A.V. NACHANE & Anr. v. UNION OF INDIA & Anr.

The petitioners in their writ petitions to this Court challenged the validity of the Life Insurance Corporatio.n (Amendment) Ordinance, 1981, th•: Life Insurance Corporation {Amendment) Act, 1981 and the Life Insurance Corpora tion of India, Class III and Class IV Employees (Bonus and Dearness Allowance) Rules, 1981 contending that: (1) the Act and the Rules were violative of Articles invalid on the 14, 19(l)(g) and 21(2) of the Constitution: ground of excessive delegation of legislative functions; (3) sub-section (2C) of. section 48 was invalid to the extent it permitted restrospective operation to rule 3 to over-ride the order of this Court in D.J. Bahadur's case; (4) Attlcle 14 was infringed beca!!Se the provisions of sub-section (2C) of section 48 provided that any rule under Clause (cc) of sub-section (2) of that section touching the terms and conditions of service of the employees of the Corporation shall have effect notwithstanding anything contained in the Industrial Disputes Act, 1947; (5) sub section (2C) added to section 48 of the Life Insurance Corporation Act, 1956 by the Amendment Act of 1981 was invalid because of excessive delegation of legislative functions and if sub-section (2C) which was an integral part of the Amendment Act was ultra vires, the entire Amendment Act would be unconstitu tional. and (6) the provisions of the Amendment Act of 1981 could not nullify the effect of the writ issued by this Court in D.J. Bahadur's case. The writ petitions were contested on behalf of the Union of India and the Life Insurance Corporation by contending that remuneration that was being paid to Class III and Class IV employees of the Corporation was far in excess of what was paid t~ similarly situated employees in other establishments in the public sectqr, and that the problem of the mounting cost of administration led to the making of the Ordinance and the Amendment Act As no improvement in the situation was possible by the process of adjudication, a policy decision was taken that in the circumstances the proper course was legislation and that was why the Amendment Act was passed and the Rules framed. The Life Jnsurance Corpora tion Act as amended and the Rules made after amendment placed the Corporation • - I- + ' - - A.V. NACHANE v. UNION 249 in the same position as other undertakings, that the advantages being enjoyed by the employees of the Corporation which were not available to similarly situated employees of other undertakings had been taken away removing the discrimina tion in favour of the employees of the Life Insurance Corporation. Repealing a Jaw was an essential legislative function which had been delegated to the Central It is not the Rules framed Government and the delegation was not excessive. by the Central Government in exercise of the delegated authority that over-ride the Industrial Disputes Act or any other existing law, but the power of abro gating the existing Jaw is in sub-section (2CJ of section 48 which was enacted by Parliaruent itself. Allowing the writ petitions in part HELD : [By the Court] The Life Insurance Corporation (Amendment) Act 1981 can operate but prospectively in so far as it seeks to nullify the terms of the 1974 settlemc:nts in regard to payment of bonus. [269 A-C, 271 A-BJ [Per Gupta & Pathak, JJ] I. (i) Rule 3 operating retrospectively cannot nullify the effect of the writ issued in D. J. Bahadur's case which directed the Life Insurance Corporation to give effect to the terms of the 1974 settlements relating to bonus until super- [269 A] seeded by a fresh settlement, an Industrial award or relevant legislation. (ii) The Life Insurance Corporation (Amendment) Act 1981 and the Life (Bonus and Insurance Corporation of India Class III and Class IV employees Dearness Allowance) Rules, 1981 are relevant legislation. In view of the decision in Madan Mohan Pathak's case these rules in so far as they seek to abrogate the terms of 1974 settlements relating to bonus, can operate only prospectively, that is, from February 2, 1981 the date of publication of the Rules. [269 B-C) (iii) A claim based on the 1974 settlements is not a fundamental right that could be enforced through this Court. (259 CJ

#2. The burden of establishing hostile discrimination was on the petitioners the rules. It was for them to show who challenged the Amendment Act and that the employees of the Life Insurance Corporation and the employees of the provisions of the Industrial Disputes the other establishments Act were applicable were the contention that by excluding the employees of the Corporation from the purview of the they had been discriminated against. There is no Industrial Disputes Act material on the basis of which it can be held that the Amendment Act of 1981 and the rules made on February 2, 1981 infringe Article 14. similarly circumstanced to justify to whom (260 F-G] Express Newspapers (Private) Limited and another v. Union of India, [1959] SCR 12 and Moti Ram Deka etc. v. General Manager, N.E.F. Railways, Maligao11. Panda etc. (1964] 5 SCR 683, held inapplicable. t In the instant case section 48(2C) read with section 48(2) (cc) authorises the Central Government to make rules to carry out the purposes _of the Act notwith standing the Industrial Disputes Act or any other law. This means that in A B c D E F G H A B c D E F G H 250 SUPREME COURT REPORTS [1982] 2 s.c.R. respect of the matters covered by the rules, the provisions of the Industrial Dis putes Act or any other law will not be operative. [262 A·B]

#3. The policy as stated in the preamble of the Amendment Act is that "for securing the interest of the Life Insurance Corporation of India and policy holders and to control the cost of administration, it is necessary that revision of the terms and conditions of service applicable to the employees and the agents of the Corporation should be undertaken expeditiously." The policy offers in exercising its powers under sufficient guidance to the Central Government that Act. [265 B-C] rules with regard to agents ofthe Corporation. Sub-section 2(B) of section 48

#4. Clause (cc) of section 48(2) empowers the Central Governm~nt to make terms and conditions of service of the employees and says that the power to make rules conferred by clause (cc) of sub-section (2) shall include the power to add, vary or repeal the regulations and other "provisions" referred to in sub section (2A) with retrospective effect from a date not earlier than June 20, '1979_ A writ issued by this Court is not a regulation nor can it be described as 'other provisions' which expression includes circulars and administrativ·~ directions. Sub-section (2CJ of se~tion 48 however provided that any rule made in clause (cc) with retrospective effect from any date shall be deemed to have had effect from that date notwithstanding any judgment, decree or order of any Court, Tribunal or other authority. Rule 3 of the rules relating to the subject. of bonus cannot make the writ issued by this Court nugatory in view of the decision of this Court in Madan Mohan Pathuk v. Union of India. [265 H-266; H 267 A]

#5. It is not really the rules framed by the Central Government that over law, but the power of in sub-section (2C) of section 48 enacted by ride the Industrial Disputes Act or any other existing abrogating the existing laws is Parliament itself. [264 Fl Hari Shankar Bag/a and another v. State of Madhya Pradesh, [1955] I SCR 3 80, referred to. [Per Chinnappa Reddy J.] . ' - ., .... The effect of the two judgments in Madan Mohan Pathak's cas.1 and D. J. Bahadur's case was clear : the settlements of 1974, in so far as they related to bonus, could only be superseeded by a fresh settlement, an industrial award or relevant legislation. But any such supersession could only have future effect, but not retrospective effect so as to disentitle the Class III and Class IV em ployees of Life Insurance Corporation from receiving the cash bonm which had been earned by them, day by day, and which the Life Insurance Corporation of India was under an obligation in D. J. Bahadur's case. The present attempt made by the 1981 amending Act and the rules thereunder to scuttle the payment of bonus with effect from a date anterior to the date of the enactment must, therefore, fail. The employee; are entitled to be paid the bonus earned by them before the date of publication of the Life Insurance Corporation of India Class III and Class IV employees i; Bonus and Dearness Allowance) Rules, 1981. terms of the writ [270H-271 BJ to pay issued A.V. NACHANE v. UNION (Gupta, J.) 251 ORIGINAL J1m1sDICTION : .writ Petition Nos. 501, 643-44, 645, A 649 and 1866 of 1981. (Under article 32 of the Constitution of India) R. K. Garg, V. J. Francis, Sunil Kumar Jain and D. K. Garg for the Petitioners in WP. 501/81. M. K. Ramamurthi, J. Rarnamurthi and Miss R. Vagai for the t Petitioners in WPs. 643-44/81. Vimal Dave and Miss Kai/ash Mehta for the Petitioners in WP. No. 645/81. A. K. Goel for the Petitioners in WP. 649/81. Dalveer Bhandari and H. M. Singh for the Petitioners in WP. 1866/81. L. N. Sinha, Attorney General, M. K. Banerjee, Soliciter General, Miss A. Subhashini and R P. Singh for Respondent No. 1 in all the matters. L. N. Sinha, Attorney General, 0. C. Mathur and Sri Narain, for Respondent No. 2 in all the matters. P.H. Parekh for the Intervener in WP. 501/81. Somnath Chaterjee, J. Ramamurthi and Miss R. Vaigai for the Intervener Ajoy Kumar Banerjee-in WPs. 643-44/81. The following Judgments were delivered (Amendment) Ordinance, 1981 which preceded GUPTA, J. The validity of the provisions of the Life Insurance Corporation (Amendment) Act, 1981 and the Life Insurance Cor poration it is challenged in this batch of writ petitions. The writ petitions have a history behind them which can be conveniently divided into three chapters. However, it will be easier to follow this history if we referred to some of the provisions of the Life Insurance Corporation Act, 1955 first. The Life Insurance Corporation was constituted under the Life Insurance Corporation Act, 1956 to provide for the nationalisation of life insurance business in India '.by transferring all } - B C D E F G H A B c 0 E F G H 252 SUPiHiE COURT REPORTS (1982] 2 S.C.R such business to the Life Insurance Corporation of India. Under section J l (I) of the Act the services of the employees of insurers whose business has vested in the Corporation are transferred to the Corporation. Sub-section (2) of section I 1 provides : "Where the Central Government is satisfied that for the purpose of securing uniformity in the scales of remu - neration and the other terms and conditions of service applicable to employees of insurers whose controlled busi ness has been transferred to, and vested in, the Corpora tion, it is necessary so to do, or that, in the interests of the Corporation and its policy-holders, a reduction in th'e remuneration payable, or a revision of the other terms and conditions of service applicable, to employees or any class the Central Government may, not of them is called for, withstanding anything contained in sub-section (!), or in the Industrial Disputes Act, 1947, or in any other law for the time being in force, or in any award, settlement or agreement for the time being in force, alter (whether by way of reduction or otherwise) the remuneration and th1: other terms and conditions of service to such extent and in such manner as it thinks fit; and if the alteration is not acceptable to any employee, the Corporation may terminate: his employment by giving him compensation equivalent to three months' remuneration unless the contract of service with such employee provides for a shorter notice of termi·· nation." There is an explanation to this sub-section which is not relevant for the present purpose. Section 48 of the Act empowers the Central Government to make rules to carry out the purposes of the Act. Sub-section (2) of section 48 in clauses (a) to (m) specifies some of the matters that the rules may provide for. Sub-section (3) of section 48 states : "Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses - ..... f - - A.v. NACHANE v. UNION (Gupta, J) 253 agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule." Section 49(1) empowers the Life Insurance Corporation of India to make regulations to provide for all matters for which provision is expedient for the purpose ot giving effect to the provisions of the Act. Clauses (a) to (m) of sub-section (21 of section 40 specify some of the matters regulations may provide for. The matter referred to in clause (b) of sub-section (2) is "the method of recruitment of employees and agents of the Corporation terms and conditions of service of such employees or agents." Clause (bb) speaks of the terms and conditions of service of persons who have become employees of the Corporation under sub-section (I) of section 11. Turning now to the history of the litigation, the first chapter begins with two settlements reached on January 24, 1974 and February 6, 1974 between the Life Insurance Corporation and its class III and class IV employees. These were 'settlements under section 18 read with section 2(p) of the Industrial Disputes Act, terms; four of the five 1947. The settlements were identical in unions of workmen subscribed remaining union ·.was a signatory to the second. The settlements cover a large ground including the claim for bonus. Clause 8 of each of the settlements was as follows : the first settlement while "BONUS: (i) No profit sharing bonus shall be paid. However, the Corporation may, subject to such directions as the Central Government may issue from to time, grant any other kind of bonus to its Class Ill and IV employees. (ii) An annual cash bonus will be paid to all Class III and Class IV employees at the rate of 15% of the annual salary (i.e. basic pay inclusive of special pay, if any, and dearness l!ilow;m<;e and additional dearness allow- A B c D E F G H - A B c D E F G 254 SUPREME COURT REPORTS ( 1982) 2 S.C.R. ance) actually drawn by an employee in respect of the financial year to which the bonus relates. (iii) Save as provided herein all other terms and conditions attached to the admissibility and payment of bonu> shall be as laid down in the settlement on bonus dated the 26th June, 1972." Clause 12 of the settlements inter alia provides : "This settlement shall be effective from I st April, 1973 and shall be for a period of In 1975 four years. i.e. from !st April 1973 to 31st March 1977." an ordinance was promulgated called the Payment of Bonus (Amend ment) Ordinance which was subsequently replaced by the Payment of Bonus (Amendment) Act, 1976. The reference to this Ordinance and the Act would not have been relevant because section 32 (i) of the original Payment of Bonus Act, 1965 made the said Act not applicable to the employees of the Life Insurance Corporation, but the Central Government appears to have decided also that the employeei; of establishments not covered by the Payment of B0nus Act would not be eligible to get bonus and ex-gratia cash payment in lieu of bonus would be made. Accordingly payment of bonus for the year 1975-76 to the employees of the Corporation was stopped under the Central Governnient. On a writ petition instructions from filed by the empl0yees of the Corporation in the Calcutta High Court, a single Judge of that court issued a writ of mandamus directing the Corporation to act in accordance with the terms of the settlement. Thereafter the Life Insurance Corporation (Modification of Settlement) Act, 1976 was passed. Some of the employee1; of Corporation challenged the constitutional validity of the Act by In Madan Mohan Pathak v. Union filing writ petition in this Court. of India and Ors.(1 this Court held that the 1976 Act offended Article 31 (2) of the Constitution and was as such void and issued a writ of mandamus directing the Union of India and the Life Insu rance Corporation to forebear from implementing or enforcing the provisions of the I 976 Act and to pay annual cash bonus for the years !st April, 1975 to 31st March, 1976 and !st April, 1976 to 31st March, 1977 to Class III and Class IV employees in accordance with the terms of the settlements. ) The second chapter began on Mareh 31, 1978 when the Cor l! · poration issued a notice under section 19(2) of the Industrial Dis- (l) [1978] 3 SCR 334. . . - - A.V. NACHANE v. UNION (Gupta, J.) 255 putes Act declaring its intention to terminate the settlements on the expiry of the period of two months from the date the notice was served. On the same day another notice was issued by the Cor poration under section 9A of the Industrial Disputes Act stating that it proposed to effect a change in the conditions of service applicable to the workmen. The change proposed was set out in the annexure fo the notice which reads : "AND WHEREAS for economic and other reasons it would not be possible for the Life Insurance Corporation of India to continue to pay bonus on the aforesaid basis; Now, therefore, it is our intention to pay bonus to terms reproduced the employees of the Corporation hereunder: "No employee of the Corporation shall be entitled to profit sharing bonus. However, the Corporation may, having regard to the financial condition of the Corporation in respect of any year and subject to the previous approval of the Central Government, grant non-profit sharing bonus to its employees in respect of that year at such rate as the Corporation may think fit and on such terms and conditions as it may specify as regards the eligibility of such bonus.'; These notices were followed by a notification issued by the Cor poration under section 49 of the Life Insurance Corporation Act on May 26, 1978 substituting a new regulation for the existing regulation No. 58 of the Staff Regulations. Simultaneously the Life Insurance Corporation (Alteration of Remuneration and other Terms and Conditions of Service of Employees) Order, 1957, called the Standardisation Order, made by the Central Government in exercise of the powers conferred on it by section 11 (2) of the Life Insurance Corporation Act was amended with effect from June I, 1978 substituting a new clause (9) for the original clause concerning bonus. Clause (9) of the Standardisation Order and Regulation 58 of the Staff Regulations after amendment read as follows : "No employee of the Corporation shall be entitled to profit-sharing bonus. However, the Corporation may, having regard to the financial condition of the Corporation jn respect of any year and subject to the previous approv~I A B c D E F G H A B c D E F G H 256 SUPREME COURT REPORTS (1982] 2 S.C.R. of the Central Government, grant non-profit sharing bonus to its employees in respect of that year at such rate as the Corporation may think fit and on such terms and conditions as it may specify as regards the eligibility for such bonus." The validity of the said two notices and the notification issued for the purpose of nullifying any further claim of the wo:rkmen to annual cash bonus in tern;s of the Settlements of 1974 was challeng ed by the workmen by filing a writ petition in the Allahabad High Court. The High Court allowed the writ petition and the Corpora· ti on preferred an appeal to this Court. Another writ petition which had been filed the Calcutta High Court challenging the said notices and the notification was transferred to this court, and the appeal and this writ petition were heard and disposed of by a common judgment. The two cases were Civil Appeal No. 2275 of 1978, (The Life Insurance Corporation of India v. D.J. Balwdur and others)(1) and Transfer case No. 1 of 1979 (Chandrashekhar Bose and others v. Union of India and Ors.)(2). By a majority the appeal pre ferred by the Corporation was dismissed and the transfer petition was allowed and a writ was issued by this Court to the Life Insu rance Corporation directing it "to give effect to the terms of the settlements of 1974 relating to bonus until superseded by a fresh settlement, an industrial award or relevant legislation." The second chapter closed with this decision. The third chapter begins with the promulgation of the Life Insurance Corporation (Amendment) Ordir.ance, 1981 on January 31, 1981. The following changes made in the principal Act by the Ordinance are material. In sub-section (2) of section 48 of the principal Act a new sub-clause (cc) was inserted with retrospective effect from June 20, 1979. Clause (cc) relates to "the terms and conditions of service of the employees and agents of the Corporation, including those who became employees and agents of the Corpora· tion on the appointed day under this Act." Three new sub-sections (2A), (2B) and (2C) were added to section 48. Sub-section (2A) says that the regulations and other provisions as in force immedia tely before the commencement of the Ordinance with respect to the terms and conditions of service of the employees and agents of the Corporation shall be deemed to be rules made under clause (cc) of (1) (1981] I SR 1083. (2) [1960] 3 SCR 499. t - i r '· -- ~ .. . ' - • A.V. NACHANE v. UNION (Gupta, J.) 257 sub-section (2). Sub-section (2B) provides that the power to make rules under clause (cc) of sub-section (2) shall include (i) the power to give retrospective effect to such rules, and (ii) the power to amend by way of addition , variation or repeal the regulations and other provisions referred to in sub-section (2A) with retrospective effect, but not from a date earlier than June 20, 1979. Sub-section (2C) reads as follows : "'The provisions of clause (cc) of sub-section (2) and sub-section (2B) and any rules made under the said clause (cc) shall have effect, and any such rule made with retros pective effect from any date shall also be deemed to have had effect from that date, notwithstanding any judgment, decree or order of any court, tribunal or other authority and notwithstanding anything contained in the Industrial Disputes Act, 1947 or any other law or any agreement, settlement, award or other instrument for the time being in force." Certain consequential changes were also made in section 49 of the Act. In clause (b) of section 49(2) which has been quoted above, the words "and the terms and conditions of service of such employees or agents" were omitted. This was necessary because the terms and conditions of service of the employees and the agents with regard to which the Corporation was empowered to make regulations by section 49(1) of the principal Act is now a matter included in clause (cc) of section 48(2) as one of the matters covered .the rule making authority of the Central Government under section 48(1) of the Act. The Ordinance also omits clause (bb) from section 49(2). Clause (bb) also quoted earlier included the terms and conditions of the service of the persons who had become employees of the Corporation under section 11 (I) of the Act. The terms and conditions of service of such persons are now included in the new clause (cc) of section 48(2). By notification dated February 2, J 981 the Central Govern ment in exercise of the powers conferred by section 48 of the Life Insurance Corporation Act, 1956 made the rules called the Life Insurance Corporation of India Class III and IV employees (Bonus and Dearness Allowance) Rules, 1981. The relevant rule is rule 3 which has been given retrospective operation from July 1, 1979. Suh-.rule {I) of rule 3 prQv\~c;r_ "No. Cla~s Ill or <;:las$ l v em~lo¥et; A B c D E F G H A B c D E F G H 258 SUPRl'ME COURT REPORTS (1982) 2 S.C.R of the Corporation shall be entitled to the payment of any profit sharing bonus or any other kind of cash bonus." Sub-rule (2) of rule 3 states that notwithstanding what sub-rule (I) provides every Class JU and Class IV employee shall be entitled to a payment in lieu; of bonus-(a) for the period commencing from July I, 1979 and ending on March 3 I, 1980 at I 5 per cent of his the rate of thereafter for every year commencing on the I st salary; and (b) April and ending on the 31st day of March of the following year, at such rate and subject to such conditions as the Central Govern ment may determine having regard to the wage level, the financial is a proviso to circumstances and other relevant factors. There this sub-rule which says that (i) no payment in lieu of bonus shall be made to any employee drawing a salary exceeding Rs. 1600 per month; and (ii) where the salary of an employee exceeds Rs. 750 per month but does not exceed Rs. 1600 per month, the maximum pay ment to him in lieu of bonus shall be calculated as if his salary were Rs. 750 per month. For the purposes of this sub-rule, "salary" was explained as meaning basic pay, special pay, if any, and dearness allowance. Sub-rule (3) of rule· 3 rescinds regulation 58 of the Staff Regulations and all other provisions relating to the payment of bonus to the employee to the extent they are inconsistent with rule 3. Writ petition No. 501 of 1981 under Article 32 of the Consti- tution was filed in this Court on February 5, 1981 by Shri A.V. Nachane and the All India Life Insurance Corporation Employees Federation, Bombay, challenging the validity of the Ordina1~ce and the aforesaid rules. Similar writ petitions by other associations of the employees of the Corporation followed. In the meantiime the Ordinancewasrepealed and replaced on March 17, 1981 bythe. Life Insurance Corporation (Amendment) Act, 1981 which received the assent of the President of India on the same day. The writ petitions were suitably amended after the Amendment Act came into force. The provisions of the Act are similar t<' thosti of the Ordinance except that the Amendment Act adds a new sub-.section, sub-section {3). to section 49 of the principal Act. The new sub section (3) which provides that the regulations made under section 49 shall be laid before each House of Parliament are similar in terms to sub-section (3) of section 48 requiring the rules made by the Central Government under the Act to be laid before each House of Parliament. Section 4 of the Amendment Act repeals the Ordinance but provides that "notwithstanding such repeal, anything done or ?ny action t~k~n und\')r the principal Act as amended by the said • ... • • l - . ~ --- ~ -- A.V. NACHANE v. UNION (Gupta, J.) 259 Ordinance shall be deemed to have been done or taken under the principal Act as amended by this Act. The validity of the Amendment Act and the Life Insurance Corporation of India Class TII and Class IV Employees (Bonus and Dearness Allowance) Rules, 1981 have been challenged on several It was argued that the Act and the rules were violative grounds. of Article 14, 19(1) (g) and 21 of the Constitution. It was further contended that the said Act was invalid on the ground of excessive delegation of legislative functions. Another contention raised was that in any event sub-section (2C) of section 48 was invalid to the extent it permitted retrospective operation to rule 3 to override the order of this Court disposing of D. J. Bahadur's case. The challenge based on Article 19(1)(g) and Article 21 does not appear to have any substance. Apart from anything else, a claim based on the 1974 settlements is certainly not a fundmental right that could be enforced through this Court. As regards Article 21, the first premise of the argument that the word 'life' in that Article includes livelihood was considered and rejected in In re: Sant Ram. The contention that Article 14 is infringed arises on the pro vision of sub-section (2C) of section 48 that any rule made under clause (cc) of sub-section (2) of that section touching the terms and conditions of service of the employees of the Corporation shall the Industrial have effect notwithstanding anything contained in It is true that after rules are made regarding Disputes Act, 1947. the terms and conditions of service, the right to raise an industrial the rules will be taken dispute in respect of matters dealt with by away and to that extent the provisions of the Industrial Disputes Act will cease to be applicable. It was argued that there was no basis on which the employees of the Corporation could be said to form a separate class for denying to them the protection of the Industrial Disputes Act. The reply on behalf of the Union of India and the Life Insurance Corporation was that the remuneration that was being paid to class III and class IV employees of the Corpora tion was far in excess of what was paid to similarly situated emp loyees in other establishments in the public sector. Some material was also furnished to support this claim though they were certainly not conclusive. The need for amending the Life Insurance Corpora tion Act, 1956 as appearing from the preamble of t_he Amendment Act and the Ordinance is as follows : " ... for securing the interests of its i;><;>l\1!¥-110\de~s 1;\Qq the Life Insurance CorporatioQ Qf lndi?; \l!Jcl A B c D E F G H - A L c D E F G 260 SUPREME COURT REPOTS [1982) 2 s.c.R. to control the cost of administration, it is necessary that revision of the terms and conditions of se.rvice applicable to the f:mployees and agents of the Corporation should be undertaken expeditiously." Referring to the preamble of the Act the Attorney-General appearing for the Union of India and the Corporation submitted that the problem of mounting cost of administration led to the makini~ of the impugned law. He added that it was felt that no improvement in the situation was possible by the process of adjudication and a policy decision was taken that in the circumstances the proper course was legislation and that is why the Amendment Act was passed and the impugned rules were framed. The learned Attorney General submitted that it was for Parliament to decide whether the situation was remediable by adjudication or required le, gislation. According to him the Life Insurance Corporation Act as amended and the rules made after amendment placed the Corporation in the same position as other undertakings, that the advantages being enjoyed by the employees of the Corporation which were not available to similarly situated employees of other undertakings have been taken away removing what he described as discrimiuation in favour of the employees of the Life Insurance Corporation. We have already said that the material produced on behalf of the Union of India and the Corporation to show that the t(:rms and conditions of service of the employees in several other undertakings in the public sector compared unfavourably to those of th c Corpo ration employees was not conclusive. But the burden of establishing hostile discrimination was on the petitioners who challenged the Amendment Act and the rules. It was for them to show that the em ployees of the Life Insurance Corporation and the employee:; of the other esrablishments to whom the provisions of the Industrial Disputes Act were applicable were similarly circumstanced to justify 1the con tention that by excluding the employees of the Corporation from the purview of the Industrial Disputes Act they had been discriminated against. There is no material before us on the basis of which we can hold that the Amendment Act of 198 I and the rules made on think that on the February 2, 1981 infringe Article 14. We do not facts of this Case Express Newspapers (Private) Limited and another v. Union of Jndia,(1) Moti Ram Deka etc. v. General Manager N.E.P. Railways, Maligaon, Pandu etc.,(2 ) relied on by the petitioner.s, havi; any application. (I ) [ 1959] SCR I 2. m [1964] 5 SCR 683. .... ... .. : A. \I. NACHANE v. UNION (Gupta, J.) 261 It was contended that sub-section (2C) added to section 48 of the Life Insurance Corporation Act, 1956 by the Amendment Act of 1981 was invalid because of excessive delegation of legislative functions and that if sub-section (2C) which is an integral part of the Amendment Act was ultra vires, the entire Amendment Act would be unconstitutional. The Amendment Act introduced clause (cc) in section 48(2) authorising the Central Government to make rules in respect of the terms and conditions of service of the emp loyees and agents of the Corporation. Sub-section (2C) of section 48 provides inter alia that rules made under clause (cc) shall have effect notwithstanding anything contained in the lndnstrial Disputes Act, 1947 or any other law for the time being in force. The argu ment is that the rules made under section 48(2) (cc) can virtually repeal the Industrial Disputes Act and other laws to the extent they are inconsistent with these rules. Repealing a law, it was submitted on the authority of Jn re Delhi Laws Act,(1) was an essential legis lative function which had been delegated to the Central Government It is now well and that the delegation was therefore excessive. settled that it is competent for the legislature to delegate to other authorities the power to frame rules to carry out the purposes of the law made by it (see In re the Delhi Laws Act,(') Raj Narain S ngh v. The Chairman, Patna Administration Committee, Patna and an other,(2) and D.S. Garewal v. State of Punjab and another( 3 ) but the essential legislative functions cannot be delegated. What is essential legislative function has been explained by Mukerjea., J. in the Delhi Laws case as follows : "The essential legislative function consists determination or choosing of the legislative policy and of formally enacting that policy into a binding rule of con duct. It is open to the legislature to formulate the policy as broadly and with as little or as much details as it thinks proper and it may delegate the rest of the legislative work to a subordinate authority who will work out the details within the framework of that policy." In Raj Narain Singh v. The Chairman, Patna Administration Com mittee, Patna, and another(2) a bench of five Judges of this Court held (I) [1951) SCR 747. [1955) SCR 290. (2) (1959] 1 Suppl. SCR 792. (3) A B c D E F G H - - - A B c D E F G H 262 sui>RilMil COURT REPORTS [ 19821 2 s.c.R. that an executive authority can be empowered by a statute to modify either existing or future laws but not in any essential feature. In the instant case section 48(2C) read with section 48(2) (cc) autho rises the Central Government to make rules to carry out the pur· poses of the Act notwithstanding the Industrial Disputes Act or any other law. This means that in respect of the matters covered by the rules the provisions of the Industrial Disputes Act or any other law will not be operative. The argument is that sub-section (2C) or any other provision Amendment Act does not lay down any legislative policy nor supply any guidelines as to the extent to which the rule-making authority would be competent to override the provisions of the Industrial Dis putes Act or other laws. Reference was made to Municipal Corpo ration af Delhi v. Bir/a Cotton Spinning and Weaving Mills, De/ht and another,(1 ) Gwalior Rayon Silk Manufacturing (Weaving) Company Limited v. Assistant Commissioner of Sales-tax and others,(2) for the proposition that unlimited right of delegation is not inher,~nt in the legislative power itself. the principal Act by introduced The question therefore is, does the Amendment Act of 1981 lay down no legislative policy or furnish no guidance to indicate the nature and extent of the modifications that the rules wiU be per mitted to make in the existing laws to carry out the purposes of the Life Insurance Corporation Act, 1956 as amended in 1981 'I Learned Attorney General relied on the decision of this Court in Harishanker Bag/a and another v. State of Madhya Pradesh (3) This was a case under the Essential' Supplies (Temporary Powers) Act, 1946. Section 3( I) of that Act says that the Central Govmunent for maintaining or increasing supplies of any essential commodity, or for securing their equitable distribution and availability at fair prices, may by order provide for regulating or prohibiting the pro duction, supply and distribution thereof and trade and commerce therein. Sub-section (2) of section 3 states that without prejudice to the generality of the powers conferred by sub-section (1), such an order may provide inter alia for regulating by licences or permits or otherwise the production or manufacture and transport, distri bution, disposal, acquisition; use or coµsumption of any es.sential commodity. Section 6 of that Act provides inter alia that any order made under section 3 shall have effect notwithstanding any- (!) (1968) 3 SCR 251. [1974) 2 SCR 879 .. (2) (3) [1955) 1 SCR 380. '· - - A.t. NACHANE v. i:JNiON (Gupta, J,j 263 thing inconsistent therewith contained in any enactment other than In exercise of the powers conferred by section 3 of that that Act. Act the Central Government made the Cotton Textiles (Control of Movement) Order, 1948. Clause 3 of the said Order requires a person to take a permit from the Textile Commis~ioner to enable him to transport cotton textiles. One of the question that arose in Harishankar Bag/a' s case was whether section 6 of the Essential Supplies (Temporary Powers) Act permitted rules to be made by the Central Government repealing by implication an existing law, which was an essential legislative function and could not validly be delegated. Mahajan C.J., speaking for the court said : ,. 1 " "Section 6 does not either expressly or by implication repeal any of the provisions of pre-existing laws, neither does not abrogate them. Those laws remain untouched and unaffected so far as the statute book is concerned. The if the repealed statute was repeal of a statute means as It is wiped out from the statute never on the statute book. book. The effect of section 6 certainly is not to repeal any one of those laws or abrogate them. Its object is simply to by-pass them where they are inconsistent with the pro- visions of the Essential Supplies (Temporary Powers) Act, 1946, or the orders made thereunder. In other words, the orders made under section 3 would be operative in regard to the essential commodity covered by the Textile Control Order wherever there is repugnancy in this Order with the the existing laws with that extent existing laws and regard to those commodities will not operate. By-passing a certain law does not necessarily amount to repeal or abroga- tion of that law. That law remains unrepealed but during the continuance of the Order made under section 3 it does not operate in that field for the time being." A B c D E F We think the Attorney-General was right in his submission that what has been said of section 6 of the Essential Supplies (Temporary Powers) Act should hold good for sub-section (2C) of section 48 of the Life Insurance Corporation Act which is similar in terms in so to make rules by far as it authorises the Central Government passing the existing laws. Mahajan C.J., also holds that assuming that the rules framed under the Act had the effect of repealing the existing laws, the power to repeal is exercised nvt by the delegate but by the Act itself. This is what he says on this point : G ' 264 StJPREMll COuRT lU!PORtS [I 982j 2 s.c.k. "Conceding, however, for the sake of argument that to the extent of a repugnancy between an order made under section 3 and the provisions of an existing law, to the extent stands repealed the existing of the repugnancy, by implication, it seems to us that the repeal is not by any Act of the delegate, but the repeal is by the legisl'ative Act of the Parliament itself. By enacting section 6 Parlia ment itself has declared that an order made under section 3 shall have effect notwithstanding any inconsistency in this order with any enactment other than this Act. This is not a declaration made by the delegate but the Legislature itself has declared its will that way in section 6. The abro gation or the implied repeal is by force of the legislative declaration contained in section 6 and is not by force> of the delegate under section 3. The the order made by power of the delegate is only to make an order under si:c tion 3. Once the delegate has made that order its power is exhausted. Section 6 then steps in wherein the Parlia ment has declared that as soon as such an order com1:s into being that will have effect notwithstanding any incon sistency therewith contained in any enactment other than it certainly could this Act. Parliament being supreme, make a law abrogating or repealing by implication provi sions of any pre-existing law and no exception could be taken on the grour.d of excessive delegation to the Act of the Parliament itself." in exercise of the delegated authority The Attorney General relied strongly on these observations in sub mitting that it is not really the rules framed by the Central Govern that override the Industrial Disputes Act or any other existing law but the power of abrogating the existing laws is in sub-section (2C) of section 48 enacted by Parliament itself. The observations quoted above from Harishankar Bag/a's case which was decided by a bench of five Judges appear to support the Attorney General's contention. The question howtwer remains to be answered, does the Lifo Insurance Corporation Act, 1956 as amended in 1981 state any policy to guide the rule-making authority ? We have earlier referred to the observations of Mukerjea J., in the Delhi Laws case that the legislature can formulate a policy as broadly and with as little or as much details as it thinks proper and may delegate the rest of the legislative work to a subordinate authority who will work out the In Harishanker Bagla's details within the framework of the policy. A 8 c D E F G H A.c. NAcHANB v. UNION (Gupta, J.) 265 case one of the questions for decision was whether section 3 of the Essential Supplies (Temporary Powers) Act, 1946 :.amounts to dele gation of legislative power outside the permissible limits. It was held that legislature had laid down a legislative principle which was "maintaining or increasing supplies of any essential commodity," and "securing their equitable distribution and availability at fair prices." That statement was held as offering sufficient guidance to the Central Government in exercising its powers under section 3. In the instant case the policy as stated in the preamble of the interests of the Life Amendment Act is that "for securing Insurance Corporation of India and its policy-holders and to control the cost of administration, it is necessary that revision of the terms and conditions of service applicable to the employees and agents of the Corporation should be undertaken expeditiously". The policy stated here is at I east as clear as the one held in Harishanker Bag/a' s case offering sufficient guidance to the Central Government in exer cising its powers under that Act, We have referred to section 48(3) of the Life Insurance Corporation Act which requires that every rule made by the Central Government under this Act shall be laid before each House of Parliament and that if both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be. This Court in D.S. Grewal v. State of Punjab and another(supra) observed as follows in respect of a similar provision requiring the rules made by the delegated authority to be laid on the table of Parliament and making the rules subject to modification, whether by way of repeal or amendment on a motion made by Parliament: "This makes it perfectly clear that Parliament has in no way abdicated its authority, but is keeping strict vigi lance and control over its delegate." In view of what has been held in Harishanker Bag/a and D. S. Grewal, both of which were decided by a larger bench, we do not find it possible to accept the contention that the Act is invalid on the ground of excessive delegation of legislative functions. It was contended on behalf of the petitioners that in any event the provisions of the Amendment Act of 1981 could not nullify the effect of the writ issued by this Court in D. J. Bahadur's case. In our opinion this contention has substance. Clause (cc) of section 48(2) empowers the Central Government to make rules with regard A 8 c 0 E F G H l .. •. A B c D E F G H 266 SUPREME COURT REPORTS t 1982] 2 s.c.R. to the terms and conditions of service of the employees and agents of the Corporation. Sub-section (2A) of section 48 provides that the regulations made under section 49 of the Act and "other provi sions' as in force before the commencement of the Amendment Act with resoect to the said terms and conditions are to be deemed as rules m~de under clause (cc) of section 48(2). Sub-section (2B) of section 48 says that the power to make rules conferred by clause (cc) of sub-section (2) shall include the powet to add, vary or repeal the regulations and "other provisions" referred to in sub section (2A) with retrospective effect from a date not earlier than June 20, 1979. Clearly a writ issued by this Court is not a regula tion nor can it be described as 'other provision' which expression possibly includes circulars and administrative directions. Sub-section (2C) of section 48 however provides inter alia that any rules made under clause (cc) with retrospective effect from any date shall be deemed to have had effect from that date notwithstanding any judgment, .decree or order of any court, tribunal or other authority. The order disposing of D. J. Bahadur's case, made on November IO, 1980 reads : "In view of the opinion expressed by the majority, the appeal is dismissed with costs to the first, second and third respondents, and the Transfer Petition No. 1 of 1979 stands allowed insofar that a writ will issue to the Life Insu rance Corporation directing it to give effec:t to the terms of the settlements of 1974 relating to bonus until superseded industrial award or relevant by a fresh settlement, an legislation. Costs in respect of the Transfer Petition will be paid to the petitioners by the second respondent." The Life Insurance Corporation of India Class III and Class IV Employees (Bonus and Dearness Allowance) Rules, 1981 were made by the Central Government on February 2, 19'81 in exercise of the powers conferred by section 48 of the Life Jnsurance Corporation Act, 1956 as amended by the Life Insurance Corporation (Amend ment) Ordinance, 198 I. Rule 3 of these rules relates to the subject of bonus concerning class III and class IV employees of the Cor poration. The substance of this rule has been set out earlier in this judgment. Clearly rule 3 seeks to supersr~de the terms of the 1974 settlements relating to bonus. By virtue of rule I (2), rule 3 lst day of July, ''shall be deemed to have come into force on the 1979'". The question is, can rule 3 read with rule I (2) nullify the effect of the writ issued by this Court on November 10, 1980 in D. J. Bahadur' s case ? In seems to us rule 3 c:annot make the writ A.C. NACHANE v. UNION (Gupta, J.) 267 issued by this Court nugatory in view of the decision of the majority in Madan Mohan Pathak v. Union of India & ors. etc.(supra) to which In Mada11 Mohan Pathak's case it reference has been made earlier. was contended that since the Calcutta High Court had by its j udg ment dated May 21, 1976 issued a writ of mandamus directing the Life Insurance Corporation to pay annual cash bonus to class Ill and class IV employees for the year April I, 1975 to March 31, 1976 as provided by the 1974 settlements and this judgment had become final, the Life Insurance Corporation was bound to obey the writ of manda mus and pay as ordered by the High Court. The court was dealing with the Life Insurance Corporation( Modification of Settlement) Act, 1976 in that case. Section 3 of that Act provided that the terms of the settlements in so far as they related to the payment of annual cash bonus to class III and class IV employees would not have any force or effect and be deemed not to have had any force or effect from April 1, 1975 Bhagwati J., speaking also for Iyer and Desai., JJ., observed : I l impost or "Here, the judgment given by the Calcutta High Court, is not a mere which is relied upon by the petitioners, declaratory judgment holding an be invalid, so that a validation statute can remove the defect pointed out by the judgment amending the law with retrospective effect and validate such impost or tax. But it is a judgment giving effect to the right of the petitioners to annual cash bonus under the Settlement by issuing a writ of Mandamus directing the Life Insurance Corporation to pay the amount of such bonus. If by reason of retrospec tive alteration of the factual or legal situation, the judgment is rendered erroneous, the remedy may be by way of appeal or review, but so long as the judgment stands, it cannot be disregarded or ignored and it must be obeyed by the Life Insurance Corporation. We are, therefore, of the view that impugned Act is in any event, irrespective of whether the constitutionally valid or not, the Life lnsurnnce Corporation is bound to obey the writ of Mandamus issued by Calcutta High Court ... " Beg. C.J. who delivered a separate but concurring judgment, after pointing out the "hurdle in the way" of the petitioner's claim based on Article 19(I)(f) of the Constitution, which was that the Act Life Insurance Corporation (Modification of Settlement) Act, 1976) was A B c D E F G H 268 SUPREME COURT REPORTS [ i 982) i s.c.R. A passed during the emergency, observed : "Tbe object of the Act was, in effect, to take away the force of the judgment of the Calcutta High Court recog nising the settlements in favour of Class III and Class IV employees of the Corporation. Rights under that judg ment could be said to arise independently of Article 19 of the Constitution. I find myself in complete agreement with my learned brother Bhagwati that to give effect to the judgment of the Calculla High Court is not the same thing as enforcing a right under Article 19 of the Constitut on. It may be that a right under Article 19 of the Constitution becomes linked up with the enforceability of the judgment. Nevertheless, the two could be viewed as separable sets of If the right conferred by the judgment indepen rights. dently is sought to be set aside, section 3 of the Act. would in my opinion, be invalid for trenchiJg upo.1 the judicial power. issued by to set aside I may, however, observe that even though the object of the Act may be th(: result of the the Calcutta High Court, yet, the mandamus section does not mention this object at all. Probably thi> was so because the jurisdiction of a High Court and the effectiveness of its orders derived their force from Article 226 of tbe Constitution itself. These could not be touched by an ordinary act of Parliament. Even if siection 3 of the Act seeks to take away the basis of the ju1dgment of the Calcutta High Court, without mentioning it, by enactiug what may appear to be a law, yet, I think that where the rights of the citizen against the State are concerned, we should adopt an interpretation which upholds those rights. Therefore, according to the interpretation I prefer to adopt the rights which had passed into those embodied in a judgment and became the basis of a Mandamus from the High Court could not be taken away in this indirect fashion.·' The Attorney General referred to a number or earlier decisions of this Court wanting us to infer that the observations quoted above from the judgment in Madan Mohan Pathak's case did not state the correct law in view of the said decisions. But these observations expressed the majority view of a bench of seven Judges bearing c D E F G H A.c. NACHANE v. UNION (Chinnappa Reddy, J.) 269 directly on the point that arises for decision in the instant case and are binding on us. We therefore hold that rule 3 operating retros pectively cannot nullify the effect of the writ issued in D. J. Bahadur' s case which directed the Life Insurance Corporation to give effect to the terms of the 1974 settlements relating to bonus until superseded by a fresh settlement, an industrial award or relevant legislation. The Life Insurance Corporation (Amendment) Act, 1981 and the Life Insurance Corporatiou of- India Class III and Class IV Emp loyees (Bonus and Dearness Allowance) Rules, 1981 are relevant in Madan Mohan legislation. However in view of the decision Pathak's case, these rules, in so fu as they seek to abrogate the terms of the 1974 settlements relating to bonus, can operate only prospectively, that is, from Feburary 2, 1981, the date of publication of the rules. The petitions are allowed to this extent only. In the circumstances of the case we make no order as to costs. CHJNNAPPA REDDY, J. I have had the advantage of perusing the opinion of my brother Gupta J., I agree with his conclusion that the Life Insurance Corporation (Amendment) Act I of 1981 can operate but prospectively in so far as it seeks to nullify the terms of the 1974 settlements in regard to the payment of bonus. On some of the other questions I have certain reservations. I do not, how ever, desire to express any opinion on those questions as my brother Pathak J., has indicated that he is incljned to agree with Gupta J., on those questions. Perhaps I will do well to add a few words of my own on the question of retrospectivity. I am spared the neces sity of stating the facts as those that are necessary have been stated by my brother Gupta J. The 1974 settlement~ provided, among various other matters, for the payment of a1111ual cash bonus (not a profit sharing bonus) to their Class III and Class IV employees at the rate of 15 per cent of the annual ;alary. The settkments were to be opera1ive from lst April 1973 10 31st March 1977. That the settlements were to be operative from 1st April 1973 to 31st March 1977 did not mean that the settlements would crnsc to be effective peremptorily from 1-4-1977 and, therefore, the annual cash bonus stipulated under the settlements would cease 10 be payable from that date onwards. The settlements would continue to be binding even after 31-3-1977 and would not be liable to be terminated by the issuance of a unilateral notice by the employer purporting to terminate the settlements. The settlements wonld cease to bi:i effective only when they were replaced A B c D E F G H - - ' ' A B c D E F G H 270 SUPREME COURT REPORTS ( 1982] 2 S.C.R. by 'a fresh settlement, an indmtrial award or n!levant legislation'. This is the law and this was what the law was prnnounced to be in Life Insurance Corporation of India v. D. J Bahadur(1 ) on a considera tion of the relevant provisions and precedents. The attempt made to supersede the settlements, in so far as they related to the payment nf bonus, by enacting the Life Insurance Corporation (Modification of Settlement) Act 1976 failed, firstly because the-Aet was held to violate the provisions of Article 31(2) of the Constitution and secondly because the A<~t could not have retrospective effect so as to absolve the Life Insurance Corporation from obeying the writ of mandamus issued by the Calcutta High Court, which had become final and binding on the parties. This wa~ the decision of this Court in Mad'm Mahan Pathak v. Union of India( 2 the Bench agreeing that the Act violated the provisions of Article 31(21 and four out of the seven judges, namely, Beg C. J., Bhagwati, Krishna Iyer and Desai JJ., taking the view that the Act did not have the effect of nullifying the writ of mandmus isst1ed by the C1lcutta High Court and the other three Judges, Chandrachud, Faz:il Ali and Shinghal JJ., preferring not to express any view on that question. ), all the seven judges who constituted The second attempt to nullify the 1974 -settlements in regard to payment of bonus, by issuing notices under section 19(2) and Section 9-A of the Industrial Disputes Act and by amending the Standardisa tion Order and the Staff Regulations, was frustrated by ihe judgment of this Court in Life Insurance Corporation of India v. D.J. Bahadur, the Court taking the view that the two settlements could only be superseded by 'a fresh settlement, an industrial award or relevant legislation'. In this case, the Court issued a writ to the Life Insu rance Corporation "to give effect to the terms of the settlements of 1974 relating to bonus. until superseded by a fresh settlement, an industrial award or relevant legislation". judgments The effect of in Madan Mohan Pathak 1s case and D.J, Bahadhur's case was clear: the settle ments of 1974, in so far as they related to bonus, <:ould only he superseded by a fresh settlement. an industrial award or relevant legislation. But any such supersession could only have future effect, but not retrospective effect so as to disentitle the Class III and Class IV employees of the Life Insurance Corporation from receiving the cash bonus which had been earned by them, day by (1) A.LR. 1980 s.c. 2181. (2) [1978) 3 ~.C.R,. 3H, - .. - A.V. NACHANB v. UNION (Chinnappa Reddy, J.) 271 day and which the Life Insurance Corporation of India was under an obligation to pay in terms of the writ issued in D. J. Bahadur's case. The present attempt made by the 1981 amending Act and the rules thereunder to scuttle the payment of bonus with effect from a date anterior to the date of the enactment must, therefore, fail. The employees are entitled to be paid the bonus earned by them before the date of publication of the Life Insurance Corporation of India Class III and Class IV Employees (Bonus and Dearness Allowance) Rules, 19 81. A B N.V.K . Petitions partly allowed. .J '