American courts it was said that the power of eminent domain cannot be exercised in respect of money and choses in action the modern trend as pointed by Nicholas on Eminent Domain Vol 1 page 99 para 2 seems to be that the right of eminent domain can be exercised on choses in action
But even if the preponderant view in the United States were that choses in action cannot come within the power of eminent domain it would not be right to allow us to be unduly influenced by this view in the interpretation of the scope and ambit of clause 2 of Article 31
We must interpret Article 31 clause 2 on its own terms without any preconceived notions borrowed from the law in the United States on the subject of eminent domain
Let us see how this interpretative exercise has been performed by this Court in the decisions that have been rendered so far and what light they throw on the question as to whether choses in action can be compulsorily acquired under clause 2 of Article 31
We shall confine our attention only to the question of compulsory acquisition of choses in action and not say anything in regard to compulsory acquisition of money for in these appeals the question arises only in regard to choses in action and it is not necessary to consider whether money can form the subject matter of compulsory acquisition
This question came to be considered by a constitution Bench of this Court in State of Bihar vs Kameshwar Singh 
Section 4b of the Bihar Land Reforms Act 1950 which provided
for vesting in the State of arrears of rent due to the pro prietors or tenure holders for the period prior to the date of vesting of the estates or tenures held by them on payment of only 50 per cent of the amount as compensation was challenged as constitutionally invalid on the ground that there was no public purpose for which such acquisition could be said to have been made
The necessity for existence of public purpose was not sought to be spelt out from Article 31 clause 2 because even if there were violation of that 1 361 clause it would be protected by Article 31A and the Ninth Schedule read with Article 31 B the
Act being included as Item in the Ninth Schedule but it was said that public purpose was an essential element in the very nature of the power of acquisition and even apart from Article 31 clause 2 no acquisition could be made save for a public purpose
It was in the context of this argument that Mahajan J observed that money and choses in action could not be taken under the power of compulsory acquisition since the only purpose which such taking would serve would be to augment the revenues of the State and that would clearly not be a public purpose
The learned judge pointed out at pages 942 944 of the Report  It is a well accepted proposition of law that property of individuals cannot be appropriated by the State under the power of compulsory acquisition for the mere purposes of adding to the revenues of the State no instance is known in which it has been taken for the mere purpose of raising a revenue by sale or otherwise Taking money under the right of eminent domain when it must be compensated in money afterwards is nothing more or less than a forced loan Money or that which in ordinary use passes as such and which the Government may reach by taxation and also rights in action which can only be available when made to produce money cannot be taken under this power
for the taking would not be for a public purpose and proceeded to and that the only purpose to support the acquisition of the arrears of rent was to raise revenue to pay compensation to some of the zamindars whose estates are being taken and this purpose did not fall within any definition however wide of the phrase public purpose and the law was therefore to this extent unconstitutional
Mukherjea J came to the same conclusion and observed at page 961 of the Report Money as such and also rights in action are ordinarily excluded from this List by American jurists and for good reasons
There could be no possible necessity for taking either of them under the power of eminent domain
Money in the hands of a citizen can be reached by the exercise of the power of taxation it may be confiscated as a penalty under judicial order But as Cooley has pointed out taking money under the right of eminent domain when it must be compensated by money afterwards could be nothing more or less than a forced loan and it is difficult to say that it comes under the head of acquisition and is embraced within its ordinary connotation
 Chandrasekhara Aiyer J also took the same view and held that money
and choses in action were exempt from compulsory acquisition not on the ground that they are movable property but on the ground that generally speaking there could be no public purpose in their 362 acquisition
Patanjali Sastri CJ and Das J on the other hand held that the arrears of rent constituted a debt due by the tenants
It was nothing but an actionable claim against the tenants which was undoubtedly a species of property  which was assignable and therefore it could equally be acquired by the State as a species of property 
These two rival views were referred to by Venkatarama Aiyer J speaking on behalf of the Court in Bombay Dyeing  Manufacturing Co Ltd vs The State of Bombay  Ors1 but the learned Judge did not treat the majority view as finally settling the law on the subject
It appears that in the subsequent case of State of Madhya Pradesh vs Ranajirao Shinde supra Hegde J delivering the judgment of the Court observed that the majority view in Kameshwar Singh s case was followed by this Court in Bombay Dyeing  Manufacturing Co s case but we do not think that this observation correctly represents what was decided in Bombay Dyeing  Manufacturing Co s case
Venkatarama Aiyer J rested his decision in Bombay Dyeing  Manufacturing Co  case on alternative grounds  if the impugned section provided for the acquisition of money and if money could not be acquired then the section was void under Article 19 1 f as imposing an unreasonable restriction on the right to hold property
If on the other hand money could be acquired  the section was void as offending Article 31 clause 2 since the section did not provide for payment of compensation
The decision in Bombay Dyeing  Manufacturing Co s case did not therefore lay down that money and choses in action could not be acquired under Article 31 clause 2
But in State of Madhya Pradesh vs Ranojirao Shinde supra this Court did hold that money and choses in action could not form the subject matter of acquisition under Article 31 clause 2 and the reason it gave for taking this view was the same as that which prevailed with the majority judges in Kameshwar Singh s case
This Court held that the power of compulsory acquisition conferred under Article 31 clause 2 could not be utilised for enriching the coffers of the State that power could be exercised only for a public purpose and augmenting the resources of the State could not be regarded as public purpose
Hegde J speaking on behalf of the Court pointed out that if it were otherwise it would be permissible for the legislatures to enact laws acquiring all public debts due from the State annuity deposits returnable by it and provident fund payable by it by providing for the payment of some nominal compensation to the persons whose rights are acquired as the acquisitions in question would augment the resources of the State but nothing so bad could be said to be within the contemplation of clause 2 of Article 31
Let us first examine on principles whether this reasoning qua choses in action is sound and commends itself for our acceptance
This premise on which this reasoning is based is that the only purpose for which choses in action may be acquired is augmenting the revenues of the State and there can be no other purpose for such 1  363 acquisition
But this premise is plainly incorrect and so is the reasoning based upon it
Why can choses in action not be acquired for a public purpose other than mere adding to the revenues of the State  There may be debts due and owing by poor and deprived tillers artisans and landless labourers to moneylenders and the State may acquire such debts with a view to relieving the weak and exploited debtors from the harassment and oppression to which they might be subjected by their economically powerful creditors
The purpose of the acquisition in such a case would not be to enrich the coffers of the State
In fact the coffers of the State would not be enriched by such acquisition because having regard to the financial condition of the debtors it may not be possible for the State to recover much or perhaps anything at all from the impoverished debtors
The purpose of such acquisition being relief of the distress of the poor and helpless debtors would be clearly a public purpose
We have taken one example by way of illustration but in a modern welfare State dedicated to a socialist pattern of society myriad situations may arise where it may be necessary to acquire choses in action for achieving a public purpose
It is not correct to say that in every case where choses in action may be acquired the purpose of acquisition would necessarily and always be augmenting of the revenues of the State and nothing else
Even the theory of forced loan may break down in case of acquisition of choses in action
There is a fundamental difference between chose in action and money in that the former has not the same mobility and liquidity as the latter and its values is not measured by the amount recoverable under it but it depends on a variety of factors such as the financial condition of the person liable the speed and effectiveness of the litigative process and the eventual uncertainty as to when and to what extent it may be possible to realise the chose in action
Even after the chose in action is acquired the State may not be able to recover the amount due under it and there may even be cases where the chose in action may be released by the State
Where money is given as compensation for taking of money the theory of forced loan may apply
but it is difficult to see how it can be applicable where chose in action is taken and money representing its value which in a large majority of cases would be less than the amount recoverable under it is given as compensation
Moreover the theory of forced loan stands considerably eroded after the amendment of Article 31 clause 2 by the Constitution Twenty fifth Amendment Act 1971 because under the amended clause even if an amount less than the just equivalent is given as compensation for acquisition of property it would not be violative of the constitutional guarantee
It is true and this thought was also expressed by Krishna Iyer J and myself in our separate but concurring Judgment in the State of Kerala vs The Gwalior Rayon Silk Manufacturing Wvg Co Ltd1 that notwithstanding the amended clause 2 of Article 31 the legislature would be expected save in exceptional socio historical setting to provide just compensation for acquisition of property but if for any reason the legislature provides a lesser amount than the just equivalent it would not be open to challenge on the ground of infringement of clause 2 of Article 1 1974 1 SCR671
364 31
Then how can the theory of forced loan apply when chose in action is acquired and what is paid for it is not the just equivalent but a much lesser amount which is of course not illusory
Moreover there is also one other fallacy underlying the argument that there can be no public purpose in the acquisition of choses in action and that is based on the assumption that the public purpose contemplated by Article 31 clause 2 lies in the use to which the pro perty acquired is to be put as for example where land or building or other movable property is acquired for being used for a public purpose
But this assumption is hot justified by the language of Article 31 clause 2 because all that this clause requires is that the purpose for which the acquisition is made must be a public purpose or in other words the acquisitions must be made to achieve a public purpose
Article 31 clause 2 does not require that the property acquired must itself be used for a public purpose
So long as the acquisition subserves a public purpose it would satisfy the requirement of clause 2 of Article 31 and therefore if it can be shown that the acquisition of choses in action is for subserving a public purpose it would be constitutionally valid
Hegde J expressed an apprehension in State of Madhya Pradesh vs Ranojirao Shinde supra that if this view were accepted it would be permissible for the legislature to enact laws acquiring the public debts due from the State the annuity deposits returnable by it and the provident fund payable by it by providing for payment of some nominal compensation to the persons whose rights were acquired
We do not think this apprehension is well founded
It is difficult to see what public purposes can possibly Justify a law acquiring the public debts due to the State or the annuity deposits returnable by it or the provident fund payable by it
If the legislature enacts a law acquiring any of these choses in action it could only be for the purpose of augmenting the revenues of the State or reducing State expenditure and that would clearly not be a public purpose and the legislation would plainly be violative of the constitutional guarantee embodied in Article 31 clause 2
We would therefore prefer the minority view of Das J in Kameshwar singh s case supra as against the majority view of Mahajan J Mukherjea J and Chandrasekhara Aiyer J So much on principle
Turning now to the authorities we find that apart from the view of the majority judges in Kameshwar Singh s case and the decision in the State of Madhya Pradesh vs Ranojirao Shinde supra there is no other decision of this Court which has taken the view that choses in action cannot be compulsorily acquired under Article 31 clause 2
There are in fact subsequent decisions which clearly seem to suggest the contrary
We have already referred to R C Cooper s case
The majority judgment case gives the widest meaning to property which of Shah J in that can be compulsorily acquired and includes within it rights in personam capable of transfer or transmission such as debts
The majority view in Kameshwar Singh s case supra and the decision in State of Madhya Pradesh vs Ranojirao Shinde supra on this point can no longer be regarded as good law in view of this statement of the law in the majority judgment of Shah J Then again in the Privy Purse case supra 365 Hidayatullah CJ held that the Privy Purse payable to a Ruler was a credit debt owned by him and since he was deprived of it by the Order of the President there was violation of his fundamental right under Article 31 clause 2
The learned Chief Justice thus clearly recognised that debt or chose in action could form the subject matter of compulsory acquisition under Article 31 clause 2
Hegde J also took the same view in his separate but concurring judgment in the Privy Purse case
It will therefore be seen that the trend of the recent decisions has been to regard debt or chose in action as property which can be compulsorily acquired under clause 2 of Article 31
We are accordingly of the view that the debts due and owing from the Life Insurance Corporation to Class III and Class IV em ployees in respect of annual cash bonus were property  within the meaning of Article 3 1 clause 2 and they could be compulsorily acquired under that clause
The question however still remains whether by the impugned Act there was compulsory acquisition of the debt due and owing from the Life Insurance Corporation to Class III and Class IV employees in respect of annual cash bonus
It was not disputed on behalf of the Life Insurance Corporation that if the impugned Act had the affect of compulsorily acquiring these debts belonging to Class III and Class IV employees it would be void as offending Article 31 clause 2 since it admittedly did not provide for payment of any compensation
The Statement of Objects and Reasons undoubtedly said that the provisions of the Settlement in regard to payment of annual cash bonus were being set aside with effect from 1st April 1975 with a view to enabling the Life Insurance Corporation to make ex gratia payment to the employees at the rates determined on the basis of the general Government policy for making ex gratia payments to the employees of non competing public sector undertaking
But the impugned Act did not contain any provision to that effect and Class III and Class IV employees were deprived of the debts due and owing to them without any provision in the statute for payment of compensation
The learned Attorney General on behalf of the Life Insurance Corporation however strenuously contended that there was no compulsory acquisition of the debts due and owing to Class III and Class IV employees under the impugned Act but all that the impugned Act did was to extinguish those debts by annihilating the provisions of the Settlement in regard to payment of annual cash bonus with effect from 1st April 1975
The debts due and owing from the Life Insurance Corporation to Class III and Class IV employees said the learned Attorney General were extinguished and not compulsorily acquired and hence there was no contravention of Article 31 clause 2
Now prior to the Constitution Fourth Amendment Act 1955 which introduced clauses 2A and 2B in Article 3 1 there was considerable controversy as to the inter relation between clauses 1 and
2 and that coloured the interpretation of the words taken possession of or acquired in clause 2 as it stood prior to the amendment
The majority view in The State of West Bengal vs Subodh Gopal Bose  Ors1 and Dwarkadas Shrinivas of 1  6 277SCI78 366 Bombay vs The Sholapur Spinning  Weaving Co Ltd  Ors1 was that clauses 1 and 2 of Article 31 were not mutually exclusive but they dealt with same topic and the deprivation contemplated in clause 1 was no other than the compulsory acquisition or taking possession of property referred to in clause 2 and hence where the deprivation was so substantial as to amount to compulsory acquisition or taking possession Article 31 was attracted
The introduction of clause   A in Article 31 snapped the link between clauses 1 and 2 and brought about a dichotomy between these two clauses
Thereafter clause
2 alone dealt with compulsory acquisition or requisitioning of property by the State and clause 1 dealt with deprivation of property in other ways and what should be regarded as compulsory acquisition or requisitioning of property for the Purpose of clause 2 was defined in clause 2A
It was if clause 2A supplied the dictionary for the mean of compulsory acquisition and requisitioning of property in clause 2
Clause 2A declared that a law shall not be deemed to provide for the compulsory acquisition or requisitioning of property if it does not provide for the transfer of the ownership or right to possession of the property to the State or to a corporation owned or controlled by the State
It is only where a law provides for the transfer of ownership or right to possession of any property to the State or to a corporation owned or controlled by the State that it would have to meet the challenge of clause 2 of Article 31 as a law providing for compulsory acquisition or requisitioning of property
Whenever therefore the constitutional validity of a law is challenged on the ground of infraction of Article 31 clause 2 the question has to be asked whether the law provides for the transfer of ownership or right to possession of any property to the State or to a corporation owned or controlled by the State
Here the Life Insurance Corporation is a corporation owned by the State as its entire capital has been provided by the Central Government
The debts due and owing to Class III and Class IV employees from the Life Insurance Corporation are cancelled or extinguished by the impugned Act
Does that amount to transfer of ownership of any property to the Life Insurance Corporation within the meaning of clause 2A of Article 31  If it does Article 31 clause 2 would be attracted but not otherwise
That depends on the true interpretation of Article 31 clause 2A
Now whilst interpreting Article 31 clause 2A it must be remembered that the interpretation we place upon it will determine the scope and ambit of the constitutional guarantee under clause 2 of Article 31
We must not therefore construe clause 2A in a narrow pedantic manner nor adopt a doctrinaire or legalistic approach
Our interpretation must be guided by the substance of the matter and not by lex scripts
When clause 2A says that in order to attract the applicability of clause 2 the law must provide for the transfer of ownership of property to the State or to a corporation owned or controlled by the State it is not necessary that the law should in so many words provide for such transfer
No particular verbal formula need be adopted
It is not a ritualistic mantra which is required to be repeated in the law
What 1  3 67 has to be considered is the substance of the law and not its form
The question that is to be asked is  does the law in substance provide for transfer of ownership of property whatever be the linguistic formula employed  What is the effect of the law  does it bring about transfer of ownership of property  Now transfer of ownership is also a term of wide import and it comprises every mode by which ownership may be transferred from one person to another
The mode of transfer may vary from one kind of property to another  it would depend on the nature of the property to be transferred
And moreover the court would have to look to the substance of the transaction in order to determine whether there is transfer of ownership involved in what has been brought about by the law
There is no doubt that in the present case the impugned Act extinguished or put an end to the debts due and owing from the Life Insurance Corporation to Class III and Class IV employees
that was the direct effect of
the impugned Act and it can therefore be legitimately said that in substance the impugned Act provided for extinguishment of these debts though it did not say so in so many words
This much indeed was not disputed on behalf of the Life Insurance Corporation and the controversy between the parties only centred round the question whether the extinguishment of these debts involved any transfer of ownership of property to the Life Insurance Corporation
The learned Attorney General on behalf of the Life Insurance Corporation sought to make a distinction between extinguishment and transfer of ownership of a debt and contended that when ownership of a debt is transferred it continues to exist as a debt in the hands of the transferee but when a debt is extinguished it ceases to exist as a debt and it is not possible to say that the debtor has become the owner of the debt
There can be no transfer of ownership of a debt said the learned Attorney General unless the debt continues to exist as such in the hands of the transferee and therefore extinguishment of a debt does not involve transfer of ownership of the debt to the debtor
This contention of the learned Attorney General though attractive at first blush is in our opinion not well founded
It is not correct to say that there can be no transfer of ownership of a right or interest unless such right or interest continues to have a separate identifiable existence in the hands of the transferee
It is not difficult to find instances where ownership of a right or interest may be transferred from one person to another by extinguishment
Take for example a case where the lessor terminates the lease granted by him to the lessee by exercising his right of forfeiture or the lessee surrenders the lease in favour of the lessor
The lease would in such a case come to an end and the interest of the lessee would be extinguished and correspondingly the reversion of the lessor would be enlarged into full ownership by the return of the leasehold interest
There would clearly be transfer of the lease hold interest from the lessee to the lessor as a result of the determination of the lease and the extinguishment of the interest of the lessee
The same would be the position where A law provides for cancellation of the lease and in such a case if the lessor is the State or a corporation owned or controlled by the State it would amount to compulsory acquisition of the leasehold interest of the lessees within meaning of clause 2A of Article 31
It was in fact to held by this 368 Court and in our opinion rightly in Ajit Singh vs State of Punjab1 where sikri J speaking on behalf of the majority pointed out at page 149 that if the State is the landlord of an estate and there is a lease of that property and a law provides for the extinguishment of leases held in an estate it would properly fall under the category of acquisition by the State because the beneficiary of extinguishment would be the State
Where by reason of extinguishment of a right or interest of a person detriment is suffered by him and a corresponding benefit accrues to the State there would be transfer of ownership of such right or interest to the State
The question would always be  who is the beneficiary of the extinguishment of the right or interest effectuated by the law If it is the State then there would be transfer of ownership of the right or interest to the State  because what the owner of the right or interest would have lost by reason of the extinguishment would be the benefit accrued to the State
This was precisely the reason why Hegde J speaking on behalf of the Court observed in the State of Madhya Pradesh vs Ranojirao Shinde supra that it was possible to view the abolition of cash grants under the Madhya Pradesh law impugned in that case as a statutory transfer of rights of the grantees to the State
It was pointed out in that case that there was no difference between taking by the State of money that is in the hands of others and the abrogation of the liability of the State to make payment to others for in the former case the State would be compulsorily taking others  property while in the latter it would be seeking to appropriate to itself the property of others which is in its hands
It is therefore clear that when a debt due and owing by the State or a corporation owned or controlled by the State is extinguished by law there is transfer of ownership of the money representing the debt from the creditor to the State or the State ownedcontrolled corporation
So long as the debt is due and owing to the creditor the State or the State ownedcontrolled corporation is under a liability to pay the amount of the debt to the creditor and therefore if the amount of the debt is X the total wealth of the creditor would be A plus X while that of the State or State ownedcontrolled corporation would be B minus X
But if the debt is extinguished the total wealth of the creditor would be reduced by X and that of the State or State ownedcontrolled corporation augmented by the same amount
Would this not be in substance and effect of transfer of X from the creditor to the State or State ownedcontrolled corporation  The extinguishment of the debt of the creditor with corresponding benefit to the State or State ownedcontrolled corporation would plainly and indubitably involve transfer of ownership of the amount representing the debt from the former to the latter
This is the real effect of extinguishment of the debt and by garbing it in the form of extinguishment the State or State ownedcontrolled corpo ration cannot obtain benefit at the cost of the creditor and yet avoid the applicability of Article 31 clause 2
The verbal veil constructed by employing the device of extinguishment of debt cannot be permitted to conceal or hide the real nature of the transaction
It is necessary to remember that we are dealing here with a case where a constitutionally guaranteed right is sought to be enforced and the protection of such right should not be allowed to be defeated or rendered illusory by legis 3 69 lative stratagems
The courts should be ready to rip open such stratagems and devices and find out whether in effect and substance the legislation trenches upon any fundamental rights
The encroachments on fundamental rights are often subtle and sophisticated and they are disguised in language which apparently seems to steer clear of the constitutional inhibitions
The need for a perspective and alert Bar is therefore very great and the courts too have to adopt a bold and dynamic approach if the fundamental rights are to be protected against dilution or erosion
In the light of this discussion the conclusion is inevitable that the direct effect of the impugned Act was to transfer ownership of the debts due and owing to Class III and Class IV employees in respect of annual cash bonus to the Life Insurance Corporation and since the Life Insurance Corporation is a corporation owned by the State the impugned Act was a law providing for compulsory acquisition of these debts by the State within the meaning of clause 2A of Article 31
If that be so the impugned Act must be held to be violative of Article 31 clause 2 since it did not provide for payment of any compensation at ail
for the compulsory acquisition of these debts
Re  Ground B Since the impugned Act has been held void as offending Article 3 1 clause 2 under Ground A it is unnecessary to consider Ground B based on infraction of Article 19  1 f
It is the settled practice of this Court to decide no more than what is absolutely necessary for the decision of a case
Moreover once it is held that the impugned Act falls within Article 31 clause 2 its validity cannot be tested by reference to Article 19 1 f by reason of clause 2B of Article 31
Hence we do not propose to discuss the very interesting arguments advanced before us in regard to Article 19 1 f
We accordingly allow the writ petitions and declare the Life Insurance Corporation Modification of Settlement Act 1976 void as offending Article 31 clause 2 of the Constitution and issue a writ of Mandamus directing the union of India and the Life Insurance Corporation to forebear from implementing or enforcing the provisions of that Act and to pay annual cash bonus for the years 1st April 1975 to 3 1 st March 1976 and 1 st April 1976 to 3 1 st March 1977 to Class III and Class IV employees in accordance with the terms of clause 8ii of the Settlement dated 24th January 1974
The respondents will pay the costs of the writ petitions to the petitioners
ORDER We agree with the conclusion of Brother Bhagwati but prefer to rest our decision on the ground that the impugned Act violates the provisions of Article 312 and is therefore void
We consider it unnecessary to express any opinion on the effect of the judgment of the Calcutta High Court in WP No 371 of 1976
PBR Petitions allowed


Summary:
From time to time the Life Insurance Corporation and its employees arrived at settlement relating to the terms and conditions of service of Class III and Class IV employees including bonus payable to them
Clause 8 of the Settle ment dated January 24 1974 which related to payment of bonus provided i that no profit sharing bonus shall be paid but the Corporation may subject to such directions as the Central Government may issue from time to time grant any other kind of bonus to its Class III and Class IV employees ii that an annual cash bonus will be paid to all Class III and Class IV employees at the rate of 15 of the annual salary actually drawn by an employee in respect of the financial year to which the bonus relates and iii that save as provided therein all other terms and conditions attached to the admissibility and payment of bonus shall be as laid down in the Settlement on bonus dated June 26 1972
Clause 12 of the Settlement which refers to the period of settlement provided 1 that the Settlement shall be effective from April 1 1973 for a period of four years and 2 that the terms of the Settlement shall be subject to the approval of the Board of the Corporation and the Central Government
One of the administrative instructions issued by the Corporation in regard to the payment of cash bonus under cl
8ii of the Settlement was that in case of retirement or death salary up to the date of cessation of service shall be taken into account for the purpose of determining the amount of bonus payable to the employee or his heirs and the other was that the bonus shall be paid along with the salary for the month of April but in case of retirement or death payment will be made soon after the contingency
The payment of Bonus Amendment Act
1976 considerably curtailed the rights of the employees to bonus in industrial establishments
But in so far as the employees of the Corporation were concerned this Act had no application because by reason of section 32 of the Payment of Bonus Act the Corporation was outside the purview of its operation
The Central Government however decided that the employees of establishments which were not covered by the Bonus Act would not be eligible for payment of bonus but exgratia payment in lieu of bonus would be made to them
Pursuant to this decision the LT C was advised by the Ministry of Finance Government of India that no further payment of bonus should be made to its employees without getting the same cleared by the Government
The Corporation accordingly issued administrative instructions not to pay bonus to its employees under the existing provisions until further instructions
To the employees  assertion that the Corporation was bound to 335 pay bonus in accordance with the terms of the Settlement the Corporation cOntended that payment of bonus by the Corporation was subject to such directions as the Central Government might issue from time to time and since the Central Government had advised it not to make any payment of bonus without its specific approval bonus could not be paid to the employees
Thereupon the All India Insurance Employees  Association moved the High Court for issue of a writ directing the Corporation to act in accordance with the terms of the Settlement dated January 24 1974 read with administrative instructions dated March 29 1974 and not to refuse to pay cash bonus to Class III and Class IV employees
A single Judge of the High Court allowed the writ petition
While the Letters Patent Appeal was pending Parliament passed the Life Insurance Corporation Modification of Settlement Act 1976 which is the Act impugned in this case
In the Letters Patent Appeal the Corporation stated that in view of the impugned Act  there was no necessity for proceeding with the appeal and hence the Division Bench made no order in the appeal
Since the effect of the impugned Act was to deprive Class III and Class IV employees of bonus payable to them in accordance with the terms of the Settlement two of the associations filed writ petitions in this Court challenging the constitutional validity of the impugned Act
It was contended on their behalf that even if the impugned Act rendered cl
8 ii ineffective with effect from April 1 1975 it did not have the effect of absolving the Life Insurance Corporation from its obligation to carry out the writ of Mandamus issued by the High Court and 2 that the right of Class III and Class IV employees to annual cash bonus for the years 1975 76 and 1976 77 under Cl
8ii of the Settlement was property and since the impugned Act provided for compulsory acquisition of this property
without payment of compensation it was violative of article 312 of the Constitution
Allowing the writ petitions Beg CJ concurring with the majority HELD  Section 3 of the Life Insurance Corporation Modification of Settlement Act 1976 is struck by the provisions of article 191f and is not saved by article 196 of the Constitution
346 A 1
The Statement of Objects and Reasons of the Act discloses that the purpose of the impugned Act was to undo settlements arrived at between the Corporation and Class III and Class IV employees on January 24 and February 6 1974 and recognised by the High Court
In Smt
Indira Gandhi vs Raj Narain this Court held that even a constitutional amendment cannot authorise the assumption of judicial power by Parliament
One of the tests laid down was whether the decision is of a kind which requires hearing to be given to the parties ie whether it involves a quasi judicial procedure
A decision reached by the Central Government is the result of a satisfaction on matters stated there and would imply quasi judicial procedure where the terms of a settlement had to be reviewed or revised
But the legislative procedure
followed in this case does not require that to be done
It would be unfair to adopt legislative procedure to undo a settlement which had become the basis of a decision of a High Court
Even if legislation can remove the basis of a decision it has to do it by an alteration of general rights of a class but not by simply excluding two specific settlements between the Corporation and its employees from the purview of section 18 of the which had been held to be valid and enforceable by a High Court
341 G H 342 A C 2a The object of the Act was in effect to take away the force of the judgment of the High Court
Rights under that judgment could be said to rise independently of article 19 of the Constitution
To give effect to that judgment is not the same thing as enforcing a right under article 19
It may be that a right under article 19 becomes linked up with the enforceability of the judgment
Nevertheless the two could be viewed as separable sets of rights
If the right conferred by the judgment independently is sought to be set aside section 3 would be invalid for trenching upon the judicial power
343 B D 336 b A restriction upon a right may even cover taking away of the right to increased remuneration in the interests of the general public
But the present is a pure and simple case of deprivation of rights of the employees without any apparent nexus with any public interest
In the instant case the impugned Act is a measure which seeks to deprive workers of the benefits of settlement arrived at and assented to by the Central Government under the provisions of the 
Such a settlement should not be set at naught by an Act designed to defeat the purpose
In judging the reasonableness of an Act the prospects held out the representations made the conduct of the Government and equities arising therefrom may all be taken into consideration
342 E F 344 E F 3
Even though the real object of the Act was to set aside the result of mandamaus the section does not mention this object
This was perhaps because the jurisdiction of a High Court and the effectiveness of its orders derived their force from article 226 of the Constitution
Even if section 3 seeks to take away the basis of the judgment without mentioning it yet where the rights of the citizens against the State are concerned the court should adopt an interpretation which upholds those rights
Therefore the rights which had passed into those embodied in a judgment and become the basis of a mandamus from the High Court could not be taken away in an indirect fashion
343 D E
Even though the Directive Principles contained in article 43 cast an obligation on the State to secure a living wage for the workers and is part of the principles declared fundamental in the governance of the country it is not a fundamental right which can be enforced
Even though the Directive Principles give a direction in which the fundamental policies of the State must be oriented yet this Court cannot direct either the Central Government or the Parliament to proceed in that direction
Even if the Directives are not directly enforceable by a Court they cannot be declared ineffective
They have the life and force of fundamentals
The best way to give vitality and effect to them is to use them as criteria of reasonableness
344 B C 5a Articles 358 and 3591A provide that as soon as the Proclamation of emergency cease to operate the effect of suspension must vanish except as respects things done or omitted to be done before the law so ceases to have effect  346 B C b The term things done or omitted to be done should be interpreted very narrowly
In the present case it means that the settlements are not to be deemed to be wiped off
All that it means is that no payment of bonus could be demanded during the emergency but as soon as the emergency was over the settlement would revive and what could not be demanded during the emergency would become payable even for the period of emergency for which payment was suspended
In other words valid claims cannot be washed off by the emergency per se
They can only be suspended by a law passed during the operation of articles 358 and 3591A
346 C F Per Chandrachud Fazal Ali and Shinghal JJ
Concurring with the majority
The impugned Act violates article 312 and is therefore void
369 G Per Bhagwati Iyer and Desai JJ Irrespective whether the impugned Act is constitutionally valid or not the Corporation is bound to obey the Writ of Mandamus issued by the High Court and to pay annual cash bonus for the year 1975 76 to Class III and Class IV employees
352 D E 1
Section 3 of the impugned Act merely provided that the provisions of the Settlement in so far as they related to payment of annual cash bonus to Class in and Class IV employees shall not have any force or effect and shall not be deemed to have had any force or effect from April 1 1975
The writ of Mandamus issued by the High Court was not touched by the impugned Act
The right of the employees to annual cash bonus  for the year 1975 76 became 337 crystallised in the judgment and this right was not sought to be taken away by the impugned Act
The Judgment continued to subsist and the corporation was bound to pay bonus in obedience to the writ of Mandamus
By the time the Letters Patent Appeal came up for hearing the impugned Act had already come into force and the Corporation could have successfully contended in the appeal that since the Settlement in so far as it provided for payment of annual cash bonus was annihilated by the impugned Act with effect from 1st April 1975 and so the employees were not entitled to bonus for the year 1975 76 and hence no writ of Mandamus could issue against the Corporation directing it to make payment of bonus
If such contention had been raised there is little doubt that the judgment of the single Judge would have been upturned
But that was not done and the judgment of the single Judge became final and binding oil the parties
353 A F 355 C Shri Prithvi Cotton Mills Ltd vs Broach Borough Municipality 1970 1 SCR 358 and Patel Gordhandas Hargovindas vs Municipal Commissioner Alimedabad   distinguished and held inapplicable 2a
The argument on behalf of the Corporation that on a proper interpretation of the clauses annual cash bonus payable under cl
8ii was by reason of cl
8i subject to the directions issued by the Central Government from time to time and the Government having stopped further payment of bonus the employees were not entitled to claim annual cash bonus is erroneous
The employees had absolute right to receive annual cash bonus from the Corporation in terms of el 8ii and it was not competent to the Central Government to issue any directions to the Corporation to refuse or withhold payment of the same
356 D H b Although under regulation 58 of the Service Regulations non profit sharing bonus could be granted subject to the directions of the Central Government and if the Government issues a direction to the contrary bonus could not be paid by the Corporation in the instant case as provided in cl 12 of the Settlement the Central Government approved the payment of bonus under cl 8ii
That having been done it was not competent to the Central Government thereafter to issue another contrary direction which would have the effect of compelling the Corporation to commit a breach of its obligation under section 181 of the to pay annual cash bonus under clause 8ii
The overriding power given to the Central Government to issue directions from time to time contained in cl
8i is conspicuously absent in cl 8ii
The power contained in cl
8i cannot be projected or read into cl 8ii
These two clauses are distinct and independent
While cl 8i is a general provision el 8ii specifically provides that cash bonus in the manner prescribed therein shall be paid to the employees
This specific provision is made subject only to the approval of the Central Government which was obtained
357 A F c Moreover under cl
8ii read with the administrative instruction issued by the Corporation annual cash bonus accrued from day to day though payable in case of retirement resignation or death on the happening of that contingency and otherwise on the expiration of the year to which the bonus related Thus the annual cash bonus payable for the year 1975 76 was a debt due and owing from the Corporation to each of the employees
 On the date when the impugned Act came into force each of the employees was entitled to a debt due and owing to him from the Corporation
357 H 358 A 3a The impugned Act must be held to be violative of article 312 since it did not provide for payment of any compensation for the compulsory acquisition of the debts
369 C b The direct effect of the impugned Act was to transfer ownership of the debts due and owing to Class III and Class IV employees in respect of cash bonus to the Life Insurance Corporation and since the Corporation is a Corporation owned by the State the impugned Act was a law providing for compulsory acquisition of the debts by the State within the meaning of article 312A
1369 B C 338 c Choses in action can be acquired by the State
So long as the acquisition sub serves a public purpose it would satisfy the requirement of article 312
There is a fundamental distinction between a chose in action and money
A chose in action has not the same mobility and liquidity as money and its value is not measured by the amount recoverable under it but depends on a variety of factors
Where money is given as compensation for taking money the theory of forced loan may apply but it is not applicable where a chose in action is taken and money representing its value is given as compensation
363 A D F R C Cooper vs Union of India   Madhav Rao Scindia vs Union of India   reiterated
State of Bihar vs Kameshwar Singh  State of Madhya Pradesh vs Ranojirao Shinde   dissented Deokinandan Prasad vs State of Bihar 1971 Suppl
SCR 634 State of Punjab vs K R Erray  Sobhag Rai Mehta   State of Gujarat vs Sri Ambica Mills Ltd  and Slat of Kerala vs The Gwalior Rayon Silk Mfg
Wvg Co Ltd  followed State of Madhya Pradesh vs Ranojirao Shinde 1968 3 SCR 489 State of Bihar vs Kameshwar Singh and Bombay Dyeing and Manufacturing Co Ltd vs State of Bombay  explained  and  held no longer good law
d The debts due and owing from the Corporation in respect of annual cash bonus were clearly property of the employees within the meaning of article 312 and they could be compulsorily acquired under article 312
Similarly their right to receive cash bonus for the period from the date of commencement of the impugned Act upto March 31 1977 was a legal right enforceable through Court of law
360 B C a Property within the meaning of articles 191f and 312 comprises every form of property tangible or intangible including debts and choses in action such is unpaid accumulation of wages pension cash grants etc
360 A R C Cooper vs Union of India   H H Maharajadhiraja Madhay Rao Jiwaji Rao Scindia Bahadur  Ors
vs Union of India   State of MP vs Ranojirao Shinde  Anr   Deokinandan Prasad vs State of Bihar 1971 Supp
SCR 634 State of Punjab vs K R Erry  Sobhag Rai Mehta 1973 2 SCR 485 and State of Gujarat  Anr vs Shri Ambica Mills Ltd Ahmedabad  referred to
4a The contention of the Corporation that when ownership of a debt is transferred it continues to exist as a debt but that when the debt is extinguished it ceases to exist as a debt and that extinguishment of a debt does not therefore involve transfer of ownership of the debt to the debtor is not well founded
Where by reason of extinguishment of a right or interest of a person detriment is suffered by him and a corresponding benefit accrues to the State there would be transfer of ownership of such right or interest to the State
The question would always be  who is the beneficiary of the extinguishment of the right or interest effectuated by the law  If it is the State then there would be transfer of ownership of the right or interest to the State because what the owner of the right or interest would lose by reason of the extinguishment would be the benefit accrued to the State 367 H 368 B C b Extinguishment of the debt of the creditor with corresponding benefit to the State or State ownedcontrolled Corporation would involve transfer of ownership of the amount representing the debt from the former to the latter
This is the real effect of extinguishment of the debt and by garbing it in the form of extinguishment the State or State ownedcontrolled Corporation cannot obtain benefit at the cost of the creditor and yet avoid  the applicability of 339 article 312
The verbal veil constructed by employing the device of extinguishment of debt cannot lot permitted to conceal or hide the real nature of the transaction 368 F B