# LIFE INSURANCE CORPORATION OF INDIA November-15 v. SUNIL KUMAR MUKHERJEE & ORS . . (P.B. GAJENDRAGADKAR, K.N. WANCHOO AND ./

- **Citation:** [1964] 5 S.C.R. 528
- **Court:** Supreme Court of India
- **Decided:** 1963-11-22
- **Case number:** Civil Appeals India Nos. 909 to 923 of 1963
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/life-insurance-corporation-of-india-november-15-v-sunil-kumar-mukherjee-ors-p-b-2991
- **Pages:** 20

## Headnote

528
SUPREME COURT REPORTS
[1964]
1963
that of immovable properties, embraced in a gross
--
valuation roll, so also here, it is not possible to separate
The . .Provincial from the composite turnover transactions which are
Governmerrt .of validly taxed, from those which are not, for that must
Madras
pertain· to the domain of tax officers and the courts
v.
have no powers within that domain.
Tn our opinion,
.'· S. Basappa the High Court was right in declaring the total assessH .d -. -
11 h J menLt? be affected by the portion which was illegal
' ayatu '! .. and v01d.
.
In the result, these appeals fail and are dismissed
with costs, one set only.
·
Appeals dismissed
1963
LIFE INSURANCE CORPORATION OF INDIA
November-15
V.
SUNIL KUMAR MUKHERJEE & ORS .
. (P.B. GAJENDRAGADKAR, K.N. WANCHOO AND
./
. .
K.C. DAS GUPTA JJ.)
. Life Insurance Corporation-Emp/oyees,-Termination of service
-Non-compliance with the provisions of the Act and order-TerminaMl
tion if, valid-Life Insurance Corporation Act, 1956 (31 of 1956),
-
sii. 7f 11(1) (2) and 49-Life Insurance Corporation Field Officers
(Alteration of Remuneration and other terms and Conditions of
Service) Order,: 1957, els . . 10, 11,-Life Insurance Corporation
Regulations, 1958, els. 4 and 5.
One of the respondents Mr.· S.K. Mukherjee was an employee
of the Metropolitan Insurance Co. Ltd., and had been working
as an.!nspe0qfwhen the appellant took over the company.
Thereafter, in February 1958, he was .directed to work as a field officer.
By the order dated October 16, 1958 his services were terminated
with immediate effect and he was informed that he would be paid
his emoluments up to the current month and one month's salary
in lieu of notice. He was not given an opportunity to show cause
against this termination. .His petition before the High Court
under Art. 226 of the Constitution challenging the validity of this
~.
order was allowed by the learned single Judge. After appealing
to a Division Bench without success the appellant came in appeal
.,
•
"
5 S.C.R.
SUPREME COURT REPORTS
529
to this Court with a certificate granted by the High Court. It
was urged on behalf of the appellant that .by the application of the
principle contained in paragraph 4(h) of the Circular issued by the
Managing Director under cl. 4(3) of the Life Insurance Corporation
Regulation 1958, it was competent to the corporation to terminate
the services of the respondents. It was contended that where
cases are dealt with under paragraphs 4(h) and 5 of the Circular,
there can be no question of the application of cl. 10 of the Life
Insurance Corporation Field Officers Order, 1957, which empowers
the appropriate authority to reduce the remuneration of the Development Officer or to tem1inate his services and in either case, an
opportunity of showing cause against the action proposed to be
taken has to be given to him. The contention of the respondents
was that the termination of their services can be brought about
only under cl. lO{a) or IO(b) of the order, and since it has not been
so brought about, the impugned orders are invalid.
Held: (i) The power of the corporation to make Regulations
is burdened with the condition that these Regulations must not bo
inconsistent with the Act and the rules framed thereunder , so that
if any of the provisions contained in the Regulations made by the
corporation under s. 49 of the Act are found to be inconsistent
either withs. II (2) or with the order made by the Central Government under s. 11(2) of the Act, they would be invalid.
(ii) Paragraph 4(h) means that 'in cases falling under it, the
services of the officers concerned would be liable to be terminated,
and that means that the termination of the services, of the said
officers must be effected in the manner prescribed by cl. JO of the
Order. That is how paragraph 4(h) of the Circular and cl. IO of
the Order can be reasonably reconciled.
This applies equally to
paragraph 5 of the Circular.
(iii) It was competent to the corporation

## Text

_Characters 0–39,876 of 44,217. This is a partial read: ask again with offset=39876 for what follows._

528
SUPREME COURT REPORTS
[1964]
1963
that of immovable properties, embraced in a gross
--
valuation roll, so also here, it is not possible to separate
The . .Provincial from the composite turnover transactions which are
Governmerrt .of validly taxed, from those which are not, for that must
Madras
pertain· to the domain of tax officers and the courts
v.
have no powers within that domain.
Tn our opinion,
.'· S. Basappa the High Court was right in declaring the total assessH .d -. -
11 h J menLt? be affected by the portion which was illegal
' ayatu '! .. and v01d.
.
In the result, these appeals fail and are dismissed
with costs, one set only.
·
Appeals dismissed
1963
LIFE INSURANCE CORPORATION OF INDIA
November-15
V.
SUNIL KUMAR MUKHERJEE & ORS .
. (P.B. GAJENDRAGADKAR, K.N. WANCHOO AND
./
. .
K.C. DAS GUPTA JJ.)
. Life Insurance Corporation-Emp/oyees,-Termination of service
-Non-compliance with the provisions of the Act and order-TerminaMl
tion if, valid-Life Insurance Corporation Act, 1956 (31 of 1956),
-
sii. 7f 11(1) (2) and 49-Life Insurance Corporation Field Officers
(Alteration of Remuneration and other terms and Conditions of
Service) Order,: 1957, els . . 10, 11,-Life Insurance Corporation
Regulations, 1958, els. 4 and 5.
One of the respondents Mr.· S.K. Mukherjee was an employee
of the Metropolitan Insurance Co. Ltd., and had been working
as an.!nspe0qfwhen the appellant took over the company.
Thereafter, in February 1958, he was .directed to work as a field officer.
By the order dated October 16, 1958 his services were terminated
with immediate effect and he was informed that he would be paid
his emoluments up to the current month and one month's salary
in lieu of notice. He was not given an opportunity to show cause
against this termination. .His petition before the High Court
under Art. 226 of the Constitution challenging the validity of this
~.
order was allowed by the learned single Judge. After appealing
to a Division Bench without success the appellant came in appeal
.,
•
"
5 S.C.R.
SUPREME COURT REPORTS
529
to this Court with a certificate granted by the High Court. It
was urged on behalf of the appellant that .by the application of the
principle contained in paragraph 4(h) of the Circular issued by the
Managing Director under cl. 4(3) of the Life Insurance Corporation
Regulation 1958, it was competent to the corporation to terminate
the services of the respondents. It was contended that where
cases are dealt with under paragraphs 4(h) and 5 of the Circular,
there can be no question of the application of cl. 10 of the Life
Insurance Corporation Field Officers Order, 1957, which empowers
the appropriate authority to reduce the remuneration of the Development Officer or to tem1inate his services and in either case, an
opportunity of showing cause against the action proposed to be
taken has to be given to him. The contention of the respondents
was that the termination of their services can be brought about
only under cl. lO{a) or IO(b) of the order, and since it has not been
so brought about, the impugned orders are invalid.
Held: (i) The power of the corporation to make Regulations
is burdened with the condition that these Regulations must not bo
inconsistent with the Act and the rules framed thereunder , so that
if any of the provisions contained in the Regulations made by the
corporation under s. 49 of the Act are found to be inconsistent
either withs. II (2) or with the order made by the Central Government under s. 11(2) of the Act, they would be invalid.
(ii) Paragraph 4(h) means that 'in cases falling under it, the
services of the officers concerned would be liable to be terminated,
and that means that the termination of the services, of the said
officers must be effected in the manner prescribed by cl. JO of the
Order. That is how paragraph 4(h) of the Circular and cl. IO of
the Order can be reasonably reconciled.
This applies equally to
paragraph 5 of the Circular.
(iii) It was competent to the corporation to adopt the Circular,
and in consequence, lay down the principles which should be followed in fitting individual officers into the scheme prescribed by cl. 5
of the order. The total amount of remuneration would undoubtedly
be determined in the light of the principles prescribed by the Circular,
but under the guise of fitting in a particular officer in the light of
the said principles it would not be open to the corporation to demote
the officer from the grade of Development Officer to a lower grade;
that would be beyond the competence of the Regulations.
(iv) Since the orders terminating the services of the respective
respondents have not been passed in accordance either with cl. JO( a)
or (b), they must be held to be invalid.
(v) An employee whose performance is poor is liable to be
dealt with under cl. IO of the order. But it is not open to the
..,
corporation to requite that person to accept an assignment in a
lower or different category. What the Regulations are authorised
to do is merely to determine his salary in the category of developl/SCI/64---34
1963
Life Insurance
Corporation of
India
v.
Sunil Kumar
Mukherjee &
others
\
530
SUPREME COURT REPORTS
[1964]
1963
ment officers, and so, an order terminating his service on the ground
that he refused to take an assignment in a lower category cannot
~
Life Insurance be justified.
Corporation of
CIVIL APPELLATE JURISDICTION:
Civil Appeals
India
Nos. 909 to 923 of 1963.
V.
Suni/Kumar
Mukherjee &
others
Appeals from the judgment and orders dated
July 26, and August I, 1962, of the Calcutta High
Court in Appeals from Original Orders Nos. 288
and 274-276, 278, 280, 279, 281, 273, 272, 271, 270,
269, 282 and 292 of 1961.
H.N. Sanyal, Solicitor General,
S.J.
Banoji,
Prasanta Kumar Ghose and K.L. Hathi, for the
appellants.
B. Sen, Salil Kumar Datta and Sukumar Ghose,
for the respondents Nos. 1 to 5.
November 22, 1963. The Judgment of the Court
was delivered by
Gajendragadkar
GAJENDRAGADKAR, J.-This is a group of 15
· J.
appeals which raise a common question about the
validity of the orders passed by the appellant Life
Insurance Corporation of India terminating the services
of its employees who are the respondents in these
appeals. The facts which give rise to the present
disputes between the parties in all the 15 cases are
substantially similar, and so, it would be enough if
we state the relevant facts in one of these cases. One
of the respondents is Sunil Kumar Mukherjee. He
was in the insurance line since June, 1941 and had
been confirmed in his service by the Metropolitan
Insurance Co. Ltd. in March, 1950. Since about
1953, he had been working as Inspector of the said
Company, and since March 18, 1955, he was holding
the appointment as Inspector at Barrackpore. The
appellant which took over the controlled business
of the Metropolitan Insurance Co. Ltd., terminated
the services of Mukherjee by an order passed on the
16th October, 1958. The respondent then moved
the Calcutta High Court under Art. 226 of the Constitution and prayed for a writ of certiorari or other
appropriate writ or order quashing the said impugned
'
\
-
5 S.C.R.
SUPREME COURT REPORTS
531
order of discharge passed against him. Sinha J.
1963
who heard the writ petition allowed the petition and
. -
directed that a writ in the nature of certiorari quashing Life lnsu~ance
and/or setting aside the impugned order be issued. Corporatzon of
A further writ in the nature of mandamus was also
India
issued directing the respondents to the writ petition
v.
not to give effect to the said impugned order. To
Sunil Kumar
the petition filed by the respondent, he had impleaded
Mukherjee &
eight respondents, the principal amongst them being
others
the appellant Corporation and the Union of India.
A
.
d b h d . .
f s· h J h
ll
Gajendragadkar
ggneve
y t e ec1s10n o m a . t e appe ants
1
preferred an appeal under the Letters Patent before
·
a Division Bench of the said High Court. Bose
C.J. and Debabrata Mokerjee J. who heard the
Letters Patent appeal substantially agreed with the
view taken by Sinha J. and confirmed the order passed
by him. The appellants then applied for and obtained
a certificate of fitness from the said High Court and
it is with the said certificate that they have come to
this Court in appeal. On similar facts, the appellants
have brought to this Court the other fourteen appeals,
and a common question which has been raised by the
learned Solicitor-General on behalf of the appellants
is that the High Court was in error in holding that
the orders of discharge passed respectively against
the respondents in these appeals were invalid.
Before dealing with the points raised by the
appellants in the present appeals, it would be convenient to set out the relevant orders passed in respect
of the appointment and discharge of the respondent
Mr. Mukherjee . When Mr. Mukherjee was appointed
a whole-time Inspector by the Metropolitan Insurance
Co. Ltd. on the 18th or 19th March, 1955, the terms
and conditions of his employment were communicated
to him by a document which contained 14 clauses
(Annexure A to the W.P.).
Clause 13 of this document provided that the appointment was subject
to termination without notice in case he was found
guilty of fraud, mis-appropriation, breach of discipline, insubordination, acting detrimental to the
interests of the company, disloyalty or gross neglect
532
SUPREME COURT REPORTS
[1964]
1963
of duty: provided, however, that he would be entitled
to 30 days' notice if his services were terminated for
Life Insurance any other reason. It is thus clear that under the
Corporation of terms and conditions of Mr. Mukherjee's original
India
appointment with the Insurance Co., he was liable
v.
to be dismissed for misconduct and was entitled to
Sunil Kumar receive 30 days' notice if his services were terminated.
Mukherjee & for reasons other than misconduct.
others
When the Life Insurance Corpn. took over the
Gajendragadkar business of the Metropolitan Insurance Co. Ltd.,
J
an order was issued in favour of Mr. Mukherjee on
·
the 14th February, 1958. By this order it was stated
that in terms of Government Order No. 53(1) l.S.N.
(I) 57 dated 30th December; 1957, he was required to
work as· a Field Officer. It was also added that he
would continue to be attached to Barrackpore Branch
Office until further orders. This order was issued
by the Divisional Manager. Thus, it appears that
after this order was given to Mr. Mukherjee, he began
to work as a Field Officer by virtue of his appointment
under the relevant Government Order. One of the
points which we have to consider in the present appeal
is : what is the effect of this order of appointment?
On the 16th October, 1958, the impugned order
terminating Mr. Mukherjee's services was passed.
This order said that in terms of section 5 of the Categorisation circular of the 2nd December, 1957, Mr.
Mukherjee's case
was
examined by the Special
Committee appointed by the Board of the Corporation
to review the cases of Ex-Branch Secretaries etc.,
and it was added that in accordance with the recommendations of the Committee which had been accepted
by the Corporation, it had been decided to terminate
his services with immediate effect. Mr. Mukherjee
was also told that he would be paid his e:moluments
up to the current month and one month"s salary in
lieu of notice. It is the validity of this order which
has been successfully challenged by Mr. Mukherjee
before the Calcutta High Court, and the learned
Solicitor-General contends· that the High Court was
in error in upholding Mr. Mukherjee's plea.
<
I
-
..
I
t
' '
5 S.C.R.
SUPREME COURT REPORTS
533
The history of the nationalisation of the Life
1963
Insurance business in this country is well-known.
. --
On the 19th January, 1956, the Life Insurance (Erner- Life Insu~ance
gency Provisions) Ordinance (No. 1 of 1956) was Corporation °1
promulgated by the President for the purpose of taking
India
over, in the public interest, the management of the
. v.
life insurance business, pending nationalisation of Sumi K~mar
such business. In due course, Act No. 9 of 1956
Mukher;ee &
was passed which took the place of the original Ordiothers
nance and it came into effect on the 21st March,
-·-
1956. This Act was followed by Act 31 of 1956 Gajendragadkar
(hereinafter called 'the Act') which was published
J.
on the !st of July, 1956. The appointed date under
s. 3 of this Act was the 1st of September, 1956. Section
7 of the Act provides that on the appointed day there
shall be transferred to and vested in the Corporation
all the assets and liabilities appertaining to the controlled business of all insurers. That is how the
Life Insurance Corporation took over all the assets
and liabilities appertaining to the controlled business
of all the insurers in this country. As a result of this
taking over, s. 11 proceeded· to make a provision for
the transfer of service of existing employees of insurers
to the Corporation. For the purpose of these appeals,
it is necessary to set out sec. 11(1) & (2).
These sub-sections read as under:-
"(l) Every whole-time employee of an insurer
whose controlled business has been transferred to and vested in the Corporation and
who was employed by the insurer 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 sam~
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 same on the appointed day
1963
Life Insurance
Corporation of
India
v.
Sunil Kumar
Mukherjee &
others
Gajendragadkar
J.
534
SUPREME COURT REPORTS
(1964]
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) 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 interests of the Corporation
and its policy-holders, a reduction in the
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 any thing contained in subsection (1 ),
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 the other terms
& 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 termination."
)·
••
'
5 S.C.R.
SUPREME COURT REPORTS
535
Then follow an explanation and sub-sections (3)
1963
and (4) which are not relevant for our purpose. It
-
would thus be seen that under s. 11(1), persons who Life Insurance
were employed by an insurer wholly or mainly in Corporation of
connection with his controlled business before the
India
appointed day, became the employees of the Corporav.
tion as from the appointed day. After they thus
Sunil Kumar
became the employees of the Corporation, they held Mukherjee &
their offices by the same tenure, at the same remuneraothers
tion and upon the same terms and conditions and
with the same rights and privileges. In other words, Gajendragadkar
on the taking over of the controlled business by the
J.
Corporation, the employees of the insurers to whom
s. 11 (I) applied became the employees of the Corporation, but their employment continued to be on the
same terms and conditions as before. This state
of affairs was to continue until the employment of
the employee was brought to an end or until his
remuneration, terms and conditions were duly altered
by the Corporation. The scheme of s. 11(1) is thus
clear. With the transfer of the controlled business
from the insurer to the Corporation, the employees
of the former became the employees of the latter,
but they were governed by the same terms and conditions until they were altered by the latter.
The proviso to s. ll(IJ shows that if any employee
had, by notice in writing, conveyed to the Central
Government prior to the appointed day his intention
not to become an employee of the Corporation his
case was outside s. 11 (1 ). In other words, such an
employee. would m?t become the employee of the
Corporation and his case would have to be dealt with
apart from s. 11 (1) & (2).
~ection 11. (2) . as it originally stood was substantially. ~od1fied m .1957,_ and the plain effect of
the prov1s1ons contamed m the said sub-section
as modified, is that the Central Government is given
the power to alter (whether by way of reduction or
other.\\'.ise) the re~uneration and the other terms and
cond1t1ons of service to such extent and in such manner
as it thinks fit. It is significant that this power can
536
SUPREME COURT REPORTS
[1964)
1963
be
exercised
by the Central Government notwithstanding anything contained in sub'.section (I)
Life Insurance or in the Industrial Disputes Act, 1947, or in any
Corporation of other law, or in any award, settlement or agreement
India
for the time being in force. It was thought that for
v.
a proper functioning of the Corporation it was essenSunil Kumar tial to confer upon the Central Government an overMukherjee & riding power to change the terms and conditions
others
of employees who were wholly or mainly employed
. --
by the insurers prior to the appointed day. Having
Ga1endragadkar conferred such wide power on the Central Government,
J.
s. I I (2) further provides that if the alteration made
by the Central Government in the terms and conditions
of his service 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 termination.
It is thus clear that in regard to cases which fall under
s. 11 (2) if as a result of the alteration made by the
Central Government any employee does not want
to work with the Corporation, he is given the option
to leave its employment on payment of compensation
provided by the last part of s. 11 (2). Thus, the
scheme of the two sub-sections of s. 11 is clear.
The
employees of the insurers whose controlled business
has· been taken over, become the employees of the
Corporation, then their terms and conditions of
service continue until they are altered by the Central
Government, and if the alteration made by the Central
Government is not acceptable to them, they are entitled to leave the employment of the Corporation
on payment of compensation as provided by s. 11(2).
,. .
After the Corporation took over the controlled
business of insurers under the Act, two circulars
were issued by the Managing Director, the first on
the 30th September, 1957 and the second on the 2nd
December, 1957. These circulars need not detain us
at this stage, because, by themselves, they were without
any authority in law. However, we would have
occasion to refer to the second circular later on.
r
.,.
- ..
5 S.C.R.
SUPREME COlJRT REPORTS
537
On the 30th December, 1957, an order was issued
1963
by the Central Government in exercise of the powers
. -
conferred on it by s. 11(2) of the Act. This order Life Insurance
was issued on blue paper and has been described Corporation of
by the High Court as the 'blue order'. We will refer
India
to this order as 'the order' in the course of this judgv.
ment. This order was issued because the Central
Sunil Kumar
Government was satisfied that for the purpose of Mukherjee &
securing uniformity in the scales of remuneration
others
and the other terms and conditions of service applica-
. -
ble to certain classes of employees of insurers, it Ga1endragadkar
was necessary to clarify the position by making speci1·
fie and clear provisions in that behalf. The object
of the order was to secure the interests of the Corporation and its policy-holders by making a reduction in
the remuneration payable to the employees governed
by the order, and effecting a revision of the other
terms arid conditions applicable to them. This order
was confined in its operation to the officers of the
insurers who were known as 'Field Officers', and
so, the order was named as the Life Insurance Corporation Field Officers' (Alteration of Remuneration and
other Terms and Conditions of Service) Order, 1957.
It consists of 12 clauses. Clause 2 defines, inter
alia, a Field Officer. In 1962, the designation 'Field
Officer' was changed into a "Development Officer",
though curiously enough the title of the Order still
refers to the Field Officer and does not incorporate
a consequential amendment in the said designation.
The definition of the "Development Officer" shows
that it takes in a person however he was designated
before the appointed day if he was wholly or mainly
engaged in the development of new life insurance
business for the insurer by supervising, either directly
or through one or more intermediaries, the work
of persons procuring or soliciting new life insurance
business, and who was remunerated by a regular
monthly salary, and who has become an employee
of the Corporation under s. 11 of the Act. This
definition excludes certain categories of employees
to which it is not necessary to refer. It is thus clear·
that the Order was intended to prescribe the· terms
538
SUPREME COURT REPORTS
[1964]
1963
and conditions of service in respect of Development
Officers who had become employees of the Corporation
Life Insurance under s. 11 (1) of the Act. Clause 3 of the Order
Corporation of prescribes the duties of the Development Officer.
India
Clause 4 prohibits the Development Officers from
v.
engaging themselves in certain activities. Clause 5
Sunil Kumar provides for the scales of pay and allowances . Clause
Mukherjee & 6 deals with the matter of leave and retirement, and
others
provides that in the matter of leave and retirement,
.
Development Officers shall be governed by the Life
Ga1endragadkar Insurance Corporation (Staff) Regulations, 1960, as
J.
amended from time to time. Clause 7 provides for
increments, and clause 8 deals with new business
bonus, while clause 9 refers to promotion of Development Officers. Clause 10 is relevant for our purpose
and must be set out in full:
"10. Penalties and termination of service:
(a) In case of unsatisfactory performance of
duties by a Development Officer or if a Development Officer shows negligence in his work or
is guilty of misconduct or is otherwise incapable
of discharging his duties satisfactorily; his remuneration may be reduced or his services may
be terminated, after giving him an opportunity of
showing cause against the action proposed to be
taken in regard to him and after conducting
such enquiry as the Corporation thinks fit.
(b) The services of any Development Officer
.. -
<
may, with the prior approval of the Chairman
(
of the Corporation, be terminated without assigning any reason after giving the Development
Officer three months' notice thereof in writing."
Clause 11 prescribes that the actual pay and allowances
admissible to any Development Officer under the
scale of pay specified in paragraph 5 shall be determined
in accordance with such principles as may be laid
down by the Corporation by regulations made in
this behalf under sec. 49 of the Act. The last clause
lays down that if a doubt arises as to the interpretation
\ of any of the provisions of the Order, the matter will
be decided by the Central Government.
\'
~
'
"'
5 S.C.R.
SUPREME COURT REPORTS
539
It is thus clear that in regard to the Field Officers
subsequently designated as Development Officers who
became the employees of the Corporation after the
appointed day, the Order provides a self-contained
code in dealing with the material terms and conditions
of service of the said Officers. In regard to the scales
of pay and allowances which have been prescribed
by clause 5, clause 11 contemplates that the actual
pay and allowances admissible to any Development
Officer will have to be determined in accordance with
the principles which the relevant regulation would
in that behalf lay down, and so, in the matter of
scales of pay and allowances clause 5 read with clause
11 has to be co-related with the relevant regulation
which had to be subsequently framed. In regard
to the other terms and conditions of service, however,
the Order makes specific and clear provisions. That
being so, there can be no doubt that in regard to the
Officers to whom the Order applies, if any action is
intended to be taken for the termination of their
services, it has to be taken under clause lO(a) or (b).
Clause 10 (a) deals with two alternatives; it empowers
the appropriate authority to reduce the remuneration
of the Development Officer or to terminate his services;
in either case, an opportunity of showing cause against
the action proposed to be taken has to be given to
him, and an enquiry has to be conducted in the manner which the Corporation may think fit. If the
Development Officer shows negligence in his work, or
is guilty of misconduct, or is otherwise incapable of
discharging his duties satisfactorily, the Corporation
may reduce his remuneration or may terminate his
service·; but that can be done only after complying with
the conditions prescribed by clause lO(a).
Clause lO(b) empowers the Corporation to terminate the services of the Development Officer without
assigning any reason and without holding any enquiry
or giving him an opportunity to show cause, provided,
of course, the order terminating his services is passed
with the prior approval of the Chairman of the Corporation. This power can be exercised without complying
1963
Life Insurance
Corporation of
India
v.
Sunil Kumar
Mukherjee &
others
Gajendragadkar
J.
540
SUPREME COURT REPORTS
[1964)
1963
with clause JO(a) and is independent of it. Thus,
.
in the matter of penalties and termination of service,
Life Insu~ance two alternative powers are conferred on the authority
Corpora~wn of and they are contained in the sub-clauses (a) and
Indw
(b) of clause 10.
Sunilv Kumar
As envisaged by clause 11 of the Order, Regulations
were framed in 1958 by the Life Insurance Corporation
Mukherjee & under s. 49 of the Act read with clause 11 of the Order.
others
These Regulations contain five Clauses; the first
Gajendragadkar gives the title of the Regulations; the 2nd defines the
J.
"Categorisation Order" which is the same as the
blue Order, as well as the "Corporation"and the
"Field Officer". Regulation 3 deals with the conveyance allowance.
Regulation 4 provides for the
manner of fixing the pay of the Development Officer.
Regulation 4 (!) lays down that the basic pay in the
scale of pay prescribed for Field Officers by the
Order shall be· so fixed that the said pay together with
the dearness allowance and conveyance allowance is
not less than the total monthly remuneration to which
the Officer was entitled before the 31st August, 1956.
Regulation 4(2) provides that where the work of the
Field Officer has been either below or above the adequate standard, the Corporation may fix his basic
pay at suGh stage in the scale as it may think fit. Regulation 4(3) prescribes that in judging a Field Officer's
work, the Corporation shall observe the principles
contained in the circular issued by the Managing
Director on the 2nd December, 1957. Regulation 5
provides for the computation of total monthly remuneration which was paid to the Officer on the 31st
August, 1956. It will be noticed that clause 4(3) of
the Regulations makes the circular issued by the Managing Director on the 2nd December, 1957 a part of the
regulation by treating it as its annexure and referring
to its provisions for the purpose of determining the
remuneration payable to the Development Officer.
That is how the said circular which, when it was
issued, had no legal authority, has now become valid
as a part of the Regulations issued by the Corporation
under s. 49 of the Act read with clause 11 of the
Order.
(
..
-
5 S.C.R.
SUPREME COURT REPORTS
541
This circular contains five paragraphs. The object
1963
of the material provisions of this circular is to determine the quality of the work which the Development Life Insurance
Officer puts in which would afford a basis for fixing Corporation of
his remuneration. Paragraph 4 of this circular deals
India
with the problem of fitting in the respective Developv.
ment Officers in the pay scales provided by clause
Sunil Kumar
5 of the Order. It consists of eight clauses (a) to (h). Mukherjee &
In the present appeals, we are concerned with the last
others
of these clauses. Paragraph 4, clause (h) reads
. --d
thus:-
·
Ga1endraga kar
"If the actual performance is less than 50of the revised quota, the cases of such Field
Officers will be referred to a Committee to be
specially appointed in each Zone. The Committee
will go through the past records of such Field
Officers and decide whether they could be continued as Field Officers either as Probationers
or on substantially reduced remunerations. In
the case of those who cannot be continued as
Field Ofhcers, the Committee will examine whether
any of them could be absorbed in administration
and where this is possible, the Committee will
fix the remuneration in accordance with the
rules to be prescribed. Where the Committee
decides that the poor performance of a Field
Officer was not due to circumstances beyond
his control or that he has made no efforts and
not shown inclination or willingness to work,
the services of such Field Officers will be terminated."
It is clear that paragraph 4(h) deals with the cases
of persons whose actual performance is less than
50 % of the revised quota, and as such, who are regarded as ineligible for fitting in the employment
of the Corporation. Their cases are required to be
referred to the Committee specially appointed in each
Zone, and on examining the record of these Officers,
if the Committee comes to the conclusion that
J .
., ~
some of them cannot be continued as Field Officers,
it may enquire whether any of them could be absorbed
542
SUPREME COURT REPORTS
[1964)
1963
in administration, and if yes, their remuneration may
.
be suitably fixed: if the Committee thought that
1/fe lnsurancf the poor performance was not due to circumstances
0'P;';rwn ° beyond his control, or that he made no efforts or
n za
showed no inclination or willingness to work, the
.v.
services of such Field Officer will be terminated.
Sumi K~mar Paragraph 5 deals with the question of ex-Branch
Muk~er1ee & Secretaries and Supervisory Officers, and it provides
".'..__ ers
that if their work is found to be unsatisfactory, the
Gajendragadkar Committee may recommend termination of the services
J.
of the officers
concerned. In
other
cases,
the
Committee will make recommendations as to whether
they should continue such Inspectors as Field Officers
and if yes, on what remuneration; or whether their
services could be utilised in any other capacity in
the Corporation, and if yes, on what remuneration?
The learned Solicitor-General has contended that
when the Corporation took over the controlled business
of insurers in this country on the appointed day,
it was found that a large number of employees in
the category of Field Officers were either incompetent
or unwilling to work efficiently, and. so, it was thought
desirable, in the interests of the Corporation itself
and in the interests of the policy-holders, to terminate
their services. That is why a well-devised scheme
wasframea by the circular and adopted in the Regulations laying down principles for determining the efficiency of the work done by the said Officers. He urges
that by the application of the principle laid down by
paragraph 4 (h) of the circular, it was competent
to the Corporation to terminate the services of the
respondents, and that is what in fact has been done
in each of the cases before us. In support ot this
plea, he has relied on the fact that paragraph 4 (h)
empowers the Corporation to terminate the services
of incompetent officers and paragraph 5 also gives
the same power in respect of ex-Branch Secretaries
and Supervisory Officers. The argument is that where
cases are dealt with under the provisions of paragraph
4 (h) or paragraph 5 of the circular, there can be no
question of applying the provisions of clause IO of
the Order.
-
..
(
5 S.C.R.
SUPREME COURT REPORTS
543
It is common ground that before terminating the
1963
services of the respective respondents in the group
of appeals before us, no enquiry has been held and Life Insurance
no opportunity has been given to the said officers Corporation of
as required by clause lO(a) of the Order. It is also
India
common ground that the impugned termination c,f
v.
their services has not been effected under clause lO(b)
Sunil Kumar
of the Order. The respondents' contention is that the Mukherjee &
termination of their services can be brought about
others
only under clause lO(a) or lO(b) of the Order, and
--
since it has not been so brought about, the impugned Gajendragadkar
orders are invalid. On the other hand, the learned
J.
Solicitor-General contends that the power to terminate
services conferred by paragraph 4 (h) of the circular
is independent of clause 10 of the Order, and the
same can he, and has been, validly exercised in the
present cases.
In considering the validity of these rival contentions, it is necessary to bear in mind the true legal
position about the character of the relevant statutory
provisions. It is plain that the provisions contained
ins. 11(2) of the Act are paramount and would override any contrary provisions contained in the Order
or the Regulations. Subject to the provisions of
s. 11(2), the provisions of the Order will prevail,
because the Order has been issued by the Central
Government by virtue of the powers conferred on it
by s. 11(2) itself. The provisions of the Order in law
partake of the character of the rules framed under
s. 48 of the Act.
fhus next to the provisions of s. 11(2)
of the Act will stand the provisions of the Order.
Then we have the Regulations issued by the Corporation under s. 49(1) of the Act..
But it must be borne
m mind that the power of the Corporation to make
Regulations is burdened with the condition that these
regulations must not be inconsistent with the Act
and the rules framed thereunder, so that if any of the
provisions contained m the Regulations made by the
Corporation under s. 49 are found to be inconsistent
either with s. 11(2) or with the Order made by the
Central Government under s. 11(2), they would be
' .
544
SUPREME COURT REPORTS
[1964]
1963
invalid. It 1s in the light of this legal position that the
-
problem posed before us in the present appeals must
Life Insurance be decided.
Corporation of
India
We have already noticed that as soon as .the Field
. v.
Officers or the Development Officers became the emSuml K~mar ployees of the Corporation on the ·appointed day
Mukher;ee & under s. 11(1 ), they initially carried with them their
others
original terms and conditions of service, and this
state of affairs continued until the Order was issued
Gajendragadkar on the 30th December, 1957. As we have already
J.
seen, the provisions of this Order provide for the
terms and conditions of service in matters covered
by the Order .. In regard to remuneration, the Order
did not completely resolve the problem, but it Jett
the determinat10n of the scale or pay and allowances
payable to each employee in the light of the Regulations
which would be framed by the Corporation in pursuance
of the authority conferred on it by clause l l of the
Order; but m regard to the termmation of services
of the employees, clause IO has made a specific provision, and wherever the Corporation wants to terminate the services of any Development Officer,
clause IO has to be complied with. It is true that
paragraph 4(h) of the circular purports to say that
m cases falling under the last part of the said paragraph,
the services of the Field Officers will be terminated.
If the said portion of paragraph 4 (h) is interpreted
to mean that it confers on the Corporation an authority
to terminate the services of the Development Officer
independently of clause IO of the Order, it would
be inconsistent with the said clause and would, therefore, be invalid. We are, however, satisfied that
the said portion of para 4 (h) really means that in
cases falling under it, the service> of the officers concerned would be hable to be terminated, and that
means that the termination of the services of the
said officers must be effected in the manner prescribed
by clause IO of the Order. That is how paragraph
4(h) and clause IO ·can be reasonably reconciled.
What we have said about para 4(h) is equally true
about paragraph 5 of the circular .
..
'
J
' '
..
5 S.C.R.
SUPREME COURT REPORTS
545
In regard to the fixation of remuneration, however,
1963
the position is that clause 5 of the Order fixes the
--
scales of pay and allowances and leaves it to the re- Life Insurance
gulations to lay down the principles in the light of Corporation of
which each individual case should be judged. It was,
India
therefore, perfectly competent to the Corporation
v.
to adopt the circular issued by the Managing Director,
Sunil Kumar
and in consequence, lay down the principles which
Mukerjee &
should be followed in fitting individual officers into
others
the scheme prescribed by clause 5 of the Order. But
. --
it is necessary to emphasise that the scope and purpose Ga1endragadkar
of fitting the officers obviously is to treat the officers
J.
as continuing to remain in the category of Development
Officers and prescribe their remunerations accordingly.
The total amount of remuneration would undoubtedly be determined in the light of the principles prescribed by the circular, but under the guise of fitting
in a particular officer in the light of the said principles
it would not be open to the Corporation to demote
the officer from the grade of Development Officer
to a lower grade; that would be beyond the competence
of the regulations. All that the Regulations can
purport to do is to lay down principles for fixing the
actual pay and allowances admissible to the Development Officers. That is the direction contained in
clause 11 of the Order and it is within the limits of the
said direction that the principles can be validly laid
down by the Regulations. After the remuneration is
determined in the light of the principles laid down
by the Regulations, if any officer is not inclined to
accept the said altered remuneration, occasion may
arise for the Corporation to exercise its power under
s. 11(2) of the Act and pay him compensation as
therein contemplated. That, however, is a matter
with which we are not concerned in the present appeals.
What we are concerned with in tbe present appeals
is the validity of the orders termiri ating the services
of the officers on the ground that they are found to
be incompetent.