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PETITIONER: MADAN MOHAN PATHAK

       Vs.

RESPONDENT: UNION OF INDIA & ORS.  ETC.

DATE OF JUDGMENT21/02/1978

BENCH: BEG, M. HAMEEDULLAH (CJ) BENCH: BEG, M. HAMEEDULLAH (CJ) CHANDRACHUD, Y.V. BHAGWATI, P.N. KRISHNAIYER, V.R. FAZALALI, SYED MURTAZA SHINGAL, P.N. DESAI, D.A.

CITATION:  1978 AIR  803            1978 SCR  (3) 334  1978 SCC  (2)  50  CITATOR INFO :  D          1980 SC1682  (67,68)  RF         1980 SC2181  (149)  R          1982 SC1126  (2,12,13,17,19)  D          1984 SC1130  (31)  F          1984 SC1291  (12)  D          1986 SC1126  (47,48,49,50)  APL        1989 SC1629  (17,22,23,24)  RF         1989 SC1741  (10)  RF         1990 SC 123  (32)  R          1992 SC 522  (17)

ACT: Life Insurance Corporation (Modification of Settlement) Act, 1976-S.  3-Validity of-Corporation entered  into  Settlement with  Class  III  and Class IV  employees  regarding  bonus- Settlement   was   subject  to  the  approval   of   Central Government-During   emergency  Central   Government   issued instructions not to pay bonus under the settlement-Employees filed Writ Petition in the High Court-A Single Judge allowed the  Writ Petition-The impugned Act was passed when  Letters Parent Appeal was pending before the High  Court-Corporation withdrew   the   appeal-Impugned  Act,   if   absolved   the Corporation  from  obligation  to  carry  out  the  Writ  of Mandamus issued by the Single Judge. Constitution  of  India : Art. 31-Bonus  payable  under  the Settlement,  if property within the mtaning of  Art.  31(2)- Stopping   payment  of  bonus,  if  amounts  to   compulsory acquisition of property without payment of compensation.

HEADNOTE: From  time  to time the Life Insurance Corporation  and  its employees  arrived at settlement relating to the  terms  and conditions  of service of Class III and Class  IV  employees including bonus payable to them.  Clause (8) of the  Settle- ment  dated  January 24, 1974, which related to  payment  of bonus,  provided-(i) that no profit-sharing bonus  shall  be paid but the Corporation may, subject to such directions  as

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the  Central Government may issue from time to  time,  grant any  other  kind  of bonus to its Class  III  and  Class  IV employees; (ii) that an       annual cash bonus will be paid to  all Class III and Class IV employees at the rate of  15% of  the  annual  salary actually drawn  by  an  employee  in respect of the financial year to which the bonus relates and (iii)  that  save as provided therein all  other  terms  and conditions  attached  to the admissibility  and  payment  of bonus shall be as laid down in the Settlement on bonus dated June  26, 1972.  Clause (12) of the Settlement which  refers to   the,  period  of  settlement  provided  (1)  that   the Settlement  shall  be  effective from April 1,  1973  for  a period  of  four  years  and (2)  that  the,  terms  of  the Settlement shall be subject to the approval       of     the Board of the Corporation and the Central Government. One  of  the  administrative  instructions  issued  by   the Corporation in regard to the payment of cash bonus under cl. 8(ii)  of the Settlement was that in case of  retirement  or death,  salary up to the date of cessation of service  shall be  taken into account for the purpose, of  determining  the amount of bonus payable to the employee or his heirs and the other was that the bonus shall be paid along with the salary for  the month of April but in case of retirement or  death, payment will be made soon after the contingency.   The  payment of Bonus (Amendment) Act.  1976  considerably curtailed the rights of the employees to bonus in industrial establishments.   But  in  so far as the  employees  of  the Corporation  were  concerned  this Act  had  no  application because by reason of s. 32 of the Payment of Bonus Act,  the Corporation  was outside the purview of its operation.   The Central  Government  however decided that the  employees  of establishments which were not covered by the Bonus Act would not be eligible for payment of bonus but exgratia payment in lieu  of  bonus  would be made to them.   Pursuant  to  this decision the L.T C. was advised by the Ministry of  Finance, Government  of  India, that no further  payment  of    bonus should  be  made to its employees without getting  the  same cleared  by  the Government.   The  Corporation  accordingly issued  administrative                 instructions  not  to pay  bonus  to its employees under the  existing  provisions until  further  instructions.  To the  employees’  assertion that the Corporation was bound to, 335 pay  bonus  in accordance with the terms of  the  Settlement the-  Corporation  cOntended that payment of  bonus  by  the Corporation  was subject to such directions as  the  Central Government  might  issue from time to time,  and  since  the Central Government had advised it not to make any payment of bonus without its specific approval, bonus could not be paid to  the  employees.   Thereupon,  the  All  India  Insurance Employees’  Association moved the High Court for issue of  a writ directing the Corporation to act in accordance with the terms  of  the Settlement dated January 24, 1974  read  with administrative instructions dated March 29, 1974 and not  to refuse  to  pay  cash  bonus  to  Class  III  and  Class  IV employees.   A  single Judge of the High Court  allowed  the writ petition.  While the Letters Patent Appeal was pending, Parliament    passed   the   Life   Insurance    Corporation (Modification  of  Settlement) Act, 1976 (which is  the  Act impugned  in this case).  In the Letters Patent  Appeal  the Corporation stated that in view of the impugned Act ,  there was  no necessity for proceeding with the appeal  and  hence the Division Bench made no order in the appeal. Since  the effect of the impugned Act was to  deprive  Class III  and  Class  IV employees of bonus payable  to  them  in

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accordance  with  the terms of the Settlement,  two  of  the associations filed writ petitions in this Court  challenging the  constitutional  validity of the impugned Act.   It  was contended  on  their behalf that even if  the  impugned  Act rendered cl. (8) (ii) ineffective with effect from April  1, 1975  it  did  not have the effect  of  absolving  the  Life Insurance  Corporation from its obligation to carry out  the writ  of Mandamus issued by the High Court and (2) that  the right  of  Class III and Class IV employees to  annual  cash bonus  for the years 1975-76 and 1976-77 under Cl. 8(ii)  of the  Settlement  was  property and since  the  impugned  Act provided  for  compulsory  acquisition  of  this   property. without  payment of compensation, it was violative  of  Art. 31(2) of the Constitution. Allowing the writ petitions Beg C.J. (concurring with the majority) HELD   :  Section  3  of  the  Life  Insurance   Corporation (Modification  of  Settlement) Act, 1976 is  struck  by  the provisions  of Art. 19(1)(f) and is not saved by Art.  19(6) of the Constitution. [346 A] 1.   The  Statement  of  Objects  and  Reasons  of  the  Act discloses  that the purpose of the impugned Act was to  undo settlements arrived at between the Corporation and Class III and  Class IV employees on January 24 and February  6,  1974 and recognised by the High Court.  In Smt.  Indira Gandhi v. Raj  Narain  this  Court held  that  even  a  constitutional amendment cannot authorise the assumption of judicial  power by  Parliament.  One of the tests laid down was whether  the decision is of a kind which requires hearing to be given  to the  parties  i.e.,  whether it  involves  a  quasi-judicial procedure.  A decision reached by the Central Government  is the  result  of a satisfaction on matters stated  there  and would  imply quasi-judicial procedure where the terms  of  a settlement  had  to  be  reviewed  or  revised.   But,   the legislative  procedure.  followed  in  this  case  does  not require  that  to,  be done.  It would be  unfair  to  adopt legislative procedure to undo a settlement which had  become the  basis  of  a  decision  of  a  High  Court.   Even   if legislation can remove the basis of a decision it has to  do it by an alteration of general rights of a class but not  by simply  excluding  two  specific  settlements  between   the Corporation  and its employees from the purview of s. 18  of the Industrial Disputes Act, 1947 which had been held to  be valid and enforceable by a High Court. [341 G, H, 342 A-C] 2(a)  The object of the Act was in effect to take  away  the force of the judgment of the High Court.  Rights under  that judgment could be said to, rise independently of Art. 19, of the  Constitution.  To give effect to that judgment  is  not the  same thing as enforcing a right under Art. 19.  It  may be  that  a right under Art. 19 becomes linked up  with  the enforceability of the judgment.  Nevertheless the two  could be  viewed  as  separable  sets of  rights.   If  the  right conferred by the judgment independently is sought to be  set aside s. 3 would be invalid for trenching upon the  judicial power. [343 B-D] 336 (b)  A  restriction upon a right may even cover taking  away of  the right to increased remuneration in the interests  of the  general public.  But the present is a pure  and  simple case  of deprivation of rights of the employees without  any apparent nexus with any public interest. In  the  instant case the impugned Act is  a  measure  which seeks  to  deprive  workers of the  benefits  of  settlement arrived  at and assented to by the Central Government  under the  provisions  of  the Industrial Disputes  Act.   Such  a

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settlement should not be set at naught by an Act designed to defeat the purpose.  In judging the reasonableness of an Act the  prospects  held  out,  the  representations  made,  the conduct of the Government and equities arising therefrom may all be taken into consideration. [342 E-F, 344 E-F] 3.   Even though the real object of the Act was to set aside the  result of mandamaus, the section does not mention  this object.  This was perhaps because the jurisdiction of a High Court  and  the effectiveness of its  orders  derived  their force from Art. 226 of the Constitution.  Even if s. 3 seeks to  take away the basis of the judgment  without  mentioning it,  yet where the rights of the citizens against the  State are concerned the court should adopt an interpretation which upholds  those  rights.   Therefore, the  rights  which  had passed  into  those embodied in a judgment  and  become  the basis of a mandamus from the High Court, could not be  taken away in an indirect fashion. [343 D-E]. 4.   Even though the Directive Principles contained in  Art. 43, cast an obligation on the State to secure a living  wage for  the  workers  and is part of  the  principles  declared fundamental  in the governance of the country, it is  not  a fundamental  right which can be enforced.  Even  though  the Directive   Principles  give  a  direction  in   which   the fundamental policies of the State must be oriented, yet this Court  cannot  direct either the Central Government  or  the Parliament  to  proceed  in that  direction.   Even  if  the Directives  are  not directly enforceable by  a  Court  they cannot  be  declared ineffective.  They have  the  life  and force  of fundamentals.  The best way to give  vitality  and effect to them is to use them as criteria of reasonableness. [344 B-C] 5(a)  Articles 358 and 359(1A) provide that as soon  as  the Proclamation  of  emergency cease to operate the  effect  of suspension  must vanish "except as respects things  done  or omitted to be done before the law so ceases to have effect.’ [346 B-C] (b)  The term "things done or omitted to be done", should be interpreted  very  narrowly.  In the present case  it  means that  the settlements are not to be deemed to be wiped  off. All  that  it  means is that no payment of  bonus  could  be demanded  during the emergency but as soon as the  emergency was over, the settlement would revive and what could not  be demanded during the emergency would become payable even  for the period of emergency for which payment was suspended.  In other  words  valid  claims  cannot be  washed  off  by  the emergency  per  se.   They can only be suspended  by  a  law passed  during the operation of Arts. 358 and 359(1A).  [346 C-F] (Per  Chandrachud, Fazal Ali and Shinghal, JJ.).  Concurring with the majority. The  impugned  Act violates Art. 31(2)  and  is,  therefore, void. [369 G] (Per Bhagwati, Iyer and Desai, JJ.) Irrespective  whether the impugned Act  is  constitutionally valid  or not, the Corporation is bound to obey the Writ  of Mandamus  issued by the, High Court and to pay  annual  cash bonus  for  the  year  1975-76 to Class  III  and  Class  IV employees. [352 D-E] 1.   Section 3 of the impugned Act merely provided that  the provisions  of the Settlement, in so far as they related  to payment  of  annual  cash bonus to Class  in  and  Class  IV employees, shall not have any force or effect and shall  not be  deemed  to have had any force or effect  from  April  1, 1975.  The writ of Mandamus issued by the High Court was not touched by the impugned Act.  The right of the employees  to annual cash bonus’ for the year 1975-76 became

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337 crystallised in     the  judgment  and this  right  was  not sought to be taken away by the impugned Act.   The  Judgment continued  to subsist and the corporation was bound  to  pay bonus in obedience to the writ of Mandamus.  By the time the Letters Patent Appeal came up for hearing, the impugned  Act had  already come into force and the Corporation could  have successfully   contended  in  the  appeal  that  since   the Settlement,  in so far as it provided for payment of  annual cash bonus, was annihilated by the impugned Act with  effect from 1st April, 1975 and so the employees were not  entitled to bonus for the year 1975-76 and hence no writ of  Mandamus could  issue  against the Corporation directing it  to  make payment of bonus.  If such contention had been raised, there is little doubt that the judgment of the single Judge  would have been upturned.  But that was not done, and the judgment of  the  single  Judge  became final  and  binding  oil  the parties. [353 A-F, 355 C] Shri   Prithvi   Cotton  Mills  Ltd.   v.   Broach   Borough Municipality,   [1970]  1  SCR  358  and  Patel   Gordhandas Hargovindas v. Municipal Commissioner, Alimedabad, [1964]  2 SCR 608; distinguished and held inapplicable. 2(a).   The argument on behalf of the Corporation that on  a proper  interpretation  of  the clauses  annual  cash  bonus payable  under cl. 8(ii) was, by reason of cl. 8(i)  subject to the directions issued by the Central Government from time to time and the Government having stopped further payment of bonus, the employees were not entitled to claim annual  cash bonus,  is erroneous.  The employees had absolute  right  to receive  annual cash bonus from the Corporation in terms  of el. 8(ii) and it was not competent to the Central Government to  issue  any directions to the Corporation  to  refuse  or withhold payment of the same. [356 D-H] (b)  Although under regulation 58 of the Service Regulations non-profit  sharing  bonus could be granted subject  to  the directions  of the Central Government and if the  Government issues  a direction to the contrary bonus could not be  paid by the Corporation, in the instant case, as provided in  cl. 12  of the Settlement, the Central Government  approved  the payment of bonus under cl. 8(ii).  That having been done  it was  not competent to the Central Government  thereafter  to issue another contrary direction which would have the effect of  compelling  the Corporation to commit a  breach  of  its obligation  under s. 18(1) of the Industrial  Disputes  Act, 1947  to  pay  annual cash bonus under  clause  8(ii).   The overriding  power given to the Central Government  to  issue directions  from  time  to time contained  in  cl.  8(i)  is conspicuously  absent in cl. 8(ii).  The power contained  in cl. 8(i) cannot be projected or read into cl. 8(ii).   These two clauses are distinct and independent.  While cl. 8(i) is a  general provision, el. 8(ii) specifically  provides  that cash bonus in the manner prescribed therein shall be paid to the employees.  This specific provision is made subject only to the    approval  of  the Central  Government,  which  was obtained. [357 A-F] (c)  Moreover, under cl. 8(ii) read with the  administrative instruction issued by the     Corporation, annual cash bonus accrued  from  day  to  day,  though  payable  in  case   of retirement,  resignation or death on the happening  of  that contingency  and otherwise on the expiration of the year  to which the bonus related, Thus the annual cash bonus  payable for  the  year  1975-76 was a debt due and  owing  from  the Corporation to each of the employees., On the date when  the impugned  Act  came  into force each of  the  employees  was entitled   to  a  debt  due  and  owing  to  him  from   the

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Corporation. [357 H, 358 A] 3(a)  The impugned Act must be held to be violative of  Art. 31(2)   since  it  did  not  provide  for  payment  of   any compensation  for the compulsory acquisition of  the  debts. [369 C] (b)  The  direct effect of the impugned Act was to  transfer ownership of the debts due and owing to Class III and  Class IV employees in respect of cash bonus to the Life  Insurance Corporation and since the Corporation is a Corporation owned by  the  State,  the impugned Act was a  law  providing  for compulsory acquisition of the debts by the State within  the meaning of Art. 31(2A). 1369 B-C] 338 (c)  Choses in action can be acquired by the State.  So long as  the  acquisition sub-serves a public purpose,  it  would satisfy   the  requirement  of  Art.  31(2).   There  is   a fundamental distinction between a chose in action and money. A chose in action has not the same mobility and liquidity as money,  and  its  value  is  not  measured  by  the   amount recoverable  under it but depends on a variety  of  factors. Where  money is given as compensation for taking  money  the theory  of forced loan may apply, but it is  not  applicable where a chose in action is taken and money representing  its value is given as compensation. [363 A, D-F] R.   C.  Cooper v. Union of India, [1970] 3 SCR 530;  Madhav Rao Scindia v. Union of India : [1971] 3 SCR 9 reiterated. State of Bihar v. Kameshwar Singh, [1952] S.C.R. 889;  State of Madhya Pradesh v. Ranojirao Shinde, [1968] 3 S.C.R.  489; dissented; Deokinandan Prasad v. State of Bihar, [1971]  Suppl.  S.C.R. 634;  State  of Punjab v. K. R. Erray &  Sobhag  Rai  Mehta, [1973]  2 S.C.R. 405; State of Gujarat, v. Sri Ambica  Mills Ltd.,  [1974]  3  S.C.R. 760 and Slat(,  of  Kerala  v.  The Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd., [1974] 1 S.C.R. 671 followed; State of Madhya Pradesh v. Ranojirao Shinde, [1968] 3 S.C.R. 489;  State of Bihar v. Kameshwar Singh, [1952]  S.C.R.  889 and  Bombay Dyeing and Manufacturing Co.  Ltd. v.  State  of Bombay,  [1959] S.C.R. 1122; explained; [1968] 3 S.C.R.  489 and [1952] S.C.R. 889; held no longer good law. (d)  The debts due and owing from the Corporation in respect of annual cash bonus were clearly property of the  employees within  the  meaning  of  Art.  31(2)  and  they  could   be compulsorily  acquired  under Art. 31(2).   Similarly  their right to receive cash bonus for the period from the date  of commencement  of the impugned Act upto March 31, 1977 was  a legal right enforceable through Court of law. [360 B-C] (a)  Property within the meaning of Arts. 19(1)(f) and 31(2) comprises  every form of property, tangible  or  intangible, including  debts  and  choses  in  action  such  is   unpaid accumulation of wages, pension, cash grants etc. [360 A] R.   C. Cooper v. Union of India, [1970] 3 S.C.R. 530; H. H. Maharajadhiraja Madhay Rao Jiwaji Rao Scindia Bahadur & Ors. v.  Union  of  India, [1971] 3 S.C.R. 9; State  of  M.P.  v. Ranojirao  Shinde & Anr., [1968] 3 S.C.R.  489;  Deokinandan Prasad v. State of Bihar, [1971] Supp.  S.C.R. 634; State of Punjab  v.  K. R. Erry & Sobhag Rai Mehta, [1973]  2  S.C.R. 485; and State of Gujarat & Anr v.  Shri Ambica Mills  Ltd., Ahmedabad, [1974] 3 S.C.R. 760 referred to. 4(a)  The contention of the Corporation that when  ownership of a debt is transferred it continues to exist as a debt but that  when the debt is extinguished it ceases to exist as  a debt  and that extinguishment of a debt does  not  therefore involve  transfer of ownership of the debt to the debtor  is not  well founded.  Where, by reason of extinguishment of  a

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right or interest of a person, detriment is suffered by  him and  a  corresponding benefit accrues to  the  State,  there would be transfer of ownership of such right or interest  to the  State.   The  question would always be  :  who  is  the beneficiary  of the extinguishment of the right or  interest effectuated  by  the law ? If it is the  State,  then  there would  be transfer of ownership of the right or interest  to the  State, because what the owner of the right or  interest would  lose  by reason of the extinguishment  would  be  the benefit accrued to the State [367 H, 368 B-C] (b)  Extinguishment  of  the  debt  of  the  creditor   with corresponding benefit to the State or State owned/controlled Corporation  would  involve  transfer of  ownership  of  the amount representing the debt from the former to the  latter. This is the real effect of extinguishment of the debt and by garbing it in the form of extinguishment, the State or State owned/controlled  Corporation cannot obtain benefit  at  the cost of the creditor and yet avoid’ the applicability of 339 Art.  31(2).  The verbal veil constructed by  employing  the device  of  extinguishment of debt cannot lot  permitted  to conceal or hide the real nature of the transaction [368 F-B]

JUDGMENT: ORIGINAL  JURISDICTION: Writ Petitions Nos. 108 and  174-177 of 1976. (Under Article 32 of the Constitution of India). R.   K.  Garg,  S. C. Agarwala & Aruneshwar  Gupta  for  the petitioners in WP 108 Somnath  Chatterjee, P. K. Chatterjee & Rathin Das  for  the petitioners in 174-77 S.   V. Gupte, Attorney Genl., U. R. Lalit, R. N. Sacluhey & A. Subhashini for r. 2 in all the WPs. S.   V.  Gupte, Attorney Gent. & D. N. Mishra for rr. 2 &  3 in WP 108 and rr. 2-4 in WP 174-77. P.   S.  Khera   for  the  Intervener  (AIN  LIC   Employees Federation) The following Judgments were delivered BEG,  C.J.-The  Life Insurance Corporation  was  constituted under  the  Life  Insurance  Corporation  Act  31  of   1956 (hereinafter to be referred to as "the Act").  On  1-6-1957, the  Central Government issued, under s. 11 (1) of the  Act, an order prescribing the ’Pay scales, dearness allowance and conditions  of  service  applicable  to-Class  III  and   IV employees.   Among  these conditions it is, stated  that  no bonus would be paid but amenities like insurance and medical treatment free of cost would be provided.  On 26-6-1959,  an order was passed by the Central Government under s. 11(2) of the  Act, amending para 9 of the 1957 Order inasmuch  as  it was  provided  that bonus other than  profit  sharing  bonus would  be  paid  to the employees  drawing  the  salary  not exceeding  Rs. 5001- per month.  On 2nd of July 1959,  there was.  a  settlement  between the L.I.C.  and  the  employees providing  for  payment  of  cash  bonus  at  the  rate   of one-and-a-half   month’s  basic  salary  which  was  to   be effective from 1-9-1956 and valid upto 31-12-1961.  In  July 1960,  regulations were framed under section 49 to  regulate the  conditions  of  service of  classes  of  employees  and regulation  58  provided for payment of  non-profit  sharing bonus  to the employees.  Orders were again passed on  14-4- 1962 and 3rd August 1963, the effect of which was to  remove the restriction of Rs. 5001- for eligibility for payment  of bonus.  On 29th January 1963, another settlement was arrived

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at between the L.I.C. and its employees for payment of  cash bonus  at the rate of one-and-a-half month’s  basic  salary. This was to continue in operation until 31st March 1969.  On 20th  June 1970, a third settlement was reached for  payment of  cash  bonus at the same rate which was to  be  effective upto 31st March 1972.  On 26-6-1972, a fourth settlement for payment  of cash bonus at the rate of 10 per cent  of  gross wages  (basic  and special pay and dearness  allowance)  was made  effective  from  1st ’April 1972  to  1973.   On  21st January 1974 and 6th February 1974, settlements for  payment of cash bonus at 15 per cent of gross wages, valid for  four years from 1st April 1973 to 31st March 1977, were  reached. It is clear that this so called "bonus" did not depend  upon profits earned but was nothing short of increas- 340 ed  wages.   The settlements were approved by the  Board  of Directors of the L.I.C. and also by the Central  Government. On 29th March, 1974, a circular was issued by the L.I.C. for payment  of  bonus in accordance with the  settlement  along with  the  salary in April.  In April 1974, the  payment  of bonus  for the year 1973-74 was actually made in  accordance with  the settlement.  Again, in April 1975, *bonus for  the year  1974-75 was made in accordance. with the  settlements. On  25th  September  1975,  however,  a  Payment  of   Bonus Amendment  Ordinance  was promulgated.   On  26-9-1975,  the L.I.C.  issued  a circular stating that, as the  payment  of bonus was being reviewed in the light of the Ordinance, and, on 22nd of March, 1976, payment of bonus for the year  1975- 76  was to, be withheld until a final decision  was)  taken. Against  this, a writ petition was filed in the; High  Court of  Calcutta.   On 21st May 1976, the  Calcutta  High  Court passed  an  order recognising the right  of  petitioners  to payment  of  bonus  for the year 1975-76  which  had  become payable along with the salary in April 1976 and ordered that it  must  be paid to the employees.  Apparently,  bonus  was treated as part of the right of the petitioners to  property protected by Article 19( and 31(1) of the Constitution.   On 29th  May 1976, the Life Insurance Corporation  Modification of Settlement Act 1976 was enacted by Parliament denying  to the  petitioners the right which had been recognised by  the settlements,  approved by the Central Government  and  acted upon  by the actual payment of bonus to the employees,  and, finally,  converted  into right under the  decision  of  the Calcutta High Court on 21st May 1976. Provisions. of section 1 1 (2) may read as follows               "(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  busi-               ness  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  anything  contained  in  sub-               section  (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     and

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             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.               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               341               or any other benefit to which the employee may               be entitled under his contract of service." Section 1 1 (2) of the Act shows that the Central Government had  ample  power to revise the scales of  remuneration  and other  terms and conditions of service if it  was  satisfied that  the interest of the Corporation or the  policy-holders demanded this.  Of course, such orders had to be passed as a result  of  satisfaction  upon material  placed  before  the Central   Government  relating  to  the  interests  of   the Corporation  or its policy holders.  But, no such order  was passed.  What was actually done was that the Act was  passed to  set  aside the terms of the settlements which  had  been incorporated  in the Judgment inter-parties of the  Calcutta High Court.               The  objects and reasons of the Act  were  set               out as follows               "The  provisions of the Payment of Bonus  Act,               1965 do not apply to the employees employed by               the  Life  Insurance  Corporation  of   India.               However,  the Corporation has, as a matter  of               practice, been paying bonus to its  employees.               The bonus to Class I and Class II employees is               being paid in pursuance of agreements  between               the Corporation and such employees.  The bonus               to Class III and ,Class IV employees is  being               paid under the terms of settlement arrived               at between the Corporation and such  employees               from time to time.  In terms of the settlement               arrived  at  between the Corporation  and  its               Class  III  and  class IV  employees  on  24th               January,  1974 under the  Industrial  Disputes               Act,  1947,  which is in force upto  the  31st               March,   1977,   bonus  is  payable   by   the               Corporation  to  its Class III  and  Class  IV               employees at the rate of fifteen per cent,  of               their annual salary without any maximum limit.               2.    It is proposed to set aside, with effect               from the 1st April, 1975, these provisions  of               the   settlement   arrived  at   between   the               Corporation  and  its Class III and  Class  IV               employees on 24th January, 1974 to enable  the               Corporation to make ex gratia payments to such               employees at the rates determined on the basis               of the general Government policy for making ex               gratia  payments to the employees of the  non-               competing public sector undertakings.                 3.  The  bill seems to,  achieve  the  above               object." The  statement  of objects and reasons  discloses  that  the purpose  ,of the impugned Act was to undo settlements  which had  been arrived at between the Corporation and  Class  III and  Class IV employees on January 24 and February 6,  1974,

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and  actually recognised by the order of the  Calcutta  High Court.   The  question  could well arise  whether  this  was really  the  exercise of a legislative power or of  a  power comparable to that of an appellate authority considering the merits  of  what  had  passed  into  a  right  to   property recognised by the This Court has decided in Shrimati  Indira Gandhi Vs.  Rai 342 Narain(1)  that  even  a  constitutional  amendment   cannot authorise the assumption of a judicial power by  Parliament. One of the tests laid down there was whether the decision is of a kind which requires hearing to be given to the parties, or,  in  other  words, involves at  least  a  quasi-judicial procedure, which the Parliament does not, in exercise of its legislative  power,  follow.   A  decision  reached  by  the Central Government, under s. 11(2) of the Act, is the result of  a satisfaction on matters stated there and  would  imply quasi-judicial procedure where the terms of a settlement had to be reviewed or revised.  But, the legislative  procedure, followed here, does not require that to be done.  It  would, in  any event, be unfair to adopt legislative  procedure  to undo  such  a  settlement which had become the  basis  of  a decision  of a High Court.  Even if legislation  can  remove the basis of a decision it has to do it by an alteration  of general  rights of a class but not by simply  excluding  two specific   settlements  between  the  Corporation  and   its employees  from  the  purview  of  the  section  18  of  the Industrial  Disputes  Act, 1947, which had been held  to  be valid  and  enforceable  by a High  Court.   Such  selective exclusion could also offend Article 14. If Parliament steps in to set aside such a settlement, which the  Central  Government could much  more  reasonably  ’have examined  after  going  into  the need for  it  or  for  its revision,  the question also arises whether it violates  the fundamental right to property guaranteed under Article 19 (1 )  (f  ) of the Constitution, inasmuch as the right  to  get bonus is part of wages and, by its deprivation, a judicially recognised right to property is taken away and not saved by- the  provisions  of Article 19 (6) of the  Constitution?   A restriction  upon a right may even cover taking away of  the right  to  increased remuneration in the  interests  of  the general  public.  Where was the question of any  restriction here  in  the interests of the general public ? it  seems  a pure and simple case of a deprivation of rights of Class III and  Class TV employees without any apparent nexus with  any public interest. The  first  hurdle in the way of this attack  upon  the  Act undoing  the  settlement  under Article 19 (1)  (f)  of  the Constitution  placed  before us what that the  Act  of  1976 notified  on  29-5-1976  was passed  during  the  emergency. Hence,   it   was  submitted  that  Article,  358   of   the Constitution is an absolute bar against giving effect to any right   arising  under  Article  19  of  the   Constitution. Furthermore, it was submitted that the effect of the Act was to wash off. the liability altogether after 1-4-1975 so that nothing remained to be enforced after 1-4-1975. The  Act is a very short one of 3 sections.  After  defining the  settlement as the one which was arrived at between  the Corporation and their workers on 24-1-1974 under section 18, read  with  clause  (p)  of section  2,  of  the  Industrial Disputes  Act,  1947 and the similar further  settlement  of 6-2-1974, section- 3 lays down (1)  [1976](2)S.C.R.347. 343               "Notwithstanding  anything  contained  in  the

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             Industrial Disputes Act, 1947, the  provisions               of each of the settlements, in so far as  they               relate to the payment of an annual cash  bonus               to every Class, III and Class IV employees  of               the  Corporation  at the rate of  fifteen  per               cent of his annual salary, shall not have  any               force  or  effect and shall not be  deemed  to               have  any force or effect on and from 1st  day               of April, 1975." The object of the Act was, in effect, to take away the force of  the judgment of the Calcutta High Court recognising  the settlements in favour of Class III and Class IV employees of the  Corporation.  Rights under that judgment could be  said to arise independently of Article 19 of the Constitution.  I find  my self in complete agreement with my learned  brother Bhagwati that to give effect to the judgment of the Calcutta High Court is not the same thing as enforcing a right  under Article  19  of the Constitution.  It may be  that  a  right under Article 19 of the Constitution becomes linked up  with the  enforceability of the judgment.  Nevertheless, the  two could  be viewed as separable sets of rights.  If the  right conferred by the judgment independently is sought to be  set aside,  section  3  of the Act, would,  in  my  opinion,  be invalid for trenching upon the judicial power. I may, however, observe that even though the real object  of the  Act  may  be to set aside the result  of  the  mandamus issued by the Calcutta High Court, yet, the section does not mention  this object at all.  Probably this was  so  because the  jurisdiction of a High Court and the  effectiveness  of its  orders  derived  their force from Article  226  of  the Constitution  itself,  These  could not  be  touched  by  an ordinary  act of Parliament.  Even if section 3 of  the  Act seeks to take away the basis of the judgment of the Calcutta High  Court,  without mentioning it, by  enacting  what  may appear  to be a law, yet, I think that, where the rights  of the citizen against the State are concerned, we should adopt an  interpretation which upholds those  rights.   Therefore, according  to  the  interpretation, I prefer  to  adopt  the rights  which had passed into those embodied in  a  judgment and became the basis of a Mandamus from the High Court could not be taken away in this indirect fashion. Apart from the consideration mentioned above there are  also other considerations put forward, with his usual  vehemence, by  Mr. R. K. Garg who relies upon the directive  principles of  the State Policy as part of the basic structure  of  our Constitution.   At any rate, he submits that in judging  the reasonableness  of a provision the directive  principles  of State policy can be used, as this Court has repeatedly done, as criteria of reasonableness, and, therefore, of  validity. Mi.  Garg bad relied strongly upon the provisions of Article 43 of the Constitution which says :               "43.   The State shall endeavour to secure  by               suitable legislation or economic  Organisation               or   in  any  other  way,  to   all   workers,               agricultural, industrial or otherwise, work, a               living  wage,, conditions of work  ensuring  a               decent standard               344               of  life  and full enjoyment  of  leisure  and               social  and  cultural  opportunities  and,  in               particular,  the  State  shall  endeavour   to               promote cottage industries on an individual or               co-operative basis in rural areas." He submits that Article 43 casts an obligation on the  State to  secure a living wage for the workers and is part of  the

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principles  "declared fundamental in the governance  of  the country".   In other words, he would have us use Article  43 as  conferring practically a fundamental right which can  be enforced.   I  do not think that we can go so  far  as  that because,  even  though  the directive  principles  of  State policy, including the very important general ones  contained in Article 38 and 39 of the Constitution, give the direction in  which  the  fundamental policies of the  State  must  be oriented yet, we cannot direct either the Central Government or Parliament to proceed in that direction.  Article 37 says that  they "shall not be enforceable by any court,  but  the principles therein laid down are nevertheless fundamental in the  governance of the country and it shall be the  duty  of the  State to apply these principles in making laws."  Thus, even  if they are not directly enforceable by a  court  they cannot  be  declared ineffective.  They have  the  life  and force  of fundamentals.  The best way in which they can  be, without  being directly enforced, given vitality and  effect in   Courts  of  laws  is  to  use  them  as   criteria   of reasonableness, and, therefore, of validity, as we have been doing.  Thus, if progress towards goals found in Articles 38 and  39  and  43  are desired,  there  should  not  be  any, curtailment of wage rates arbitrarily without disclosing any valid  reason  for  it as is. the case here.   It  is  quite reasonable, in my opinion, to submit that the measure  which seeks  to  deprive workers of the benefits of  a  settlement arrived at and assented to by the Central Government,  under the provisions of the Industrial Disputes Act, should not be set  at  naught by an Act designed to  defeat  a  particular settlement.   If  this  be the purpose of  the  Act,  as  it evidently  is, it could very well be said to be contrary  to public  interest, and, therefore, not protected  by  Article 19(6) of the Constitution. Furthermore,  I think that the principle laid down  by  this Court in Union of India & Ors. v. M/s.  Indo-Afghan Agencies Ltd.(1)  can  also  be taken into  account  in  judging  the reasonableness  of the provision in this case.  It was  held there (at p. 385) :               "Under our jurisprudence the Government is not               exempt   from  liability  to  carry  out   the               representation  made  by it as to  its  future               conduct  and it cannot on some  undefined  and               undisclosed ground of necessity or  expediency               fail to carry out the promise solemnly made by               it,  nor  claim to be the judge  of  its,  own               obligation  to  the  citizen on  an  ex  parte               appraisement of the circumstances in which the               obligation has arisen." (1)  [1968] (2)S.C.R.365. 34 5 In that case, equitable principles were invoked against  the Government.   It is true that, in the instant case, it is  a provision  of  the  Act  of  Parliament  and  not  merely  a governmental  order whose validity is challenged before  us. Nevertheless, we cannot forget that the Act is the result of a proposal made by the Government of the day which,  instead of  proceeding  under section 11(2) of  the  Life  Insurance Corporation  Act,  chose  to  make  an  Act  of   Parliament protected  by  emergency  provisions.   I  think  that   the prospects  held out, the representations made , the  conduct of  the Government, and equities arising therefrom, may  all be taken into consideration for judging whether a particular piece  of legislation, initiated by the Government  and  en- acted by Parliament, is reasonable. Mr. Garg has also strongly attacked section 3 of the Act as,

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violative  of Article 14 of the Constitution which was  also not  available to the petitioners during the emergency.   He alleges  that the Corporation has been making very  handsome profits  so that the question of jeopardising the  interests of  the  Corporation or Policyholders could not  arise.   He submits  that  the  Act  is  nothing  more  than   selective discrimination  practised  against the lower levels  of  the staff  of  the Life Insurance Corporation.  I do  not  think that these contentions are devoid of force. I  am sorry that due to the very short interval left for  me to  dictate my opinion in this case I have not been able  to fully set out the reasoning or to cite all the authorities I would have liked to have done.  The pressure of work on hand is  too  great.   I  have  several  judgments  to  pronounce tomorrow,  the last day on which I shall have the  authority to participate as a Judge in the decisions of this Court.  I have, however, thought it to be my duty to indicate my  line of  thinking  briefly as I have my  doubts  whether  Article 31(2A) is not an effective answer to complete reliance  upon Article 31(2) of the Constitution. It  is true that the right to receive bonus which  had  been recognised by the Central Government both by its orders  and conduct   under  a  settlement  is  a  right  to   property. Nevertheless, since acquisition is defined by Article 31(2A) of  the  ’Constitution,  I  seriously  doubt  whether   that definition  of acquisition really satisfied by the facts  in the case before us.  The provision reads as follows :               "31(2A)  Where a law does not provide for  the               transfer   of  the  ownership  or   right   to               possession of any property to the State or  to               a  Corporation  evened or  controlled  by  the               State,  it shall not be deemed to provide  for               the compulsory acquisition or  requisitioning,               of property, notwithstanding that it  deprives               any person of his property." I have, however, no doubt that the conclusion reached by  my learned  brother Bhagwati is quite correct inasmuch  as  the benefits  of  the rights recognised by the judgment  of  the Calcutta  High Court could not be indirectly taken  away  by section 3 of the Act selectively directed against  specified settlements only. 346 I think that section 3 of the impugned Act is struck by  the provisions of Article 19(1) (f) of the Constitution and  not saved  by  Article 19(6) of the Constitution.   It  is  also struck by Article 14.  If the fundamental rights  guaranteed by Articles 14 and 19 are not suspended, but their operation is  only  suspended, a view which I expressed in  A.  D.  M. Jabalpur v. Shivkant Shukla(1) the effect of the  suspension is to restore the status quo ante.  Would this not mean that only  the validity of an attack based on Articles 14 and  19 is  suspended during the Emergency ? But, once this  embargo is  lifted Articles 14 and 19 of the Constitution whose  use was suspended, would strike down any legislation which would have   been  bad.   In  other  words,  the  declaration   of invalidity  is stayed during the emergency.   Both  Articles 358  and 359(1A) provide that, as soon as a proclamation  of emergency  ceases to operate, the effect of suspension  must vanish "except as respects things done or omitted to be done before the law so ceases to have effect". The  things done or omitted to be done could  certainly  not mean  that the rights conferred under the  settlements  were washed  off  completely  as  the  learned  Attorney  General suggested.  To hold that would be to convert the  suspension of  invalidity  into  a validation of law  made  during  the

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emergency.   If  the  law was not  validated  but  only  its invalidation  was  suspended, we should not give  any  wider effect to the suspension.     I  think we  should  interpret "things done or omitted to be done" very     narrowly.    If this be so, it means that the settlements are not to be deemed to  be  wiped  off.   No  doubt  payments  under  them  were temporarily  suspended.   This must obviously mean  that  no payment  could be demanded under them during the  emergency, but,  as  soon as the emergency was  over,  the  settlements would  revive  and  what could not be  demanded  during  the emergency  would  become  payable even  for  the  period  of emergency  for which payment was suspended.   Otherwise  the enactment  will  have effect even after  the  emergency  had ceased.   This  would  clearly be contrary  to  the  express provisions  of  Article 358 and 359(1A).   In  other  words, valid  claims cannot be washed off by the emergency per  se. They  can  only  be suspended by a  law  passed  during  the operation of Article 358 and 359(1A) of the Constitution. For the reasons given above, I reach the same conclusion  as my learned brother Bhagwati although perhaps by a difference route. concur in the final order made by my learned  Brother Bhagwati. BHAGWATI, J.-These writ petitions are filed by employees  of the    Life    Insurance   Corporation    challenging    the constitutional  validity of the Life  Insurance  Corporation (Modification of Settlement) Act, 1976.  This unusual  piece of   legislation  was  enacted  by  Parliament  during   the emergency at a time when there could hardly be any effective debate  or discussion and it sought to render ineffective  a solemn and deliberate Settlement arrived at between the Life Insurance Corporation and four different associations of its employees  for payment of cash bonus.  It is  necessary,  in order to appreciate the various (1)  A.T.R. 1976 S.C. 1207-[1976] Suppl.  S.C.R. 172. 347 contentions  arising in the writ petitions  to  recapitulate briefly  the facts leading up to the enactment of  the  Life Insurance  Corporation  (Modification  of  Settlement)  Act, 1976, hereinafter referred to as the impugned Act. The  Life  Insurance Corporation is  a  statutory  authority established  under the Life Insurance Corporation Act,  1956 and  under  section  6 it is the general duty  of  the  Life Insurance  Corporation to carry On life insurance  business, whether  in  or  outside India, and it  is  required  to  so exercise  its  powers  as  to  secure  that  life  insurance business   is  developed  to  the  best  advantage  of   the community.   It  is not necessary to refer  to  the  various provisions of the Life Insurance Corporation Act, 1956 which define  the  powers,  duties  and  functions  of  the   Life Insurance  Corporation Act, since we are not concerned  with them  in these writ petitions.  It would be enough to  refer to  section  49 which confers power on  the  Life  Insurance Corporation  to make regulations.  ’Sub-section (1) of  that section  provides that the Life Insurance Corporation  may,. with  the previous approval of the Central Government,  make regulations, not in consistent with the Act, "to provide for all matters for which provision is expedient for the purpose of  giving  effect to the provisions" of the  Act  and  sub- section (2) enacts that in particular and without  prejudice to  the generality of the power conferred under  sub-section (1), such regulations may provide for-               "(b)  the method of recruitment  of  employees               and  agents of the Corporation and  the  terms               and conditions of service of such employees or               agents;

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             (bb)  the terms and conditions of  service  of               persons  who  have  become  employees  of  the               Corporation  under subsection (1)  of  section               11;" The Life Insurance Corporation has in exercise of the  power conferred under clauses (b) and (bb) of sub-section (2).  of section  49  and with the previous approval of  the  Central Government,  made  the Life  Insurance  Corporation  (Staff) Regulations,  1960  defining  the terms  and  conditions  of service  of  its employees.  There is  only  one  Regulation which is material for our purpose, and that is Regulation 58 which is in the following terms               "The   Corporation   may,  subject   to   such               directions  as  the  Central  Government   may               issue,  grant non-profit sharing bonus to  its               employees  and the payment thereof,  including               conditions of eligibility for the bonus, shall               be  regulated  by instructions issued  by  the               Chairman from time to time." We have set out Regulation 58 in its present form as that is the  form in which it stood throughout the relevant  period. It  will  be a matter for consideration as to  what  is  the effect  of  this  Regulation on the  Settlement  arrived  at between the Life Insurance Corporation and its employees  in regard to bonus. 348 It  appears that right from 1959 Settlement were arrived  at between  the  Life Insurance Corporation and  its  employees from  time to time in regard to various matters relating  to the  terms and conditions of service of Class III and  Class IV  employees including bonus payable to them.  The last  of such  Settlement dated 20th June, 1970, as modified  by  the Settlement  dated  26th June, 1972, expired on  31st  March, 1973.  Thereupon four different associations of employees of the  Life Insurance Corporation submitted their  charter  of demands for revision of scales of pay, allowances and  other terms  and conditions of service on behalf of Class III  and Class IV employees.  The Life Insurance Corporation  carried on  negotiations with these associations. between July  1973 and January 1974 at which there was free and frank  exchange of  views  in  regard  to  various  matters  including   the obligation of the Life Insurance Corporation to the  policy- holders   and;.   the   community   and   ultimately   these negotiations culminated in a Settlement: dated 24th January, 1974  between  the  Life  Insurance  Corporation  and  these associations.  The Settlement having been arrived at other-- wise  than  in the course of  conciliation  proceeding,  was binding on the parties under section 18, sub-section (1)  of the  Industrial  Disputes  Act,  1947  and  since  the  four associations  which  were  parties to  the.  employees,  the Settlement was binding on the Life Insurance Corporation and all  its Class III and Class IV employees.   The  Settlement provided  for  various  matters relating to  the  terms  and conditions of: service but we are concerned only with Clause (8)  which made provision in regard to bonus.   That  clause was in the following terms               "(i)  No profit sharing bonus shall  be  paid.               However, the Corporation may, subject to  such               directions as the Central Government may issue               from  time  to time, grant any other  kind  of               bonus to its Class III & IV employees.               (ii)  An annual cash bonus will be paid to all               Class III and’ Class IV employees at the  rate               of  15% of the annual salary (i.e.  basic  pay               including of,special pay, if any, and dearness

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             allowance  and additional dearness  allowance)               actually  drawn by an employee in  respect  of               the financial year to which thebonus relates.               (iii) Save as provided herein all other  terms               and  conditions attached to the  admissibility               and payment of bonus shall be as laid down  in               the Settlement on bonus dated tile 26th, June,               1972." It  is also necessary to reproduce here Clause (12) as  that has some bearing on the controversy between the parties "PERIOD OF SETTLEMENT: (1) This Settlement shall be effective from 1st April,  1973 and  shall  be for a period of four years,  i.e.,  from  1st April,, 1973 to 31st March, 1977. 349               (2)  The  terms of this  Settlement  shall  be               subject  to the approval of the Board  of  the               Corporation and the Central Government.               (3)   This  Settlement  disposes  of  all  the               demands raised by the workmen for revision  of               terms and conditions of their service.               (4)   Except as otherwise provided or modified               by this Settlement, the workmen shall continue               to be governed by all the terms and conditions               of  service as set forth and regulated by  the               Life  Insurance Corporation of  India  (Staff)               Regulations,  1960 as also the  administrative               instructions issued from time to time and they               shall,  subject  to  the  provisions   thereof               including  any period of  operation  specified               therein   be   entitled   to,   the   benefits               thereunder." It was common ground between the parties that the Settlement was approved by the Board of the Life Insurance  Corporation as also by the Central Government and the Chief of Personnel by  his  Circular dated 12th March, 1974  intimated  to  the Zonal  and  Divisional  Managers that the  approval  of  the Central  Government to the Settlement having  been  received the  Life Insurance Corporation should proceed to  implement the  terms of the Settlement.  The Executive  Director  also issued   a  circular  dated  29th  March,  1974   containing administrative  instructions in regard to, payment  of  cash bonus  under  clause  8  (ii)  of  the  Settlement.    These administrative instructions set out directions in regard  to Various  matters  relating to payment of cash bonus  and  of these, two are material.  One was that in case of retirement or  death,  salary up to the date of  cessation  of  service shall  be taken into account for the purpose of  determining the  amount of bonus payable to the employee, or  his  heirs and  the other was that the bonus shall be paid  along  with the salary for the month of April, but in case of retirement or death, payment will be made "soon after the contingency". There  was  no  dispute that for the first  two  years,  1st April, 1973 to 31st March, 1974 and 1st April, 1974 to  31st March,  1975, the Life Insurance Corporation paid  bonus  to its Class III and Class IV employees in accordance with  the provisions  of Clause 8(ii) of the Settlement read with  the administrative  instructions  dated 29th March,  1974.   But then  came the declaration of emergency on 26th  June,  1975 and troubles began for Class III and Class IV ,employees  of the Life Insurance Corporation. On 25th September, 1975 an Ordinance was promulgated by  the President  of India called the Payment of Bonus  (Amendment) Ordinance, 1975 which came into force with immediate effect. Subsequently, this Ordinance was replaced by the Payment  of

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Bonus  (Amendment)  Act, 1976 which was brought  into  force with  retrospective effect from the date of  the  Ordinance, namely,   25th   September,   1975.    This   amending   law considerably curtailed the rights of the employees to  bonus in industrial establishments, but it had no impact so far as the  employees  of  the  Life  Insurance  Corporation   were concerned  since the original Payment of Bonus Act  was  not applicable  to the life Insurance Corporation by  reason  of section 32 which exempted the Life Insurance L5-277SCI/78 350 Corporation  from  its operation.  The  Central  Government, however, decided that the employees of establishments  which were  not covered by the Payment of Bonus Act would  not  be eligible for payment of bonus but ex-gratia cash payment  in lieu  of  bonus would be made "as may be determined  by  the Government  taking  into account the wage  level,  financial circumstances  etc.  in each case and such payment  will  be subject  to a maximum of 10% and pursuant to this  decision, the  Life Insurance Corporation was advised by the  Ministry of  Finance that no further payment of bonus should be  made to  the employees "without getting the same cleared  by  the Government".   The Life Insurance Corporation  thereupon  by its  Circular  dated 26th September, 1975 informed  all  its offices  that  since the question of payment  of  bonus  was being  reviewed  in the light of the Bonus  Ordinance  dated 25th  September,,  1975,  no bonus should  be  paid  to  the employees  "under  the  existing  provisions  until  further instructions".    The’   All-India   Insurance    Employees’ Association  protested against this stand taken by the  Life Insurance   Corporation  and  pointed  out  that  the   Life Insurance  Corporation was bound to pay bonus in  accordance with  the terms of the Settlement and the direction  not  to pay  bonus  was clearly illegal and  unjustified.  The  Life Insurance  Corporation  conceded that payment of  bonus  was covered by the settlement but contended that it was  subject to  such  directions as the Central Government  might  issue from  time  to  time and since the  Central  Government  had advised  the  Life  Insurance Corporation not  to  make  any payment  of bonus without their specific approval, the  Life Insurance Corporation was justified in not making payment to the  employees.  This stand was taken by the Life  Insurance Corporation in its letter dated 7th February, 1976 addressed to, the All India Insurance Employees’ Association and  this was   followed  by  a  Circular  dated  22nd   March,   1976 instructing   all   the  offices  of  the   Life   Insurance Corporation not to make payment by way of bonus. The  All-India  Insurance Employees’  Association  and  some others thereupon filed writ petition No. 371 of 1976 in  the High   Court  of  Calcutta  for  a  writ  of  Mandamus   and Prohibition directing the Life Insurance Corporation to  act in  accordance with the terms of the Settlement  dated  24th January.  1974  read with  the  administrative  instructions dated  29th  March,  1974  and  to  rescind  or  cancel  the Circulars dated 26th September, 1975, 7th February, 1976 and 22nd  March,  1976 and not to refuse to pay  cash  bonus  to Class III and Class IV employees along with their salary for the  month of April 1976 as provided by the Settlement  read with the administrative instructions.  The writ petition was resisted  by  the  Life  Insurance  Corporation  on  various grounds  to which it is not necessary to refer since we  are not  concerned with the correctness of the judgment  of  the Calcutta High Court disposing of the writ petition.  Suffice it to state, and that is material for our purpose, that by a judgment dated 21st May, 1976 a Single Judge of the Calcutta

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High  Court allowed the writ petition and issued a  writ  of Mandamus and Prohibition as prayed for in the writ petition. The  Life Insurance Corporation preferred a  Letters  Patent Appeal against the judgment of the learned Single Judge  but in  the  mean time the impugned Act bad  already  come  into force  and it was, therefore, stated on behalf of  the  Life Insurance  Corporation before the Division Bench that  there was 351 no  necessity for proceeding with the appeal and  hence  the Division Bench made no order in the appeal.  The result  was that  the  judgment  of the learned  Single  Judge  remained intact  : with what effect, is a matter we  shall  presently consider. On  29th  May,  1976 Parliament  enacted  the  impugned  Act providing  inter  alia for modification’ of  the  Settlement dated  24th  January,  1974  arrived  at  between  the  Life Insurance  Corporation and its employees.  The impugned  Act was a very short statute consisting only of three  sections. Section 1 gave the short title of the impugned Act,  section 2  contained  definitions  and  section  3,  which  was  the operative section, provided as follows :               "Notwithstanding  anything  contained  in  the               Industrial Disputes Act, 1947, the  provisions               of the settlement in so far as they relate  to               the  payment of an annual cash bonus to  every               Class  III  and  Class  IV  employees  of  the               Corporation  at the rate of fifteen per  cent,               of his annual salary, shall not have any force               or effect and shall not be deemed to have  had               any force or effect on and from the 1st day of               April, 1975." Since  the  impugned Act did not set at  naught  the  entire settlement  dated  24th January, 1974  but  merely  rendered without force and effect the provisions of the Settlement in so  far as they related to payment of annual cash  bonus  to Class  III and Class IV employees and that too not from  the date  when  the  Settlement became operative  but  from  1st April, 1975, it was said to be a statute modifying the  pro- visions  of the Settlement.  The plain and undoubted  effect of  the impugned Act was to deprive Class III and  Class  IV employees  of  the  annual cash bonus  to  which  they  were entitled under clause 8(ii) of the Settlement for the  years 1st April, 1975 to 31st March, 1976 and 1st April, 1976 to 3 1  St  March, 1977 and therefore, two  of  the  associations along with their office bearers field the present writ peti- tions   challenging  the  constitutional  validity  of   the impugned Act. There were two grounds on which the constitutionality of the impugned  Act was assailed on behalf of the petitioners  and they were as follows :               A.    The  right  of Class III  and  Class  TV               employees  to annual cash bonus for the  years               1st  April, 1975 to 31st March, 1976  and  1st               April,  1976 to 31st March, 1977 under  clause               8(ii) of the Settlement was property and since               the  impugned  Act  provided  for   compulsory               acquisition  of this property without  payment               of   compensation,   the  impunged   Act   was               violative of Article 31(2) of the Constitution               and was hence null and void.               B.     The impugned Act deprived Class III and               Class IV employees of the right to annual cash               bonus  for the years 1st April, 1975  to  31st               March, 1976 and 1st April, 1976 to 31st March,

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             1977  which  was vested in them  under  clause               8(ii)   of  the  Settlement  and  there   was,               therefore,   clear   infringement   of   their               fundamental right under Article               3 52               19(1)  (f) and since this deprivation  of  the               right to annual cash bonus, which was  secured               under  a Settlement arrived at as a result  of               collective bargaining and with full and mature               deliberation on the part of the Life Insurance               Corporation  and the Central Government  after               taking  into  account  the  interests  of  the               policy-holders  and the community and  with  a               view  to approximating towards the goal  of  a               living wage as envisaged in Article 43 of  the               Constitution,  amounted  to  an   unreasonable               restriction, the impugned Act was not saved by               Article  19(5) and hence it was liable  to  be               struck down as invalid. We  shall proceed to consider these grounds in the order  in which we have set them out, though we may point out that  if either ground succeeds, it would be unnecessary to  consider the other. But  before we proceed, further, it would be  convenient  at this  stage  to  refer  to  one  other  contention  of   the petitioner based on the judgment of the Calcutta High  Court in  Writ Petition No. 371 of 1976.  The contention was  that since the Calcutta High Court had by its judgment dated 21st May,  1976  issued  a writ of Mandamus  directing  the  Life Insurance Corporation to pay annual cash bonus to Class  III and Class IV employees for the year 1st April, 1975 to  31st March, 1976 along with their salary for the month of  April, 1976 as provided by the Settlement and this judgment had be- come  final  by reason of withdrawal of the  Letters  Patent Appeal preferred against it, the Life Insurance  Corporation was  bound  to obey the writ of Mandamus and to  pay  annual cash bonus for the year 1st April, 1975 to 31st March,  1976 in  accordance  with  the  terms  of  clause  8(ii)  of  the Settlement.   It is, no doubt, true, said  the  petitioners, that  the impugned Act, if valid, struck at clause 8(ii)  of the Settlement and rendered it ineffective and without force with  effect  from 1st April, 1975 but it did not  have  the effect of absolving the Life Insurance Corporation from  its obligation  to carry out the writ of Mandwnus.   There  was, according  to the petitioners, nothing in the  impugned  Act which  set  at  naught the effect of  the  judgment  of  the Calcutta High Court or the binding character of the writ  of Mandamus  issued  against the  Life  Insurance  Corporation. This   contention  of  the  petitioners   requires   serious consideration and we are inclined to accept it. It is significant to note that there was no reference to the judgment  of  the Calcutta High Court in  the  Statement  of Objects  and Reasons, nor any non-obstante clause  referring to  a judgment of a court in section 3 of the impugned  Act. The  attention  of Parliament does not appear to  have  been drawn  to the fact that the Calcutta High Court had  already issued  a  writ of Mandamus commanding  the  Life  Insurance Corporation  to  pay the amount of bonus for  the  year  1st April,   1975  to  31st  March,  1976.   It   appears   that unfortunately  the  judgment  of  the  Calcutta  High  Court remained almost unnoticed and the impugned Act was passed in ignorance  of that judgment.  Section 3 of the impugned  Act provided that the provisions of the Settlement in so far  as they relate to payment of annual cash bonus to Class III 353

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and  Class IV employees shall not have any force  or  effect and shall not be deemed to have had any force or effect from 1st  April,  1975.  But the writ of Mandamus issued  by  the Calcutta High Court directing the Life Insurance Corporation to  pay the amount of bonus for the year 1st April, 1975  to 31st March, 1976 remained untouched by the impugned Act.  So far  as  the right of Class III and Class  IV  employees  to annual  cash  bonus  for the year 1st April,  1975  to  31st March,  1976  was concerned, it became crystallised  in  the judgment and thereafter they became entitled to enforce  the writ  of Mandamus granted by the judgment and not any  right to annual cash bonus under the settlement.  This right under the,  judgment  was  not  sought to be  taken  away  by  the impugned  Act.   The judgment continued to subsist  and  the Life  Insurance  Corporation was bound to  pay  annual  cash bonus  to Class III and Class IV employees for the year  1st April, 1975 to 31st March, 1976 in obedience to the writ  of Mandamus.   The  error  committed by  the  Life.   Insurance Corporation  was that it withdrew the Letters Patent  Appeal and  allowed  the judgment of the learned  Single  Judge  to become final.  By the time the Letters Patent Appeal came up for  hearing, the impugned Act had already come  into  force and  the Life Insurance Corporation could,  therefore,  have successfully  contained in the Letters Patent  Appeal  that, since  the Settlement, in as far as it provided for  payment of  annual cash bonus, was annihilated by the  impugned  Act with  effect  from 1st April, 1975, Class III and  Class  IV employees  were  not entitled to annual cash bonus  for  the year  1st April, 1975 to 31st March, 1976 and hence no  writ of  Mandamus  could  issue  directing  the  Life   Insurance Corporation  to  make  payment  of  such  bonus.   If   such contention  had been raised, there is little doubt,  subject of course to any constitutional challenge to the validity of the  impugned Act, that the judgment of the  learned  Single Judge  would  have  been  upturned  and  the  Writ  petition dismissed.   But  on account of  some  inexplicable  reason, which  is  difficult  to  appreciate,  the  Life   Insurance Corporation did not press the Letters Patent Appeal and  the result  was  that the judgment of the learned  Single  Judge granting  writ of Mandamus became final and binding  on  the parties.  It is difficult to see how in these  circumstances the  Life Insurance Corporation could claim to  be  absolved from the obligation imposed by the judgment to carry out the Writ of Mandamus by relying on the impugned Act. The  Life  Insurance  Corporation  leaned  heavily  on   the decision of this Court in Shri Prithvi Cotton Mills Ltd.  v. Broach Borough Municipality(’-) in support of its contention that  when  the  settlement in so far  as  it  provided  for payment  of  annual  cash bonus was set  at  naught  by  the impugned Act with effect from 1st April, 1975, the basis  on which  the judgment proceeded was fundamentally altered  and that  rendered the judgment ineffective and not  binding  on the  parties.  We do not think this decision lays  down  any such  wide proposition as is contended for and on behalf  of the  Life  Insurance  Corporation.  It  does  not  say  that whenever  any  actual  or  legal  situation  is  altered  by retrospective legislation, a judicial decision rendered by a court on the basis of such factual or legal situation  prior to the alteration, would (1)  [1970]1 S.C.R. 388. 354 straightaway,  without  more,  cease  to  be  effective  and binding on the parties.  It is true that there, are  certain observations  in this decision which seem to suggest that  a court  decision may cease to be binding when the  conditions

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on  which it is based are so fundamentally altered that  the decision   could  not  have  been  given  in   the   altered circumstances.   But these observations have to be  read  in the  light of the question which arose for consideration  in that case.  There, the validity of the Gujarat Imposition of Taxes by Municipalities (Validation) Act, 1963 was  assailed on behalf of the petitioners.  The Validation Act had to  be enacted  because  it  was  held  by  this  Court  in   Patel Gordhandas    Hargovindas   v.    Municipal    Commissioner, Ahmedabad(1)   that   since  section  73   of   the   Bombay Municipality Boroughs Act, 1925 allowed the Municipality  to levy a ’rate? on buildings or lands and the term ’rate?  was confined  to, an imposition on the basis of  annual  letting value,  tax  levied  by  the  Municipality  on  lands,   and buildings  on  the  basis  of  capital  value  was  invalid. Section   3   of   the   Validation   Act   provided    that notwithstanding  anything contained in any judgment,  decree or  order of a court or tribunal or any other authority,  no tax  assessed  or  purported  to have  been  assessed  by  a municipality on the, basis of capital value of a building or land and imposed, collected or recovered by the municipality at  any time before the commencement of the  Validation  Act shall  be  deemed  to  have  invalidly  assessed,   imposed, collected  or  recovered and the imposition,  collection  or recovery of the tax so assessed shall be valid and shall  be deemed to have always been valid and shall not be called  in question merely on the ground that the assessment the tax on the  basis of capital value of the building or land was  not authorised by law and accordingly any tax so assessed before the  commencement of the Validation Act and leviable  for  a period  prior  to  such commencement but  not  collected  or recovered  before  such  commencement may  be  collected  or recovered in accordance with the relevant municipal law.  It will  be  seen  that by section 3 of the  impugned  Act  the Legislature retrospectively imposed tax on building or  land on  the  basis of capital value and if the tax  was  already imposed,  levied  and  collected on  that  basis,  made  the imposition  levy, collection and recovery of the tax  valid, notwithstanding the declaration by the Court that as  ’rate, the  levy was incompetent.  This was clearly permissible  to the Legislature because in doing so, the Legislature did not seek   to  reverse  the  decision  of  this  Court  on   the interpretation  of  the  word  ’rate,,  but  retrospectively amended  the law by providing for imposition of tax on  land or building on the basis of capital value and validated  the imposition,  levy,  collection and recovery of tax  on  that basis.   The decision of this Court holding the levy of  tax to  be  incompetent  on  the basis  of  the  unamended  law, therefore, became irrelevant and could not stand in the  way of  the tax being assessed, collected and recovered on  the, basis  of  capital value under the  law  as  retrospectively amended.   That is why this Court held that  the  Validation Act  was effective to validate imposition, levy,  collection and  recovery  of tax on land or building on  the  basis  of capital  value.   It is difficult to see bow  this  decision given  in the context of a validating statute can be of  any help to the life Insurance Corporation.  Here, the  judgment given by the (1)  [1964] 2S.C.R.608. 355 Calcutta   High   Court,  which  is  relied  upon   by   the petitioners,  is not a mere declaratory judgment holding  an impost  or tax to be invalid, so that a  validation  statute can  remove the defect pointed out by the judgment  amending the  law with retrospective effect and validate such  impost

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or tax.  But it is a judgment giving effect to the right  of the petitioners to annual cash bonus under the Settlement by issuing  a  writ of Mandamus directing  the  Life  Insurance Corporation  to pay the amount of such bonus.  If by  reason of  retrospective,  alteration  of  the  factual  or   legal situation,  the judgment is rendered erroneous,  the  remedy may  be  by  way of appeal or review, but  so  long  as  the judgment stands, it cannot be disregarded or ignored and  it must  be obeyed by the Life Insurance Corporation.  We  are, therefore,  of the view that, in any event, irrespective  of whether  the impugned Act is constitutionally valid or  not, the Life Insurance Corporation is bound to obey the writ  of Mandamus issued by the Calcutta High Court and to pay annual cash bonus for the year 1st April, 1975 to 31st March,  1976 to Class III and Class IV employees.  Now, to the grounds of constitutional challenge Re: Ground A : This ground raise-& the question whether the impugned Act is violative  of  clause,  (2)  of  Article  31.   This  clause provides   safeguards  against  compulsory  acquisition   or requisitioning of property by laying down conditions subject to  which  alone property may be  compulsorily  acquired  or requisitioned  and  at the date when the  impugned  Act  was enacted, it was in the following terms               "No  property shall be, compulsorily  acquired               or requisitioned save for a public purpose and               save by authority of a law which provides  for               acquisition or requisitioning of the  property               for  an amount which may be fixed by such  law               or which may be determined in accordance  with               such  principles and given in such  manner  as               may be specified in such law; and no, such law               shall  be called in question in any  court  on               the  ground  that  the  amount  so  fixed   or               determined  is not adequate or that the  whole               or  any  part of such amount is  to  be  given               otherwise than in cash Clause (2) in this form was substituted in Article 31 by the Constitution (Twenty-fifth Amendment) Act, 1971 and by  this amending Act, clauses (2A) and (2B) were also introduced  in Article 31 and they read as follows :-               "(2A)  Where a, law does not provide  for  the               transfer   of  the  ownership  or  right   to,               possession of any property to the State or  to               a  corporation  owned  or  controlled  by  the               State,  it shall not be deemed to provide  for               the  compulsory acquisition or  requisitioning               of Property, notwithstanding that it does  any               person of his property.               (2B)  Nothing in sub-clause (f) of clause  (1)               of Article 19 shall effect any such law as  is               referred to in clause (2) 356 The argument of the petitioners was that the right of  Class III  and Class IV employees to annual cash bonus’  for  the, years  1st  April, 1975 to 31st March, 1976 and  1st  April, 1976  to 31st March, 1977 under Act provided for  Insurance, Corporation  12,  it  was a  law  providing  for  compulsory acquisition of property as contemplated under clause (2A) of Article  31  and  it was, therefore, required  to  meet  the challenge  of  Article  31,  clause  (2).   The   compulsory acquisition of the right to annual cash bonus’ sought to  be effectuated  by the impugned Act, said the petitioners,  was not  supported by public purpose nor did the  impugned  Act. provide  for  payment of any compensation for the  same  and

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hence  the impugned Act was void as contravening clause  (2) of Article 21. The  first question which arises for consideration on  this. contention  is whether the right of Class III and  Class  IV employees  to ’annual cash bonus’ for the years  1st  April, 1975 to 31st March, 1976 and 1st April, 1976 to 31st  March, 1977 under the Settlement was property so as to attract  the inhibition  of Article 31, clause (2).  The  Life  Insurance Corporation  submitted that at the date when  the,  impugned Act  was  enacted, Class III and Class IV employees  had  no absolute  right  to receive ’annual cash bonus’  either  for the,  year  1st April, 1975 to 31st March, 1976 or  for  the year  1st  April, 1976 to 31st March, 1977  and  there  was, therefore,, no property which could be compulsorily acquired under the impugned Act.  The argument of the Life  Insurance Corporation was that the Life Insurance Corporation  (Staff) Regulations,  1960 which laid down the terms and  conditions of  services inter alia of Class III and Class IV  employees did  not contain any provision for payment of  bonus  except Regulation  58  and since under this  Regulation,  grant  of annual  cash  bonus by the life  Insurance  Corporation  was subject  to such directions as the Central Government  might issue,  the  right of Class III and Class  IV  employees  to receive  annual  cash  bonus  could not be  said  to  be  an absolute right.  It was a right which was liable to, be  set at  naught  by any directions that might be  issued  by  the Central  Government and in fact the Central  Government  did issue  a direction to the life Insurance Corporation not  to make payment of bonus to the employees "without getting  the same cleared by the Government" and consequently, Class  III and Class IV employees had no absolute right to claim bonus. The  result,  according to the Life  Insurance  Corporation, also  followed on a proper interpretation of clauses  8  (i) and  8(ii) of the Settlement, for it was clear on  a  proper reading of these two clauses that annual cash bonus  payable to Class III and Class IV employees under clause 8 (ii) was, by  reason of clause 8 (i) , subject to such  directions  as the Central Government might issue from time to time and the Central  Government having directed that no further  payment of  bonus  should be made to the employees,  Class  III  and Class  TV employees were not entitled to claim  annual  cash bonus from the Life Insurance Corporation.  This argument of the  Life Insurance Corporation is plainly erroneous and  it is,  not possible to accept it.  Regulation  58  undoubtedly says  that  non-profit sharing bonus may be granted  by  the Settlement  was property and since the impugned transfer  of the  ownership of this right to the Life which  was  ’State’ within the meaning of Article 35 7 the Life Insurance Corporation to its employees, subject  to such  directions  as the Central Government may  issue  and, therefore,  if the Central Government issues a direction  to the  contrary, nonprofit sharing bonus cannot be granted  by the  Life Insurance Corporation to any class  of  employees. But here, in the present case, grant of annual cash bonus by the  Life  Insurance Corporation to Class III and  Class  IV employees under clause 8(ii) of the Settlement was  approved by  the Central Government as provided it clause 12 and  the ’direction  contemplated by Regulation 58 was given  by  the Central Government that annual cash bonus may be granted  as provided  in  clause 8(ii) of the Settlement.   It  was  not competent  to  the Central Government  thereafter  to  issue another  contrary direction which would have the  effect  of compelling the Life Insurance Corporation to commit a breach of  its obligation under section’18, sub-section (1) of  the

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Industrial  Disputes Act, 1947 to pay annual cash  bonus  in terms of clause 8 (ii) of the Settlement.  Tumina to  clause 8(i)  of the Settlement, it is true that under this,  clause non-profit  sharing  bonus  could be  granted  by  the  Life Insurance  Corporation  ’subject to such directions  as  the Central  Government  may issue from time to time  but  these words  giving overriding power to the Central Government  to issue directions from time to time are conspicuously  absent in clause 8(ii) and it is difficult to see bow they could be projected or read into that clause,.  Clauses 8(i) and  8(ii are  distinct and independent clauses and while clause  8(i) enacts a general provision that non-profit sharing bonus may be  paid by the Life Insurance Corporation to Class III  and Class IV employees subject to such directions as the Central Government might issue from time to time, clause 8(ii) picks out  one kind of non-profit sharing bonus  and  specifically provided  that annual cash bonus shall be paid to all  Class III and Class IV employees at the rate of 15 per cent of the annual  salary  and  this specific provision  in  regard  to payment  of  annual cash bonus is made subject to  only  the approval  of  the Central Government  which  was  admittedly obtained.  It is, therefore, clear that Class III and  Class IV employees had absolute right to receive annual cash bonus from the Life Insurance Corporation in terms of clause 8(ii) of  the Settlement and it was not competent to  the  Central Government  to  issue any directions to the  Life  Insurance Corporation to refuse or withhold payment of the same. It  is  true that under clause 8(ii) of the  Settlement  the annual  cast bonus for a particular year was payable at  the rate of 15 per cent. of the annual salary actually drawn  by the  employee in respect of the financial year to which  the bonus, related and it would, therefore, seem that the  bonus was  payable at the end of. the year and not before, but  it was not disputed on behalf of the Life Insurance Corporation that  even an employee who retired or resigned  before  the, expiration  of  that year, as also the heirs of  a  deceased employee  who  died during the. currency of the  year,  were entitled  to  receive,  proportionate  bonus  and  the  Life Insurance  Corporation  in fact recognised this  to  be  the correct  position in its administrative  instructions  dated 29th  March, 1974 and actually paid proportionate  bonus  to the  retiring- or resigning employee and the heirs;  of  the deceased  employee.   The annual cash  bonus  payable  under clause 8(ii) of the Settlement, therefore, accrued 358 from  day  to-day,  though payable  in  case  of  retirement resignation  or death, on the happening of that  contingency and  otherwise, on the expiration of the year to  which  the bonus related.  There was thus plainly and unquestionably  a debt in respect of annual cash bonus accruing to each  Class III or Class IV employees from day-to-day and  consequently, on the expiration of the year 1st April, 1975 to 31st March. 1976,  the annual cash bonus payable under clause  8(ii)  of the  Settlement  was  a debt due and  owing  from  the  Life Insurance Corporation to each Class III or Class IV employee and  so  also at the date when the impugned  Act  came  into force, each Class III or Class IV employee was entitled to a debt   due  and  owing  to  him  from  the  Life   Insurance Corporation  in  respect of the annual cash bonus  from  1st April,  1976 upto that date.  The question is whether  these debts due and owing from the Life Insurance Corporation were property  of  Class III and Class IV  employees  within  the meaning  of Article 31(2).  So also, was the right  of  each Class III and Class IV employee to receive annual cash bonus for the period from the date of commencement of the impugned

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Act  upto  31st  March, 1977 property  for  the  purpose  of Article  31(2)  ? These questions we shall  now  proceed  to consider,   for   on  the  answer  to   them   depends   the applicability of Article 31(2). It  is clear from the scheme of fundamental rights  embodied in  Part III of the Constitution that the guarantee  of  the right  to property is contained in Article 19 (1 )  (f)  and clauses  (  1 ) and (2) of Article 31. It stands  to  reason that  ’property’  cannot have one meaning in  Article  19(1) (f),  another in Article 31 clause (1) and still another  in Article  31,  clause  (2).  ’Property’ must  have  the  same connotation  in all the three Articles and since  these  are constitutional  provisions intended to secure a  fundamental right, they must receive the widest interpretation and  must be  held  to  refer  to  property  of  every  kind.    While discussing the scope and content of Entry 42 in List III  of the  Seventh  Schedule to the  Constitution,  which  confers power  on Parliament and the Legislatures to legislate  with respect  to "acquisition and requisitioning of property"  It was  J., speaking on behalf of the majority in  R.  India(1) that   property  which  can  be  compulsorily   aquired   by legislation  under this Entry means the  "highest  anything, being   that  right  which  one  has  to  with  respect   to "acquisition  and requisition of property", it  was  pointed out by Shah, C. Cooper v. Union of acquired by legislative a man can have to lands or tenements, goods or chattels  which does  not  depend  on  another’s  courtesy  :  it   includes ownership,  estates and interests in corporeal  things,  and also  rights  such as trade-marks, copyrights,  patents  and even rights in persona capable of transfer or  transmission, such,  as  debts; and signifies a beneficial right to  or  a thing  considered as having a money value,  especially  with reference  to transfer or succession, and to their  capacity of   being  injured".   It  would,  therefore,  seem   that, according to the decision of the majority in R. C. Cooper’.s case, debts and other rights in personam capable of transfer or  transmission  are property which can form  the  subject- matter of compulsory acquisition.  And this would seem to be unquestionable  on principle, since  even  jurisprudentially debts  and other rights of action are property and there  is no (1)  [1970] 3 S.C.R. 530. 359 reason  why they should be excluded from the  protection  of the  constitutional  guarantee.   Hidayatullah,  C.J.,   had occasion  to  consider  the true nature of  debt  in  H.  H. Maharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur & Ors. v.  Union  of India(1) where the question  was  whether  the Privy  Purse payable to the Ruler was property of  which  he could  be said to be deprived by the Order of the  President withdrawing  his  recognition as Ruler.  The  learned  Chief Justice,  making  a very penetrating analysis of  the  jural relationship involved, in a debt, pointed out that " a  debt or  a  liability to pay money passes  through  four  stages. First  there  is a debt not yet due.  The debt has  not  yet become  a  part of the obliger’s ’things’  because.  no  net liability  has  yet arisen.  The Second stage  is  when  the liability  may have arisen but is not either ascertained  or admitted.   Here again the amount due has not become a  part of the obligor’s things, The third stage is reached when the liability  is  both ascertained and admitted.   Then  it  is property proper of the debtor in the creditor’s hands.   The law  begins  to recognise such property  in  insolvency,  in ,dealing   with  it  in  fraud  of   creditors,   fraudulent preference  of  one creditor against  another,  subrogation,

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equitable  estoppel, stoppage intransitive etc.   A  credit- debt  is then a debt fully provable and which is  fixed  and absolutely owing.  The last stage is when the debt becomes a judgment debt by reason of a decree of a Court." and  apply- ing  this  test,  concluded that the Privy  Purse  would  be property   and   proceeded  to  add  :  "As,  soon   as   an Appropriation  Act is passed there is established a  credit- debt and the outstanding Privy Purse becomes the property of the  Ruler  in the hands of Government.  It is  also  a  sum certain  and  absolutely payable." Since the effect  of  the Order  of  the President was to deprive the,  Ruler  of  his Privy Purse which was his property the learned Chief Justice held that there was infringement of the fundamental right of the  Ruler under Article 3 1 (2).  Hegde, J.,  also  pointed out  in  a separate but concurring judgment that  since  the right to get the Privy Purse was a legal right  "enforceable through  the  courts", it was undoubtedly property  and  its deprivation  was  sufficient to, found a petition  based  on contravention  of Article 31(2).  It was also held  by  this Court in State of Madhya Pradesh v. Ranajirao Shinde &  Anr. (2)  that  a right to receive cash grant annually  from  the State was property within the, meaning of that expression in Article 19(1)(f) and clause (2) of Article 31.  The right to pension  was  also regarded as property for the  purpose  of Article  19(1)  (f)  by  the  decisions  of  this  Court  in Deokinanda  Prasad v. State of Bihar(1) and State of  Punjab v. K. R. Erry & Sobhag Rai Mehta(4).  This Court adopted the same line of reasoning when it said in State of Gujarat  and Anr.  v. Shri Ambica Mills Lid., Ahmedabad(5)  that  "unpaid accumulations represent the obligation of the, employers  to the  employees and they are the property of the  employees". Mathew,  J., speaking on behalf of the Court, observed  that the obligation to, the employees owned by the employers was (1)  [1968] 3 S.C.R. 489. (3)  [1971] Supp.  S.C.R. 634. (4)  [1973] 2 S.C.R. 405. (5)  [1974] 3 S.C.R. 760. (2)  [1968] 3 S.C.R. 9. 360 "property from the standpoint of the employees".  It  would, therefore,  be  seen  that Property within  the  meaning  of Article  19(1)(f)  and clause (2) of  Article  31  comprises every  form of property, tangible or  intangible,  including debts and chooses in action, such as unpaid accumulation  of wages,  pension, cash grant and  constitutionally  protected Privy  Purse.   The  debts  due  and  owing  from  the  Life Insurance Corporation in respect of annual cash bonus  were, therefore,  clearly  property  of Class  III  and  Class  IV employees within the meaning of Article 31, clause (2).  And so also was their right to receive annual cash bonus for the period; from the date of commencement of the impugned.   Act upto   31st  March,  1977,  for  that  was  a  legal   right enforceable  through  a court of law by issue of a  writ  of Mandamus, Vide the observation of Hegde, J., at page 194  in the Privy Purse case. But  a  question  was raised on behalf  of  the  Respondents whether  debts  and  choses in  action,  though  undoubtedly property,  could  form  the  subject-matter  of   compulsory acquisition  so as to attract the applicability  of  Article 31,  clause  (2).  There is divergence  of  opinion  amongst jurists in the United States of America on this question and though  in the earlier decisions of the American courts,  it was  said  that  the  power  of  eminent  domain  cannot  be exercised  in  respect of money and choses  in  action,  the modern trend, as pointed by Nicholas on Eminent Domain, Vol.

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1,  page 99, para 2, seems to be, that the right of  eminent domain  can be exercised on choses in action.  But  even  if the preponderant view in the United States were that  choses in action cannot come within the power of eminent domain, it would  not be right to allow us to be unduly  influenced  by this  view in the interpretation of the scope and  ambit  of clause  (2)  of Article 31.  We must interpret  Article  31, clause (2) on its own terms without any preconceived notions borrowed from the law in the United States on the subject of eminent domain.  Let us see how this interpretative exercise has been performed by this (Court in the decisions that have been  rendered  so  far and what light  they  throw  on  the question as to whether choses in action can be  compulsorily acquired  under clause (2) of Article 31.  We shall  confine our attention only to the question of compulsory acquisition of  choses  in  action and not say  anything  in  regard  to compulsory  acquisition of money, for in these  appeals  the question arises only in regard to choses in action and it is not  necessary  to  consider  whether  money  can  form  the subject-matter  of  compulsory acquisition.   This  question came to be considered by a constitution Bench of this  Court in  State of Bihar v. Kameshwar Singh(’,).  Section 4(b)  of the  Bihar  Land  Reforms Act,  1950,  which  provided.  for vesting  in  the State, of arrears of rent due to  the  pro- prietors or tenure holders for the period prior to the  date of  vesting  of  the estates or tenures  held  by  them,  on payment  of only 50 per cent of the amount as  compensation, was  challenged  as constitutionally invalid on  the  ground that there was no public purpose for which such  acquisition could  be  said  to  have  been  made.   The  necessity  for existence  of public purpose was not sought to be spelt  out from  Article  31, clause (2), because even  if  there  were violation of that (1)  [1952] S.C.R. 889. 361 clause,  it would be protected by Article 31A and the  Ninth Schedule read with Article 31-B, the.  Act being included as Item   in  the Ninth Schedule, but it was said  that  public purpose  was an essential element in the very nature of  the power of acquisition and even apart from Article 31,  clause (2), no acquisition could be made save for a public purpose. It  was  in the context of this argument that  Mahajan,  J., observed that money and choses in action could not be  taken under  the power of compulsory acquisition, since  the  only purpose  which such taking would serve would be  to  augment the  revenues of the State and that would clearly not  be  a public purpose.  The learned judge pointed out at pages 942- 944 of the Report :               "It is a well accepted proposition of law that               property of individuals cannot be appropriated               by  the  State under the power  of  compulsory               acquisition  for the, mere purposes of  adding               to  the, revenues of the State-no instance  is               known in which it has been taken for the  mere               purpose  of  raising  a revenue  by  sale,  or               otherwise  Taking  money under  the  right  of               eminent domain, when it must be compensated in               money afterwards is nothing more or less  than               a forced loan Money or that which in  ordinary               use  passes as such and which  the  Government               may  reach  by  taxation-and  also  rights  in               action  which can only be available when  made               to  produce money, cannot be taken under  this               power". for  the  taking  would not be for  a  public  purpose,  and

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proceeded  to  and  that the only purpose,  to  support  the acquisition of the arrears of rent was "to raise revenue  to pay compensation to some of the zamindars whose estates  are being  taken"  and  this purpose did  not  fall  within  any definition, however, wide, of the phrase ’public purpose and the  law  was, therefore, to this  extent  unconstitutional. Mukherjea,  J., came to the same conclusion and observed  at page 961 of the Report               "Money  as such and also rights in action  are               ordinarily excluded from this List by American               jurists and for good reasons.  There could  be               no  possible  necessity for taking  either  of               them under the power of eminent domain.  Money               in  the hands of a citizen can be  reached  by               the exercise of the power of taxation, it  may               be  confiscated  as a penalty  under  judicial               order-But,  as Cooley has pointed out,  taking               money  under the right of eminent domain  when               it  must  be compensated by  money  afterwards               could  be nothing more or less than  a  forced               loan and it is difficult to say that it  comes               under the head of acquisition and is  embraced               within its ordinary connotation." Chandrasekhara  Aiyer, J., also took the same view and  held that money. and choses in action were exempt from compulsory acquisition  "not  on  the  ground  that  they  are  movable property,  but on the ground that generally  speaking  there could be no public purpose in their 362 acquisition".   Patanjali Sastri, C.J., and Das, J., on  the other hand held that the arrears of rent constituted a  debt due by the tenants.  It was nothing but an actionable claim, against  the  tenants  which was undoubtedly  a  species  of ’property’  which  was assignable and, therefore,  it  could equally be acquired by the State as a species of ’property’. These two rival views were referred to by Venkatarama Aiyer, J.  speaking  on  behalf of the Court  in  Bombay  Dyeing  & Manufacturing Co.   Ltd.  v. The State of Bombay  &  Ors.(1) but the learned Judge did not treat  the  majority  view  as finally settling the law on the subject.     It appears that in  the  subsequent  case  of State  of  Madhya  Pradesh  v. Ranajirao Shinde (supra) Hegde, J., delivering the  judgment of  the Court observed that the majority view  in  Kameshwar Singh’s  case was followed by this Court in Bombay Dyeing  & Manufacturing  Co.’s  case, but we do not  think  that  this observation correctly represents what was decided in  Bombay Dyeing  & Manufacturing Co’s case.  Venkatarama  Aiyer,  J., rested  his decision in Bombay Dyeing &  Manufacturing  Co’$ case  on  alternative  grounds : if,  the  impugned  section provided  for the acquisition of money, and if  money  could not be acquired, then the section was void under Article  19 (1) (f) as imposing an unreasonable restriction on the right to  hold  property.  If, on the other hand, money  could  be acquired  ,  the section was void as offending  Article  31, clause (2) since the section did not provide for payment  of compensation.  The decision in Bombay Dyeing & Manufacturing Co.’s  case  did  not, therefore, lay down  that  money  and choses  in  action could not be acquired under  Article  31, clause (2). But  in State of Madhya Pradesh v. Ranojirao Shinde  (supra) this  Court did hold that money and choses in  action  could not form the subject-matter of acquisition under Article 31, clause  (2) and the reason it gave for taking this view  was the same as that which prevailed with the majority judges in Kameshwar  Singh’s case.  This Court held that the power  of

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compulsory  acquisition conferred under Article  31,  clause (2)  could not be utilised for enriching the coffers of  the State;  that  power  could be exercised only  for  a  public purpose and augmenting the resources of the State could  not be  regarded  as  public purpose.  Hegde,  J.,  speaking  on behalf of the Court, pointed out that if it were  otherwise, "it would be permissible for the legislatures to enact  laws acquiring  all  public  debts due from  the  State,  annuity deposits  returnable by it and provident fund payable by  it by providing for the payment of some nominal compensation to the  persons whose rights are acquired, as the  acquisitions in  question would augment the resources of the State",  but nothing so bad could be said to be within the  contemplation of  clause  (2)  of Article 31.  Let  us  first  examine  on principles  whether this reasoning qua choses in  action  is sound and commends itself for our acceptance. This  premise on which this reasoning is based is  that  the only  purpose for which choses in action may be acquired  is augmenting  the  revenues of the State and there can  be  no other purpose for such (1)  [1958] S.C.R. 1122. 363 acquisition.   But this premise is plainly incorrect and  so is  the reasoning based upon it.  Why can choses  in  action ’not be acquired for a public purpose other than mere adding to  the revenues of the State ?  There may be debts due  and owing  by poor and deprived tillers, artisans  and  landless labourers  to  moneylenders and the State may  acquire  such debts  with  a  view to relieving  the  weak  and  exploited debtors  from  the harassment and oppression to  which  they might be subjected by their economically powerful creditors. The  purpose of the acquisition in such a case would not  be to enrich the coffers of the State.  In fact, the coffers of the State would not be enriched by such acquisition, because having regard to the financial condition of the debtors,  it may  not  be  possible for the State  to  recover  much,  or perhaps anything at all, from the impoverished debtors.  The purpose of such acquisition being relief of the distress  of the  poor  and helpless debtors would be  clearly  a  public purpose.  We have taken one example by way of  illustration, but  in  a modern welfare State, dedicated  to  a  socialist pattern of society, myriad situations may arise where it may be  necessary  to acquire choses in action for  achieving  a public purpose.  It is not correct to say that in every case where  choses  in  action may be acquired,  the  purpose  of acquisition  would necessarily and always be  augmenting  of the revenues of the State and nothing else.  Even the theory of  forced  loan may break down in case  of  acquisition  of choses in action.  There is a fundamental difference between chose  in action and money, in that the former has  not  the same mobility and liquidity as the latter and its values  is not  measured  by the amount recoverable under  it,  but  it depends  on  a  variety of factors  such  as  the  financial condition of the person liable, the speed and  effectiveness of the litigative process and the eventual uncertainty as to when  and to what extent it may be possible to  realise  the chose  in  action.   Even  after  the  chose  in  action  is acquired,  the State may not be able to recover  the  amount due under it and there may even be cases where the chose  in action  may be released by the State.  Where money is  given as  compensation for taking of money, the theory  of  forced loan  may apply,. but it is difficult to see how it  can  be applicable  where  chose  in  action  is  taken  and   money representing  its value, which in a large majority of  cases would be less than the amount recoverable under it, is given

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as compensation.  Moreover, the theory of forced loan stands considerably  eroded  after  the amendment  of  Article  31, clause (2) by the Constitution (Twenty-fifth Amendment) Act, 1971,  because under the amended clause, even if  an  amount less  than the just equivalent is given as compensation  for acquisition  of property, it would not be violative  of  the constitutional guarantee.  It is true, and this thought  was also  expressed  by  Krishna Iyer, J.,  and  myself  in  our separate  but concurring Judgment in the State of Kerala  v. The  Gwalior  Rayon Silk Manufacturing  (Wvg.)  Co.  Ltd.(1) that, notwithstanding the amended clause (2) of Article  31, the  legislature  would  be expected,  save  in  exceptional socio-historical  setting to provide just  compensation  for acquisition   of  property,  but  if  for  any  reason   the legislature   provides  a  lesser  amount  than   the   just equivalent, it would not be open to challenge on the  ground of infringement of clause (2) of Article (1)  [1974] 1 S.C.R.671. 364 31.  Then,  how  can the theory of forced  loan  apply  when chose  in action is acquired and what is paid for it is  not the  just equivalent but a much lesser amount, which  is  of course  not  illusory.  Moreover, there is  also  one  other fallacy underlying the argument that there can be no  public purpose  in the acquisition of choses in action and that  is based on the assumption that the public purpose contemplated by Article 31, clause (2) lies in the use to which the  pro- perty  acquired is to be put as for example, where  land  or building  or  other movable property is acquired  for  being used  for  a  public purpose.  But this  assumption  is  hot justified by the language of Article 31, clause (2), because all that this clause requires is that the purpose for  which the  acquisition  is made must be a public purpose,  or,  in other  words,  the, acquisitions must be made to  achieve  a public  purpose.   Article 31, clause (2) does  not  require that the property acquired must itself be used for a  public purpose.   So  long as the acquisition  subserves  a  public purpose,  it would satisfy the requirement of clause (2)  of Article  31  and,  therefore, if it can be  shown  that  the acquisition  of choses in action is for subserving a  public purpose,  it  would be constitutionally valid.   Hegde,  J., expressed  an  apprehension in State of  Madhya  Pradesh  v. Ranojirao Shinde (supra) that if this view were accepted, it would  be  permissible  for the legislature  to  enact  laws acquiring  the public debts due from the State, the  annuity deposits returnable by it and the provident fund payable  by it by providing for payment of some nominal compensation  to the  persons  whose rights were acquired.  We do  not  think this  apprehension is well founded.  It is difficult to  see what  public purposes can possibly Justify a  law  acquiring the  public debts due to the State or the  annuity  deposits returnable  by it or the provident fund payable by  it.   If the  legislature enacts a law acquiring any of these  choses in  action, it could only be for the purpose  of  augmenting the revenues of the State or reducing State expenditure  and that  would  clearly  not  be  a  public  purpose  and   the legislation would plainly be violative of the constitutional guarantee  embodied  in Article 31, clause (2).   We  would, therefore, prefer the minority view of Das, J., in Kameshwar singh’s  case  (supra)  as  against  the  majority  view  of Mahajan, J., Mukherjea, J. and Chandrasekhara Aiyer, J. So  much on principle.  Turning now to the  authorities,  we find  that,  apart from the view of the majority  judges  in Kameshwar  Singh’s  case and the decision in  the  State  of Madhya  Pradesh  v. Ranojirao Shinde (supra),  there  is  no

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other  decision of this Court which has taken the view  that choses  in  action  cannot be  compulsorily  acquired  under Article  31,  clause  (2).  There  are  in  fact  subsequent decisions  which clearly seem to suggest the, contrary.   We have already referred  to R. C. Cooper’s case.  The majority judgment case gives the widest meaning to ’property which of Shah, J., in that can be, compulsorily acquired and includes within  it  ::rights  in personam  capable  of  transfer  or transmission, such as debts. The majority view in  Kameshwar Singh’s  case  (supra) and the decision in State  of  Madhya Pradesh  v.  Ranojirao Shinde (supra) on this point  can  no longer be regarded as good law in view of this statement  of the law in the majority judgment of Shah, J. Then again,  in the Privy Purse case (supra), 365 Hidayatullah,  C.J., held that the Privy Purse payable to  a Ruler  was  a  credit-debt owned by him  and  since  he  was deprived  of  it by the Order of the  President,  there  was violation of his- fundamental right under Article 31, clause (2).  The learned Chief Justice thus clearly recognised that debt  or  chose in action could form the subject  matter  of compulsory acquisition under Article 31, clause (2).  Hegde, J.,  also took the same view in his separate but  concurring judgment  in the Privy Purse case.  It will,  therefore,  be seen  that  the trend of the recent decisions  has  been  to regard  debt  or chose in action as property  which  can  be compulsorily acquired under clause (2) of Article 31. We are accordingly  of the view that the debts due and  owing  from the Life Insurance Corporation to Class III and Class IV em- ployees  in  respect of annual cash  bonus  were  ’property’ within the meaning of Article 3 1, clause (2) and they could be compulsorily acquired under that clause. The question, however, still remains whether by the impugned Act  there  was compulsory acquisition of the debt  due  and owing  from the Life Insurance Corporation to Class III  and Class IV employees in respect of annual cash bonus.  It  was not  disputed  on behalf of the Life  Insurance  Corporation that  if  the impugned Act had the  affect  of  compulsorily acquiring  these debts belonging to Class III and  Class  IV employees, it would be void as offending Article 31,  clause (2), since it admittedly did not provide for payment of  any compensation.    The  Statement  of  Objects   and   Reasons undoubtedly  said that the provisions of the  Settlement  in regard to payment of annual cash bonus were being set  aside with effect from 1st April, 1975 with a view to enabling the Life Insurance Corporation to make ex-gratia payment to  the employees  "at  the  rates determined on the  basis  of  the general  Government policy for making ex-gratia payments  to the, employees of non-competing public sector  undertaking". But  the impugned Act did not contain any provision to  that effect and Class III and Class IV employees were deprived of the debts due and owing to them without any provision in the statute for payment of compensation.  The learned  Attorney- General  on  behalf  of  the  Life  Insurance   Corporation, however, strenuously contended that there was no  compulsory acquisition  of  the debts due and owing to, Class  III  and Class IV employees under the impugned Act, but all that  the impugned   Act  did  was  to  extinguish  those   debts   by annihilating  the provisions of the Settlement in regard  to payment  of  annual cash bonus with effect from  1st  April, 1975.   The  debts  due and owing from  the  Life  Insurance Corporation  to Class III and Class IV employees,  said  the learned   Attorney-General,   were  extinguished   and   not compulsorily  acquired and hence there was no  contravention of  Article 31, clause (2).  Now, prior to the  Constitution

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(Fourth Amendment) Act, 1955, which introduced clauses  (2A) and (2B) in Article 3 1, there was considerable  controversy as  to the inter-relation between clauses (1) and.  (2)  and that  coloured  the  interpretation  of  the  words   "taken possession  of or acquired" in clause (2) as it stood  prior to  the amendment.  The majority view in The State  of  West Bengal  v.  Subodh  Gopal  Bose  &  Ors.(1)  and   Dwarkadas Shrinivas of (1) [1954] S.C.R. 587. 6-277SCI/78 366 Bombay v. The Sholapur Spinning & Weaving Co. Ltd. & Ors:(1) was that clauses (1) and (2) of Article 31 were not mutually exclusive;   but  they  dealt  with  same  topic   and   the deprivation  contemplated in clause (1) was no,  other  than the compulsory acquisition or taking possession of  property referred  to in clause (2) and hence where  the  deprivation was so substantial as to amount to compulsory acquisition or taking   possession,   Article  31   was   attracted.    The introduction  of  clause (’-)A) in Article, 31  snapped  the link  between  clauses  (1)  and (2)  and  brought  about  a dichotomy  between these two clauses.   Thereafter,  clause. (2)    alone   dealt   with   compulsory   acquisition    or requisitioning of property by the State and clause (1) dealt with  deprivation of property in other ways and what  should be  regarded as compulsory acquisition or requisitioning  of property for the Purpose of clause (2) was defined in clause (2A).  It was if clause (2A) supplied the dictionary for the mean  of  ’compulsory  acquisition  and  requisitioning   of property  in  clause (2).  Clause (2A) declared that  a  law shall   not  be  deemed,  to  provide  for  the   compulsory acquisition  or requisitioning of property, if it  does  not provide  for  the  transfer of the  ownership  or  right  to possession of the property to the State or to a  corporation owned  or controlled by the State.  It is only where  a  law provides   for  the  transfer  of  ownership  or  right   to possession of any property to the State or to a  corporation owned or controlled by the State that it would have to  meet the challenge of clause (2) of Article 31 as a law providing for  compulsory acquisition or requisitioning  of  property. Whenever, therefore, the constitutional validity of a law is challenged on the ground of infraction of Article 31, clause (2),  the question has to be asked whether the law  provides for the transfer of ownership or right to possession of  any property  to  the  State  or  to  a  corporation  owned   or controlled   by  the  State.   Here,  the   Life   Insurance Corporation  is  a  corporation owned by the  State  as  its entire capital has been provided by the- Central Government. The debts due, and owing to Class III and Class IV employees from  the  Life  Insurance  Corporation  are  cancelled   or extinguished  by  the  impugned Act.  Does  that  amount  to transfer of ownership of any property to the Life  Insurance Corporation within the meaning of clause (2A) of Article  31 ? If it does, Article 31, clause (2) would be attracted, but not  otherwise.  That depends on the true interpretation  of Article 31, clause (2A). Now, whilst interpreting Article 31, clause (2A), it must be remembered  that  the interpretation we place upon  it  will determine   the  scope  and  ambit  of  the   constitutional guarantee  under  clause  (2) of Article 31.  We  must  not, therefore, construe clause (2A) in a narrow pedantic  manner nor  adopt  a  doctrinaire  or  legalistic  approach.    Our interpretation must be guided by the substance of the matter and not by lex scripts.  When clause (2A) says that in order to attract the applicability of clause  (2)  the  law   must

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provide for the transfer of ownership of property to the  State or to a corporation owned or controlled by the State, it  is not  necessary that the law should in so many words  provide for  such  transfer.  No particular verbal formula  need  be adopted.   It is not a ritualistic mantra which is  required to be repeated in the law.  What (1)  [1954] S.C.R. 674. 3 67 has to be considered is the substance of the law and not its form.  The question that is to be asked is : does the law in substance  provide for transfer of ownership-  of  property, whatever  be the linguistic formula employed ? What  is  the effect  of  the  law  : does  it  bring  about  transfer  of ownership of property ? Now, ’transfer of ownership is  also a  term of wide import and it comprises every mode by  which ownership  may  be transferred from one person  to  another. The  mode of transfer may vary from one kind of property  to another  : it would depend on the nature of the property  to be transferred.  And moreover, the court would have to  look to  the substance of the transaction in order  to  determine whether there is transfer of ownership involved in what  has been brought about by the law. There is no doubt that in the present case the impugned  Act extinguished  or put an end to the debts due and owing  from the  Life  Insurance Corporation to Class III and  Class  IV employees. that was the, direct effect of. the impugned  Act and  it  can,  therefore,  be  legitimately  said  that   in substance  the impugned Act provided for  extinguishment  of these  debts,  though it did not say so in  so  many  words. This  much  indeed was not disputed on behalf  of  the  Life Insurance  Corporation  and  the  controversy  between   the parties   only  centred  round  the  question  whether   the extinguishment  of  these  debts involved  any  transfer  of ownership  of  property to the Life  Insurance  Corporation. The learned Attorney General on behalf of the Life Insurance Corporation   sought   to   make   a   distinction   between extinguishment  and  transfer  of ownership of  a  debt  and contended  that when ownership of a debt is transferred,  it continues to exist as a debt in the hands of the transferee, but when a debt is extinguished it ceases to exist as a debt and it is not possible to say that the debtor has become the owner of the debt.  There can be no transfer of ownership of a  debt, said the learned Attorney-General unless  the  debt continues  to exist as such in the hands of the  transferee, and,  therefore, extinguishment of a debt does  not  involve transfer  of  ownership  of the debt to  the  debtor.   This contention   of   the   learned   Attorney-General,   though attractive  at  first  blush, is, in our  opinion  not  well founded.   It  is not correct to say that there  can  be  no transfer  of  ownership of a right or interest  unless  such right or interest continues to have a separate  identifiable existence  in  the  hands  of the  transferee.   It  is  not difficult  to find instances where ownership of a  right  or interest  may be transferred from one person to, another  by extinguishment.   Take for example, a case where the  lessor terminates  the  lease  granted  by him  to  the  lessee  by exercising his right of forfeiture or the lessee  surrenders the lease in favour of the lessor.  The lease would in  such a  case come to an end and the interest of the lessee  would be  extinguished and correspondingly, the reversion  of  the lessor  would be enlarged into full ownership by the  return of the leasehold interest.  There would clearly be  transfer of the lease-hold interest from the lessee to the lessor  as a  result  of  the  determination  of  the  lease  and   the extinguishment  of  the interest of the  lessee.   The  same

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would be the position where A law provides for cancellation, of the lease and in such a case, if the lessor is the  State or a corporation owned or controlled by the State, it  would amount  to compulsory acquisition of the leasehold  interest of the lessees within meaning of clause (2A) of Article  31. It was in fact to held by this 368 Court  and in our opinion rightly in Ajit Singh v. State  of Punjab(1)  where  sikri,  J.,  speaking  on  behalf  of  the majority, pointed out at page 149 that if "the State is  the landlord of an estate and there is a lease of that  property and a law provides for the extinguishment of leases held  in an  estate-it  would  properly fall under  the  category  of acquisition   by  the  State  because  the  beneficiary   of extinguishment  would  be the State".  Where  by  reason  of extinguishment of a right or interest of a person, detriment is  suffered by him, and a corresponding benefit accrues  to the  State,  there would be transfer of  ownership  of  such right  or interest to the State.  The question would  always be  : who is the, beneficiary of the extinguishment  of  the right  or  interest effectuated by the law?  If  it  is  the State,  then  there would be transfer of  ownership  of  the right  or interest to the State-, because what the owner  of the  right  or  interest would have lost by  reason  of  the extinguishment  would be the benefit accrued to  the  State. This  was  precisely the reason why Hegde, J.,  speaking  on behalf of the Court observed in the State of Madhya  Pradesh v. Ranojirao Shinde (supra) that it was possible to view the abolition  of  cash  grants under  the  Madhya  Pradesh  law impugned in that case "as a statutory transfer of rights  of the grantees to the State".  It was pointed out in that case that there was no difference between taking by the State  of money  that is in the hands of others and the abrogation  of the liability of the State to make payment to others, for in the  former  case  the State would  be  compulsorily  taking others’ property, while in the latter it would be seeking to appropriate to itself the property of others which is in its hands.   It  is, therefore, clear that when a debt  due  and owing  by the State or a corporation owned or controlled  by the  State  is  extinguished by law, there  is  transfer  of ownership  of  the  money representing  the  debt  from  the creditor   to  the  State  or  the  State   owned/controlled corporation.   So long as the debt is due and owing to,  the creditor,   the   State  or   the   State   owned/controlled corporation  is under a liability to pay the amount  of  the debt  to the creditor and, therefore, if the amount  of  the debt is X, the total wealth of the creditor would be A  plus X,  while  that  of  the  State  or  State  owned/controlled corporation  would  be  B  minus  X.  But  if  the  debt  is extinguished,  the  total wealth of the  creditor  would  be reduced by X and that of the State or State owned/controlled corporation augmented by the same amount.  Would this not be in  substance and effect of transfer of X from the  creditor to  the  State or State owned/controlled corporation  ?  The extinguishment   of   the   debt  of   the   creditor   with corresponding benefit to the State or State owned/controlled corporation  would plainly and indubitably involve  transfer of  ownership of the amount representing the debt  from  the former   to  the  latter.   This  is  the  real  effect   of extinguishment of the debt and by garbing it in the form  of extinguishment,  the State or State owned/controlled  corpo- ration cannot obtain benefit at the cost of the creditor and yet avoid the applicability of Article 31, clause (2).   The verbal   veil  constructed  by  employing  the   device   of extinguishment  of  debt cannot be permitted to  conceal  or

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hide the real nature of the transaction.  It is necessary to remember  that  we  are dealing here with  a  case  where  a constitutionally  guaranteed right is sought to be  enforced and the protection of such right should not be allowed to be defeated or rendered illusory by legis- 3 69 lative  stratagems.  The courts should be ready to rip  open such  stratagems and devices and find out whether in  effect and substance the legislation trenches upon any  fundamental rights.   The encroachments on fundamental rights are  often subtle and sophisticated and they are disguised in  language which apparently seems to steer clear of the  constitutional inhibitions.   The need for a perspective and alert Bar  is, therefore,  very  great and the courts too have to  adopt  a bold and dynamic approach, if the fundamental rights are  to be protected against dilution or erosion. In   the  light  of  this  discussion,  the  conclusion   is inevitable that the direct effect of the impugned Act was to transfer  ownership of the debts due and owing to Class  III and  Class IV employees in respect of annual cash  bonus  to the Life Insurance Corporation and since the Life  Insurance Corporation  is  a  corporation  owned  by  the  State,  the impugned Act was a law providing for compulsory  acquisition of  these  debts by the State within-the meaning  of  clause (2A)  of Article 31.  If that be so, the, impugned Act  must be  held to be violative of Article 31, clause (2) since  it did not provide for payment of any compensation at ail.  for the compulsory acquisition of these debts. Re : Ground (B) Since  the  impugned  Act has been held  void  as  offending Article 3 1, clause (2) under Ground (A), it is  unnecessary to  consider Ground (B) based on infraction of Article 19  ( 1)  (f). It is the settled practice of this Court to  decide no  more than what is absolutely necessary for the  decision of a case.  Moreover, once it is held that-the impugned  Act falls within Article 31, clause (2), its validity cannot  be tested  by  reference  to Article 19 (1) (f)  by  reason  of clause  (2B)  of  Article 31. Hence  we  do  not-propose  to discuss the very interesting arguments advanced before us in regard to Article 19 (1) (f). We accordingly allow the writ petitions and declare the Life Insurance Corporation (Modification of Settlement) Act, 1976 void as offending Article 31, clause (2) of the Constitution and  issue a writ of Mandamus directing the union  of  India and   the  Life  Insurance  Corporation  to  forebear   from implementing or enforcing the provisions of that Act and to, pay  annual cash bonus for the years 1st April, 1975 to 3  1 st  March, 1976 and 1 st April, 1976 to 3 1 st  March,  1977 to, Class III and Class IV employees in accordance with  the terms of clause 8(ii) of the Settlement dated 24th  January, 1974.   The  respondents  will pay the  costs  of  the  writ petitions to the petitioners.                            ORDER We agree with the conclusion of Brother Bhagwati but  prefer to  rest  our decision on the ground that the  impugned  Act violates the provisions of Article 31(2) and is,  therefore, void.  We consider it unnecessary to express any opinion  on the  effect  of the judgment of the Calcutta High  Court  in W.P. No. 371 of 1976. P.B.R.              Petitions allowed. 3 70