# A.V. NACHANE & ANOTHER v. UNION OF INDIA & ANOTHER

- **Citation:** [1982] 2 S.C.R. 246
- **Court:** Supreme Court of India
- **Decided:** 1981-12-28
- **Bench:** A. C. Gupta, R. S. Pathak, 0. Chinnappa Rbddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/a-v-nachane-another-v-union-of-india-another-8903
- **Pages:** 26

## Headnote

Life Insurance Corporation (Amendment) Act 1981, Life lnsurance Corporation (Ordinance) 1981, and Life Insurance Corporation of India Class III and
Class IV Employees (Bonus and Dean1ess) Allowance Rules.
Act and Ordinance whether ultra vires Articles 19(1)(g) and 21 of the
Constitution-Act whether suffers from excessive delegation of powers.
Rule 3 of the Rules-Cannot make the writ is.1Ued by the Supreme Court
nugatory-Can operate only prospectively.
Constitution of India 1950 :
Article 14-Hostile discrimination-Burden of proof-On whom lies.
Article 21-'life'-Whether includes 'livelihood'
Article 32-Claim based on industrial settlement-Whether a fundamental
right and enforceable.
Administrative Law-Delegated legislation-Statutory rule over-tiding existing
,_
/aw-Validity of.
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 such business to the Life Insuranc'' Corporation
of India.
Under Section II (I) of the Act the services of the employees of the
insurers whose business had vested in the Corporation were transferred to the
Corporation. Section 49(1) empowered the Life Insurance Corporation of India
to make regulations for the purpose of giving effect to the provisions of the Act.
Two settlements were reached on January 24, 1974 and February 6, 1974
between the Life Insurance Corporation and its Class III and Class JV employees.
These settlements covered a large ground including the claim for bonus. These
were settlements under section 18 read with section 2(p) of the Indus1:rial Disputes
Act 1947. Under clause 12 of the settlements, the settlements were to be~effective
from 1st April, 1973 for a period of four years that is, from !st April, 1973 to
31st March, 1977. In 1975, the Payment of Bonus (Amendment) 0.rdinance was
promulgated which was subsequently replaced by the Payrne:ot of Bonus
(Amendment) Act 1976. The Central Government decided that the employees
of establishments not covered by the Payment of Bonus Act would 1001 be liable
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A.V. NACHANE v. UNiON
247
to get bonus and cx-gratia payment in lieu of bonus. Payment of Bonus for the
year 1975-1976 to the employees of the Corporation was stopped under instructions from the Central Government.
A writ petition filed by the employees of the Corporation in the Calcutta
High Court was allowed, and the Corporation was directed to act in accordance
with the terms of the settlement.
In Madan Mohan Pathak v. Union of India and
Ors. [1978] 3 SCR 334, the Supreme Court held that the 1976 Act offended Article
31(2) of the Constitution and was void, and directed the Union of India and the
Life Insurance Corporation to forbear from implementing or enforcing the provisions of the 1976 Act and to pay annual cash bonus for the years 1st April, 1975
to 31st March, 1976 and 1st April 1976 to 31st March, 1977, to Class III and Class
IV employees in accordance with the settlements.
On March 31, 1978, the Corporation issued a notice under section 19(2) of
the Industrial Disputes Act declaring its int,;ntion to terminate th~ settlements on
the expiry of two months from the date of notice. On the same day another
r.otice was also issued by the Corporation under section 9A of the Industrial
Disputes Act stating that it proposed to effect a change in the conditions of
service applicable to the workn,en. These notices were followed by a notification issned by the Corporation 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 Remuner;;tion and other Terms and Conditions of
Service of Employees) Order, 1957, was amended by the Central Government,
substituting a new clause (9) for the original clause concerning bonus, to take
effect from June 1, 1978, to provide that the e

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246
A.V. NACHANE & ANOTHER
v.
UNION OF INDIA & ANOTHER
December 28, 1981
(A. C. GUPTA, R. S. PATHAK AND
0. CHINNAPPA RBDDY, JJ.]
Life Insurance Corporation (Amendment) Act 1981, Life lnsurance Corporation (Ordinance) 1981, and Life Insurance Corporation of India Class III and
Class IV Employees (Bonus and Dean1ess) Allowance Rules.
Act and Ordinance whether ultra vires Articles 19(1)(g) and 21 of the
Constitution-Act whether suffers from excessive delegation of powers.
Rule 3 of the Rules-Cannot make the writ is.1Ued by the Supreme Court
nugatory-Can operate only prospectively.
Constitution of India 1950 :
Article 14-Hostile discrimination-Burden of proof-On whom lies.
Article 21-'life'-Whether includes 'livelihood'
Article 32-Claim based on industrial settlement-Whether a fundamental
right and enforceable.
Administrative Law-Delegated legislation-Statutory rule over-tiding existing
,_
/aw-Validity of.
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 such business to the Life Insuranc'' Corporation
of India.
Under Section II (I) of the Act the services of the employees of the
insurers whose business had vested in the Corporation were transferred to the
Corporation. Section 49(1) empowered the Life Insurance Corporation of India
to make regulations for the purpose of giving effect to the provisions of the Act.
Two settlements were reached on January 24, 1974 and February 6, 1974
between the Life Insurance Corporation and its Class III and Class JV employees.
These settlements covered a large ground including the claim for bonus. These
were settlements under section 18 read with section 2(p) of the Indus1:rial Disputes
Act 1947. Under clause 12 of the settlements, the settlements were to be~effective
from 1st April, 1973 for a period of four years that is, from !st April, 1973 to
31st March, 1977. In 1975, the Payment of Bonus (Amendment) 0.rdinance was
promulgated which was subsequently replaced by the Payrne:ot of Bonus
(Amendment) Act 1976. The Central Government decided that the employees
of establishments not covered by the Payment of Bonus Act would 1001 be liable
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A.V. NACHANE v. UNiON
247
to get bonus and cx-gratia payment in lieu of bonus. Payment of Bonus for the
year 1975-1976 to the employees of the Corporation was stopped under instructions from the Central Government.
A writ petition filed by the employees of the Corporation in the Calcutta
High Court was allowed, and the Corporation was directed to act in accordance
with the terms of the settlement.
In Madan Mohan Pathak v. Union of India and
Ors. [1978] 3 SCR 334, the Supreme Court held that the 1976 Act offended Article
31(2) of the Constitution and was void, and directed the Union of India and the
Life Insurance Corporation to forbear from implementing or enforcing the provisions of the 1976 Act and to pay annual cash bonus for the years 1st April, 1975
to 31st March, 1976 and 1st April 1976 to 31st March, 1977, to Class III and Class
IV employees in accordance with the settlements.
On March 31, 1978, the Corporation issued a notice under section 19(2) of
the Industrial Disputes Act declaring its int,;ntion to terminate th~ settlements on
the expiry of two months from the date of notice. On the same day another
r.otice was also issued by the Corporation under section 9A of the Industrial
Disputes Act stating that it proposed to effect a change in the conditions of
service applicable to the workn,en. These notices were followed by a notification issned by the Corporation 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 Remuner;;tion and other Terms and Conditions of
Service of Employees) Order, 1957, was amended by the Central Government,
substituting a new clause (9) for the original clause concerning bonus, to take
effect from June 1, 1978, to provide that the employees of the Corporation shall
not be entitled to profit-sharing bonus.
The validity of the aforesaid two notices and the notification issued for the
purpose of nullifying any further claim to annual cash bonus was challenged by
the workmen in a writ petition in the Allahabad High Court. The High Court
allowed the writ petition. In .the appeal by the Corporation to this Court the
Life Insurance Corporation of India v. D.J. Bahadur [1981] 1 SCR 1083 and th~
writ petition filed in the Calcutta High Court transferred to this Court,
Chandrasekher Bose and others v. Union of lndia and Ors. [1960] 3 SCR 499, a
writ was issued !o the 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 Jegisla lion".
On January 31, 1981, the Lire Insurance Corporation (Amendment)
Ordinance, 1981 was promulgated. A new sub-clause (c) was inserted witb
retrospective effect from June 20, 1979 in sub-section (2) of section 48 of the
Principal Act. Three new sub-sections (2A), (2B) and (2C) were a<so added to
section 48. Sub-section (2A) provided that the regulations and other provisions
with respect to the terms and conditions of service of the employees and agents
of the Corporation at the commencement of the Ordinance shall be deemed. to be
rules made under clause (cc) of sub-section (2). Sub-section r(2B) provided 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 amrnd 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
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( 1982j 2 s.c.it.
June 20. 1979. Sub-section (2C) provided that provisions of clause (cc)
of sub-rection (2) and sub-section (2B) and any rule made under cla.use (cc)
shall have effect, notwithstanding any
judgment, decree, or order of any
court, tribunal or other authority, the Industrial Disputes Act 1947, any
agreement, settlement, award or other instrument.
The Central Government by a notification dated February 2, 1981 made
the Life Insurance Corporation of India Class Ill and Class IV Employees
(Bonus and Dearness Allowance) Rules 1981. Rule 3 which had been given
retrospective operation with effect from July 1, 1979 provided by sub-rule { 1)
that : "No Class III or Class IV employee of the Corporation shall be entitled to
the payment of any profit sharing bonus or any other kind of cash bonus", and
sub-rule(2) of rule 3 provided that notwithstanding sub-rule (1), every Class III
and Class IV employee shall be entitled to a payment in lieu of bonus (a) for
the period commencing from July 1, 1979 and ending on March 31, 1980 at the
rate of 15 per cent of his salary, and (b) thereafter for every year commencing
from lst April and ending on the 31st day of the March of the following year
at such rate and subject to conditions which the Central Government may
determine. Sub-rule (3) of rule 3 .rescinded regulation 58 of the Staff Regulations and all other provisions relating to the payment of bonus to the extent
they were inconsistent with rule J,
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 Corporation 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
14, 19(l)(g) and 21(2) of the Constitution: (2) the Act was invalid on the
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) subsection (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 unconstitutional. 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 Corporation Act as amended and the Rules made after amendment placed the Corporation
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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 discrimination 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
Government and the delegation was not excessive. It is not the Rules framed
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 abrogating 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]
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I. (i) Rule 3 operating retrospectively cannot nullify the effect of the
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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 superseeded by a fresh settlement, an Industrial award or relevant legislation. [269 A]
(ii) The Life Insurance Corporation (Amendment) Act 1981 and the Life
Insurance Corporation of India Class III and Class IV employees (Bonus and
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
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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
who challenged the Amendment Act and the rules. It was for them to show
that the employees of the Life Insurance Corporation and the employees of
the other establishments to whom the provisions of the Industrial Disputes
Act were applicable were similarly circumstanced to justify the contention
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 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. (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.
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 notwithstanding the Industrial Disputes Act or any other law. This means that in
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SUPREME COURT REPORTS
[1982] 2 s.c.R.
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respect of the matters covered by the rules, the provisions of the Industrial Disputes Act or any other law will not be operative. [262 A·B]
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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 policyholders 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
sufficient guidance to the Central Government in exercising its powers under
that Act. [265 B-C]
4.
Clause (cc) of section 48(2) empowers the Central Governm~nt to make
rules with regard to the terms and conditions of service of the employees and
agents ofthe Corporation. Sub-section 2(B) of section 48 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 subsection (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 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. [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 employees 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 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 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.
[270H-271 BJ
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A.V. NACHANE v. UNION (Gupta, J.)
251
ORIGINAL J1m1sDICTION : .writ Petition Nos. 501, 643-44, 645,
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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.
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M. K. Ramamurthi, J. Rarnamurthi and Miss R. Vagai for the
Petitioners in WPs. 643-44/81.
Vimal Dave and Miss Kai/ash Mehta for the Petitioners in WP.
No. 645/81.
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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
GUPTA, J. The validity of the provisions of the Life Insurance
Corporation (Amendment) Act, 1981 and the Life Insurance Corporation (Amendment)
Ordinance, 1981 which preceded 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
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(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 business has been transferred to, and vested in, the Corporation, it is necessary so to do, or that, in the interests of the
Corporation and its policy-holders, a reduction in th'e
remuneration payable, or a revision of the other terms and
conditions of service applicable, to employees or any class
of them is called for, the Central Government may, notwithstanding anything contained in sub-section (!), 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
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A.v. NACHANE v. UNION (Gupta, J)
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."
253
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 the 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
and the 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,
1947. The settlements were identical in terms; four of the five
unions of workmen subscribed to the first settlement while the
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 :
"BONUS:
(i)
No profit sharing bonus shall be paid.
However, the
Corporation may, subject to such directions as the
Central Government may issue from time to time,
grant any other kind of bonus to its Class 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 allowA
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( 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
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the 26th June, 1972."
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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
four years. i.e. from !st April 1973 to 31st March 1977." In 1975
an ordinance was promulgated called the Payment of Bonus (Amendment) 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
instructions from the Central Governnient.
On a writ petition
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
filing writ petition in this Court.
In Madan Mohan Pathak v. Union
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 Insurance 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 Corl! · poration issued a notice under section 19(2) of the Industrial Dis-
(l) [1978] 3 SCR 334.
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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 Corporation 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
the employees of the Corporation in terms reproduced
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 Corporation 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
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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 challenged 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 in 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 preferred by the Corporation was dismissed and the transfer petition
was allowed and a writ was issued by this Court to the Life Insurance 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 immediately 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.
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A.V. NACHANE v. UNION (Gupta, J.)
257
sub-section (2).
Sub-section (2B) provides that the power to make
A
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 :
B
"'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 retrospective 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
by .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 Government 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.
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SUPRl'ME COURT REPORTS
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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 the rate of I 5 per cent of his
salary; and (b)
thereafter for every year commencing on the I st
April and ending on the 31st day of March of the following year,
at such rate and subject to such conditions as the Central Government may determine having regard to the wage level, the financial
circumstances and other relevant factors. There is a proviso to
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 payment 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 Constitution 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 subsection (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
H
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
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A.V. NACHANE v. UNION (Gupta, J.)
259
Ordinance shall be deemed to have been done or taken under the
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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
grounds. It was argued that the Act and the rules were violative
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 provision 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
have effect notwithstanding anything contained in the Industrial
Disputes Act, 1947. It is true that after rules are made regarding
the terms and conditions of service, the right to raise an industrial
dispute in respect of matters dealt with by the rules will be taken
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 Corporation was far in excess of what was paid to similarly situated employees 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 Corporation Act, 1956 as appearing from the preamble of t_he Amendment
Act and the Ordinance is as follows : " ... for securing the interests of
the Life Insurance CorporatioQ Qf lndi?; \l!Jcl its
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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 Corporation 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 employees 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 contention 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
February 2, 1981 infringe Article 14. We do not think that on the
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.
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