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AJOY KUMAR BANERJEE & ORS. ETC.

v.·

UNION OF INDIA & ORS. ETC.

12fst March, 1984

[Y.V. CHANDRACHUD C.J., R.S. PATI!AK Al'D SABYASACHI

MUKHARJI, JJ.)

Constitution t>[ India 1950, Artie/~.• 14, I9(1) (g), ' Artie/~ JIB & G•~trar !murance Businrss (NatiatolisQtion) Act 1972 Src. 16, Rixhr ~( Cemrol Gam~ mcnt to from~ Jcht-s under tilt Act-Whtthtr affects fundamrnta/ rifhUof

- rmp/oyeu of companlu constituted unclrr the Act.

1nc/Ju/on of on 1Act In rite Ninth Srltt<lttle dors not prottct ordu at •4 cations luutd undtr the said Act. ·

Schrm~ natifitd undrr Su. 16(1) uhethtr protutrcl.

Introduction of ,.fdrm through ft!litfalion-Law nud Ml ha>t unimsof oppficotion-Pit<Ymrof mttT.od of introducing r<forms-Whtthtr ptrntiSJib!<- Srutulory provlsio11 M'htth'r could bt srruck 1/own. 011 viet u/ umltdncllls[on.

I huiMifial Disputrs Act /947-Witetlttr oppficabf~ le> grMral insurQna tom- .POnln \

Crn<ral Insurance lJus/nru (Nationali•atiull) Act 1971, &c. 16(1)/.g).

Grn<ra/ Insurance (Rotlottalisatlon anJ Revision of Pay•Scalu nn:Ji!lhtr Condt1lon. of'St, lrt of Supervisory, Clerlcul and Subordittot6 Stoff) S~ Amrmlment Schrmc of 19SO-Sclttmt <>f 1980 rrfttllif/1/0 rvlsioll of pay sralts atJ4 othtr lrrnu ond condillons of service-Whtt!ttr u/11o vlru Sec. /6{2) oud ;,., JiJ-· IVhttlttr suf!rrs from vi" oft.tcuslvc <lt/egatlun of /egis/uti!'<! p'uwtr. • ·

lnttrputotlon of Stotuts-Couf/tt btwet!lt lire statttts..:..Ont iptclal othrt' II • ltntrai-Whlrlr; to prtvnii-TtJI$fur dttamln<ttlon o[. .

/t /"'rrpretat/on of slatttl<s-Not '"~'' exur/u Ill ulllllcs-Pro•is!otll ~

trr "''" dtl•flallt!f poer-Curmruclion.

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A.K. B:\NERJCE V. UNION . 253

. to !972 tl\cre were over l 00 lnsuranc~ Companies-Indian and rnor ' r 1 1 , The conditions of serv1cc o t1e emp oyees of these companies were (ore•gn. d by the rc.1pectivc contracts of service between th~ companies and the governc On t3th.May 1971, the Government oflndia a'Sumed managment ' (mployesc.ncral insurance companies under the General Insurance (Emergency of theseS . . .

Provisions) Act, 1971. Th.e General Inuran; e Busmess~(Nat•onal 1sation) Act,

1972 nationalised gcneralJnsurnce busmes5..o ·

Fo;•r merger schemes ere framed in 1973 b>· the Central Govrnment in ercise of the powers contained in s. 16(1) of the Act and four co:np, nies;

riental Fire and General Insurance Company, Naliolkll Insurance Complny N•"' India Assurance Compan)' and United India Insurance Company Ltd., wm merged into and they . alone "ere allowed to carry OTl the busine.s of g<ocral insurane. The1c comp1nies started functioning from lst.January, 1973

nd the process of mergr was completed by 1st January, 1974 when the 8forc- $3id four schemes came into force.

The Government of India_by a notification dat.:d 27th !>by, 1974, fronted a '.cheme' called the General Insurance (Rationalisation and Re, ision of Pay Sal,. and Other Cond1tions of Service or Supervisory, Clerical and Subordhate

StU!') S:h<me, 1974 in exercise of the powers conferred by s. 16(,)(g) of the Act.

This achcme provided for tbe rationalisation and revisiC>n of pay scales and otbcr ltrms and condilions of service of employ"s working in sup:rvisory, clericJI and !llbordioate positions 'and governed the pay scales, dearness atlowanec, other a!Jowaoces and other trms and conditions of the general insurance emp!oyees.

Plroyaph 23 or the Scheme prolrided that the new 'seal~ of pay' shall remain in force till Decnnber 31, 1976 and thereafter shall continue to be in force

Wll<:!S modified by the Central Go,-emment.

lo 1976, the Board of Directors approved a policy for promotion. On lit .

June, 1976. another SCheme by Which amendment~ y, erc made With reg:lrd tO

Pvidtnt Fund, Was Introduced. On 30th July 1977, a Scheme amending pro-

Y~IOfls regarding skk leave was also introduced.

IC I The employees submit!ed a memorandum objtig to. the revision of pay

1 t and other cond•tions or service and wntcd a n:f~nc.: to the Industrial ~

nl. The class IU nod IV emploees .hoWe\er did oot accept the revision of

rvee Condllio • d d 1 di1pufe. The . ns, Pay. ,"Cle-s l!earnes4 allowance, tc. ~d r'IJe n ustrta lnll bl ro "'ere conctlltJon procccdinLS and thre was la1lurc to bmg about ca e scttktnent or dhpute1• . . •

In 1980 the G . . . . f' . and b 1 • ' overnment introduc~J the General Insurance (Rallona JSatJon. "'"' lton of p s · Cl • ~I and S bo . ay cak, and Other Conditions of Seryice of Supe1 vtsory, <;"· ' was int du rdJnatc Stafl') Second Amendment Scheme, 1980. This Scheme wh1ch ro Uted b d d 'I d lion," 1.

Y a notifkation date..! Septemtxr 30, 1980 rna c eta1 e provt Allowan ° how the adjustment ullowunce iS to be dealt with so far u D:acness

ltti~~· CC. Ovenirnc Allowanc.: Contribution to Provident Fund and other

 ""'at bcneGt\ "' • 1 ! h • ' llopufattd 'ere concerned. Paragraph 7 which d:a t w I rettrcmo:nt that •n employee who was in service of the Corporation b<:for~ lh~

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254 SUPRDIE COUllT REPOilJS • [19~413 s.c.l\:

. t ' . com'mencemcnt of the Scheme of 1980 shol~ retire fro": service When he auains the age or 60 yea~. but an employee, who JOinS te servoce ?f the Corporation

. free the commencement of the Scheme would reme on attaoning the ae or 58 .. ars. The FourthSchedule to the Scheme indicated the revised scales .or pay,. .. .-. The petitionetS in their writ petitio'ns to this Court contended that the te;.. .nd conditions of service enunciated in 1974 being a result of bilaceral agree men~ could not be changed unilaterally to the detriment of the employees and that the nolification deprived the rigllls of the employees to recei, e dearne•5 al'owallte ttc. with the rise in the cost of living index. It was furthe ... contended that ohe

Scheme was. violative of•. 16<2\ of the Act and ultr:t vires Articles 14, 19(c)r~) and Anicle 3112) or the Conscicution, and that the Constitucion 44ch amendment . deleting Ankles 31 and 19 cannot sa, e the Schen1e, since the amendment came

into force only 20th June, 1979, whereas the impugned notification a!Toctin11 che rights ofthe employees to emolumtnts took effect from Jst January, 1979.

The ro<pondents contested the writ petition~ on 'the ground ohot s. 16(6) authorised .che Ctntro.l Government by notification, 10 odd, to emend r t~ v:uy any scheme framed under •· 16 and consequently rutionaliSlltion or re, i<ion of pay scale• was permi-., bl< by the 19Ril scheme. Moreovtr in compnri.on ll'ith other employees in governmental or 'public •ector<, the employ= or I he gener•l

in5urnce comp3nies were 'High...,.ase i~!andcrs• and it was consequently nccnsary to put A ceiling on illeir emolumtnts and 'ooher amenitie! in ord<r to facilitale beller functioning or th~ insurance companies:>$ well as to subserve ohe. object and purpo<c of the nationalisation policy. . •

A!lowine tho..writ pecitions,

 HELD : l. (a) The impugned scheme of 1980 js b;.d os heina beJiund the scope of the authority or I he Central Government, under tbc Gtneralln>Uroncc

Bu"neu (JIIarlonali<aoion) Act, 1972, and therefor~ quashed. This, however, w!tl

no~ prevens lhe Govtrnment, if it u w advi .. .J, co frame any appropriate lca•slallon or m•ke'any >ppropriote amendomnt , ivina power to the Central GoVI'rnment 10 frame any scheme as It considers fit and proper.·.

(2900 ; :Z'JIABI ·

1 (b) Tht !<:heme of 1980 so far a~ it~~ not relate<! t<' the amalgom•cio~· ~~ merr of insur&rce COmp•nies, ~~ not 10art301Cd by •uiH. (I) of s<CiiUO lu.

e $4: com is therefore bad and beyond authority. [278Dl

't .• ~.JI. Nodwn~ & Anothtr v, U•rlon of (rodia & Anothtr {1981) 2 S.C.R p. 46 j ,. auon MuhUII l'orlruk

U I " 1\J , n Tlt LJ ~. n orr nflndia & Ot1. rc., ! t 1173) 3 s.c.,_. P • • Cit IO"J'Itlnr'"'"d"" Curpo•mlull of India" • D.J. Buhoc/u' & OrJ., [198111 S ....

l) • rc crrr 10.

'2. 11~< duty of the Co . . . • 1 n i$ tO ri•d lh• • .

Urt In lnltrprrtinll Or construinllll proVO\ O (. ...c<>' • '<•lion 1nd uod d 1 o • •· > ' <man lit mcanina in the contut. Jnterprctal on Ji 'out "'"" or •tuae 4 t tO n• lloe me 001 a mtre uerd'e in ~<'mantic$ but an ottcmP 1 , oJ """'1 of the leli;)atioo from the "'Nds d, un~, rstun<l the , one"

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the pul (275CDl l . ¢slb f . . . -- . ·· j ,.h' hem~ is an e:tercise of delegated authority. The scope and .ambit

 3 (ad 1 :ted QUthority must be so comtrucd, if posible, as not to make it t of such e eg of the vice of e:tcessive delegation of legislative power. In order to • . ••d bce"USC d be ' !: ··"" he power valid, s.16 of the Act shoul 60 corut=d 1n such manner

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makct c h r d 1 r · that it docs not_ suffer rom t c v.ce o c egauon o excesstve leglSfauvc

ulltoritf. {275El • .

_ ... ~_:(b) Unlimited right of delegation iS not inherent !n the legislative !)Ower. _ . . '

[275 F] •

_ G•a/iar Rayon-Silk Mfg. (Wtog.) Co. Ltd. v. Tlte A; m. CommiJ.Siou<r of Salts Tax & OrJ., {1974} '2S.C.R. p. 879, referred to. -

' . ' ' . . . .

- 4. Th$ , rowth of legislat-ive power of th~ executive is a sist6cant develop.

m<11t of the 10th ccnrury. The theory of ltJi.rs•:-f<Jir~ hns been given a go-by and large nd comprehensive powers nrc being assumed by the State with a view to improve social and economic wcJI.being of the people. Most of the modern socioeconomic legislations passed by the lcila ture lay down the guiding principles of

- the legislative policy: The lcgislntures, bccau5e or limitation imposed upon lhem and the time factor, hardly can r.o into the matters in detail. The pr.lctice of empowerinll the e•ecutive to mul<c - subordinate legisltion within the prescribed sphere has evolved out or practical necessity and pragmatic needs of the modern

·~-

. elfare Sttc.. -(275G216Al • '

S. Rtgarding dclegatc!ilcgislation, the principle which has been wellestabfi•h:d 'ts th>t the lesislature must lay down the gui dlines, the principles of policy for the authority to who m powr to make lUbordinate leglilation is

mtru~Jed. The le&itimacy of delegated legislation dop.:nd upon its b<:ing used as ancill:.ry which the kislature considers 1.., be nc•"C>Sary for the purpose of eer~ ci•in& i.s lc~\Siative power .:tfcctively and compktely. Tile l<gislature must n:tain it its o; oa bnd the es.cntiallcl!tslativc function which consists in d.:.:l<ring the lr!i>latht poicy nd lay down the standard which i' to be enacted into a rule of !'""• ar.d ... -h:.t can bedolcgated is the ta1k of subordinate legislation' whkh by 111 \ery nJture is ancillary to the ·tature which ddcgatcs the power to make it e!f<e1hc P'ovided the legislative policy i• cnunduted with suOkient clearness or a ' 1""ilrd !.id down. Tho court,., nnnot and do not interfere on the discretion

n.J th<:t ndoubtcdly rc.ts with the fe&i>I41Ure itself in dctcrn1ining !he c., tent of 1 e dtk¥O&t<d power in 11 particular case. [.!768-D] · 1

or thf.. Th: ~thorily and scope for • , ut-onlialc k.; i•lation can t-e n!d In either It-It .c two ~0ay, ; numcly onel '' hlch ncatc1 wider ddgltiort :md one which

r>ets tht dclc~; ation, {277El . . ·

~~ . . ~Dd . e mstan~ case, the Acl must be read In conjunction \\ ith the Me in~·

•bollliJl Claus~ No. 16 of the Dill whih Introduced the Ad in qucstjori. But

Ac1 ,.:~· h mu, t be read in cnjun.:tion with subse.:tion 2 '_'fsection 16 of the - 11.e &; h clearly iodk<Hcd the obct of framing the scheme: Wlder s. 16(1) of

t. l271Dj

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+56 ' Sl1PREME COuRT RI!POR~ [1984] 3 s.e.R~

' . 7. In vi~ of tbe fanauaae of s~~~:'('l ofsection J6 and the memorandu~

to the Bill, the one which restricts t})e.delegation must be preferred to the other.

So read, the. authority aiven um{er s, 16 under the different clauses of sub-section

(l) mustbeolo subserv~ tbe object s envaged in ub-srction (2) of section 16 or the Act, and if it is so read thc_q framjng of a ache me for purposes mentioned i.n . different Clauses of sub-sectio, P m of .SI!ctiop.l6 must be. related, to lhe malgamation or merger of1hp .fusurance compnies . as. envisaged bO.th in the ineniol'tlndum on -delegated lepfation as well as !ub-section,.~) of section 16. · . . . .

' [217F-G] . 8.

Sometim~ there have been rise i~ emoluments with the rie in the cC,')st of index in certain t>Ulllic 'Sector. corporations. The: lc"islature h!lWever , is free to · . recognise the d.tgree <Pf harm or evil and to make provisions for the same. In m'aking disimilar ; proisions for one sroup of public sector undertaldng! does - not pl!r se•make a law discriminatory as. !uch. Courts w!ll not sit as sui>er-

Jegislature and strike down a p.Uticular classifkation on the ground that any under-tnctusion namely JtJat some others hve been. left untouched so long as there is ilo iolation ofconstitufioilal rtstraints.

[~85D~E] ,.. . . '

9. : Pite-'mealapproach to a general problem permitted by under-inclusive classifieations, is ometimesjustified when it is considered that legislatures deal · with $uch problm. usually <>n an expc:rimental basis. It is impossible to' tell how

successfl a prticular Jlpproach might. be, what dislocation might occur~ and Situatioii inight develop and what new evil might be generated in the attempt. 7\.dminisl{ative expediettts must be forged and tested. Legislators recogniziog. these factors ll)lght wish to proceed cal!, tiously, and courts must allow to do so.

[286B-C]

Specilil CotJrts Bill, [1978) 2 S.C.R. 'p. 476 at pages 540-541, Stare of Gujorat

md'Anr. v. Shri Ambica iJills Limited, Ahmedabad, etc., [1974] 3lS:C.R. p. 760 ·

and f?..K. Garif etc. v. 'U11ion of India ct Ors.!etc., [1982] 1 S.C.R. p. 947, referred to. •

Inthe'instant case.-as there was no industrial dispute pending, the around that th~ pe.titioners'have been chosen out of a vast body of workmen to bediscri- , F . minatea against and exclu&d from the operation of the Indutrial Disputes- Act, is no grounlthatthere has been no violation of Article 14 of the Constitution.

. [2860}

.u

tO. Differentiation is ttot:a!ways discriminatory. If there is a rational ne~ , orr the basis ()f which differentiation has bn made with the object sought' to be • achieved by particular provision, then such differenti!ltion .is n<>t discriminatory and does not violate the principles of Article 14 of the Constitution. There. is intelligible basis for differentiation. Wheter the same result or better result

outd have been achieved and better basis of differentiation evolveq is within the .

4omain ofleislaturl,}and mu!t be left to the wisdom o_f the legislature. . . . • · , . [21l8H-:a9Bl . . . t t •. Article 14 tloes not prevo11t the Leh\fure from introducine a re'ft>rm i.e. by applying the Ieaislatin to .some instituions or objects or areas oJ!Ily .a"ording. to-the-e:ttigency oNh1 situatiol'l d further classifiation of seliwtmn . Mn be SU&incd on historioalreasoas or reasons of admipistrativc exipaey .o•

....

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A.K. BANERJEE v. UNION 257

/ . . 'Piece-meal method of introducing reforms. The law need not apply to' all the 1lt; rs9Jfs in the sense of having a universal application to all persons. A law can

-sustained if it deals equally with the people of[ well-defined "Class-employees of

"Insurance Companies as such, and suc}l a law is not open to the charge of'deial ·of equal protection on the ground that it had not appliCation to other persons .. . . ~~~

State of Karnataka & Anr. etc. v. Ranganatha eddyf & fAn;. etc. [1978] I S.C.R. p. 641 at pages 672, 676 & 6~1.., referredlto.

A .

To the intant case, for the purpose of rationalisation, the illsuriince com- <, panies wanted to curtail the emoluments of class III nnd class IV employees on

a small scale. It cannot therefore be said that there are no distingui$hing factors .and that fot choosing a particular group for expe.riment, the respondents should C

be fonnd guilty of treating people differently while they are alike in all material respects. [~880] . 12.

T~.,.e object of the General Insurance Business (Nationalisation) Act 1972 is to run the business efficiently so that the funds available might be utilised 1'or socially viable and core projects of national importance .. The Nationalised Banks and the Iqsurancc Companies for the purposes of appftcability. or other-

. D wise of the provision_s of the Industrial DisputesiAct cannot be treated, as be- . longing to one class. Historical reasons provide an intelligible differentia ·<distinguishing Nationalised Insurance Companies from the Nationalised Banks.

The financial resources, structures and functions of the Banks are different from

those of the Insurance Companies. [288A-E]

13.

The general rule to be foJJowed in case of conflicfbetweeri twottatu(es .is that the later abrogates the earlier one. A prior special law would 'yield to a

tater general law if eitqerf these two conditions are satisfied : . .

(i) The two are inconsistent with each other an'd (ii) there is some express ' Teference in the later to the earlier enactment.

[282D-FJ ..

14. (i). The Legislature has the undoubted right to alter a law already promulgated through subsequent legislation, (ii) A special law may be altered,

abrogated or repealed by a later general law by an express provision, (iU).A later ce11eral Jaw will override prior special law if the two, are so repugn, ent to each other that they, cannot co-exist even though no express provision in that behalf

. is found in the general law, and'.(iv) It is only in)he absence or a provision to G the contrary and of a clear inconsistency that a special hiw will remain wholly . upaJfectect by a later general law.

{282G-HJ

MaxU>ell--;-:"Interpretation of Statutes" Twelfth Edition pp. 196-198, referred

JX (:ottoo- Spinning ' & Weavint Mills Co: J:.td. v. State of u.P. & , Ors., {1961] 3 S.C.R. t>· 185 and U.P. State Electricity Board &: Ors, v. Hari Skankt7 .rtiJA aiul Or:r., U979] 1 .S.C.R. p, il.55, referred to.

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258 '

SUPREME COUR~ RE~ORT~ . .,

[1984) 3 s.c ·. .

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IS. Th~ Gene.,; llruurance Business (Nationalisation) Aci was PU . .

Nth Schedule of the Constitution as ltcm.9S on IOtll Augst 1975. 1/ ;: 1!1•· the rights of the petitioners had b"n aectcd .by .te schme of 1980 thea~· risbts would not enjoy immunity from bemg •crutnased samply beuse the Act' uodet which the scheme was framed had been put m the N_inth Schedule. In

. event any right which accrued to the persons concerned praor to the plac Y N" 1r Sch d le c:n at be ret os~ t" 1 ..

Cln<nt: of the Act in 'the ant e u n • r ,...cave y anccted by th, impugned prvisions: [284EGJ.


In the instant cse, empowering the- Go\'crnment to frame schemes for carrying out the purposes of the Act does not in any way affect or abridge lhe fundamental tights of the petitioners nod would not attract Artick t9(1)(g). • ' (284H ; 2BlAi

ORIGINAL JURISDICTION : Writ Petition Nos. 5370 74 of !980.

(Under Art. 32 of the Constitution)

• M.K. Ramamur1M, J. Rama;1111ri/ri nnd Miss R. Vaig11i for the petitioners in WPs. 5370-74

R.K. Garg and V.J. Fr; ncis for the petitioners in WP. 5434.

J.P. Coma & Mukuf Mrrcigutfor Intervener in WPs. 5~70·74.

K, Parasara11, Attorney Gneral, :\f.K. Bmrn:il:'e, Addition; il Solicitor General, M1ss A. Sublraahini uotl c. v, Suhba Rua, for lh~ respondent (Union of 1ndi;1)

• P.R. Mridul, O.C. Ma!lwr, S. Sukumaran, D.N. Mis/rrcJ & Miss J.hera Ma1hur for respondent no, 2 in WPs. 5370-74 &. 5434.

 1/emant Sharma & lmlu Sharma for th~ respondent in Wi'S 5370-74.

l'l!leet Kuma,, Lalit Bhasin Vinay Bhasin & AfiJ's.Arsill Singh,.. for Rspondcot Nos, 3 to 6 in V;'Ps. 5434 & 5370 74. .

.AmbriJJs Kimlur for lntcr\eoer iriWP. 5370.

Clsalu/idus Sinhu Intervener-in-person in '~Ps .. 5370 H.

The JuJgment f th C . . . o. e ourt was delm:rcd by

A.K BANERJEE: v. U.'fiON (Mukharji, J.) -259

SABYASACHI MuimARJI J. These petitions under Article 32 of the Comtitution are filed by the employees of the General Insurance Companies and the • All India Insurance Employeess Association. 'the respondents are, . Union of India, the General Insurance Corporation of InCfia and four General Insurance companies.

The petitioners chaHenge the Notification dated 30th September, 1980 of lhe Ministry of Finance (Department of Econo~ rnic Affairs) (Insurance) introducing what is called General lnsu4 ranee (Rationalisation and. Revision of Pay Scales and Other Con~

dition~ of Service of Supervisory, Clerical .and Subordinate Staff)

Second Amendment Scheme, 1980 as being illegal and violative of their fundamental rights under Articles 14, 19(1)"(g) and 31 of the Constitution of India.

Prior to 1972, 1here were 106 General Insurance companies Indian and foreign. Conditions of service of these employees were governed by the respective contracts of service between the com panies and the employees. On 13th May, 1971, the Government of

- India, assumed management of the general insurance companies under the. General Insurance (Emergency Provisions) Act, 1972.

The general insurance business was nationalised by the General Insurance Business (Nationalis'ltion) Act, 1972 (Act 57 of 1972).

The _preamble of the Act explains the purpose or'the Act as to provide for the acquisition and transfer of shares of Indian insurance companies and undertakings of other insurers in -order to serve better the needs of economy in securing development of general insurance business in the best interest of the community and to ensure that the operation of the economic system does not result in the concentration of wealth to the common detriment, for the regulation and control of such business and for matters connec~ ted therewith or incidental the1eto.

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

Under Section 3(a)of the Act, 'acquiring company' has been defined as any Indian insurance COJ!lpany and, where a scheme had been fram ed involving the merger of one or more insurance companies in another or amalgamation of two or moresuch companies, means the indian insurance company in which any other company has

s:

2~0

SUPREME COURT REPORTS

[1984) 3 S, C.R.

been merged or te company. which has been framed as a result of the amalgamaion. ·

Section A provides that on the appointed •ctay all the shaies in . the capital of every Iridian insurance company shall be transferred ·

to and vested in the Central Governmei, J.t free of all trusts, liabilities

 JJ and encumbraces affecting these ..

:.E .

Section 5 provid-es for transfer of the undertakings of other . existing .insurers. -section 6 provides for the effect of transfer of undertakings. Section 8 provides for t)le Provident Fund, superan'nuation, welfare or any other fund existing. Section 9 stip.ulates that Central Government shall form a. Government company in accordance with the provisions of the Companis Act, to be known as the General Insuranct; Corporation of India for the purpose of superintending, controlling and carrying on lhe usiness of gerieraJ in$urance: Section 10 stipulats that all shares in the capital of every -Indian insurance company which shall stand transferred to and vested in the Central Government by virtue of Section 4 shall imediately after such vesting, stand transferred to and vested in t•l ·

Corporation.

Chapter IV deals with the amounts to be paid for acquisition and as sucb. we are nof concerned in this case with that chapter in view of the controversy'involved. ·

Chapter V of the aforesaid Act deals with ''Scheme for re- • organisation of general insurance business" Section 16 and.l7 of :F 'fhe Act in this chapter are as follows.:

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• "16. (1) If the Central Government i.s of opipion tha't for the more efficient carrying on of general insurance busi~

ness it is. necessary so to do, it may, by notification, frame one or more schemes providing for ail or any of the following. matters :·

(a) ' the merger in one Indian insurance company of any other Indian insurance comp&ny, or the formation of a

ew company by the amalgamation of two or more .

Indian. insurance companfes ; .

i< ...

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(b) the transfer to and vesting in the acquiring company .;., of the undertaking (including all its bsiness~ propertic~,

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A.~. BA.NERJE£ v. UNION (Mukharji, J.)

ttssets and liabilities) of any Indian insurance company

which ceases to exist by reason of the scheme ;

r(c) the constitution, name and registered office and the

capital structure of the acquiring company and the issue and allotment of shares ;

Ill, '(d)· the constitution of a board of management by whatever name called for the anagement of the acquiring company;

>(e) the alteration of the memorandum and articles. of

association of the acquiring company for such purposes 0 as may be necessary to give effect to the schee ;

If) the continuance in the acquiring company of the

services of all officers and other em-ployees of the Indian insurance company which has ceaSJ!e to exist by reason Of the scheme, on the same tenns and conditioqs which they were getting or, as .the case may be, by which they were governed immediately before the. commencement of tle scheme ;

(g) the rationalisation or revision of pay scales and other 11 terms aqd conditions of service ott officers and other em~

_, .. ployees wherever necessary;

(h) the transfer to the acquiring company of the provi- dent, supperannuation, welfare and other funds relating to the officers and other employees of the Indian insurance company which has ceased to exist by reason of the scheme ;

, (i) the continuance by or against the acquiring company of legal proceedings pendin!i.., by .or against any Indian insurance company which 'bas ceased to exist by reason / of the scheme, and the initiation of such legal proceedings, civil or criminal, as the Indian insurance company _might have initiated if it had not ceased to exist ;

,,,(j) such incidental, consequential and supplemental matters as are necess; ry to give fuil effect to the .Sl::heme.

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SUEREME COURT RI!PORTS [1984] 3 s.c.R ...

 (2) :. In framing schemes under sub-section _(1). the . . . object. nf 'the} traF.GnveJD.ment shallbeto ensure 1hat ultimately there are only f,_our companies (excluding the Cor- / poration) in existence and that they are so situate as to render

tht:ir combined services effective in all parts of India.

(3) Where a scheme unrler sub-section (1) provides.·. for the transfrr of any property or liabilities, than, by 'Wrtue . of th~ scheme,_ the property shall stand tFansferred to and_

vested in, and those liabilities shall be tramferred to and be come the Jiabilities of the acquiring company.

(4) If the rationalisation or revision of any pay scalesor other terms and conditions of service under any scheme is not acceptable to any officer or other employee, the acquir- -ing company may terminate his employment by giving himcompensation equivalent to three months remuneration~·

. J< unless the contract M service with such employee provides for- . a shorter notice of termination.

Explanation.-The compensation payable to ::.n officer~ or other employee under this sub-section shall be in addition to, and shall not affect, any pension, gratuity, provident fund• .. of-other benefit to whfh the employee, may be entitled underhis contra¢t of service. J

(5) Notwithstanding anything contained in the Indus-. trial Disputes Act, 1947 or in my other Jaw for the time be.;- ing in force, the transfer of the services of any officer orother employee of an Indian insurance company to the _acquiring company shall not entitle any such officer or otheremployee to any compensation under that Act or other Jaw, . and no s11ch claim!'shall be entertained by any court, tribu- - nal or oth_e_rl authority. •·

(6) (.The Central Government may, by notification •. add to, amend or vary any scheme framed under thi~ section.

(7) The provisiqns of this sectjon -and of any schemefntmed tinder it shall have effect notwithstanding anything to , the contrary contained in any other law or any agreement, . award or other instrment for the time being in force.

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. ._ -J 1\.1';:. BANERJEe v. UN10N (Afukharji, J.) 263

17.

A copy of every scheme . and e-very amendment "thereto framed under section 16 shall be laid, as soon as .m:ty be afta it is m:tde, befor.:: each House of Parliament."

The object of any sc1cme undtr this chapter, according to -the petitioneh, w tS ckar from th~ main p.trt of Section 16(1) f the >;'Said A.ct, i.e. a sc!11!11l; m td~ under this chapter was only for the purpose of provicling fur the mrger of Indian insurance companies, and this was made Clc . .tr by Section i6(2} of the Act. Section 16(4) oUhe 'Said Act, it was co.1tentkd on beh'llf of the petitioners, implied that .any scheme of rationJiisation or revision of pay sc.tles and other

terms could only b~ in the context of merger and amalgamation of one or more of tbe companies. In this connection mention was made in the petition ; r the "Memorandum regarding delegated 11egislation" submitted to the Parliament along with the General

Insurance Business (Nationalisation) Bill, 1972 (Bill No. 60 of 1972), , which later became the aforesaid Act. It was made explicit,

acording to the petitioners, that clause 16 of the Bill, later Section

16 of the Act "empowers the Central Government to frame one . -or more schemes for the merger of one Indian insurance company with another or for the amalgamation of the two or more Indian ; insurance companies and for matter consequential to such merger )--or amalgamation, as the case might be." It was in the aforeaid > -context of merger of companies that Section 16(l)(g) provided for rationalisation and revision of pay scales and other terms and coll- .Oitions of service of officers and other employees wherever necessary.

 In exercise of the powers contained in the aforesaid Section J6(1) ofthe said Act, four mrger schemes were framed in 1973 by --the Central Government and the four companies, Oriental Fire and r;... nd General Insurance Company Ltd., National Insurance Comt -.Pany Ltd., New India Assurance CoD)pany Ltd., and United India

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Insurance . Company Ltd., into one or the other of which several _general insurance companies in the country were merged, were alone allowed to carry-on the business. of genera[ insurance.

The j)reamble of the scheme," called the New India Assurance Company Limited (Merger) Scheme, 1973, had stated that'the Centntl Government was o( the opinion tha_t for the more efficient t; arrying on of

~ ihe general insurance business, .it was necessary to frame scheme for

 the merger of certain . Indian Insurance companies in . the New lnd ia Assurance Company Limited. The preambles Of the merger

chemes in respect of the other three companies were on similar

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SUPR'EME COURT REPORTS [1984.]3 s.d.R. 1lines. These four companies are subsidiaries of the General Insurance Corporation of India. The cotnpanie~ started functioning from . " 1st January, 1973 and the process of merger of the various com

panies into one of , the othef four companies was completed by 1st January, 1974, when the said four schemes came into force. The said schemes povided for the transfer of officers and employees of the merged companies to the transferee Company. The memox nindum and the articles of association of the four Companies were. " . also . suitably altered by the said schemes. Thereafter there had

beeli no merger or an:talgamation of any insurance company. The petitioners stated that there had been no reorganisation of generat . insurance business either. This position is not in dispute. . •·

By a notification dated 27th May, 1974, the Ministry of Finance (Department of Revnpne l/.nd Insurance), Government of _r India, framed a 'scheme' called the General Insurance (Rationalis'a- tionaild Revision of, Pay Scales and other CondHions of Service of Supervisory, Clerical and Subordinate Staff) Scheme, 1974, arid the ; reamble of the scheme. stated that "whereas the Central Government is of the opinion that fot the mqre efficient carrying on genera! .t,_suiince business, it is necesary to' do~', therefore, in exercise or .

the.powers conferred by Section 16(l)(g) of the aforesaid Act, the

' . . . . . Central Government framed the $sheme' to provide for the -..r <( .. rationalisation and revision of pay scales and other terms and con dition of service of ep}ployees working in supervisory, clerical and subordinate .position under the insurers. The sai'd scheme governed the pay scales, dearness allowance, other allowances and other terms aitd conditions of the general insurance employees. ·

It dealt, inter aHa, with nature and hours of work, fixation. . retirement, provident fund and gratuity.

Paragraph 23 of the 1974 A-- scheme providd that the ·· 'New scales of pay' shall remain in force . ' initially up to and inclusive of 31st December, 1976 and thereafter '"' shall continue to be in force unless modified by the Central Govern~ .. ment. T'he scheme was framed after negotiations with the parties .

ncerned. The petitionets further state tnat the scheme was J?Brported to have been made under . Section 16(1)(g) of the said Acfand it was treated as one made under Section 16(1) as part of. 1

t'h.e four merger schemes. The petitioners state that otherwise, it . weuld have been invalid. ·

1he petitiones furher state that the employees of the 'in-su.:..

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' A.K. BANERJEE v. UNION (Mukharji, J.) . . 265~

ranee companies serving _throughout the country were, however, subsequently not satisfied with the pay scales, dearness allowance, other terms and conditions availab1e to them on account of several factors. Through tl\eir associations, they submitted their charters , oJ demands to the General Insurance Corporation of India in 977

for the revision of terms and conditions of their servie. Negotiations were held between the management and the unions for the upward revision but according to the petitioners, nothing happened.

Industrial dispute was raised between the management of General Insurance Corporation of India and the class iii and IV employees on the demand of revi5ion of pay scales, dearness alk>wance and

other allowances and service conditions. The Chief Labour Commissioner (Central), Government of India; Ministry of Labour,

issued concifiation notice dated 11th September, 1980 under the Industrial Disp'utes Act, 1947 to the Chairman of the General Insurance Corporation and the general secretaries of the employees' asso.ciations. _There were several meetings. It was decided, accord ing,..t<r the "etitioners, that in . the meanwhile until te talks wei.e

resumed the employes would not resort to strike. There was representation to the respondents not to change the conditions of service pending the conciliation proceed_ings. It is not necessary to refer in detail to all these, which have been set out in the petition.

But nothing fruitful happened. The Labour Commissioner in the circumstances sent a failure report under the Industriall2Jsputes Act, 194 7 to the Secretary, Government of India, Ministry of Labour, stating that there was failure to bring about amicable settlement of of disputes. The petitioners con.tend that rio further action was taken and according to them the conciliation proceed_ings were still pending. This, however, is not accepted by th~ respondents, according to whom there was failure report and the conciliation proceedings ended thereafter. The scheme mntioned hereinbefore,

which is under challenge was issued thereafter. We will have to deal with the scheme in great detail as the same is the subject rn1tter of challenge is these petitions under Article 32 of the Constitution. '

After the 1974 scheme, in 1976, the Board of Directors approved of promotion policy .. On 1st June, 1976 another scheme by

whic~ there were amenchents with regard to Provident Fund, was ' introduced. As mentioned before in 1977, major unions submitted ll' • charters of demands to the respondent No. 2, seeking revision in the terms and conditions of service of the 'employees with retrospective

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-effect: Between lOth. March, 1977 to 30th March,. 1977, memo

randum was addressed by, the employees of all India Association.t~ the Union Finance Minister.

In the memorandum addressed, it was stated that in the normal circumstances on the expiry. of the prescribed period •r operation of an agreement, settlement of award, the unions usually submitted charters of demands and. the said charters of demantis . were settled eithe( through mutu1l neptiations or as a tesult of award of an inQ.ustrial tribunll, but as the . pay scales and other conditions of service of the .employees in general insurance industry were, however, governed oy a scheme or scheme t9 be formulated by the Central Government and it was the Central Government which could amend these, the unions submitted that there was justitlcation for making upward revisi0n in the scheme and shifting the base year fro, m 1960 to 1970-7 J for the purpose of prescrib, ing pay scales.· This point was stressed . by cJunsel appearing fbr the General J?surance Company, in order to ephasise thatthe Ut, ions always

accepted the position prior to the present petition, that t].le govern ment had the power to amend or makefuriher schemes under the

provi.sion~ of the N:1tionalisation Act. Qn 30 July, 1977'scheme amending the provisions regarding sick leave was introduced. In 1978 Promotion Policy was revised by General Insurance Company . . Between 1979-80, there were dicussions. between the management of the Corporation and the representatives of the Trade Unions which were held on- 8th, 9th, lOth October, 1979, 7th,. 8th, 9th, April, 1980, 12th and 13th June and .1st August 1980. The manage ment of the Corporation after several rounds of discussions with the Unions sought to narrow down the area of differences and submitted to the Government the demands made by the Unions ·

• .t • _, and the managment's recommendations. The General fnsurance Corporation submitted befc.re us that the Central Government after finally' considering the demands and recommendations of the . management of the Corporation framed nd notified the scheme under challenge on 30th September, 1980.

It was contended on behalf of tl1e petitioners that the _said notification had been issued by the Government suddenly and unilateraiJy, witho.ut any notice to the parties concerned. Th.e employees were taken unawares. It was contended that from the provisions of the said notification the service conditions of the employees including the petitioners employees, particularly with regard.

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A.K. BANERJEE V. UNION (Mukharji, ].) 267

\to dearess allowance, stagnation increments, retirement age and •<lther increments had become worse than before and detrimental ·-to the employees. While the employees were eagerly awaiting ·.improvement in their service copd itions, this notification had unilaterally altered the service conditions to their prejudice. 'Pet!tioners in their petitions had alleged certain facts by certaia •

ilfustrations, which according to them, indicated tat employees had been affected adversely, inter alia, in gross stating salary of -(}ifferent group3 of employes, salary on confirmation of assistants who are graduates etc. It wa<;. further stated .that retirement age

.. was 60 years for all the cmploes under the 1974 scheme. But

.under the.new scheme, retirement age was reduced to 58 years for employees joining on or after I st January, 1979.

Clause 7 Of the impugned notification preribed different ages of retireent, though the employess were of the same class and 'Similarly situated ·<tccording to the petitioners. Para 12(1) of the impugned schem'e -provided that an employee who was in service befor~ the commencement of the said scheme would retire at the age of 60 years but f'rovided that an employee joining the service on or after the com-

.nencment of the said scheme would retire from service on attainin'g the ag~ of 58 y.ears. This was. discriminatory, according to the :'Petitioners, being viola.tive of Article 14 of the Constitution.

It was further alleged that stagnation increments that is d.ncrements after reaching the maxinium of the grade t~ all cadres up. to muximum of 3 for every two years of service were given befo.re,

~-but now under the present notification clause 5 substituted para- ; graph 7 and provided for no stagnation increment except only one increment for two years to the employees ifi record clerk cadre. :Previously, there was no maximum limit on salary. Now maximum -ilimit was fixed at Rs. 2750.

Earlier, according to the petitioners,

Hose Rent. Allowance was given to all employees irrespective o~ havmg offictal accommodation, under the new scheme, house rent :.allowance was withdrawn for employees having'offici~!l accommoda-

; tion. E2rned leave earJier could have been accumulated upto 180 ·"<lays, but the new scheme lirititcd -the acumu!ation of earned leave •upto 180 day-s for the employees retiring at the age of 58 years and

120 days for the employees retiring at the age of 60 years. , U was :stated in the petitions that this had substantially reduced the emolumients of the general insurance employees, and it had adversely " H .:affected .thq:mployess throughout the country.

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' [1984] 3 S.C.R~ ( ~-

1he maiQ ground of the challenge is that th~ impugned notification is illegal as the Central Government has no po\vr to issue it under Sectiol). 16 of the said Act and such as the notification framing the present "scheme" is ultra .vires Section 16(1) of. the ·, ; Generallnsurance Business (Nationalisation) Act 1972. Accordi~ to . the petitioners, once the . merger of the insurance companies took

place and the process of reorganisation was complete on i lit

January, 1974 as mentioned before by forming the four insurance companies by the four schemes already framed in 1973, thre coulcf be no fur, ther'schemes except in . connection with further reorganisation of general insurance busfness and the merger of moreinsurance companies as mentioned in sub-section (1) of *Section 1& ''of tEe . said Act. By the present alleged scheme there was no . merger or reorganisation contemplated,"•unlike 1974 scheme, ccord

ing to the petitioners. The petitioner's contend that merely maki; g: amendment to the terms and condition iS of service of the employees . ' unconnectd with or not necessitated by the reQrganisation of the-

);>uiness or merger or ama!g\mation of the companies ould n'ot

fall within Section 16(l)(g) of the Act According to the petitioners. lhe' only properly called 'schemes'sanctioned under Secflon 16(1) arethose four 'merger 'schemes of 1973 as would b'e evident trom the ·

preamble to the Act.

The petitioners further contend tliat under the Life Insurance C, orporation Act, Banking Companies Act, etc. there were poers; to frame regulations independently of reorganisation. But there is no su~ power, . according 'to the petitioners, under the General' Jnsural}ce Business (Nationalisation) Act, 1972. The said notification

therefore is without the authority of law. It is, further, submitted that the present service conditions .. of the employees unn:Hrted tO<· . . reorganisation of general insurance business or merger or ama1ga- ·•mation of insurance companies, could nat form part of any scheme-. or notification. und'~ section 1 q of the aforesaid Ac~. Section.1 8(7} of the Act would not come into play and the pmvisions of the: Industrial Disputes Act, 1947 rincloding section 94 were applicable-· . : . to the general insurance industry. Therefore tf the compantes wanted to change the service conditions of their employees affecting:; them adversely, they should baye given, the petition1:rs coBtend,.

notice of changes under section. 9A of the Industrial Disputes Act,. . 1947, negotiated with the employees and arrived at some!lettlerrient

or .. had the dispute adjudicated upon l!nder the said Act. Since; this ha~ not been done, particularlywhen the conciliation proceed- ..

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A.K. BANERJEE V. UNION (Mukharji, J.) 269'

ings were still pending in the absence of Government's acknowledge- , ment of failure report of the conciliation officer, the action of the Government in issuing the unilateral notification is bad in law. It is submitted further that impugned n.otification is ultra vires being violative of Article 14 of the Co'nstitution because it discriminated between employees 'similarly situated, ptrticularly in the matter of

dearness allowance and retirement age. . ' .

The petitioners contend that under the Sick Textile Undertakings (Nationalisation) Act, 1974, the Coking Coal Mines (Nationalisation) Act, 1972 etc., spearate companies had been formed on nationafisation. The employees of those companies were entitled to have their service conditions regulated under Industrial Disputes , Act, 1947. In the present case, the employees jhave been deprived : 9f .the existing benefits without following the procedures prescribed under the Industrial Disputes Act, 1947. Therefore, there was discrimination and violation of article 14 of the Constiution. The petitioners therefore contend that the terms and conditions of service enunciated in 1974 being as a result of bilateral agreement, could not be changed unilaterally, to the detriment of th.e employees' fundamental rights to carry on their employment for gain and as such -violative or article 19(1) (g) of the Constitution. It js stated that the notification was illegal, being ultra vires section '16 of the 'Act.

Since, according to the petitioners, such notification deprived the rights of the employees to receive dearness allowance etc. with the rise in the cost of living index without any limit, it is deprivation of property without providing for compensation and is thus also violative of article 31(2) of the , constitution. The petitioners, further, contend that the Constitution 44th amendment deletin/ Articles 31 and I9(t) (f) cannot save the scheme since that Amend~' ment came into force only on 20th June, 1979, whereas the impugned • notification affecting the fights of the employees to emoluments takes et.Tect from 1st January, 1979. It was further urged that the protection of article 31B read with Nineth Schedule of the Constitution was not available to any scheme or notification much less the present one.

The present notification, according to the petitioners, disregarded the directive-principles enunciated in Article 43 of the Constitution.

The petitioners therefore ask for quashing the said notification by these petitions under Article 32 of th~ Constitution.

The second batch of Writ applications ~Writ Petition Nos. 5434-37 of 1980) are on behalf of the employees as well a, s the.

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[1984) 3 S.C.R.

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Gepral Insurance EmpJoyees. Ali India Association challenge the scheme of 1980 more or less on the same though not)dentical grounds mentioned in Writ Petition Nos. 5370-74 of 1980. Interim order ' was passed in the said application regarding payment of dearness aUowance as would appear frotri. t)1e Court's ordec dated 25.8.1981.

In the said order, dir, ections were given for payment of dearness allowance payable under th! old scheme from the beginning of 1981 -with quarter April, as ell as quarter beginning from July, 1981

1Within ce'rtain time mentioned_in the said order. It was. further, directed that subsequent.dearness allowances' will be paid, in accordance with the directions to be given at the time of disposal of these writ applications, • .

•• In the Writ Petitions Nos. 5370-74 of 1980, there is a petition ·-on behalf of All India National General Insurance Employees Association for intervention. It res presents a Trade Union of work""" n. men working in the offices of GeneraOnsurance Corporation of lndi~,

.. Bombay as. well as its subsidiaries. They, inter alia, allege that the main petitions have challenged the scheme of 1980 op purely technical grounds and though it would be correct to say that the scheme

--~ ; of 1980 does not meet _the aspirations of the workers wholly as . reflected in the various charters of .demands submitted to the .E maMgement, th; y are of the opinin that the same is not completely bereft of ay merit so that the sa)lle may be quashed by this Court. . ·. · They menti-oned certain additional benefits available in the said . scheme of .1980 in paragraphs 15, 16, 17, 18 and 19 of the said

application.· They therefore claim right to intervene in the said Writ F application Nos. 5370-74 of 1980. There is 51lso an application by . Senior Assistants of the New India Assrance Company Ltd. and National Confederation of Genera(Insurance Employees, represented by its Vice-president under Order XLVII Rule 6 of the Supreme Court Rules of 1966 praying for" permission to intervene in these petitions. Upon this an Jinterim order was pased on 24.10.1980. "; staying the operation of the scheme (operation of the Notification dated 30th September, 1980) and notice was issued in the stay application ..

All these will qe'disposed of by this judgment.

It will therefore be necssary, before we examine the contenti.ons raised 'in these ptitions, to briefly consider the scheme of 1980 . . As mentioned before, this scheme is caUe<i the General Insurance

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A.K •. BANERJEE v, UNION (Mukharji, J.) 27n

(Rationalisation and Revision of Pay Scales and other Conditions of .Service 'Of :supervisory, G:lerical and Subordinate Staff) Second Amendment Scheme, 1980. Some new definitrons have been provided by paragraph 2 of 1980 scheme which included the meaning of the 'Company' and under the scheme it. mentioned that the 'Company' would mean the four nationalised comanies, National Insurance Company Limited, the New India Assuranc~ Company Limited, the Oriental Fire and General insurance Company Limited and the United India Insurance Company Limited. Sub paragraph

(ii) of paragraph 2 of the said scheme defines 'Net monthly emolu4 rrients'.

By sub-paragraph (ii), the amended definition of 'Revised terms', (Revised Scales of .Pay) was inserted.

By paragraph 3, . adjustment of pay was stipulated on the coming into effect of

operation of 1980 scheme. How the basic pay is to be fixed is provided by 1980 scheme. It also makes detailed provision! as to how the adjustment allowance is to be dealt' with so far as Dearness Allowance, Overtime allowance, Contribution to rovident Fund and other retirement benefits are concerned. Paragraph 51 deals with the ·

'Increments'. Paragraph 6 deals with Earned Leave. and other encashrrient of leave at the time of retirement and death. Paragraph 7 deals with 'Retirement' and stipulates that an employee who was

in service of the Corporation before the commencement of the

I ' scheme of 1980 should retire from service when he attains the age of

60 years .. But an employee, who joins the service of the Corporation after the commencement of the schem~\vill retire on his attaining

' the age of 53 years. It further stipulates that an . employee would . retire on the afternoon of_ the last day of the month in which he "attains the age of 60 years' o~ 58 years as the case might be. Clause 8 deals with 'Gratuity'. Clause 10 provides the duration of revised te1ms and stipulates that the revised terms should be continued to oe in force unless modified by the Central Government. Then the Second chedule of 1974 scheme which dealt with Travelling Allowance category, Travel by Road and different allowances for the same, transfer grant were amended and the new Fourth Sehedule

included scales of pay to be fixed). on the revised scales of pay indicated therein.

It is not necessary to set out further details ofthe actual provisions of 1980 scheme. While on behalf of the petitioners, it was contended that the revised .scales of pay. and the terms indud ed l

therein were highly detrimental t~ the employees concerned, on the

0 ther hand; it was contended on behalf of the Union oflndia as well

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as the General Insurance Company that on the whole, 'the revised s1c; ales of pay provided for better pay. and allowances and better opportunities to he employees concerned. One of the intervener unions alsO states that the 1980 scheme is not completely .devoid of merit. Parties pave taken us through in detail by help of charts and other 'figures in support' of the' respectiv~ cases and contentions. It . is not necess.ary, in view of the nature of the contentions raised . .. " . ' ' ' ' beforC\uS, to express any opinion on the merits or demerits of the rival contentions :Or the prties iti respect of the details of ei{her or . - . ' both the schemes. It may. however, be stated that there bas been a ceiling on increase of pay automatically with the increase of the ries in the cost of index. The respondents, namely, the union of India as well as the General Insurance Company, contended that in com paris( n with other employees is governmental sectors or public sector!j, the employees of. the general insurance companies were ''Hi&h -iage landers' and it was necessary to put a ceiling on the emolunients and other amenites in order to facilitate better function. ing of the ip.surance companies concerned as well as subrve the object and ptiq, se of the nationalis'ation policy. The . various defailed items of the scheme of 1974 and. 1980 have to be viewed in this background. ..

' - ' The obsic and, in our opinion, the main questions are-has the Government and the respondents power in law to introduce the 19M scheme and if they hav~ that power, have they exercised that power in any arbitrat)l': and whimsical manner' to deny to the petitio- .. ners any of the fundamental rights and whether the petitioners. have been discriminated against? these, therefore, are the questions an• it is not nect; ssary, in our opinion, to detain ourselves with lengthy . extrcts from the. scheme of 1974 'and ,1980 to examine wicl) is better or ich is detrimental and if so, to what extent. On these~ there will be and are divergent' views. ·•

The scheme of 1980 has been framed by the Central Govern ment under the authority given to it by the Aci under General . Insurance Business (Nationalisation) Act; 1972. The scope of that ·

a)lthority has,· therefore, to be foun<; i u:nder Chapter V t:ontaining sections 16 & 17 of the- Act. We have set out hereinbefore the terms of Sections 16 & 17. Sub-section (1) of Section 16 authorises the Central Government, ~it is ofthe opinon that ~"for the mote efl- - eiettt carrying or). of .general inmrance business, it is necessary to do so, may, by notification; fram .. oJie or mOre scemes" proV'I.din , fiDr

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A.K. BANERJEE v. UNION (Mukha, rji, J.) 273

-all or any of the matters enumerated in the different clauses of

section 16(1) of the said Act, and the matters have been set out in the different clauses of the said sub-section. for the preseot purpose, .t; lause (g) is t; elevant, which gives authority to the Central Govern- , ment to frame scheme for rationalisation or revision of. pay scales

.and other terms and conditions of service of officers and other . employees wherever necessary.

C!ame (j) of the said sub-section gives authority to the Central Government also to frame.scheme for :Such incidental, consequential al)d supplemental matters as are

necessary to give full effect to the scheme. Therefore, the question

th:rt 'is necessary [Jr this purpose to determine, is, whether the power :given to the Central Government by clause (g) for the rationalisation ,

'()f revision of pay scales and other terms and. conditions of seryice of officers and other employees, whereyer necessary can be said to authorise the Centrai!Government t_o frame the present scheme uncter <Consideration. This must be judged in tconjuction with sub-section

(6) of Section 16 which authorises the Central Governmnt, by notification, to add, to amend or to vary any scheme framed under 'Section 16. The point at issue, is, whether rationalisation or revision of pay scales and other terms and conditions of service of officers and other employees wherever necessary can . authorise the Central Government to frame scheme like the scheme of 1980, which is unconnected with or unrelated to the merge:r of one Indian insurance <:oropany with another imurance company or the formation of a new

company by the amalgamation of two or more Indian insurance companies. In order to find that out, it is necessary to read the . provisions of this Act as a whole.

Primarily, if the words are intelligible and can be given full meaning, we should not cut down their amplitude. Secondly, the purpose!or object of the conferment of the power J; UUSt be borne in mind. Tne first indication of the said object in this case, as is often in similar istatutes, can be gathered from the preamble to the Act. We have noticed the preamble of the present Act. This preamble has also to be read in the light of sub-section (2) of'Section 16 which provides that lthe object of the Central Government in framing the schemes under sub-section ( l) was to give authority to the Centrai Government to frame schemes, to ensure that ultimately there are only four insurance companies (excluding the Corporation) in existence and that they are so situate as to render their combined services effective in all parts of India. 'Sub-section (2), therefore, to a large extent circumscribes the

amplitude.of the power given under sub-section (1) of Section 16 of- .the Act. As framing of the scheme is an exercise of the delegated

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authority by the Central Government, the memorandum Fegarding:. delegated legislation submitted to the Parliament along with the General Inmranee Business (Nationalisation} BiH, 1972 will provide some. guidance also, As we have noticed. that clause 16 of the s, ai<L Bill Which later on oecame Section 16 of the Act' explained the -needl for delegated authority and stated the object as .'to frame one or more scheme for thnrlerger of one Indian insurance company with another or for the amalgamation of the two or more insurancecompani(ts and for matters consequential to such merger or' amalgamation as the case might be'. Bearing in mind that t, his is a. delegated kgislation and keeping in mind that the authority to frame: the scheme must be found within the object of the power given under- Chapter V of the Act and'reading the entire connected provisions. together, it appears tQ us, that the only authority or power to frame . scheme given was for the purpose of merger of one Indian insurance

compaJ?Y with another for amalgamation of two"br more Indian insurance companies and for matters consequential to such merger or amalgamation as the case might be. Any scheme though, it might come within the wide expressions used in su~-section (6) of Section 16 as well as clause (g) or clause (j) of sub--section (1) of Section 16,. which is unrelated~ or unconnected with the amalgamation of the insurance companieS or merger consequent upon nationalisation would be beyond the authority of the Central Government. This. has to be So if read in conjupction with sub-section (2) of Section 16 ofthe Act. 1t is evident from the scheme of 1980 that it is not

~ connected with r is not for the purpose to ensure that ultimately ther'e are only four insur<, tnce companies existing and they are SOo .situate as to render comb'ined services effective in all parts oflndia.

It is true that subsequent to the merger of the four insurance companies, scheme _ as indicated herein-before, dealing with P.rovident Fund, Gratuity etc. have been framed but these, in our opinion, aFe irrelevant when judging the question f the authority to frame a

' ' ' particular scheme which is impugned. It is also true that the scheme of 1974 so far as pay scale was concerned as indicl\ted in the scheme as .we have set .out hereinbefore provided that the scheme would remain in force initially for a period upto 31st December, 1976 nd thereafter shall continue to be in force unless modified by the Central Government. It is also true hat the employees themselves, as indicated hereinbefore, wanted revision of pay scales and claimed through their nmerous charters of -demands amending or framing of a fresh scheme by the Government on the basis tlrat the Central Government alone had the authotity to frame. fhe scheme under the,

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

A.K. BANERJEE V. UNION (Mukharjl~ J;)

27.S

conditions become inevitable. from time to time in all running. busi

ness or administrations. Clause (g) of sub-section (1) of Section 16 authorises the Central Gove{nment'to frame scheme for ratiol}atisatioh ahd revision of pay scales and other terms and conditions of

ser\rices of officers and other employees wherever necessary. But it is evidnt that the cheme oJ 1980 impugned 'in these petitions is not related to the .object envisaged in sub-section (2) of Section: 16 of • the Act. In order to be warranted by the object of delegated legislatibn as explained in the memorandum to . the Bill which incorporated Section 16 of the Act, read with the preamble of the

Act, unless it can. be said that the scheme is related to sub-sectjon

(2) o0f SeCtion 16 of the Act, it wonldbe an exercise of power beyond delegation. The duty qr he Court in interpreting or .coristrubi.g a

pro-visio'n is to read the sectipn, and understand its meaning in the :context. Interpretation of a provision. or statute . is not a mere

exercise ln sennntics but an attempt to find out the rneani.(lg of the

Iegislati'on fron1 the words use.d. understand the context and the purpose of the expressions used and then to construe the epressions .sensibly. ·

There is another aspect .which has to be kept in mind. The scheme is an exercise of delegated authority. The scope anq ambit

of such delegated 'authority must be spconstrued, i( possible, as not to make it bad because of the vice of excessive delegation of legisia- . tive power. In order to make the power valid, we should so cosntrue. the power, if possible, given under Sectioh .16 of the Act in such . manner that is does not suffer from the vice of delegation of exces4 ' sive leislative authority.

It is well-settled that unlimited right of delegation is not . inherent in the legislative power itself. This Court has reiteratd

the aforesaid. principle in Gwalior R!lyon Silk Mfg. ( Wvg.) co: Ltd.

v. The Asstt. Cammissioner of Sales Tax & Ors.{1) The growth of legislative power of the <h.ecutive is a significant development of the

, 20th century. The theory is iaissez-faire has been given a go-by and G

 . large and comptehensive powers are being assumed b)l th'e State with a view of improve social an~ eonomic well-being of the ' people.

Mst of the modern socio-economic legislations passed by the legislature lay down the guiding principles of the legislative policy. The legislatures, because of limitation imposed upon them

(I) [19741 2 S.C.R. P• 879.

''276

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. [1984] 3 S.C.R~

A r ·nd the. time factor, hardly 'cango irito the matters in detail. The

.' 'practice Of empoweririg the executive to make subordinate legisl~ron

within he prescribed sphere h<l; S .volved OUt of practical necesity

arid pragmatic needs of the modern welfare State. . .

-··· Reg.arding delegated lgislation, the principle.which as been well-established is that legilaturc must lay down the guidelines, t.he . principles of policy for the. authority . to whom power t~ make

suborqinate legislation is entrusted. The legitimacy of delegate.d :legislation deBcnds upon its being used as ancillary which the legis- .'lature cons!ders to be necessllry for the pfpose pf exercising its . Igislature power effectively and completely . . The 'legislature must .. retain .in. its own 'hand the essential'legislative function which con.:.

 :sists in declaring the lgislative policy and lay down the. standarq :which is to be enacted into a' rle of law' and what. can be' oelegated , s the task of subordinat(: iegish1tlon which by' very nature is ancillary to the st.atute which delegates the power to make it effective provided the legislative policy is enunciated with suff'tcierit clear, ness -or a standard laid down. The courts cannot .and do not interfere on the discretion that undoubtedly rests with the legislature itself fn determining the .extent of \he delegated . power in a particular cas~.

It is true that in his case. under Section 16(l)(g), rati.on'alisation or ·revision of pay scales and .other terms and conditions of service of officers and other ·mployees wherever necessary is one of the purpos~ for which scheme can be . framed under Se'ction 16(1) of the Act. :It is also true that incidptal, co.n squenlial and supplemenetary

:ill alters as are necessary' to . give full effect to the schee are also authoriseq under clattS9 (j) of sub-section (I) of Se~:tion 16. It bas also to be borne in mi'nd • that scheme and every' amendment to a scheme framed under. sec.tion . 16 shaH be lid as soon as may be after.'itis made before each Huse of Parliament. The last provision is indicative of the power of superintendence that the legislature maintains ovet the subordinate iegislation of scheme frmed by the . . delegate under the authority gjven under the Act. , From that point.

ofview, it is possible to consid.er as indeed it was argued on behalf . bf the respondents in ihis" case, that having regard to the fat that one . of the objects of the Preai:rj.ble is regulation and control of general insurance .business and other. mltters connected therewith. or inci

dental thereto. and having regard to the fact that rationalisation and_ . revision of .pay scales whenever necessary . was one of the objects'

envisaged under sub-section (1) alongwith clause (j) of sub-section.

(1) of Section 16 of Section 16 read with the safeguards of section

.. A..K. BANJ:RJEE v. UNION (Mukharji, J.) . 277

. -~ 17-aswe nave 'Set out hereinbefore in case of revision and rationalisa-

-~. 'tio~ of pay spates whenever it bcomes neces.saryl as in this case,

~ .accordipg to the respondents, it had become necessary, the scheme ·

~ -Qf 1980 wa~ prmissible within th~ delegated authority:·. But we

rnust bear in ininc\ the observatio.ns of Mukhe:rjea, J. iri The Delhi Laws'l1) case to the following etrect' : ·

''The. essential legislative function consists in the deter-

::.. 'mination or choosing of the legislaive policy and .of enact- / ing that_ plicy into a binding rule of conduct. It _is open to . ·-the legislature to formulate the policy as broadly and with as

 little or.as -much 9etails as it thinks proper and it may dele. o ·:gate tbe rest of the legislative work to a subordinate autho- -' tity who will work out of the details ithin ihe framework of

that policy". ' ·

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But as explained• befote the Act must be read as a whole. _,. 'The Act must be read in conjunction with the preamble to the Act .and in conjunction .with the memorandum in Clause No. 16 of the Bill which introdued the Act in questia1_1.

But above all it must be .. read in conjunction with -sb-section (2) of ection l6 of the Act which clearly indicated the object of framing the scheme under Section 16(1) of the Act. The auth-ority and cope for subordinate legislation can be read in either of the two ways ; name'ly one which .creates wider delegation and one which .res.tricts that delegation. In 1our opinion, in view of the _language of sub-section (2) of Section 16

and the memoandum to the 'Bill, in the peculiar facts of this case the one which restricts tlie delegation. must be preferred to the other.

So read, in otir opiniqn, the authority under Section 16 under the .(fifferent ciause of sub-section (1) must pet(_) SQbserve the.object ' as envisaged in subsection (2) of Section 16 of the. Act,_ and _ ifit is so read than framing of a. scheme for purposes mentioned .

in different clause of 'sub section (1) . of Section 16 must be 4il relat~ tQ the aalgamation or merger of the insurance companies _

as . envisaged both in the memorandum pn delegated legislation as well as sub-section (2) Of Section 16, We may mention ' in this connection that in the case of A. V. Nachane & Another v.

Unioi, of-India & Aiz(f)ther,(~) this cnention of delegated legislation was .adverted to. In that case the Court was concerned with Life

~ (1) £l'SlJ S.C.R. 137.

~) (1,12] 2 S.C.R 246.

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278 $UP.Roi£ coiJ'Rr ilii>oP.is. [1984j 3 S.C, Jt. . .

. A - Jsurance orp.oration (Amendment)·. Act, 1981 where the Plicy of: ''the Act as stated in the -preamble ·?f the Amendment Act was th ' "for securing the interets of the Life lnsuram; e Cor~JQrarion :~ India and its policyholders and to control, the cost of administra tion, it is ecessary that revision of the terms. and condition o£·

B < • service applicable to the emplorees and agents of the Corporntion: should be undertahn expendiously. That was the object or the Act in question. ·. Unfortunately that is not the object indicated: as the objec:t of the power to frame sceme under Section 16 or the

- present Act.'. In view of that object mentioned in the said decision.

and for other reasons in the case of.f.V. Nac!Jane &: Anbtherv c Union of /ndi~ & Another (supra), this Court held that the Act;~ question did not suffer from the vice of excessive dekgatioo. In . view of what we have stated herdnbefore, the scheme of 1980 sofar as it is not related to the amalgamation or merger of insuranee companies, it is !lot 'warranted by sub-section (I) of Section 16. If

that be 5o, the scheme. must be held to be bad and bcyon~ au tho- ~~· .

This being the position, it is not necessary to eaminc the various other contentions raised in this case. Various contentions havebeen made. Both sides relied on various dcciion$ i'n support of their respective contentions. Both sides relied on the decisins dealing with the employees of the Life Insurance Corporation and the ,\cts and the _amendments in connection with their terms of employment. We will ju>t note the decisions. Reliance .was placed on the decision ill

he cas, of MaJmJ Mohan Pathak v. Union of httlia & Or.<, Erc.(ll , The question in that decision was that the validity of Section 3 <>fthG _.Life lrburance Corporation (Modification of Settlement) tiel, 1976. ~

The questions involved in that decision, in the vi~·\\ \l"e htW~ takcn'as- -.1 well as in the facL1 of the instant case, arc not relevant. In last mentioned Cae there Was a Writ pdition which was allowed b)' the learned single Judge of th~ High Cout 1111d appeal was pr-eferred>

from that decision. During the pendency of the appeal, thr~ as

an amendment to the Act namely, the life Insurance Corporuon (Modificatior of Settlement) Act, 1976. In-the Letters Putent Appeal, the Corpoation stated that in view of the imptlgned Act, there wiiS no nectbctty f_or procetding with_ the appeal and the Division Doc~ of Calcutta . H•gh Court made no order. on. the said npp(l11. ThtS.

,1) (1918]3 S.C.R. 334.

\~:-~~-r . . ' .

I . . . ;.>.."K. Jl:\~L"RJ~I! v. W!ON (;1/uk/wr}i, J.) . . 2; 9

 _.· '. rt hlcl among otb; r things tl; at tlie rights r .the ~1rties had I

.-ccu 11• ed in the JUdgment and became the basis of a Mandamus . rysta 11 . . 1 :1 b . .

H'gh Coutt and 1t cou • not e taken away by mdirect fashion fthe I d by the Act undcr.chalknge before this Court. , . propose ·

F . h-andrachud ,' J .• as th_e l 1arnd. Chief iustice then was, spak f. : for himself and Fzal. All and Shanghai, JJ: concurred with the I' .mg · 1 h · -majority vJ":w on the bsl:i t.J.lt t e tmpugned Act violated Article j1(2}of the Constitu _lion and Wds therefore void. Bhugwati, J. speak- : iog for himself and_ on behalf o~ I yer & Desai, J J. was of the view . \.,·that irr.espective of _wheth_cr the Impugned Act was constitutionally

-, valid or not, the CorporatiOn was bound to obey the writ of Manda- (· 111us issued by the High Court and to p:y the bonus for the. year : 1975-76 to class Ill and Cl:m IV em;>loyees. The said. learned

~ judgs held that writ of Mand .\ms w:ts !lOt touched by the impugn- ' d Act. The other observations of the said Judges as well as the 'J -~Jlher learned Judges are not rkvnnt in the view we have taken. In

l . instant CJSe before us we uJ n•lt have any cHe of settlement which

 was the subject matter there bctw<!en the workers and .tbe e.mployers f .and the rigllls flowing therefrom. , .. ,.

I .

Reliance was also placed on th~ decisio.n in the case of Tlte ; lift luuran;:e Corpararlon of fndla v. D.J. Baltadur & OTs{1). as well

as th~ decision in the case of A. V. N.J.:hane & Allotlter v. Union of. E .• . lni,!t & Anorltrr . (supra). In the view 'we have taken, it is not •

-uecessary to examine these d~isions in C:ktail. In those cases, the

question under consideration was the Life Insurance Corporation . Act, 19_56 and the subsequent amndments thereto as well as certain

~;~ -ordrs_m respect of the same. i ' The basis upon which the aforesaid two decisions proceeded i, -.ere (a) a right had crystallised by thll directions in IJJ. Bahadur's Ci1$e ( • . . tf pra) and this could not be :dtered.or taken away except by

fur~:h •ndustrial sc:ulemcnt or uward or by relevant t.:gislatlon and . .

in~ •; relevant lcgblation which WJS the subjct matt.:r of challenge ·. G .had • Nochtm~'j' cas-: (supra) c-Jn not take away th~· rights which tvid nctcfrued to the 'emnloves with retrospective effect. As. is •II ro I ,. _ . . .· -.liffcr. rn 1 le facts of the case be Tore us, the 'situation is ent1rely

-;, hct~:t. We un: conccrncJ here with the questi'on primarily r the schc d 'f · h , ·. me 1~ au_thoris.:d by tli.: Act un 1 1t 1s so aut pons- -· ... . l] I, S.C.R. 1033.

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_A . ed the question is . whether the Act in question is consiiiution 1·1

SUPREMJ! COU~T REPORTS ·

' h h' h a Y "alid in the sense it had taken away any ng t_s w 1c had crystal!' :.. ed or whether it infringed Article 1'4 of the Constitu_tion. The~~ decisions also deal with the question whether a special legislation would supersede a general legislation and which legislation cold beconsidered. to be a special legislation.

It may be noted that we arc not concerned with any settlement or award. In t_hat view of the-,' matter, it is not necessary to detain ourselves with the said decisions.

and the various aspect dealt with in the said decisions. .

Another aspect that was canvassed before us was whether ; ; Section 16 of the 1972 Act with which we arc concerned in any way 'I affected any ndustrial dispute and whether Jhe provisions of sub- I section {5) of Section 16 or sub-section (7) of Section 16 in any way curtailed any 'right in respect of any industrial dispute and if so.,. whether the General Insurance Business (Nationalisation) Act, 1972 ,"j is a special legislation or whether !he Industrial Disputes Act, 194T is a special legislation in respect' of adjudication of rights between-. the employees and the emplo)'er.

If we bad held that the scheme of 1980 was permissible within, the power delegated under Section I 6 of the Gcnc:rl Insurance E . Business (Nationalisation) Act, 1972, it would have been necessary

for us to discuss whether there is any conflict between the provi~ sions of the said Act and the Industrial Disputes Act, 1947 and if so~ which would prevail. sction 16(5) of the 1972 Act, aS: we have noticed earlier, stipulates that notwithstanding anything contained in the Industrial Disputes Act, 1947 or iu any other law l' for the time being in force, the transfer of the services of any officer or othfr employee of an Indian insurance company to the acquiring company shall not entitle any such office! or other employee to any compensation under thut Act or other law and 00 such claim shall be entertained by any court, tribunal or ; ther authority. This, to a. c certain extent• clearly txc!udcs the operation of the Industrial Dis~

puts Act, 1947 in respect of disputes arising on the tranfcr of the: busrncss of goeral insurance. There is no such question bef<Jrt us.

Had it been posiblc to hold that the scheme of 1980 wus v; lic.l i[).

propr c.terche of the authority under Section 16 of the Act. a

q~stJOn would have , arisen as to whether the ceiling an_d othr con- 8 dillons on emoluments coulc.l be imposed on the employees in the manner proposed lo be done under the scheme of 1980 withoutreference to the procedure for adu}ication of these matters under tbC

A.K. BANERJEE v. UNION (Mukharji, J.) 281'

Industrial Disputes Ac; t, 1947. Then the question had to be judged by reference to sub-section (5) .and sub-section (7) of Section 16 of the 1972 Act. Section i6.empoweFed the. Goveni.ment by nptification to add to, amend or very any scheme framed under Section 16(1 ).

Sub--section (7) provides that the provisions of this section, namely Section 16 of the 1972 Act and onmy sch.eme under t shall have effect notwithstanding anything to the contrary contained in any other law or any agreement, award or other instrument for the time being iri force.

We have noticed the scheme of 1980: That schem~ puts certain: new conditions abou~ retirement, about emeluments and _ <>tber benefits of the empioyees. It may be noted that the applica- tion of Industrial Disputes Act as such in general is not .abrogated by the provisions of 1972 Act, nor made wholly inapplicable in respect of matters not covered . by any provisions of the. scheme.

This aspect is important and must be borne i~ n1ind.

Wrongful dismisal, other disciplinary proceedings, unfair labour practices, victimization etc. would _still remain unaffected by. any scheme or. any pfovision of the Act. The only relevant and material question that would have arisen, is, whether in ca?e where a statutory ceiling whith one f the counsel for the petitioners tried .to describe as "statutory gherao on rise of increase in emoluments and o_ther benefits with the rise in the cost of index of prices" affected the position _under the Industrial Disputes i\ct: 194 7. •It may be noted as we have noted before that this. is not a case where any dispute was pending before any tribunal or before any authority

underthe Industrial Dis_putes Act, 1947 between the workmen con- . cerned and ihe insurance companies. Though there was conciliation proceedings, the conciliation proceedings could not rach to any successful soluti(; m and the Coi1ciliation Officer has mad~ a report failure of conciliation. The Goverment had the report Thereafter the Government has not referred the dispute to_ any industrial tribunal "ut . has framed a scheme which is the subject matter of challenge before us. It cannot, in our opinion, be said that conciliat ' tion proceedings or any proceeding under the Industrial Disputes . Act were pending and therefore i.n the middle of the proceedin-gs under the Industrial Disputes Act,· the Government had acted an_d, framed the scheme _and as such th" same was bad and i'!Jegal. There. were no proceediogs pending under _the Industrial Disputes _Act~

1947. With the finding of the Conci_iiatfon Officer, the Government_

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 SUPRFJ4£ COURT REPORTS [1984] 3 s.C:R.

ha(\':t\\10. options, either reaching a s-ttleme1,1t or framiDg a 5cheinc .

1 on the one hand• Of to make a• reference to the tribunal ohhc

dispute. regaring the points mentioned in the demands of the work:-. men. T:here is .. one factual dispute which, in our opinion, is.. not

v.ey material. According to the petitioners, the <; Jovernment had . not. acknowledged the recipt of the failure report of the Concilia

tion Officer. Acoording to he . rspop.dent~, the receipt \vas acknowledged ; the. failure of the. conciliation proceeding~ however, is admitted_. 'No .further steps or proeedings were required as such.

The Government had. to assess on the failnre of the conciliation

pceedigs either io refer the matter to the tribunal or to take such steps as it considred necessary. lf.th~ Go:venunent had not taken anj! ofthe steps, then it was open, if the employees concerned wero io.an)cway aggrieved, t~ take appropriate proe<:edings agaJnst the Gov.erument for doing so. As mentioned hereinbefore if the scheme was belfto be valid, then the qu.e.stion what is the general law and what . is the speciallaw anq which .law in case of conflict would prevail wou.ld have arisen and that would have necessitated-the. application of the principle "Generalia s.pl.'ialibus no1i d1rcgant".

Tfie, general rule .to be fqllow.cd in case of conflict etween , t\vo statutes. is tliat tbe late; abrogates the eatlter one.

In< otber words, a prior speialla.W would yi.~Jd tQ aJa_ter genral law, if ether.of the

' . ' . .. . ( two f9Uo.wing c()nditions is satisfied. . . ·

(i) The two are in<; onsistcnt with each other . • • . . . (H) There is some express reference in the latr to the.

earlierenactment.

. - If either of these tWO. conditiOnS is fulfilled, the Jater law, even though generl, would.prevail. . .

JJt.

Fromthe text and the. decision~, four tests. are. deducible and.

G . these ate : (i) The I_egislat1:1re bs the undubted rig lit to a, ltr a !a~ ..

alre3cdy promulgated through subsequent legislation, ·(ii) A special law may be. al!erga'ted or repealed 'by a later general bw by a a express. provision, (iii) A i{l.ter. general law will override prior special law iftbe two are so repugnarit to each other that they c_al)not' co-eist even though no express provision in that behalf is found in th~ li genc; r~I Iw, and (iv) It is. only in. the ab5encc of a . provision to the

_contrary and of a cler incosistency that a spciaJlaw wiJrremin wholly unaffected .by a later gen, eral 1aw.

See in this connction .• tt.

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A.K. BANERJEE Jl, U'NlOJ.~,(Mulfltttrji, J,) 28-3

~well on "The lltmftlltion.<?f~.~tutes" Twlfth Eqjtion; pages

l~{i-19S. . .

The question was posed in the cse of 'file Life Insutance C<!r~ . poration of India v. D.J. Bahadur & Ors, (supra) where at page 1125, Krishna lyer, J. has dealt yvjth the aspect of th~ quetjon. There B the learned Ju9ge pose~ tl').e que!lti}l!l wi1ether the LTC Act was a • special legislation or a .geQeral legislation.

Refrence in this. connecion may alo be mad~ on Cra.ies .on "St<J, tute (aw" Seventh Edition (1971) paras 377~3.8'2,.bp~ it has to be l:)rope in mind that ·-primary intention has .to be given effect to. Normally two aspects of the question woyld hav:e uemnded imwr&l if th~ sc;:hn:ie.of < c 1980 was held to bo valid on the first ground s w.e have disclls~; ed, {)ne is whether the Gel)~:'l..L)nural)ce Busins.s (Nntionalis~'\on) Act, 1972 is a specil sttWe ang the Indusrial Diputs Act, 1947 . .

'~ a general Act or vice v.t:rsa, !!.nd seconly wh5:tpcr there is a, ny --expressprovision in the General Insurance Business (Nationali~~

1ion) Act, 1972 which deals with the &ubject. Now in.this .case \XC

have categoricalreferenyY to the Industdal Disputes A_ct, 1941 in '$Ub-section (5) and suqsectioo (7) of Section 16 9f .the General Insurance Business (Nationalisat-ion) Act, 1972. There is, however, one apeCt where i, t would have bec;:.n neceS, suy ha9 Wf( heJd the .

'Schmc to be vlid ohrwise, if there h. ad been no Genert insurance ~sinss {N ationalistion) Act, 1972, then (he employees -ould have been eJ?ti.tled to .ra!~.e a dispute on the question o( in~

· frease of emoluments and revision of pay scale J¥ith r.ise in the cost ()f index • of the prices under the Jndust'rial Disputes Act, 1947 . . In such -a situation, the Government, after conciliation proceedings, ·.was empowerd to .make a referene if it considered so necessary . having regard to the nit.ure of the disputes raised .. Though it qm- . not be said that reference was a matter of right but it was within the

realm of power of tb.e Government and the Government has a duty

:toact with discretion on rele:vai}t coosideratins. to make or ncit to .make a reference taking into consideration the facts and circum- : ~1ances of ea.ch case .. TQ that limitesl ete:~H it coul<l hve. en said

, that this right or powr las be!!n c.u.rtaile9 by the Genera). Insra, nce

. Business (Nation.alisation) Act, 9.72, if tqf! sl}me ww; qth.erwi:~~ .

- '"i:lid.

Having regard to the -context in which the question now arises H 'llefore us, in our opinion, there is no questipn i, s o whe-qer the

'JlrOvisions of Industrial Disputes Act would vre:vjJ . 9Vf. tqe.'provi-

' .

. .


. '[1984] 3 S.C.R~ ·:

sions of General Insurance Business (Nationalisation) Act. -:There is no industrial dispute pending as such. The Gneral lnsranc~ . Business (Nationalisation) Act, 1972 has not abrt>gated the Indus-- . trial Disputes Act, 1957 as. such.

The question of the application of the principle of "Genraliir specialibt1s non derogant" has been. dealt with irt the case of J.K •.

Cotton Spining & Weaving Mills Co. Ltd. v. State of u:P. & Ors.t1)' Some 9f these aspects were also discuss_ed in the case of U.P. State: Electricity Bodrd & Ors; v. Hari Shanker Jain and Ors,(2)

Had it been possible to. upbold the scheme of 1980 as being: within the power of 1972.Act, it would have been also.necessary for us to consider whether such a scheme or Act would have been constitutionally valid .in the context of fundamental rights under Article-

14, article 19(l)(g) and artiCle 31 of the Consttution and th~ effect of the repeal of article 31 by the 44th amendment of the Constitu-· tion. The General Insurance.· Business (Nationalisation) Act was; put n the Nineth Schedule of the Constitution as item.95 orr lOth- August, 1975. .The effect of putting a particular provision in the: Nineth Schedule at a particular timy has been considered by thi~

Court in the case of.of Prag fee & Oil Mills & Anr. Etc. v. Uniotl of India.<'3) It was held by the. learned Chief Justice in the said decisionr. . thaton a plain reading o( article 31A, it could not. be said that the protective umbrella of the Nineth Schedule took in not only the· acts and regulation~ specified thereiti but also orders and ntifica-_ tions issued under those acts and regulations.

Therefre if any rights of the . petit.ioners had beeil. affected by the scherne of 198oi then th, ose.rights would not enjoy immunity from being scrutinised: simply because t.he Act unaer which the scheme was framed haibeen put in the .. Nintl1 Schedule. In any event any right whick. accrued to the porsons concerned prior to the placement of -the Act in the"Nineth SchedtJfe cannot be retrospectiv_ely affected byr the impugned pr<)visions. ·

It was contended that the rights of the peritiones under article 19(1 )(g) have been affected by the iml)ugned legislation. and the: . scheme framed thereunder. Empo)Vering the Government to frame:-

. shemes for carrying out the purpose of the Act, does not, in our

I H

(I)

1961] 3 S.C.R. 185:

(2) .[19791 1 S.C.R. 35S •

. (3) [19781 3. S.C.R 29J.

...

A.K. BANERJEE v. UNlON (Mukharji, J.) 285

optmon, in the fects an~ circumstances' o( the case, 'in any way, A. affect or abridge the fundamental , rights of the petitioners anq would not attract artiqle 19(1) (g). ,

The other aspect 'which was canvas~d before us. was whether the Act and the. scheme in question violate9 'article 14 of the.

Constitution: This question has to be understood from two aspectsf\ namely whether making a provision for sala'ry and emoluments of the petitioners who are the employees of the General Insurance .Corporation specijicaly and differently from the empwyees of other

})ublic section undertakings is dcriminatory in any. manner or not and the other question, is,· wether making a prov.ision. for the employees of General Insurance Corporat_ion for settlement of their dues by schemes and not leaving the. question open to the general provisions of Industria] Disputes f'\ct, 19~7 is discriminatory and violative of the rights of the employees.

It is true tbat sometimes there have. been rise . in emoluments with the rise io the cost of.indee in certain public sector corporatios: The legislature however is free to recognise the degree of harm or evil and to make provisions for the same. In making dis-similar provisions for one group of public sect"Or undertakings does not per se make a law discriminatory as such.. It is well-settied that COtlts will not sit as super-legislature and strike down a particular classification on the ground that any under-inclusion namely that some others have ben len untouched so long as there is no vio1ation of constitutional restraints: It was contended that the application of • . the Industrial Disputes Act not having been excluded from the Nationalised Textile Mills, Nationalised Coal 'and Coking Coal .Mines and Nat'ionalised Banks but if and is so far as it excluded the appllcation o.f the Industrial Disputes Act, in case of general insurance companies, the same is arbitrary and bad. In this connection . reliance may be placed on the observations of the learned Chief . ·

Justice in the case of 'Special Courts Bill197~'.(1) The same principle was reiterated b~ this Court in the case of State •of Gujarat and Anr.

v. Shi Ambica Mills Limited, Ambedabad etc.(2) In that case, this 'court was of the view that in the matter of economic legislation or

tefom, a provision would not be struck down on the vice of under inclusion, inter alia, (or the reasons tht 'the legisfature could' not be


~ (2) [19741 3 S.C.R. 760 "·

(\984] 3. s:c:R~

A . ~; cqair{'.d:to impose \l.POl; l dJn~tr~}ive agect~ ta*. W}1lc~. cu\l,<J

not be<(.)atried .o.ut 01 whic.h ms.~ be. crri, e!, i; l}.t o.tl a Ia~¥ ~~~~a .single 'Stroke. It was further reiterated th~~ piec~~<!-l appr(j)acb to a,

 ; geQ.erl problem~ permitted by under-inclusive classifications, is sopletimes juStified when it is considered that legfslatures d'eal with such prblems USU?IIY on an expetimehtat.ba'sis. It is impossible to . 1ell how successful a particular approacl) trtigfrt be, what disloc-ation .

might occur, and what situa.tion might develop and what new evil

.J)

. ·. ' might be generated in. the attempt.· Administrative eJtpedients. must he forged and teste~.

Leislators rcogni.irJg t!Iese factors might wish to proceed cautiously, and couJts m1:1st allow thernto do s.9.'. This pinciple was again reiterated. in the Constitution Bench decision.ofthis Court' in the case of R.K .. Garg ~~~. v. Union of India & Ors. tc.( 1)

As tliere was no indstrial dispute pending, we are of the opinion .that o~ the ground that the . petit.ioners bave been chosen out of a vast body o{ workmen to b~ discriminated aainst aud

excludin~ them fron;:~ the operatio~ of lndustril Disputes At, there

ha~ been no viQl\ltion of Article 14 oft.he Copstitution. This question, however, it "must be. emphasised again, does .not really arise in the wiew we have taken. .

Before us it was rcontended that sick mills whkh have been

~ationalised have bee~ treted differently. than general jnsuranee .employees under 1972 Act ip. Section 16(5) and Section 16(7) and in . the scheme framed under the General Insurance Business (Nation:::- . lisafon) -Act, . 1972. The object and .purpose o•f tl; e Sick Textile

Undertakings (Natior; alisation) Ac.t, 1974, was "reorganising and rehabilitating such sick textile undertakings so as to subset:\'e the

interest~ of genera) public by :augmentation of the products and

sJistriution at fair prices f different varities of cloh and yarn"7 The basic objective of the .said Act. was rehabilitation of the sick textile mil!s.

Tht~.t was different from the purpose of the present · Act.• The sick textile units had tinder them the bulk o~ their emplo yees as. W9rk1t1el1 tho; e wi10 came under the provisions of Industrial .

Disputs Act; Section 14 of.the said Act stjitUtOI:ily recogni9es te special . position of th~ workmen as contra-distinguished. ffom the other employees by enacting . seperate. provisions in t:his respe<; t thereon. Further-more it has to be borne in mind that the aforesaid

- • .. • • • • +

(l) [1982] l S C.R-,947 ..

. f

,-h .. ·

• 1

• A.K. BANE'RJEE v. VNIOi'4 (M'tikh(trji, J.)- 281

At~ was -<::ancerii'hi wftlh the e'Mni.r{n:t attntation of production . A . :and disfflbufum.Of certit1n iroth 'and yarn which are commodities.

essential to 'the ilationa:l economy \iein~ imp.ortant consumer items ..

Therefore 'the 'case of the t'fnployees of sick textile Ulldleitakings: .. Whtch ha-s been mflltiorted by the petitioners an'd argued before US;

ciitndt be ~6inpitte~ OJl shni1ar anes ;_, n tespect of. this aspect With tn'e present ptt1tioners. We ''/ould have rejected this subrnission on a behalf 6f'tlie peti(roners, hM it been necessary fdr us to .do so but in. tb:'e view that h'a's been tak"e'b, it is not necessary.

Atiott1e'r item mentioned o':!fOre us was tire employees of Coking- .

Coal Mines (Nati&ralisatioh) Act, 1972.· It has to be.borne in mind ' that the object covered by 'the schem! of th:e Act was entirely 'diffe~

rent 'from the General fnsurance Business (Natioballsation) Act,·

19'72. 1'he Coki-rrg Coal Mines (Natiomli'sation) A1::t, 1972 was . entrcted to provide-for the transfer ol the interest 6f the owners' f

such mines an(! also the transfer 6f the interest of owners of coke oven plants with a view 'to "reorg1mising and recdnstructi.ng such cO'al mines and pbnts for the purpose of protecting, serving and permitting scientific de.velopment of resources of coking coal nee'ded. to meet the growing requirement of iron & steel industry" .. Accor~

ding totbe normal prcvlent view, the workmen of Cokirig Coal Mines were sweate~ labour. These \vorkmen constituted very large percentage of the employes. The act-in question namely the Coking . E:

Coal M_ines (Nationalisation) Aet recognised the independent exis tence -c, f the said workers as a class. It has also to be kept in mind that coking coal is a commodity very vital to the national economy and prime raw materialS of iron & steel industry which is a basic ·. industry. The workmen employed ijl. the coal mines were also sweated labour, Their special position was also statutorily recognise(\

in the said Act: Coal-is also one of. the basic materials required to sustain gro:wth.

The provisions of Coking Coal Mines (Nationalisa~ tion) Act have been considered in detail and the special feature has been taken note of in the case of Tara Prasad Sing(l etc. v. Union of India &Ors(1). According to the respondents, Class Ill and Class G; IV employees of the General Insurance Company are high wage earners. They are islanders -by - themselves-accorqing to the

respondents. It is true that judges shoul(not bring their pers<;>nal knowledge into action in deciding. the controversy before the Courts but if common knowledge is ay guide, then undoubtedly these

 Hr . • '

(1) [1 ,80] 3 S.C.R. 1042.

~ .

'il: .

~88

.SUPREME .COURT REPORTS

(1984) 3 S; C; R.

emptoyeesareveryhigbly paid in _compaison to mny ()tbers. The object ofthe Genr&-1 Insurlmce B.usness (Nationalisation) Act, 1972 is to run the busines~ efficiently so that the funds available might be utilised for socially viable and cor~ project~ of natioal 'importace. -From O!le point of yiew the Nationalised Banks and the Insurance ·

Companies for. the purpose· of . applicability or otherwise of the' .

pryisionsof t.he Indusrial Dl.sputes Act .canot' be treted as bel on ging , to one class: . Historical reasons . provide an intelligible .. differentia distinguishing Nationalis.ed l.Dsurance. Companies 'from,· .ihe Ntionalisea Banks. The reason suggested by the respondents ·. was that priOT to Banks Ntio-nalisation,. Industrial disputes between

\orkroen and the Banks .were treated since 1950 on All India basis with the totality of the-banks being involved therein. Several awards. have. ben made . treating them_ as su6idik'e Shastri Awar~, 1953.

Shastri Award Tribunal wasconstituted witli a :view to settle the disputes of the workmen of tbe Bnks with all commercial Banks (excluding Co-oprative Banks etc.) on the ope hand and the emplo

yee~ on the other. Desai Award, 1.962 bipartite settlement between Indian Banks Association and the Ex.change BatJks Assodatin on .· . tb(( one hand and AU India ank Employees Associatton and AH lncfta Bank Employees Federation on the other, are some of t.he examples. As against this, prio! to th~ Act in question befre us, disputes between insurance companies arid their. work!Jlen were . settled on independent company' basis w_ith no All India projections ·.involved. It in.aY also be noted th.at unlike the case of some banks, there is no existi!lg award or settlement with the petitioner-6 emploees . of the general insurance companies . and .the for insurance companies. The financial resources, structures and functions of the Banks are-different from thqse of the insurance companies. It may also be noted as was pointed out to us on behalf _of the espondents (hat Bank's Class III. and IV employees are about. 4,85,000 in 198l . as compared to irisuance companies which empioy. about ,25,000 Class Ill and class IV employees.· Therefore for' the :PUrpose . of raiionalisation; the insurance companies . wanted to curtail their emoluments _on a small scale. -It cannot be said that there are no ·

dist:'ingihing fators and that _for choosing a partiular . group for . eperirneot, the respondents should be.fourid guilty o£treating people differently \llhile they' are alik~ in all ni(\terial respects. :

' . Differentiation is not always discriminatory. If there is a -.• . rationl!l nxus on ll1e. basis of which differentiation has been made with .the object sought to be acaieved by particular. provision,. then. .Qlch .differentiation . is noi . discriminatory and does a•t

' "'

A.K'. BANERJEE v. UNION (Mukharjil J.) 289

'\'!alate the principles of article 14 of the Constitution. This principle

:is too well-settlM now to be .reiterated by reference to cases. There

is intelligible basis for differentiation. Whether the same result. or better result could have been achieved and better basis of differentia- ,

. tion evplved is witin the domain of legislature and must be left to

'tpe wisdom f the legislatu, re. Had it een held that the scheme of ·. B 198\l was within the authodty given by the Act, we would have rejected the challenge to the Act and the scheme under article 14 ·()f the Constitutioil .

It was also urged before us on behalf of the respondents that c the petitioners being employees of public sector undertakings, and

these are economic instrumentalities pf the State and having regard

to the contents and .contour of the concpt of public employment .as developed 'in the Iridian legal system, an employee in a public -sector can be approximated with and treted as a government

'l!iervant. Having regard to the principles which govern the employer D '.and employee relationship in the governmental sectors, .the condi-

.tions of service of employees in public employment should be -exclusively governed by the statute and by the rules and regulations 'framed thereunder. Predication of such power would necessarily exclude the provisions oflndustrial . Disputes Act and the principles of collective bargaining just as these would exclude the principles of E

o.ntractual relationship in such mtters. The point is interestitJ.g.

Howeer, in the view we have taken; we neep p.ot discuss this aspect :any further. . ·

It was further submitted on behalf of the respondent that the ntionale, justification and the genesis of the law of nationalisation F being the creation of economic instrumentalities to -subserve the .constitutional and adfll'tinistrative goals of governance in a social welfare society, the running of public s.ector undertakings is neither for profit earnng of the management nor for sharing such profits with the workmen alone but to utilise the investible .funds available as a result of such ventures and undertakings for socially-oriented goals laid down by the governmental policies operating on the said sectors. In this connection reference was made before us to the decision in the case. of State'of Karnataka & Anr. etc.·~. Rangantha .Reddy & Anr. etc.(l)

J. {191$] 1 S.C.R. 64'1 at pages 672, 676 & 691.

 "- __ .;._, . ., __ .

29J SUPRB~IE eouar: REP.ORTS [193-lj 3 S.C.R~-

. A. . . . .>(!pfoy'fuent in tb(!:pubHc s:ectot .undertakings erijoy.s. a statuh ·· nwas submitted th.at botlfbistbtically as well as a matter of.Hrw, the~

': publiC"sectdr utidertakli)gs being the economic . insti:timeritatrties or .tlie Stite ad dischargin~· the obligations which tlie Stafehave, the

employees of such undertakings iit principle. cannot be distinguished~ from the employees in the govetninennervices~ In this c6nnection B our.atterition was drawn to the case of Suklulev Singh & Ors. v. Bhagai.

Ram Sardar Singh .Raghuvanshf & :4nr:e) It \Y3.S urged that in all cons- -. ' . : .. titutional de_mocracies, the relationship'between the govemmcnfand.

.· the civil service i~ exciusively govered by the statutory .provisions ..

-. with the power in the. Governenfto unil:Herally alter the condi- C _ tionsofservice ?th~ gvrnment em.pl9yees. Reference \vas. made't~ - / . "The Law of CIVII.Servtce' by Kaplan. It was furtber subm1tted that. . .::_ iri-Jndi~ - the aw, js tbat'.origin ·()f the Goverment ervice might be-

' contractual but once appinted t~ a post under the Government, the .

_ goveriment servant acquires a status nd .. the rights and ob"iigations.. .

are no longer dependenf<ln the consent o( both the parties but by D

. ·.. . . . statut •.

We wo.uld have conside red . thse aspects had it been nccssry for s to do so but iUs not nece_ssary in the view taken. We may- - reiterate that article ·. 14 does not . prevent legislature from intro~ . . - .

- . . . ',,; ducing a n; fofm i.e. by applying the legisla.tion to some institutions

E : . . . _ or objects _ or areas only according. to the exigency of'the situation .

.• _,.

. .

. . .

and further classification of selection can b:: -ust~ ined on historical: . . -{ . reasons or reasons of administrative . exigency or piece-meal method .

 ..

. of introducing reforms. The law need not apply . to au the persons-

. in the sense of having a universal application to all peisons. A law

ca~ be sustained if it ueals equally with the people of _, veil-defined ·: class-employees of insurance c_ompanies as' such and such a law is. . . . not open to the charge of denial .of equal pro(e<; tion. on the ground . that it had not application to other persons. ·· · . . . .. ' . . . . . " .· .

In the view we have taken of the matter •. these applications.

G succeed and theimpugneds-cheme of 1980'must be hc:ld to be bad . as beyond .the scope . of the authority of the entral Government,.

under the Generai Insurance Business (Nationalisation) . Act, 1972. . . . : The operation of the scheme _has been restrained by the order passed . . a~ interin order in._th.ese cases: The impugned scheme is therefore- . . . quashed~ and ·will no( J>e given effect. to~. The parties. 'will be at ·

- H ·. . . >. . . . . . . • .

~· [1975]3 S.C.R~ 619 at page 646.

.. -_ :.- ·

. )

A.K. BANERJEE v. UNION • (Mukharji, J.) 291 •

liberty to adjust the if rights as if the scheme had not been framed.

The application for intervention isallowed. Let appropriate writs be issued quashing the-tcheme of 1980. This, however, will not prevent the Government, if it so advised, to' frame any appropriate legis~ 1ation or makeany appropriate amendment giving power to Central

. Government to frame any .scheme as it considers fit and pre;> per. In . the facts and circumstances of these cases and specially in view of B the fact that petitioners had themselves' at one point of time wanted that new 1cheme be framed by the Central Government, we direct that parties will pay and bear theit own costs in all these matters.

The rules are made absolute o the extetlt indicated above.

N.V.:K.

Petitions allowed.

• .