# [1984] 3 S.C.R. 252

- **Citation:** [1984] 3 S.C.R. 252
- **Court:** Supreme Court of India
- **Decided:** 1984
- **Bench:** Y.V. Chandrachud C.J, R.S. PATI!AK Al'D SABYASACHI · MUKHARJI
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1984-3-s-c-r-252-8759
- **Pages:** 40

## Headnote

l
Constitution t>[ India 1950,
Artie/~.• 14, I9(1) (g), ' Artie/~ JIB & G•~~trar
!murance Businrss (Natia~tolisQtion) 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 r~vlsioll 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 Stotut~s-Couf/t~t b~twet!lt lire statt~tts..:..Ont iptclal othrt'
II • ltntrai-Whlrlr; to prtvnii-TtJI$fur dttamln<ttlon o[.
.
/t /"'rrpretat/on of slatttl<s-Not '"~'' exur/u Ill u~l~llllcs-Pro•is!otll ~
trr "''" dtl•flallt!f po~·er-Curmruclion.
f.
t I
__:.-
.-
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 manag~ment
' (mploy~esc.ncral insurance companies under the General Insurance (Emergency
of theseS
.
.
.
Provisions) Act, 1971. Th.e General In~uran;e Busmess~(Nat•onal 1sation) Act,
1972 nationalised gcneralJnsur~nce busmes5..o
·
Fo;•r merger schemes ~ere framed in 1973 b>· the Central Gov~rnment 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 insuran~e. The1c comp1nies started functioning from lst.January, 1973
~nd the process of merg~r 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 t~rms 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
P~vidtnt Fund, Was Introduced. On 30th July 1977, a Scheme amending proY~IOfls regarding skk leave was also introduced.
IC I The employees submit!ed a memorandum obj~ti~g to. the revision of pay
1 ~t and other cond•tions or service and w~ntcd a n:f~~nc.: to the Industrial
~
1
~n~l. The class IU nod IV emplo~ees .hoWe\·er did oot accept the revision of
rv~ee Condllio
•
· d · d
· 1
di1pufe. The
. ns, Pay. ,"C~le-s l!e

## Text

_Characters 0–39,870 of 106,353. This is a partial read: ask again with offset=39870 for what follows._

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252
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.)
l
Constitution t>[ India 1950,
Artie/~.• 14, I9(1) (g), ' Artie/~ JIB & G•~~trar
!murance Businrss (Natia~tolisQtion) 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 r~vlsioll 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 Stotut~s-Couf/t~t b~twet!lt lire statt~tts..:..Ont iptclal othrt'
II • ltntrai-Whlrlr; to prtvnii-TtJI$fur dttamln<ttlon o[.
.
/t /"'rrpretat/on of slatttl<s-Not '"~'' exur/u Ill u~l~llllcs-Pro•is!otll ~
trr "''" dtl•flallt!f po~·er-Curmruclion.
f.
t I
__:.-
.-
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 manag~ment
' (mploy~esc.ncral insurance companies under the General Insurance (Emergency
of theseS
.
.
.
Provisions) Act, 1971. Th.e General In~uran;e Busmess~(Nat•onal 1sation) Act,
1972 nationalised gcneralJnsur~nce busmes5..o
·
Fo;•r merger schemes ~ere framed in 1973 b>· the Central Gov~rnment 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 insuran~e. The1c comp1nies started functioning from lst.January, 1973
~nd the process of merg~r 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 t~rms 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
P~vidtnt Fund, Was Introduced. On 30th July 1977, a Scheme amending proY~IOfls regarding skk leave was also introduced.
IC I The employees submit!ed a memorandum obj~ti~g to. the revision of pay
1 ~t and other cond•tions or service and w~ntcd a n:f~~nc.: to the Industrial
~
1
~n~l. The class IU nod IV emplo~ees .hoWe\·er did oot accept the revision of
rv~ee Condllio
•
· d · d
· 1
di1pufe. The
. ns, Pay. ,"C~le-s l!earnes4 allowance, ~tc. ~~d r'IJ~e ~n ustrta
lnll bl
ro "'ere conctll~tJon procccdinLS and th~re was la1lurc to b~mg 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~
A.
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254
SUPRDIE COUllT REPOilJS •
[19~413 s.c.l\:
.
t
'
.
com'mencemcnt of the Scheme of 1980 sho~l~ retire fro": service When he auains
the age or 60 yea~. but an employee, who JOinS t~e servoce ?f the Corporation
·.
free the commencement of the Scheme would reme on attaoning the a~e or 58
· ~ .. ars. The Fourth·Schedule 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
in5ur~nce 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'JIA·BI ·
1· (b) Tht !<:heme of 1980 so far a~ it~~ not relate<! t<' the amalgom•cio~·
~~ mer~r of insur&r~ce COmp•nies, ~~ not 10art301Cd by •uiH. (I) of s<CiiUO lu.
e $4: com is therefore bad and beyond authority. · [278Dl
't .• ~.JI. Nodwn~ & Anothtr v, U•rlon of (rodia & Anothtr {1981) 2 S.C.R· p. ~
46
j
,. auon MuhUII l'orlruk
U I
"
1\J ,n
Tl~t LJ
~. n orr nflndia & Ot1. ~rc., ! t 1173) 3 s.c.,_. P· • • Cit·
~ IO"J'Itlnr'"'"d"" Curpo•mlull of India" • D.J. Buhoc/u' & OrJ., [198111 S
....
l) • rc crrr 10.
'2. 11~< duty of the Co
·
. .
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lh•
• .
Urt In lnltrprrtinll Or construinllll proVO\ O · (.
...c<>'
• '<•lion 1nd uod
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<man lit mcanina in the contut. Jnterprctal on
Ji 'out
"'"" or •~tuae 4
t tO n•
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lloe me
001 a mtre uerd'e in ~<'mantic$ but an ottcmP
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"""'1 of the leli;)atioo from the "'Nds ~d, un~,·rstun<l the ,one«
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--- ..:.---I . ,... ,, .~ .. :.:;:;; ... :.:~: ::: 00~·~· ....... ~.=-,
the pul
(275C·Dl
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 pos~ible, 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
'
!:
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he power valid, s.16 of the Act shoul
60 corut=d 1n such manner
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·
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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 sis~t6cant 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 lc~i~la 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 legisl~tion within the prescribed
sphere has evolved out or practical necessity and pragmatic needs of the modern
··~-
. ~elfare St~tc.. -(275G·216Al •
'
S. Rtgarding dclegatc!ilcgislation, the principle which has been well·estabfi•h:d 'ts th>t the lesislature must lay down the gui d~lines, the principles of
policy for the authority to who m pow~r 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 k~islature considers 1.., be nc•"C>Sary for the purpose of e~er~
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 po~icy ~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-onli~alc k.;i•lation can t-e n!~d In either
It-It .c two ~0~ay, ; numcly onel '' hlch ncatc1 wider dd~gltiort :md one which
r>ets tht dclc~;ation, {277El ·
.
.
·
~~
·
.
.
~Dd . e mstan~ case, the Acl must be read In conjunction \\ ith the Me in~·
•bo~llliJl Claus~ No. 16 of the Dill whi~h Introduced the Ad in qucstjori. But
Ac1 ,.:~· h mu,t be read in c~njun.:tion with sub·se.:tion 2 '_'fsection 16 of the -
11.e &; h clearly iodk<Hcd the ob~ct 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) must·beolo subserv~ tbe object ~s env~aged 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 comp~nies . 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 ri~e 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 di~similar ;pro~isions 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>erJegislature and strike down a p.Uticular classifkation on the ground that any
· under-tnctusion namely JtJat some others h~ve been. left untouched so long as
there is ilo ~iolation ofconstitufioilal rtstraints.
[~85D~E]
,..
.
.
'
9. : Pit~e-'mealapproach to a general problem permitted by under-inclusive
classifieations, is ~ometimesjustified when it is considered that· legislatures deal · ·
with $uch probl~m. ·usually <>n an expc:rimental basis. It is impossible to' tell how
successf~l a p~rticular 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
m~d'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.
•
In·the'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 Indu~trial Disputes- Act,
is no grounlthat·there has been no violation of Article 14 of the Constitution.
.
[2860}
:G
·.u
tO. Differentiation is ttot:a!ways discriminatory. If there is a rational ne~
, orr the basis ()f which differentiation has b~n 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. Whet~er the same result or better result
~outd have been achieved and better basis of differentiation evolveq is within the .
4omain ofle~islaturl,}and mu!t be left to the wisdom o_f the legislature.
.
·
.
.
· •
·
·
,
.
[21l8H-:a9Bl
.
.
.
t t •. Article 14 tloes not prevo11t the Le~h\fure from introducine· a re'ft>rm
i.e. by applying the Ieaislati~n to .some institu~ions or objects· or areas oJ!Ily
.a«ording. to-the-e:ttigency oNh1 situatiol'l ~d further classifi~ation 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'de~ial
··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 .
B
To the in~tant 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 twot~tatu(es
.is that the later abrogates the earlier one. A prior special law would 'yield to a
tater general law if eitqer~f 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
E
F
. 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 .
.
N~th Schedule of the Constitution as ltcm.9S on IOtll Aug~st 1975. 1/ ;: 1!1•·
the rights of the petitioners had b«n a~ectcd .by .t~e sch~me of 1980 thea~·
risbts would not enjoy immunity from bemg •crut~nased samply be~use the Act'
uodet ·which the scheme was framed had been put m the N_inth Schedule. In
10
.
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 pr~visions: [284E·GJ.
Prog Tee &-Oil MJ/11 &: Anr. et~. v. Union of lndid; [1978] 3 S.C.R. p. 29J,.
tderrtd to.
·
In the instant c~se, 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 G~neral, :\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 R~spondcot 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
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SUPREME COURT REPORTS
[1984) 3 S,C.R.
been merged or t~e company. which has been framed as a result of
the amalgama~ion. ·
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 encumbra~ces affecting these ..
•,
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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 Compani~s 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 stipulat~s 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 im-
~ediately 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 b~siness~ 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;
261
>(e) the alteration of the memorandum and articles. of
B
association of the acquiring company for such purposes·
0
as may be necessary to give effect to the sche~e ;
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 tl~e scheme ;
D
·(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
.
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object. nf ·'the} ~traF.GnveJD.ment · shall·be·to 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 ·instr~ment for the time being in force.
. ,,., ._
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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· m~rger 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,
a~cording 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 afore~aid
>
-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 m~rger 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
,..
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 p~ovided for the transfer of officers and employees
of the merged companies to the transferee Company. The memo- x
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 nece~sary to' do~', therefore, in exercise or· .
the.powers conferred by Section 16(l)(g) of the aforesaid Act, the
~
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.
.
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.
.
· Central Government framed the $s~heme' 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 provid~d 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 petitione~s fur~her state that the employees of the 'in-su.:..
t
4
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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 servi~e. 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 t~e talks wei.e·
resumed the employe~s 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 m~ntioned 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
c-
'y
whic~ there were amench~ents 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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SUPR,PM£ COURT REPORTS
[l984J 3 S.C.R. .,
-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 e~phasise thatthe Ut,ions always
accepted the position prior to the present· petition, that t].le govern·
ment had the power to amend or make·furiher 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 di~cussions. 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 · ·
•
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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 dear~ess allowance, stagnation increments, retirement age and
· •<lther increments had become worse than before and detrimental
·-to the employees.