# LIFE INSURANCE CORPORATION OF INDIA & ANOTHER ETC v. S.S. SRIVASTAVA & OTHERS

- **Citation:** [1987] 3 S.C.R. 180
- **Court:** Supreme Court of India
- **Decided:** 1987-05-05
- **Case number:** Civil Appeal No. 10761077 of 1987
- **Bench:** E.S. Venkataramiah, K.N. Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/life-insurance-corporation-of-india-another-etc-v-s-s-srivastava-others-9719
- **Pages:** 44

## Headnote

'
Life Insurance Corporation of India (Staff) Regulations 1960-
-4' •
Retirement of Class I and Class II Employees appointed on or after
September 1, 1956 at 58 years-Whether valid and legal.
"#'
Life Insurance Corporation Act, 1956--Section 11(2)-Fixation
of 60 years as age of superannuation for transferred employeesWhether unreasonable.
Constitution of India, 1950-Articles 14 and 16-Different ages of
D retirement for Class I and II Officers-Classification of employees into
two categories for fixing of age of superannuation depending on dates of
entry into service-Whether valid and legal.
The Life Insurance Corporation was established 011 September 1,
1956 under the Life l11Sura11ce Act of 1956 (Act 31 of 1956) by
E amalgamati11g about 200 i11surers carrying on life insurance business in
the country. It had no employees ofits own to carry on the vast business
which had been taken over and the nature of the work was such that the
Corporation required the services of employees with experience and
expertise in running life insurance business. In order to meet the above
need, Sectio11 11 ol'the Act came to be enacted. Sub-section (1) provided
F
that with e!Tect from September 1, 1956, every whole time employee of
the erstwhile insurers would become an employee of the Corporation
and hold oftice therein by the same tenure, at the same remuneration,
and upon the same terms and conditioPS and with the same rights and
privileges as to pension and gratuity and other matters as he would have
held on September 1, 1956, had the Act not been passed.
G
The conditions of service of the employees whose services were
transferred to the Corporation under Section U(l) were not uniform.
The conditions governing the retirement of those employees were also
diverse and dill'erent. In some cases the age of retirement had been
fixed at 55 years, in some at 58 years and in some others at 60 years. In
H many cases, the insurers had permitted their employees to continue in
180
L.I.C. v. S.S. SRIVASTAVA
181
their services even beyond 60 years depending upon their etliciency and
physical capacity.
For the purposes of rationalising the pay scales of the transferred
employees, under sub-section (2) of Section 11 the Central Government
was empowered to alter the terms of service of the employees as to their
remuneration in such manner as it thought lit. The sub-section was
amended by Acts 17 and 36of19S7.
Clause (bb) of sub-section (2) of Section 49 conferred power on the
Corporation to make regulations with the previous approval of the
Central Government as regards 'the terms and conditions of service of
persons who had become employees of the Corporation under subsection (1) of Section 11'.
Under clauses (b) and (bb) of Section 49(2) of the Act, Begulations
were framed prescribing the ages of retirement of the employees of the
Corporation belonging to different categories with the previous
approval of the Central Government and were incorporated in the Life
Insurance Corporation of India (Stall) Begulations, 1960 made by the
Corporation which came into effect on July, 1960.
Under Begulation 19(1), all transferred employees were entitled
to remain in service till they completed 60 years of age but the appoint·
ing authority was empowered to retire any such transferred employee
on completion of 55 years of age or at any time thereafter, if his elli·
ciency was found to have been impaired. Under Regulation 19(2) emp·
Ioyees appointed to the service of the Corporation on or after September,
1956, were required to retire on completion of 58 years of age but the
appointing authority was empowered to retire any such employee on
completion of 55 years of age or thereatler if his elliciency was found to
have been impaired.
In the case of the transferred employees this regulation was made
in conformity with the 'standardisation order' passed in respect of
Class III and Class IV transferred employees. in whose case the age of
A
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t retirement was fixed at 60

## Text

_Characters 0–39,987 of 112,306. This is a partial read: ask again with offset=39987 for what follows._

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B
c
LIFE INSURANCE CORPORATION OF INDIA &
ANOTHER ETC.
v.
S.S. SRIVASTAVA & OTHERS
MAY 5, 1987
[E.S. VENKATARAMIAH AND K.N. SINGH JJ.]
'
Life Insurance Corporation of India (Staff) Regulations 1960-
-4' •
Retirement of Class I and Class II Employees appointed on or after
September 1, 1956 at 58 years-Whether valid and legal.
"#'
Life Insurance Corporation Act, 1956--Section 11(2)-Fixation
of 60 years as age of superannuation for transferred employeesWhether unreasonable.
Constitution of India, 1950-Articles 14 and 16-Different ages of
D retirement for Class I and II Officers-Classification of employees into
two categories for fixing of age of superannuation depending on dates of
entry into service-Whether valid and legal.
The Life Insurance Corporation was established 011 September 1,
1956 under the Life l11Sura11ce Act of 1956 (Act 31 of 1956) by
E amalgamati11g about 200 i11surers carrying on life insurance business in
the country. It had no employees ofits own to carry on the vast business
which had been taken over and the nature of the work was such that the
Corporation required the services of employees with experience and
expertise in running life insurance business. In order to meet the above
need, Sectio11 11 ol'the Act came to be enacted. Sub-section (1) provided
F
that with e!Tect from September 1, 1956, every whole time employee of
the erstwhile insurers would become an employee of the Corporation
and hold oftice therein by the same tenure, at the same remuneration,
and upon the same terms and conditioPS and with the same rights and
privileges as to pension and gratuity and other matters as he would have
held on September 1, 1956, had the Act not been passed.
G
The conditions of service of the employees whose services were
transferred to the Corporation under Section U(l) were not uniform.
The conditions governing the retirement of those employees were also
diverse and dill'erent. In some cases the age of retirement had been
fixed at 55 years, in some at 58 years and in some others at 60 years. In
H many cases, the insurers had permitted their employees to continue in
180
L.I.C. v. S.S. SRIVASTAVA
181
their services even beyond 60 years depending upon their etliciency and
physical capacity.
For the purposes of rationalising the pay scales of the transferred
employees, under sub-section (2) of Section 11 the Central Government
was empowered to alter the terms of service of the employees as to their
remuneration in such manner as it thought lit. The sub-section was
amended by Acts 17 and 36of19S7.
Clause (bb) of sub-section (2) of Section 49 conferred power on the
Corporation to make regulations with the previous approval of the
Central Government as regards 'the terms and conditions of service of
persons who had become employees of the Corporation under subsection (1) of Section 11'.
Under clauses (b) and (bb) of Section 49(2) of the Act, Begulations
were framed prescribing the ages of retirement of the employees of the
Corporation belonging to different categories with the previous
approval of the Central Government and were incorporated in the Life
Insurance Corporation of India (Stall) Begulations, 1960 made by the
Corporation which came into effect on July, 1960.
Under Begulation 19(1), all transferred employees were entitled
to remain in service till they completed 60 years of age but the appoint·
ing authority was empowered to retire any such transferred employee
on completion of 55 years of age or at any time thereafter, if his elli·
ciency was found to have been impaired. Under Regulation 19(2) emp·
Ioyees appointed to the service of the Corporation on or after September,
1956, were required to retire on completion of 58 years of age but the
appointing authority was empowered to retire any such employee on
completion of 55 years of age or thereatler if his elliciency was found to
have been impaired.
In the case of the transferred employees this regulation was made
in conformity with the 'standardisation order' passed in respect of
Class III and Class IV transferred employees. in whose case the age of
A
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D
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t retirement was fixed at 60 years. The result was that the regulation
G
made a clear and distinct classitication of all the employees of the
Corporation belonging to all dasses into two groups-transferred emp·
loyees and the employees appointed after September 1, 1956 for
purposes of the age of retirement having regard to the historical
reasons.
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SUPREME COURT REPORTS
[1987] 3 S.C.R.
Consequent upon the settlement arrived at, upon an industrial
dispute which arose between Class III and Class IV employees who were
appointed subsequent to September 1, 1956 in the Corporation, Fegulation 19 of the Life Insurance Corporation of India (Stall) Regulations
1960 which came into force w.e.f. July 1, 1960 was amended and the
employees of the Corporation were divided both longitudinally and
latitudinally insofar as the age of retirement was concerned. Longitudinally, all the transferred employees belonging to Class I and II became
entitled to continue in service till they attained the age of 60 years, the
Corporation being empowered to retire any of them prematurely on
completion of 55 years of age if his etliciency was found to have been
impaired, and all the Class I and Class II otlicers appointed to the
service of the Corporation on or atler September 1, 1956 had to retire
on completion of 58 years of age subjet again to the power of the Corporation to retire any such employee on completion of 55 years of age or at
any time thereatler if his etliciency was found to have been impaired.
Latitudinally, the employees were divided into two groups and .all the
employees belonging to Class III and Class IV, irrespective of the fact
D whether they were translerred employees or employees appointed after
September 1, 1956 were entitled to continue in service till 60 years of
age, but the employees belonging to Class I and Class II who were
appointed to the service of the Corporation on or aller September 1,
1956 had to retire on the completion of 58 years of age subject to the
usual clause relating to premature retirement.
E
F
Sub-regulation (2) of Fegulation 19 was modified empowering the
appointing authority to extend at its discretion of service of any employee of the Corporation belonging to Class. I or Class II categories
appointed to service on or aller September 1, 1956 for one year at a time
upto 60 years of age. The power to extend the service of employees
belonging to Class I and Class II appointed on or after September 1,
1956 beyond 58 years of age was withdrawn from January 21, 1977 and
the Corporation was permitted to retire an employee on completion of
50 years of age.
The first respondent joined the Corporation as a Class III empG loyee on March 22, 1957. Subsequently, he was promoted to a Class I
~
post and ultimately as Assistant Divisional Manager. Since he was born
in the month of June, 1926, notice was issued to him in February, 1984
of his retirement which was due on June 30, 1984 on his completing the
age of 58 years. Before the date of his retirement, he instituted a writ
Petition in the High Court questioning the validity of Fegulation 19(2)
H of the (Stall) Regulations, 1960, as it stood then and prayed for the issue
--------------····'-
L.I.C. v. S.S. SRIVASTAVA
183
o!' writ o!' mandamus directing the Corporation not to retire him before A
he attained the age ol' 60 years.
It was contended by the first respondent before the High Coulft
that there was no justification to prescribe two different ages ol' retirement one for the transferred employees belonging to Class I and Class
II categories and the other for the employees who joined the service of B
the Corporation after September 1, 1956 and who also belonged to
Class I and Class II categories, and that in regard to those who joined
the service after being appointed to Class III post aller September 1,
1956, there could not be any reduction of age of retirement from 60 to
58 years on their being promoted to a Class I or Class II post. Since he
· had the right to continue in service if he had remained in Class III only C
till he attained the age of 60 years as a Class Ill employee, age of
retirement could not be reduced to 58 years only because he had been
promoted to a Class I post.
It was urged on behalf of the Corporation and the Union of India
that the transferred employees and the employees who joined the D
service after September 1, 1956 belonged to two distinct and separate
classes which had been treated differently throughout for valid reasons.
Since there was no uniformity in the establishments in which the transferred employees were working prior to nationalisation of the life
insurance business, it became necessary to fix the age of retirement of
the transferred employees on a fair, equitable and just basis. In the 'E
circumstances, the classification of the employees into two categories,
namely, transferred employees and others who joined on or after
September 1, 1956 for the purposes of age of superannuation was a
valid classification and Articles 14 and 16 of the Constitution had not
been violated. It was further submitted that the discrimination made
between the employees belonging to Class I and Class II on the one hand
F
and the employees belonging to Class III and Class IV on tbe other in the
matter o!' the age of superannuation was not invalid since they belonged
to two different categories of employees who were governed by dill'erent
conditions of service as regards pay, perquisites, allowances, administrative powers etc.
The High Court did not !ind any unconstitutionality in a rule or
regulation providing the age of retirement at 60 years of employees who
G
had been absorbed from the service of the erstwhile insurers and to that
extent it held that the grouping being reasonable the Court might not
travel into the domain of legislative policy. It, however, found that
when once a transferred employee belonging to Class III and an empH
·- -~-------·------
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SUPREME COURT REPORTS
(1987] 3 S.C.R.
loyee appointed after 1st September, 1956 by the Corporation to a Class
III post is promoted to Class I, the distinction of the transferred employee _and direct appointee could not be maintained, as on promotion
tiley became persons belonging to the same category of employees
enjoying the same conditions of service. Hence the age of retirement
should be the same in the case of both such promotees. It accordingly
held that the first respondent was entitled to continue till he attained the
age of 60 years as other Class I employees belonging to the category of
transferred employees. The Writ Petition was allowed and RegulaHon
19(2) was struck down as being violative of Articles 14 and 16 of the
Constitution of India and the Corporation was directed not to retire the
first respondent before he attained the age of 60 years.
Allowing the appeals, by special wave, of the Life. Insurance
Corporation oflndia and the Union oflndia, this Court,
HELD: 1.1 The decision taken by the Corporation and the Central Government as regards the ages of retirement of the different clasD ses of the employees of the Corporation is a bona tide one aod cannot be
characterised as unreasonable aod it is not, therefore, liable to be upset
by a decision of the Court. [222G J
1.2 In the instant case, the High Court erred in striking down
Regulation 19(2) of the L.l.C. (Staff) Regulations 1960 as amended in
E
the year 1977 and in directing the Corporation to continue the first
respondent in its service till he completed the age of 60 years. [223A]
2.1 Classification of employees into two categories fQr purposes of
tiiQng the age of' superannuation depending up6n the date of entry into
service is not something which is unusual, aod such classification
F
becomes necessary on account of historical facts and the need for treating the employees in a fair and just way. [220G]
2.2 Merely because the pay, allowances and other perquisites
drawn by the transferred employees and by the employees appointed
after September 1, 1956 by the Corporation are the same, it ca11Dot be
G said that the transferred employees and the other employees had been
~
integrated so as to form one cadre. So far as the age of retirement is
concerned, they are being treated diflerently right from the date on
which the Corporation was established. [221G]
2.3 In the instant case, since the classification of the employees
H for the purpose of age of retirement into two categories is reasonable
L.I.C. v. S.S. SRIVASTAVA
185
and not arbitrary and there is a reasonable nexus between the classiA
fication and the object to be attained thereby, it is not possible to bold
that Regulation 19(2) is violative of Articles 14 and 16 of the Constitution. [222C]
3. The Act itself made a distinction between the transferred emp·
loyees and the employees recruited to the service of the Corporation B
after September 1, 1956 by making amendments in Section 11 and in
clauses (b) and (bb) of sub-section (2) of Section 49 of the Act. In the
(Staft) Regulations, 1956 and the (Staft) Regulations, 1960 there was
again a distinction made between the transferred employees and the
employees recruited after September 1, 1956. The distinction between
the two classes is recognised by Parliament even as late as 1981 which it C
amended Section 49 of the Act by deleting clause (bb) of sub-section (2)
thereof and by amending Section 48 of the Act by introdudng clause
(cc) in sub-section (2) and the new sub-section (2A) in it. At no point of
time the transferred employees were integrated into ane cadre alongwith employees appointed after September 1, 1956 as such and the
transferred employees have retained their birth-marks throughout. The D
!'act that the pay, allowances and other conditions of services have been
made the same in respect of both the transferred employees and the
employees of the Corporation recruited after September 1, 1956 has not
brought about the integration of the two Cla8Ses of employees into one
single cadre. [214GH; 215A: E-F]
4.1 The determination of 58 years as age of superannuation, in
the case of the employees, who entered service after September 1, 1956
by itself cannot be considered to be arbitrary since in almost all the
public sector corporations, Central services and the State services, 58
years age is considered to be a reasonable age at which officers can be
E
directed to retire from their service. [212C]
F
4.2 Regarding the discrimination in the age of retirement between employees belonging to Class I and Class II on the one hand and
Class III and Class IV on the other, it is true that originally employees
belonging lo Class III and Class IV categories amongst the transferred
employees were given the benefit of retirement at the age of 60 years, G
but the employees belonging to Class III and Class IV categories atler
1st September, 1956 were required to retire ou the completion of 58
years of age. Pursuant to the settlement arrived at between the Management and the Class III and IV employees recruited after September 1,
1956, this discrimination was removed and Regulation 19 was amended
w.e.f.June 19, 1965. [212D-F]
H
186
SUPREME COURT REPORTS
(1987] 3 S.C.R.
A
4.3 Having regard to the lower emoluments and other benefits
which the employees belonging to Class III and Class IV are entitled to
get from the Corporation and the higher emoluments and other benefits
to which ollicers belonging to Class I and Class II are entitled to and
also the nature of their work and the powers enjoyed by them, fixation
B of ditJerent ages of retirement to the different classes of employees
could not by itself be violative of Articles 14 and 16 of the Constitution. [212F-G I
5. Having regard to different conditions of service that were prevailing in the varions establishments whose business was taken (Iver by
the Corporation, fixation of age of superannuation is one of the essential
C parts of the process of transfer and integration to which sub-section (2)
of Section 11 of the Act is applicable. The lixation of 60 years as the age
of superannuation in the case of transferred employees cannot be considered to be unreasonable in view ot'the history of this case. [208C-D]
D
6. The transferred employees who are treated favourably belong
to a vanishing group and, perhaps, within a period of two years none of
them would be in the service of the Corporation. Thereafter, only one
class of employees would be in the service of the Corporation, namely,
those appointed subsequent to September 1, 1956 by the Corporation in
respect of whom the Corporation has fixed the age of retirement as 58
E years which corresponds to the age of retirement in almost all the public
sector establishments, the Central Government services and the State
Government services. [221C-E]
7. The High Court was right in holding that it was not discriminatory to extend the benefit of the age of 60 years to the transferred
F
employees. However, it was not correct in holding that on promotion
from Class III to Class I, the transferred employees and the directly
recruited employees would lose their birth-marks. The intention of
Parliament was that even as late as in 1981 the two groups of employees,
namely, the transferred employees and employees recruited after
September 1, 1956 in the Corporation should be kept separate. In these
G .circumstances, the High Court was in the error in holding that when
employees are recruited to a lower grade from two sources, no favourable treatment should be extended to recruits t'rom one source on their
promotion to the higher grade. The fact that an employee had entered
the service of the Corporation aller September 1, 1956 in a Class III
post and is later on promoted to a Class I post does not make any
H difference. [216E-H; 217D]
y·
L.1.C. v. S.S. SRIVASTAVA
187
8. In the instant case, when the first respondent was promoted to
A
the Class I post in 1963 the age of retirement of officers in the Class I
post had been fixed at 58 years and was not different from the age of
retirement of Class III employees. It was only in 1965 under the settlement, the age of retirement of employees in Class III and Class IV who
joined service after September 1, 1956 was raised to 60 years. If he felt
that the conditions of service of Class I officers were Ukely to be prejudiB
cial to him, he could have refused the promotion offered to him. Having
accepted the promotion alongwith the higher benefits flowing from it he
cannot contend after several years that he had been prejudicially affected by the condition relating to the age of retirement applicable to
Class I officers appointed after September 1, 1956. That apart, the
higher emoluments and other perquisites to which Class I employees
C
may be entitled to and the better conditions of work which are enjoyed
by them substantially compensate the effect of the lowering of the age of
retirement from 60 years to 58 years. [213E-G]
Christopher Pimenta and Others v. Life Insurance Corporation of
India, A.I.R. 1958 Bombay 451; Life Insurance Corporation of India v.
D
D.J. Bahadur & Ors., [1981] 1 S.C.R. 1083; Ram Lal Wadhwa & Anr.
v. The State of Haryana & Ors., [1973] l S.C.R. 608; State of Punjab v.
Joginder Singh, [1963] Supp. 2 S.C.R. 169; Tejinder Singh and Another
v. Bharat Petroleum Corporation Ltd. and Anr., [1986] 4 S.C.C. l37;
Roshan Lal Tandon v. Union of India, [1968] 1 S.C.R. 185; Miss Lena
Khan v. Union of India and Ors., Jt. [1987] 2 S.C. 19; Railway Board v.
E
A. Pitchumani, [1972] 2 S.C.R. 187; Manindra Chandra Sen v. Union
of India & Ors., A.I.R. 1973 CAL. 385; M/s British Paints (India) Ltd.
v. The Workmen, [1966] 2 S.C.R. 523; Mohammad Shujat Ali & Ors.
etc. v. Union of India & Ors. etc. lt975] 1S.C.R.449; Workmen of the
Bharat Petroleum Corporation Ltd. (Refining Division) Bombay v.
Bharat Petroleum Corporation Ltd. and Another, [1984] 1 S.C.R. 251;
F
Tamil Nadu Education Department Ministerial & General Subordinate Service Association v. State of Tamil Nadu & Anr., [1980] 1
S.C.R. 1026, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10761077 of 1987.
G
t
From the Judgment and Order dated 17.8.1985 of the Allahabad
High Court in C.M. Writ No. 6849 of 1984.
K. Parasaran, B. Datta, P.P. Rao, K.L. Hathi, Anil Nauriya,
S.R. Aggarwal, Y. Ramachandran, U.J. Rana, R.P. Srivastava, HemH
A
188
SUPREME COURT REPORTS
[1987] 3 S.C.R.
ant Sharma, P. Parmeshwaran, Ms. Sushma Suri and C. V. Subba Rao
for the Appellants.
M.K. Ramamurthy, C.S. Vaidyanathan, S. Ravindra Bhatt,
Mohan, S.R. Setia and Probir Choudhary for the Respondents.
B
The Judgment of the Court was delivered by
c
VENKATARAMIAH J. The question involved in these appeals
by special leave which are filed against the judgment dated August 17,
1985 of the High Court of Allahabad in Civil Miscellaneous Writ No.
6849 of 1984 relates to the constitutional validity of regulation 19(2) of
the Life Insurance Corporation of India (Staff) Regulations, 1960
(hereinafter referred to as 'the (Staff) Regulations, 1960'}, as amended
on 21. !. 1977 by the Life Insurance Corporation of India (hereinafter
referred to as 'the Corporation') which provides that an employee
belonging to Class I or Class II appointed to the service of the Corporation on or after 1st September, 1956 shall retire on completion of
D 58 years of age but the competent authority may, if it is of the opinion
that it is in the interest of the Corporation to do so, direct such employee to retire on completion of 50 years of age and at any time thereafter on giving him three months' notice or salary in lieu thereof.
Prior to January, 1955 tl~ere were more than 200 insurers carryE ing on life insurance business in India. As it came to the notice of the
Government that the Indian life insurers, with a few exceptions, were
virtually controlled by few individuals who were utilising the funds of
those companies to the detriment of the industry and the policyholders, the Government decided to nationalise the life insurance
business. Pursuant to the said decision, the President of India promulF
gated the Life Imurance (Emergency Provisions) Ordinance, 1956 on
January 19, 19.56 providing for the vesting of the management of the
life insurance business (which was called the controlled business under
the Ordinance) which was being carried on by any insurer in India on
that day in the Central Government and providing for its management.
On the passing of the said Ordinance the management of the controlG
led business of all the insurers in India thus vested in the Central
Government and pending the appointment of the custodians for the
controlled business of any insurer the person in charge of the management of such business immediately before the passing of the Ordinance
was required to be in charge of the management of the business for and
on behalf of the Central Government. The Ordinance contained deH tailed provisions for the carrying on of the life insurance business by
L.l.C. v. S.S. SRIVASTAVA [VENKATARAMIAH. J.)
189
the Government for the time being. The Ordinance was replaced by A
the Life Insurance (Emergency Provisions) Act, 1956 which was
published on 21st of March, 1956. The said Act was followed by the
Life Insurance Corporation Act, 1956 (Act 31 of 1956) (hereinafter
referred to as 'the Act') which was published in the Gazette on 18th
June, 1956. The Act, however, came into force on ]st July, 1956. The
Act provided for the establishment and incorporation of the Corporation. The Corporation was accordingly established on fat September,
1956. Under the Act the expression 'appointed day' is defined as the
date on which the Corporation is established. The appointed day for
the purposes of the Act is, therefore, September 1, 1956. By virtue of
section 7 of the Act on the appointed day all the assets and liabilities
appertaining to the controlled business of all insurers, the management of which it had been taken over earlier by the Central Govenment, stood transferred to and vested in the Corporation. When the
Corporation thus came into existence it had no empioyees of its own to
carry on the vast business of the large number of ins'1rers which had
been taken over by it. It, therefore, became necessary to transfer the
services of the existing employees of the insurers to the Corporation
beca!lse without the services of those employees it was almost impossible for the Corporation to run the life insurance business in India
which involved management of the various offices situated in different
parts of India, servicing nf lakhs of insurance policies, the administraB
c
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tion of the assets taken over from the insurers and several other
activities connected with the life insurance business. The nature of the
E
work of the Corporation was such that it required the services of the
employees with sufficient experience and expertise in running the life
insurance business. In order to meet the above need section 11 of the
Act came to be enacted. Section 11 of the Act originally stood as
follows:
"11. Transfer of service of existing employees of insurers
to the Corporation-
( l) Every whole-time employee of an insurer whose
controlled business has been transferred to and vested in
F
the Corporation and who was employed by the insurer G
wholly or mainly in connection with his controlled business
immediately before the appointed day shall, on and from
the appointed day, become an employee of the Corporation, and shall hold his office therein by the same tenure, at
the same remuneration and upon the same terms and conditions and with the same rights and privileges as to penH
190
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SUPREME COURT REPORTS
[1987] 3 S.C.R.
sion and gratuity and other matters as he would have held
the same on the appointed day if this Act had not been
passed, and shall continue to do so unless and until his
employment in the Corporation is terminated or until his
remuneration, terms and conditions are duly altered by the
Corporation:
Provided that nothing contained in this sub-section
shall apply to any such employee who has, by notice in
·+
writing given to the Central Government prior to the
appointed day, intimated his intention of not becoming an
•
employee of the Corporation.
(2) Notwithstanding anything contained in sub-section (1) or in any contract of service, the Central Government may, for the purposes of rationalising the pay scales
of employees of insurers whose controlled business has
been transferred to and vested in it or for the purpose of
reducing the remuneration payable to employees in cases
where in the interest of the Corporation and its policyholders a reduction is called for, alter the terms of service
of the employees as to their remuneration in such manner
as it thinks fit; and if the alteration is not acceptable to any
employee the Corporation may terminate his employment
on giving him compensation equivalent to three months'
remuneration unless the contract of service with such employee provides for a shorter notice of termination.
Explanation: The compensation payable to an emplGyee under this sub-section shall be in addition to and shall
not affect any pension, gratuity, provident fund money or
any other benefit to which the employee may be entitled
under his contract of service.
(3) If any question arises as to whether any person
was a whole-time employee of an insurer or as to whether
any employee was employed wholly or mainly in connection with the controlled business of an insurer immediately
before the appointed day the question shall be referred to
the Central Government whose decision shall be final.
( 4) Notwithstanding anything contained in the
Industrial Disputes Act, 1947 (14 of 1947), or in any other
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L.l.C. v. S.S. SRIVASTAVA [VENKATARAMIAH, J.]
191
law for the time being in force, the transfer of the services
of any employee of an insurer to the Corporation shall not
entitle any such employee to any compensation under that
Act or other law, and no such claim shall be entertained by
any Court, tribunal or other authority."
Sub-section (1) of section 11 of the Act provided that every
whole-time employee of an insurer whose controlled business had
been transferred to and vested in the Corporation and who was employed by the insurer wholly or mainly in connection with the controlled
business immediately before the appointed day, i.e., September 1,
1956, would on and from the appointed day become an employee of
the Corporation, and would hold his office therein by the same tenure,
at the same remuneration and upon the same terms and conditions and
with the same rights and privileges as to pension and gratuity and other
matters as he would have held the sam~ on the appointed day if the
Act had not been passed, and would continue to do so unless and until
A
B
c
his employment in the Corporation was tern1inated and until his remuneration, terms and conditions were duly altered by the CorporaD
tion. The proviso to that sub-section provided that nothing contained
in sub-section (1) of section 11 of the Act would apply to any such
employee who had by notice in writing given to the Central Government prior to September 1, 1956 intimated his intention of not becoming an employee of the Corporation. The whole-time employees of the
erstwhile insurers whose services were thus transferred to the CorpoE
ration are hereinafter referred to as 'the transferred employees' of the
Corporation. As mentioned earlier, there were more than 200 insurers
whose controlled business had been taken over by the Corporation and
we are informed that there were about 27 ,000 whole-time employees
working in them. The conditions of service of these transferred employees of the Corporation whose services were transferred to the
F
Corporation under section 11(1) of the Act were not uniform. It was
naturally difficult to continue after the establishment of the Corporation in the cases of all the transferred employees, the conditions of
service enjoyed by them when they were in the employment of the
former insurers. The conditions governing the retirement of those officials with which we are concerned in these appeals were also diverse G
and different. In some cases the age of retirement had been fixed at
55 years, in some at 58 years and in some others at 60 years. In many
cases the insurers had permitted their employees to continue in their
service even beyond 60 years depending upon their efficiency and
physical capacity. The conditions of service of employees and in
particular the terms of remuneration prevalent in some of the former H
192
SUPREME COURT REPORTS
[1987] 3 S.C.R.
A insurance organisations were also disadvantageous to the policyholders. It, therefore, became necessary to bring about uniformity in
the conditions of service of the transferred employees. Parliament,
therefore, enacted sub-section (2) of section 11 of the Act which provided that notwithstanding anything contained in sub-section (I) of
B
section 11 or in any contract of service, the Central Government might
for the purposes of rationalising the pay scales of employees of insurers
whose controlled business had been transferred to and vested in it or
for the purposes of reducing the remuneration payable to those employees in cases where in the interest of the Corporation and its policyholders a reduction was called for, alter the terms of service of the
employees as to their remuneration in such manner as it thought fit
C
and if the alteration was not acceptable to any employee the Corporation might terminate his employment on giving him compensation
equivalent to three months' remuneration unless the contract of
service with such employee provided for a shorter notice of termination. Doubts arose as regards the meaning of sub-section (2) of section
1i of the Act. In Christopher Pimenta and Others v. Life Insurance
P Corporation of India, A.LR. 1958 Bombay 451 the High Court of
Bombay opined that under section 11(2) of the Act the Central
Government could alter the terms and conditions of service of the
employees only as to the remuneration and that the said sub-section
had no reference to the other terms and conditions of the service. The
above decision of the Bombay High Court was delivered on 16.4.1957.
E It is stated that there were cases pending in other courts also questioning the scope and ambit of sub-section (2) of section 11 of the Act as it
stood originally. Hence in order to remove all doubts the President of
India promulgated an ordinance (which was replaced by Act 17/1957)
substituting a new sub-section in the place of the original sub-section
(2) of section 11'of the Act making it more comprehensive and thus
F
enabling the Central Government to alter suitably all conditions of
service of the transferred employees. The new sub-section (2) of section 11 of the Act was further modified by Act 36 of 1957. Thereafter
sub-section (2) of section 11 of the Act read as follows:
G
H
"(2) Where the Central Government is satisfied that for
the purpose of securing uniformity in the scales of remuneration and the other terms and conditions of service
applicable to employees of insurers whose controlled business has been transferred to, and vested in the Corporation, it is necessary so to do, or that, in the interest of the
Corporation and its policy-holders, a reduction in the remuneration payable, or a revision of the other terms and
}-
f
L.1.C. v. S.S. SRIVASTAVA [VENKATARAMIAH, J.]
193
conditions of service applicable, to employees or any class A
of them is called for, the Central Government may, notwithstanding anything contained in sub-section (1), or in
the Industrial Disputes Act, 1947, or in any other law for
the titn~ being in force, or in any award, settlement or
agreement for the time being in force, alter (whether by
way of reduction or otherwise) the remuneration and the B
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 C
termination.
Explanation-The compensation payable to an employee
under this sub-section shall be in addition to, and shall not
affect, any pension, gratuity, provident fund money or any
other benefit to which the employee may be entitled under D
his contract of service."
Section 49(1) of the Act conferred powers on the Corporation to
make with the previous approval of the Central Government regulations not inconsistent with the Act and the rules made thereunder. It
provided for making regulations to provide for all matters for which
E
provision was expedient for the purposes of giving effect to the provisions of the Act. Clause (b) of sub-section (2) of section 49 of the Act
in particular conferred power on the Corporation to make regulations
as regards the method of recruitment of employees and agents of the
Corporation and the terms and conditions of such employees or
agents. It was felt that clause (b) of section 49(2) of the Act was not in
F
terms applicable to the transferred employees who became the employees of the Corporation under sub-section ( 1) of section 11 of the
Act but only referred to the employees and agents of the Corporation
who were employed after the Corporatin was established, that is,
after 1st September 1956. To remove the above doubt by Act 17 of
1957 section 49 of the Act was amended by introducing clause (bb) in G
sub-section (2) of section 49 of the Act which expressly conferred
power on the Corporation to make regulations with the previous
approval of the Central Government as regards 'the terms and conditions of service of persons who have become employees of the Corporation under sub-section (1) of section 11'. The above clause was introduced into the Act with retrospective effect along with the new subH
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19-1
SUPREME COURT REPORTS
[1987] 3 S.C.R.
A section (2) of section 11 of the Act. It is this to be seen that the
conditions of service of the transferred employees were to be regulated
by the provisions of the Act, by an order made by the Central Government under section 11(2) of the Act and the regulations made under
clause (bb) of section 49(2) of the Act. Even before clause (bb) was
actually introduced into the Act with retrospective effect by Act 17 of
lJ
1957 the Corporation had promulgated the Life Insurance Corporation of India (Staff) Regulations, 1956 (hereinafter referred to as 'the
(Staff) Regulations, 1956'). Under regulation 21 of the (Staff) Regulations, 1956 provision was made regarding superannuation and retirement of the employees of the Corporation. Regulation 21 reads as
follows:
c
D
E
F
G
"21. An employee shall retire at fifty-five years of age provided that the appointing authority may at its discretion
extend the service every year upto 60 years of age.
Provided, however, that in respect of some of the
employees of insurers who are allowed to continue in
service beyond age 60 because of the terns and conditions
of employment having not been favourable in the past, the
Executive Committee may at its discretion extend their
service every year upto age 65.
Provided further that during the three years, beginning from 1st September, 1956, the Executive Committee
may, at its discretion, extend the service of a class I employee, who has completed sixty years of age for such period
as may be specified but not exceeding one year at a time if
such extension is considered necessary in the interest of the
Corporation.
Explanation-Notwithstanding anything contained in
this Regulation, where an employee has privilege leave
earned but not availed of as on the date of retirement as
prescribed in the above Regulation he may be permitted to
avail of the leave and in that case the employee will be
deemed to retire from service at the expiry of the leave."
The above regulation fixed the age of retirement of an employee
at 55 years while empowering the authority to extend the service of an
employee, at its discretion, every year upto 60 years of age. The first
H
proviso to regulation 21 of the (Staff) Regulations, 1956, however,
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L.1.C. v. S.S. SRIVASTAVA [VENKATARAMIAH, J.]
195
authorised the Corporation to allow some of the employees of insurers A
who were allowed to continue in service beyond the age of 60 years for
the reasons mentioned therein. The above regulation thus made a
distinction between an employee who entered the service of the
Corporation after it was established, i.e., after 1st September, 1956
and the transferred employees insofar as the age of retirement was
concerned.
B
Pursuant to the power conferred on it under sub-section (2) of
section 11 of the Act the Central Government issued an order on
1.6.1957 called the Life Insurance Corporation of India (Alteration of
Remuneration and other Terms & Conditions of Service of Employees) Order, 1957 which came into force retrospectively from 1st C
September, 1956. This order is called the 'standardisation order'. This
Order applied to all transferred employees who had become employees of the Corporation under section 11( 1) of the Act and who were
in supervisory, clerical and subordinate grades (now classified as Class
III and Class IV employees) of the erstwhile insurers on 31st August,
1956. Clause 13 of the above Order, which related to the age of D
superannuation read as follows:
"13. Retirement:
The normal age of retirement shall be 60. But the
Corporation may require any employee who has attained E
the age of 55 to retire if his efficiency is found to have been
impaired."
Clause 13 of the above Order, therefore, modified regulation 21
of the (Staff) Regulations, 1956 to the extent indicated therein with
effect from the commencement of the Corporation.