TaxTMI 
TaxTMI 
1984 (3) TMI 419
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.... India and four General Insurance companies. The petitioners challenge the Notification dated 30th September, 1980 of the Ministry of Finance (Department of Economic Affairs) (Insurance) introducing what is called General Insurance (Rationalization and Revision of Pay Scales and other Conditions of Service of Supervisory, Clerical and Subordinate Staff) Second Amendment Scheme, 1980 as being illegal and violative of their fundamental rights under Articles 14, 19(1)(g) and 31 of the Constitution of India. Prior to 1972, there were 106 General Insurance companies Indian and foreign. Conditions of service of these employees were D, governed by the respective contracts of service between the companies and the employees. On 13th May, 1971, the Government of India assumed management of the general insurance companies under the General Insurance (Emergency Provisions) Act, 1972. The general insurance business was nationalised by the General Insurance Business (Nationalisation) Act, 1972 (Act 57 of 1972). The preamble of the Act explains the purpose of the Act as to provide for the acquisition and transfer of shares of Indian insurance companies and undertakings of other insurers in ....
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.... opinion that for the more efficient carrying on of general insurance business it is necessary so to do, it may, by notification, frame one or more schemes providing for all or any of the following matters: (a) the merger in one Indian insurance company of any other Indian insurance company, or the formation of a new company by the amalgamation of two or more . Indian insurance companies; (b) the transfer to and vesting in the acquiring company of the undertaking (including all its business, properties, assets and liabilities) of any Indian insurance company which ceases to exist by reason of the scheme; (c) the constitution, name and registered office and the capital structure of the acquiring company and the issue and allotment of shares; (d) the constitution of a board of management by whatever name called for the management of the acquiring company; (e) the alteration of the memorandum and articles of association of the acquiring company for such purposes as may be necessary to give effect to the scheme, (f) the continuance in the acquiring company....
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.... provident fund of other benefit to which the employee may be entitled under his contract of service. (5) Notwithstanding anything contained in the Industrial Disputes Act, 1947 or in any other law for the time being in force, the transfer of the services of any officer or other employee of an Indian insurance company to the acquiring company shall not entitle any such officer or other employee to any compensation under that Act or other law, and no such claim, shall be entertained. by any court, tribunal or other authority. (6) The Central Government may, by notification add to, amend or vary any scheme framed under this section. (7) The provisions of this section and of any scheme. framed under it shall have effect notwithstanding anything to the contrary contained in any other law or any agreement, award or other instrument for the time being in force. 17. A copy of every scheme and every amendment , thereto framed under section 16 shall be laid, as soon as may be after it is made, before each house of Parliament." The object of any scheme under this chapter, according to the petitioners, was clear from the mai....
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....tarted functioning from 1st January, 1973 and the process of merger of the various companies into one of the other four companies was completed by I st January, 1974, when the said four schemes came into force. The said schemes provided for the transfer of officers and employees of the merged companies to the transferee Company. The memorandum and the articles of association of the four Companies were also suitably altered by the said schemes. Thereafter there had been no merger or amalgamation of any insurance company. The petitioners stated that there had been no reorganisation of general insurance business either. This position is not in dispute. By a notification dated 27th May, 1974, the Ministry of Finance (Department of Revenue and Insurance Government of India, framed a 'scheme' called the General Insurance (Nationalisation and Revision of Pay Scales and other Conditions of Service of Supervisory, Clerical and Subordinate Staff) Scheme, }974, and the preamble of the scheme stated that "whereas the Central Government is of the opinion that for the more efficient carrying on general insurance business, it is necessary to do", therefore, in exercise of the powers co....
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....rt to strike. There was representation to the respondents not to change the conditions of service pending the conciliation proceedings. It is not necessary to refer in detail to all these, which have been set out in the petition. But nothing fruitful happened. The Labour Commissioner in the circumstances sent a failure report under the Industrial Disputes Act, 1947 to the Secretary, Government of India, Ministry of Labour, stating that there was failure to bring about amicable settlement of disputes. The petitioners contend that no further action was taken and according to them the conciliation proceedings were still pending. This, however, is not accepted by the respondents, according to whom there was failure report and the conciliation proceedings ended thereafter. The scheme mentioned hereinbefore, which is under challenge was issued thereafter. We will have to deal with the scheme in great detail as the same is the subject matter of challenge is these petitions under Article 32 of the Constitution. After the 1974 scheme, in 1976, the Board of Directors approved of promotion policy. On 1st June, 1976 another scheme by which there were amendments with regard to Provident Fund....
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....ed by the Government suddenly and unilaterally, without any notice to the parties concerned. The employees were taken unawares. It was contended that from the provisions of the said notification the service conditions of the employees including the petitioners employees, particularly with regard to dearness allowance, stagnation increments, retirement age and other increments had become worse than before and detrimental to the employees. While the employees were eagerly awaiting improvement in their service conditions, this notification had unilaterally altered the service conditions to their prejudice petitioners in their petitions had alleged certain facts by certain illustrations, which according to them, indicated that employees had been affected adversely, inter alia, in gross starting salary of different group of employees, salary on confirmation of assistants who are graduates etc. It was further stated that retirement age was 60 years for all the employees under the 1974 scheme. But under the new scheme, retirement age was reduced to 58 years for employees joining on or after 1st January, 1979. Clause 7 of the impugned notification prescribed different ages of retirement, t....
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.... as mentioned in sub- section (1) of Section 16 of the said Act. By the present alleged scheme there was no merger or reorganisation contemplated, unlike 1974 scheme, according to the petitioners. The petitioners contend that merely making amendment to the terms and conditions of service of the employees unconnected with or not necessitated by the reorganisation of the. business or merger or amalgamation of the companies would not fall within Section 16(1)(g) of the Act. According to the petitioners, the only properly called schemes sanctioned under Section 16(1) are those four merger schemes of 1973 as would be evident from the preamble to the Act. The petitioners further contend that under the life Insurance Corporation Act, Banking Companies Act. etc. there were power to frame regulations independently of reorganisation. But there is no such power, according to the petitioners, under the General Insurance Business (Nationalisation) Act, 1972. The said notification therefore is without the authority of law. It is, further, submitted. that the present service conditions of the employees unrelated to reorganisation of general insurance business merger or amalgamation of insuranc....
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....mpensation and is thus also violative of article 31(2) of the Constitution. The petitioners, further, contend that the Constitution 44th amendment deleting 1 Articles 31 and 19(1) (f) cannot save the scheme since that Amendment came into force only on 20th June, 1979, whereas the impugned notification affecting the rights of the employees to emoluments takes effect from 1st January, 1979. It was further urged that the protection of article 31 read with Ninth Schedule of the Constitution was not available to any scheme or notification much less the present one, The present notification, according to the petitioners, disregarded the directive principles enunciated in Article 43 of the Constitution. The petitioners therefore ask for quashing the said notification by these petitions under Article 32 of the Constitution. The second batch of Writ applications (Writ Petition Nos. 5434-37 of 1980) are on behalf of the employees as well as the General Insurance Employees All India Association challenge the - scheme of 1980 more or less on the same though not identical grounds mentioned in Writ Petition Nos. 5370-74 of 1980. Interim order was passed in the said application regarding pa....
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....ed by paragraph 2 of 1980 scheme which included the meaning of the 'Company' and under the scheme it mentioned that the 'Company' would mean the four nationalised companies, National Insurance Company Limited, the New India Assurance Company Limited, the oriental Fire and General Insurance Company Limited and the United India Insurance Company Limited. Sub paragraph (ii) of paragraph 2 of the said scheme defines 'Net monthly emoluments'. By sub- paragraph (ii), the amended definition of 'Revised terms', (Revised Scales of Pay) was inserted. By paragraph 3, adjustment of pay was stipulated on the coming into effect of operation of 1980 scheme. How the basic pay is to be fixed is provided by 1980 scheme. lt also makes detailed provisions as to how the adjustment allowance is to be dealt with so far as Dearness Allowance, overtime allowance, Contribution to Provident Fund and other retirement benefits are concerned. Paragraph 5 deals with the 'Increments. Paragraph 6 deals with Earned Leave and other Encasement of leave at the time of retirement and death. Paragraph 7 deals with 'Retirement' and' stipulates that an employee who was in se....
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....better functioning of the insurance companies concerned as well as subserve the object and purpose of the nationalisation policy. The various detailed items of the scheme of 1974 and 1980 have to be viewed in this background. The-basic and, in our opinion, the main questions are- has the Government and the respondents power in law to introduce the 1980 scheme and if they have that power, have they exercised that power in any arbitrary and whimsical manner to deny to the petitioners any of the fundamental rights and whether the petitioners have been discriminated against? These, therefore, are the questions and it is not necessary, in our opinion, to detain ourselves with lengthy extracts from the scheme of 1974 and 1980 to examine which is better or which is detrimental and if so, to what extent. On these, there will be and are divergent views. The scheme of 1980 has been framed by the Central Government under the authority given to it by the Act under General Insurance Business (Nationalisation) Act, 1972. The scope of that authority has, therefore, to be found under Chapter V containing Sections 16 & 17 of the Act. We have set out hereinbefore the terms of Sections 16 & 17.....
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.... This preamble has also to be read in the light of sub- section (2) of Section 16 which provides that the object of the Central Government in framing the schemes under sub- section (1) was to give authority to the Central Government to frame schemes, to ensure that ultimately there are only four insurance companies (excluding the Corporation) in existence and that they are so situate as to render their combined services effective in all parts of India. Sub- section (2), therefore, to a large extent circumscribes the amplitude of the power given under sub-section (1) of Section 16 of the Act As framing of the scheme is an exercise of the delegated authority by the Central Government, the memorandum regarding delegated legislation submitted to the Parliament along with the General insurance Business (Nationalisation) Bill, 1972 will provide. some guidance also. As we have noticed that clause 16 of the said Bill which later on became Section 16 of the Act explained the need for delegated authority and stated the object as 'to frame one or more scheme for the merger of one Indian insurance company with another or for the amalgamation of the two or more insurance companies and for m....
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....use (g) of sub- section (1) of Section 16 authorises the Central Government to frame scheme for rationalisation and revision of pay scales and other terms and conditions of services of officers and other employees wherever necessary. But it is evident that the scheme of 1980 impugned in these petitions is not related to the object envisaged in sub-section (2) of Section 16 of the Act. In order to be warranted by the object of delegated Legislation as explained in the memorandum to the Bill which incorporated Section 16 of the Act, read with the preamble of the Act, unless it can be said that the scheme is related to sub-section (2) of Section 16 of the Act, it would be an exercise of power beyond delegation. The duty of the Court in interpreting or construing a provision is to read the section, and understand its meaning in the context. Interpretation of a provision or statute is not a mere exercise in semantics but an attempt to find out the meaning of the legislation from the words used, understand the context and the purpose of the expressions used and then to construe the expressions sensibly. There is another aspect which has to be kept in mind. The scheme is an exercise of....
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....ng the extent of the delegated power in a particular case. lt is true that in this case under Section 16(1)(g), rationalisation or revision of pay scales and other terms and conditions of service of officers and other employees wherever necessary is one of the purpose for which scheme can be, framed under Section 16(1) of the Act. It is also true that incidental, consequential and supplementary matters as are necessary to give full effect to the scheme are also authorised under clause (j) of sub-section (1) of Section 16. It has also to be borne in mind that scheme and every amendment to a scheme framed under section 16 shall be laid as soon as may be after it is made before each House of Parliament. The last provision is indicative of the power of superintendence that the legislature maintains over the subordinate legislation of scheme framed by the delegate under the authority given under the Act. From that point of view, it is possible to consider as indeed it was argued on behalf of the respondents in this case, that having regard to the fact that one of the objects of the Preamble is regulation and control of general insurance business and other matters connected therewith or ....
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....ed legislation as well as sub-section (2) of Section 16. We may mention in this connection that in the case of A.V. Nachane & Another v. Union of India & Another, this contention of delegated legislation was adverted to. In that case the Court was concerned with Life Insurance Corporation (Amendment) Act, 1981 where the policy of the Act as stated in the preamble of the Amendment Act was that "for securing the interests of the Life Insurance Corporation of India and its policy-holders and to control the cost of administration, it is necessary that revision of the terms and condition of service applicable to the employees and agents of the Corporation should be undertaken expendiously. That was the object of the Act in question. Unfortunately that is not the object indicated as the object of the power to frame scheme under Section 16 of the present Act. In view of that object mentioned in the said decision and for other reasons in the case of A.V. Nachane & Another v. Union of India & Another (supra), this Court held that the Act in question did not suffer from the vice of excessive delegation. In view of what we have stated herein- before, the scheme of 1980 so far as it is not rel....
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....s was not touched by the impugned Act. The other observations of the said Judges as well as the other learned Judges are not relevant in the view we have taken. In instant case before us we do not have any case of settlement which was the subject matter there between the workers and the employers and the rights flowing therefrom. Reliance was also placed on the decision in the case of The Life Insurance Corporation of India v. D.J. Bahadur & Ors as well as the decision in the case of A.V. Nachane Another v. Union of India & Another (supra). In the view we have taken, it is not necessary to examine these decisions in detail. In those cases, the question under consideration was the Life Insurance Corporation Act, 1956 and the subsequent amendments thereto as well as certain orders in respect of the same. The basis upon which the aforesaid two decisions proceeded were (a) a right had crystalized by the directions in D.J. Bahadur's case (supra) and this could not be altered or taken away except by a fresh industrial settlement or award or by relevant legislation and (b) the relevant legislation which was the subject matter of challenge in A. V. Nachane's case (supra) cann....
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.... in respect of disputes arising on the transfer of the business of general insurance. There is no such question before us. Had it been possible to hold that the scheme of 1980 was valid in proper exercise of the authority under Section 16 of the Act, a question would have arisen as to whether the ceiling and other conditions on emoluments could be imposed on the employees in the manner proposed to be done under the scheme of 1980 without reference to the procedure for adjudication of these matters under the Industrial Disputes Act, 1947. Then the question had to be judged h by reference to sub-section (5) and sub-section (7) of Section 16 of the 1972 Act. Section 16 empowered the Government by notification to add to, amend or very any scheme framed under Section 16(1) Sub-section (7) provides that the provisions of this section, namely Section 16 of the 1972 Act and of any scheme under it shall have effect notwithstanding anything to the contrary contained in any other law or any agreement, award or other instrument for the time being in force. We have noticed the scheme of 1980. That scheme puts certain new conditions about retirement, about emoluments and other benefits of the....
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....o further steps or proceedings were required as such. The Government had to assess on the failure of tile conciliation proceedings either to refer the matter to the tribunal or to take such steps as it considered necessary. If the Government had not taken any of the steps, then it was open, if the employees concerned were in any way aggrieved, to take appropriate proceedings against the Government for doing so. As mentioned hereinbefore if the scheme was held to be valid, then the question what is the general law and what is the special law and which law in case of conflict would prevail would have arisen and that would have necessitated the application of the principle . "Gener alia specialibus non derogant". The general rule to be followed in case of conflict between two statutes is that the later abrogates the earlier one. In other words, a prior special law would yield to a later general law, if either of the two following conditions is satisfied. (i) The two are inconsistent with each other. (ii) There is some express reference in the later to the earlier enactment. If either of these two conditions is fulfilled, the later law, even though general, would prevail. F....
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....owered to make a reference if it considered so necessary having regard to the nature of the disputes raised. Though it cannot be said that reference was a matter of right but it was within the realm of power of the Government and the Government has a duty to act with discretion on relevant considerations to make or not to make a reference taking into consideration the facts and circumstances of each case. To that limited extent it could have been said That this right or power has been curtailed by the General Insurance Business (Nationalisation) Act, 1972, if the scheme was otherwise valid Having regard to the context in which the question now arises before us, in our opinion, there is no question as to whether the provisions of Industrial Disputes Act would prevail over the provisions of General Insurance Business (Nationalisation) Act. There is no industrial dispute pending as such. The General Insurance Business (Nationalisation) Act, 1972 has not abrogated the Industrial Disputes Act, 1957 as such. The question of the application of the principle of "Generalia specialibus non derogant" has been dealt with in the case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State ....
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....oyees of other public section undertakings is discriminatory in any manner or not and the other question, is, whether making a provision for the employees of General Insurance Corporation for settlement of their dues by schemes and not leaving the question open to the general provisions of Industrial Disputes Act, 1947 is discriminatory and violative of the rights of the employees. It is true that sometimes there have been rise in emoluments with the rise in the cost of index in certain public sector corporations. The legislature however is free to recognise the degree of harm or evil and to make provisions for the same. In making dissimilar provisions for one group of public sector undertakings does not per se make a law discriminatory as such. It is well-settled that courts will not sit as super-legislature and strike down a particular classification on the ground that any under- inclusion namely that some others have been left untouched so long as there is no violation of constitutional restraints. It was contended that the application of the Industrial Disputes Act not having been excluded from the Nationalised Textile Mills, Nationalised Coal and Coking Coal Mines and Natio....
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.... as to subserve the interests of general public by augmentation of the products and distribution at fair prices of different varieties of cloth and yarn". The basic objective of the said Act was rehabilitation of the sick textile mills. That was different from the purpose of the present Act. The sick textile units had under them the bulk of their employees as workmen those who came under the provisions of Industrial Disputes Act. Section 14 of the said Act statutorily recognises the special position of the workmen as contra- distinguished from the other employees by enacting separate provisions in this respect thereon. Further-more it has to be borne in mind that the aforesaid Act was concerned with the ensuring; augmentation of production and distribution of certain cloth and yarn which are commodities essential to the national economy being important consumer items Therefore the case of the employees of sick textile undertakings which has been mentioned by the petitioners and argued before us cannot be compared on similar lines in respect of this aspect with the present petitioners. We would have rejected this submission on behalf of the petitioners, had it been necessary for us ....
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....icability or otherwise of the provisions of the Industrial Disputes Act cannot be treated as belonging to one class. Historical reasons provide an intelligible differentia distinguishing Nationalised Insurance Companies from the Nationalised Banks. The reason suggested by the respondents was that prior to Banks Nationalisation, Industrial disputes between workmen and the Banks were treated since 1950 on All India basis with the totality of the banks being involved therein. Several awards have been made treating them as such like Shastri Award, 1953. Shastri Award Tribunal was constituted with a view to settle the disputes of the workmen of the Banks with all commercial Banks (excluding Co-operative Banks etc.) on the one hand and the employees on the other. Desai Award, 1962 bipartite settlement between Indian Banks Association and the Exchange Banks Association on the one hand and All India Bank Employees Association and All India Bank employees Federation on the other, are some of the examples. As against this, prior to the Act in question before us, disputes between insurance companies and their workmen were settled on independent company basis with no All India projections invo....
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....r. Predication of such power would necessarily exclude the provisions of Industrial Disputes Act and the principles of collective bargaining just as these would exclude the principles of contractual relationship in such matters. The point is interesting. However,, in the view we have taken, we need not discuss this aspect any further. It was further submitted on behalf of the respondent that the rationale justification and the genesis of the law of nationalisation being the creation of economic instrumentalities to subserve the constitutional and administrative goals of governance in a social welfare society, the running of public sector undertakings is neither for profit earning of the management nor for sharing such profits with the workmen alone but to utilise the investible funds available as a result of such ventures and undertakings for socially-oriented goals laid down by the governmental policies operating on the said sectors. In this connection reference was made before us to the decision in the case of State of Karnataka & Anr. etc. v. Ranganatha Reddy & Anr. etc Employment is the public sector undertakings enjoys a statuh. It was submitted that both historically as we....