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PETITIONER: AJOY KUMAR BANERJEE & ORS. ETC.

       Vs.

RESPONDENT: UNION OF INDIA & ORS. ETC.

DATE OF JUDGMENT21/03/1984

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) CHANDRACHUD, Y.V. ((CJ) PATHAK, R.S.

CITATION:  1984 AIR 1130            1984 SCR  (3) 252  1984 SCC  (3) 127        1984 SCALE  (1)539  CITATOR INFO :  RF         1990 SC 104  (8)  RF         1992 SC  81  (37)

ACT:      Constitution  of  India  1950  Articles  14  19(1)  (g) Article 31B  & Insurance Business (Nationalisation) Act 1972 Sec. 16, Right of Central Government frame schemes under the Act-Whether  affects   fundamental   rights   of   employees companies constituted under the Act.      Inclusion of  an Act  in the  Ninth Schedule  does  not protect order or notifications issued under the said Act.      Scheme notified under Sec. 16(1) whether protected.      Introduction of reform through legislation-Law need not have universal  application-Piecemeal method  of introducing reforms-Whether  permissible-Statutory   provision   whether could be struck down on vice of underinclusion.      Industrial  Disputes  Act  1947-Whether  applicable  to general insurance companies.      General Insurance  Business (Nationalisation)  Act  197 Sec. 16(1)(g).      General Insurance (Nationalisation and Revision of Pa!. Scales  And  other  Conditions  of  Service  of  Supervisory Clerical and  Subordinate Staff)  Second Amendment Scheme of 1980-Scheme of  1980 relating for revision of pay scales and other terms  and conditions  of service-Whether  ultra vires Sec.  16(2)  and  invalid-  Whether  suffers  from  vice  of excessive delegation of legislative power.      Administrative Law-Delegated legislation-Principles of- Scope of subordinate legislation .      Interpretation   of   Statutes-Conflict   between   the statutes-one special  other general-Which  to  prevail-Tests for determination of.      Interpretation  of   statutes-Not  mere   exercise   in semantics-Provisions   conferring   or   delegation   power- Construction. 253

HEADNOTE:      Prior to 1972, there were over 100 Insurance Companies- Indian and  A, foreign.  The conditions  of service  of  the employees of these companies were governed by the respective

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contracts  of   service  between   the  companies   and  the employees. On 13th May 1971, the Government of India assumed management of  these general  insurance companies  under the General Insurance  (Emergency  Provisions)  Act,  1971.  The General  Insurance   Business  (Nationalisation)  Act,  1972 nationalised general insurance business.      Four merger  schemes were framed in 1973 by the Central Government in  exercise of  the powers contained in s. 16(1) of the  Act and  four companies;  oriental Fire  and General Insurance Company,  National  Insurance  Company  New  India Assurance Company  and United  India Insurance Company Ltd., were merged into and they alone were allowed to carry on the business  of  general  insurance.  These  companies  started functioning from Ist January, 1973 and the process of merger was completed  by Ist January, 1974’ when the aforesaid four schemes came into force.      The Government  of India  by a  notification dated 27th May, 1974,  framed a  ’scheme’ called  the General Insurance (Rationalisation  and  Revision  of  Pay  Scales  and  other Conditions  of   Service  of   Supervisory,   Clerical   and Subordinate Staff)  Scheme, 1974  in exercise  of the powers conferred by  s. 16(1)(g)  of the  Act. This scheme provided for the rationalisation and revision of pay scales and other terms and  conditions of  service of  employees  working  in supervisory, clerical and subordinate positions and governed the pay  scales, dearness  allowance, other  allowances  and other  terms   and  conditions   of  the  general  insurance employees. Paragraph  23 of the Scheme provided that the new ’scales of pay’ shall remain in force till December 31, 1976 and thereafter shall continue to be in force unless modified by the Central Government.      In 1976,  the Board  of Directors approved a policy for promotion.  On  Ist  June,  1976  another  scheme  by  which amendments were  made with  regard to  Provident  Fund,  was introduced. On  30th July 1977, a Scheme amending provisions regarding sick leave was also introduced. ’ F      The employees  submitted a  memorandum objecting to the revision of  pay scales  and other conditions of service and wanted a reference to the Industrial Tribunal. The class III and IV  employees however  did not  accept the  revision  of Service Conditions,  pay scales dearness allowance, etc. and raised   industrial   dispute.   There   were   conciliation proceedings and  there was  failure to  bring about amicable settlement of disputes.      In  1980,   the  Government   introduced  the   General Insurance (Rationalisation  and Revision  of Pay  Scales and other conditions  of Service  of Supervisory,  Clerical  and Subordinate  Staff)  Second  Amendment  Scheme,  1980.  This Scheme  which   was  introduced   by  a  notification  dated September 30,  1980 made  detailed provisions  as to how the adjustment allowance  is to be dealt With so far as Dearness Allowance, overtime  Allowance,  Contribution  to  Provident Fund and other retirement benefits were concerned. Paragraph 7 which  dealt with ’retirement’ stipulated that an employee who was in service of the Corporation before the 254 commencement of  the  Scheme  of  1980  should  retire  from service when  he  attains  the  age  of  60  years,  but  an employee, who joins the service of the Corporation after the commencement of the Scheme would retire on attaining the age of 58 years. The Fourth Schedule to the Scheme indicated tho revised scales of pay.      The petitioners  in their  writ petitions to this Court contended  that   the  terms   and  conditions   of  service enunciated in  1974 being  a result  of bilateral  agreement

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could not  be changed  unilaterally to  the detriment of the employees and  that the  notification deprived the rights of the employees  to receive  dearness allowance  etc. with the rise in  the cost  of living index. It was further contended that the  Scheme was  violative of  s. 16(2)  of the Act and ultra vires  Articles 14,19(1)(g)  and Article  31(2) of the Constitution,  and  that  the  Constitution  44th  amendment deleting Articles  31 and  19 cannot  save the Scheme, since the amendment  came into force only 20th June, 1979, whereas the  impugned  notification  affecting  the  rights  of  the employees to emoluments took effect from 1st January, 1979.      The respondents  contested the  writ petitions  on  the ground that  s. 16(6)  authorised the  Central Government by notification, to  add, to amend or to vary any scheme framed under s.  16 and consequently rationalisation or revision of pay scales  was permissible  by the 1980 scheme. Moreover in comparison With  other employees  in governmental  or public sector, the  employees of  the general  insurance, companies were ’High-wage islanders’ and it was consequently necessary to put  a ceiling on their emoluments and other amenities in order to  facilitate better  functioning  of  the  insurance companies as  well as  to subserve the object and purpose of the nationalisation policy.      Allowing the writ petitions, ^      HELD: 1.  (a) The  impugned scheme  of 1980  is bad  as being beyond  the scope  of the  authority  of  the  Central Government,   under    the   General    Insurance   Business (Nationalisation) Act,  1972, and  therefore quashed.  This, however, will  not prevent  the  Government,  if  it  is  so advised, to  frame any  appropriate legislation  or make any appropriate amendment giving power to the Central Government to frame  any scheme  as it considers fit and proper. [290G; 291A-B]      1. (b)  The scheme  of 1980 so far as it is not related to the amalgamation or merger of insurance companies, is not warranted by  sub-s.  (1)  of  section  16.  The  scheme  is therefore bad and beyond authority. [278D]      A.V. Nachane  & Another  v. Union  of India  &  Another [1982] 2  S.C.R p. 246, Madan Mohan Pathak v. Union of India JUDGMENT: Corporation of  India v. D.J. Bahadur & Ors. [1981] 1 S.C.R. p. 1083. referred to.      2. The  duty of the Court in interpreting or construing a provision  is to  read the  section,  and  understand  its meaning in  the context  interpretation of  a  provision  or statute is  not a  mere exercise in semantics but an attempt to find  out the  meaning of  the legislation from the words used, understand the context and 255 the purpose  of the  expressions used  and then to construct the expressions  sensibly. [275C-D]      3 (a) The scheme is an exercise or delegated authority. The scope  and ambit  of such delegated authority must be so construed, if possible, as not to make it bad because of the vice of  excessive delegation of legislative power. In order to make  the power  valid, s.16  of the  Act  should  be  so construed in  such manner  that it  does not suffer from the vice  of  delegation  of  excessive  legislative  authority. [275E]      3. (b) Unlimited right of delegation is not inherent in the legislative power. [275 F]      Gwalior Rayon  Silk Mfg.  (Wvg.) Co.  Ltd. v. The Asst. Commissioner of  Sales Tax  & Ors.,  [1974] 2 S.C.R. p. 879, referred to.

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    4. The  growth of legislative power of the executive is a significant development of the 20th century. The theory of laissez-faire  has   been  given   a  go-by  and  large  and comprehensive powers  are being  assumed by the State with a view to  improve social  and  economic  well  being  of  the people. Most of the modern socioeconomic legislations passed by the  legislature lay  down the  guiding principles of the legislative policy.  The legislatures, because of limitation imposed upon  them and  the time  factor, hardly can go into the matters  in  detail.  The  practice  of  empowering  the executive  to   make  subordinate   legislation  within  the prescribed sphere has evolved out or practical necessity and pragmatic needs of the modern welfare State. [275G-276A]      5. Regarding delegated legislation, the principle which has been  well-established is  that the legislature must lay down the  guidelines,  the  principles  of  policy  for  the authority to  whom power  to make subordinate legislation is entrusted. The  legitimacy of  delegated legislation  depend upon its  being used  as  ancillary  which  the  legislature considers to  be necessary for the purpose of exercising i s legislative   power    effectively   and   completely.   The legislature must  retain  it  its  own  hand  the  essential legislative  function   which  consists   in  declaring  the legislative policy  and lay down the standard which is to be enacted into  a rule  of p law, and what can be delegated is the task of subordinate legislation which by its very nature is ancillary  to the  statute which  delegates the  power to make  it   effective  provided  the  legislative  policy  is enunciated with sufficient clearness or a standard laid down The courts cannot and do not interfere on the discretion and that  undoubtedly  rests  with  the  legislature  itself  in determining  the   extent  of   the  delegated  power  in  a particular case. [276B-D]      6. The  authority and scope for subordinate legislation can be  read in  either of  the two  ways; namely  one which creates  wider  delegation  and  one  which  restricts  that delegation. [277E]      In  the   instant  case,   the  Act  must  be  read  in conjunction with the Memorandum in Clause No. 16 of the Bill which introduced the Act in question. But above all, it must be read  in conjunction  with sub-section 2 of section 16 of the Act  which clearly  indicated the  object of framing the scheme under s. 16(1) of the Act. [277D] 256      7. In  view of the language of sub-s. (2) of section 16 and the  memorandum to the Bill, the one which restricts the delegation must  be preferred  to the  other. So  read,  the authority given  under s.  16 under the different clauses of sub-section (I)  must be to subserve the object as envisaged in sub-section (2) of section 16 of the Act, and if it is so read then  framing of  a scheme  for purposes  mentioned  in different clauses  of sub-section  (1) of section 16 must be related to  the amalgamation  or  merger  of  the  insurance companies as  envisaged both  in the memorandum on delegated legislation as well as sub-section (2) of section 16. [277F- G]      8. Sometimes  there have  been rise  in emoluments with the rise  in the  cost of  indeed in  certain public  sector corporations. The  legislature however  is free to recognise the degree  of harm  or evil  and to make provisions for the same. In  making dissimilar  provisions  for  one  group  of public sector  undertakings does  not  per  se  make  a  law discriminatory as  such.  Courts  will  not  sit  as  super- legislature and  strike down  a particular classification on the ground  that any under-inclusion namely that some others

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have been left untouched so long as there is no violation of constitutional restraints. [285D-E]      9. Piece-meal  approach to  a general problem permitted by under-inclusive  classifications, is  sometimes justified when it  is considered  that  legislatures  deal  with  such problem, usually  on an experimental basis. It is impossible to tell  how successful a particular approach might be, what dislocation might  occur, and  situation might  develop  and what  new   evil  mights   be  generated   in  the  attempt. Administrative  expedients   must  be   forged  and  tested. Legislators recognizing  these factors might wish to proceed cautiously, and courts must allow to do so. [286B-C]      Special Courts  Bill [1978]  2 S.C.R.  p. 476  at pages 540-541, State  of Gujarat  and Anr.  v. Shri  Ambica  Mills Limited Ahmedabad  etc. [1974] 3 S.C.R. p. 760 and R.K. Garg etc. v.  Union of India & Ors. etc., [1982] I S.C.R. p. 947, referred to.      In the instant case, as there was no industrial dispute pending, the  ground that  the petitioners  have been chosen out of  a vast  body of  workmen to be discriminated against and excluded  from the  operation of the Industrial Disputes Act, is  no ground  that there  has  been  no  violation  of Article 14 of the Constitution. [286D]      10. Differentiation  is not  always discriminatory.  If there  is   a  rational   nexus  on   the  basis   of  which differentiation has  been made  with the object sought to be achieved by  particular provision, then such differentiation is not discriminatory and does not violate the principles of Article 14  of the Constitution. There is intelligible basis for differentiation.  Whether  the  same  result  or  better result  could   have  been  achieved  and  better  basis  of differentiation evolved  is within the domain of legislature and must  be left  to the  wisdom of the legislature. [288H- 289B]      11. Article  14 does  not prevent  the Legislature from introducing a  reform i.e.  by applying  the legislation  to some institutions  or objects or areas only according to the exigency of  the situation  and  further  classification  of selection can  be sustained on historical reasons or reasons of administrative exigency or 257 piece-meal method  of introducing  reforms. The law need not apply to  all the  A  persons  in  the  sense  of  having  a universal application to all persons. A law can be sustained if it  clears equally with the people of well-defined class- employees of  Insurance Companies as such, and such a law is not open  to the charge of denial of equal protection on the ground that  it had not application to other persons. [290E- F]      State of  Karnataka &  Anr. etc. v. Ranganatha Reddy, & Anr. etc.  [1978] I  S.C.R. p.  641 at pages 672, 676 & 691, referred to.      In   the    instant   case,    for   the   purpose   of rationalisation, the  insurance companies  wanted to curtail the emoluments  of class  Ill and  class IV  employees on  a small scale.  It cannot  therefore be said that there are no distinguishing factors  and that  fol choosing  a particular group for experiment, the respondents should be found guilty of treating  people differently  while they are alike in all material respects [288G]      12.  The  object  of  the  General  Insurance  Business (Nationalisation)  Act   1972  is   to  run   the   business efficiently so  that the  funds available  might be utilised for  socially   viable  and   core  projects   of   national importance.  The   Nationalised  Banks   and  the  Insurance

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Companies for  the purposes of applicability or otherwise of the provisions  of the  Industrial Disputes  Act  cannot  be treated  as  belonging  to  one  class.  Historical  reasons provide   an    intelligible   differential   distinguishing Nationalised  Insurance   Companies  from  the  Nationalised Banks. The  financial resources, structures and functions of the  Banks   are  different  from  those  of  the  Insurance Companies. [288A-E]      13. The general rule to be followed in case of conflict between two  statutes is that the later abrogates the easier one. A  prior social  law would yield to a later General law if either of these two conditions are satisfied:      (i) The  two ale  inconsistent with each other and (ii) there is  some express reference in the later to the earlier enactment. [282D-F]      14. (i)  The Legislature  has the  undoubted  right  to alter  a   law  already   promulgated   through   subsequent legislation, (ii) A special law may be altered, abrogated or repealed by  a later  general law  by an  express provision, (iii) A  later general law will override a prior special law if the  two are  so repugnant to each other that they cannot co-exist even  though no express provision in that behalf is found in the general law, and (iv) It is only in the absence of a  provision to the contrary and of a clear inconsistency that a  special law will remain wholly unaffected by a later general law. [282G-H]      Maxwell-"Interpretation of Statutes Twelfth Edition pp. 196-198, referred to.      J.K. Cotton  Spinning & Weaving Mills Co. Ltd. v. State of U.P.  & Ors.  [1961] 3  S.C.R,. p.  185  and  U.P.  State Electricity Board  & Ors.  v. Hari  Shanker  Jain  and  Ors. [1979] 1 S.C R. p. 355, referred to. 258      15. The  General Insurance  Business  (Nationalisation) Ac; was  put in  the Ninth  Schedule of  the Constitution as Item 95  on loth  August 1975.  If any  of the rights of the petitioners had  been affected  by the  scheme of  1980 then these rights would not enjoy immunity from being scrutinised simply because the Act under which the scheme was framed had been put in the Ninth Schedule. In any event any right which accrued to  the persons  concerned prior to the placement of the Act  in the  Ninth Schedule  cannot be  retrospectively. affected by the impugned provisions. [284E-G]      Prag Ice  & Oil  Mills &  Anr. etc.  v. Union of India, [1978] 3 S.C.R. p. 293, referred to      In the instant case, empowering the Government to frame schemes for carrying out the purposes of the Act does not in any way  affect or  abridge the  fundamental rights  of  the petitioners and  would not  attract Article 19(1)(g). [284H; 285A]

&      ORIGINAL JURISDICTION:  Writ Petition  Nos. 5370-74  of 1980      (Under Art. 32 of the Constitution)      M. K.  Ramamurthi, J. Ramamurthi and Miss R. Vaigai for the petitioners in WPs. 5370-74      R. K. Garg and V. J. Francis      J. P.  Cama & Mukul Mudgal for Intervener in WPs. 5370- 74.      K.  Parasaran,   Attorney  General,   M.  K.  Banerjee, Additional Solicitor  General, Miss  A. Subhashini and C. V. Subba Rao, for the respondent (Union of India)

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    P. R.  Mridul, O. C. Mathur, S. Sukumaran, D. N. Mishra & Miss  Meera Mathur  for respondent no. 2 in WPs. 5370-74 & 5434.      Hemant Sharma  & Indu Sharma for the respondent in WPs. 5370-74. r.  Vineet Kumar, Lalit Bhasin, Vinay Bhasin & Miss Arshi singh?,  for Respondent  Nos. 3  to 6  in WPs.  5434 & 5370-74.      Ambrish Kumar for Intervener in WP. 5370.      Chandidus Sinha Intervener-in-person in WPs. 5370-74.      The Judgment of the Court was delivered by 259      SABYASACHI MUKHARJI J. These petitions under Article 32 of the  Constitution are  filed  by  the  employees  of  the General Insurance  Companies and  the  All  India  Insurance Employees Association.  The respondents are, Union of India, the General  Insurance Corporation of India and four General Insurance companies.      The petitioners  challenge the  Notification dated 30th September, 1980  of the  Ministry of  Finance (Department of Economic Affairs)  (Insurance) introducing  what  is  called General Insurance  (Rationalization and    Revision  of  Pay Scales and  other  Conditions  of  Service  of  Supervisory, Clerical and  Subordinate Staff)  Second  Amendment  Scheme, 1980 as  being illegal  and violative  of their  fundamental rights  under   Articles  14,   19(1)(g)  and   31  of   the Constitution of India.      Prior  to   1972,  there  were  106  General  Insurance companies Indian and foreign. Conditions of service of these employees were  D, governed  by the  respective contracts of service between  the companies  and the  employees. On  13th May, 1971, the Government of India assumed management of the general insurance  companies  under  the  General  Insurance (Emergency Provisions)  Act,  1972.  The  general  insurance business was  nationalised by the General Insurance Business (Nationalisation) Act,  1972 (Act  57 of 1972). The preamble of the Act explains the purpose of the Act as to provide for the acquisition  and transfer  of shares of Indian insurance companies and  undertakings of  other insurers  in order  to serve better the needs of economy in securing development of . general  insurance business  in the  best interest  of the community and  to ensure  that the operation of the economic system does not result in the concentration of wealth to the common detriment,  for the  regulation and  control of  such business and  for matters  connected therewith or incidental thereto.      Act 57  of 1972, by Section 2, declared that it was for giving effect  to the  policy of  the State towards securing the principles  specified in clause (c) of Article 39 of the Constitution. Under  Section 3(a)  of  the  Act,  ’acquiring company’ has  been defined  as any  Indian insurance company and, where  a scheme had been framed involving the merger of one or  more insurance  companies in another or amalgamation of two  or more  such companies,  means the Indian insurance company in which any other company has 260 been merged or the company which has been framed as a result of . the amalgamation.      Section 4  provides that  on the  appointed day all the shares in  the capital  of every  Indian  insurance  company shall be transferred to and vested in the Central Government free of  all trusts, liabilities  and encumbrances-affecting these.      Section S  provides for transfer of the undertakings of other existing  insurers. Section  6 provides for the effect of transfer  of undertakings.  Section 8  provides  for  the

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Provident Fund,  superannuation, welfare  or any  other fund existing. Section  9 stipulates    that  Central  Government shall form  a Government  company  in  accordance  with  the provisions of  the Companies Act, to be known as the General Insurance  Corporation   of  India   for  the   purpose   of superintending, controlling  and carrying on the business of general insurance.  Section 10 stipulates that all shares in the capital  of every  Indian insurance  company which shall stand transferred to and vested in the Central Government by virtue of  Section 4  shall immediately  after such vesting, stand transferred to and vested in to Corporation .      Chapter IV  deals with  the  amounts  to  be  paid  for acquisition and  as such  we are  not concerned in this case with that chapter in view of the controversy involved.      Chapter V  of the  aforesaid Act deals with "Scheme for reorganisation of general insurance business" Section 16 and 17 of the Act in this chapter are as follows:           "16. (1)  If the  Central Government is of opinion      that for  the more  efficient carrying  on  of  general      insurance business it is necessary so to do, it may, by      notification, frame  one or  more schemes providing for      all or any of the following matters:      (a)   the merger in one Indian insurance company of any           other Indian  insurance company,  or the formation           of a  new company  by the  amalgamation of  two or           more . Indian insurance companies;      (b)   the transfer  to and  vesting  in  the  acquiring           company of  the  undertaking  (including  all  its           business, properties, 261           assets and  liabilities) of  any Indian  insurance           company   which ceases  to exist  by reason of the           scheme;      (c)   the constitution,  name and registered office and           the capital structure of the acquiring company and           the issue and allotment of shares;      (d)   the constitution of a board of management by what           ever  name   called  for  the  management  of  the           acquiring company;      (e)   the alteration  of the memorandum and articles of           association of  the  acquiring  company  for  such           purposes as may be necessary to give effect to the           scheme,      (f)   the continuance  in the  acquiring company of the           services of  all officers  and other  employees of           the Indian  insurance company  which has ceased to           exist by  reason of  the scheme, on the same terms           and conditions  which they were getting or, as the           case  may   be,  by   which  they   were  governed           immediately before the commencement of the scheme;      (g)   the rationalisation or revision of pay scales and           other terms  and conditions of service of officers           and other employees wherever necessary;      (h)   the transfer  to the  acquiring  company  of  the           provident, superannuation, welfare and other funds           relating to  the officers  and other  employees of           the Indian  insurance company  which has ceased to           exist by reason of the scheme;      (i)   the  continuance  by  or  against  the  acquiring           company of legal proceedings pending by or against           any Indian  insurance company  which has ceased to           exist by  reason of the scheme, and the initiation           of such  legal proceedings,  civil or criminal, as           the Indian  insurance company might have initiated           if it had not ceased to exist;

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    (j)   such incidental,  consequential and  supplemental           matters as  are necessary  to give  full effect to           the scheme. 262           (2) In  framing schemes under sub-section (1), the      object of  the Central  Government shall  be to  ensure      that  ultimately   there  are   only   four   companies      (excluding the  Corporation) in existence and that they      are so  situate as  to render  their combined  services      effective in all parts of India.           (3) Where  a scheme under sub-section (1) provides      for the  transfer of any property or liabilities, than,      by virtue  of the  scheme,  the  property  shall  stand      transferred to  and vested  in, and  those  liabilities      shall be  transferred to and be come the liabilities of      the acquiring company.           (4) If  the rationalization or revision of any pay      scales or  other terms  and conditions of service under      any scheme  is not  acceptable to  any officer or other      employee,  the  acquiring  company  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      officer or  other employee under this sub-section shall      be in  addition to,  and shall not affect, any pension,      gratuity, provident  fund of other benefit to which the      employee may be entitled under his contract of service.           (5)  Notwithstanding  anything  contained  in  the      Industrial Disputes  Act, 1947  or in any other law for      the time  being in  force, the transfer of the services      of any officer or other employee of an Indian insurance      company to  the acquiring company shall not entitle any      such officer  or other  employee  to  any  compensation      under that  Act or  other law, and no such claim, shall      be  entertained.   by  any  court,  tribunal  or  other      authority.           (6) The  Central Government  may, by  notification      add to,  amend or  vary any  scheme framed  under  this      section.           (7) The  provisions of  this section  and  of  any      scheme.   framed    under   it    shall   have   effect      notwithstanding anything  to the  contrary contained in      any  other   law  or  any  agreement,  award  or  other      instrument for the time being in force. 263           17. A  copy of  every scheme and every amendment ,      thereto framed  under section 16 shall be laid, as soon      as may  be after  it is  made,  before  each  house  of      Parliament."      The object  of any scheme under this chapter, according to the  petitioners, was clear from the main part of Section 16(1) of the said Act, i.e. a scheme made under this chapter was only  for the  purpose of  providing for  the merger  of Indian insurance  companies, and  this  was  made  clear  by Section 16(2)  of the Act. Section 16(4) of the said Act, it was contend  on behalf  of the petitioners, implied that any scheme of  rationalization or  revision of  pay  scales  and other terms  could only  be in  the context  of  merger  and amalgamation of  a one  or more  of the  companies. In  this connection  mention   was  made   in  the  petition  of  the "Memorandum regarding  delegated legislation"  submitted  to the Parliament  along with  the General  Insurance  Business (Nationalisation) Bill,  1972 (Bill  No. 60  of 1972), which

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later became  the  aforesaid  Act.  It  was  made  explicit, according to  the petitioners,  that clause  16 of the Bill, later Section 16 of the Act "empowers the Central Government to frame  one or more schemes for the . merger of one Indian insurance company  with another  or for  the amalgamation of the two  or more  Indian insurance  companies and for matter consequential to  such merger  or amalgamation,  as the case might be."  It was  in the  aforesaid context  of merger  of companies that Section 16(1)(g) provided for rationalisation and revision of pay scales and other terms and conditions of service of officers and other employees wherever necessary.      In exercise  of the  powers contained  in the aforesaid Section ]  6(1) of  the said  Act, four  merger schemes were framed in  1973 by  the  Central  Government  and  the  four companies, oriental  Fire and    General  Insurance  Company Ltd., National  Insurance Company  Ltd., New India Assurance Company Ltd.,  and United India Insurance Company Ltd., into one  or   the  other  of  which  several  general  insurance companies in  the country were merged, were alone allowed to carry on  the business of general insurance. The preamble of the scheme,  called the  New India Assurance Company Limited (Merger)  Scheme,   1973,  had   stated  that   the  Central Government was  of the  opinion that  for the more efficient carrying on  of  the  general  insurance  business,  it  was necessary to  frame scheme  for the merger of certain Indian Insurance companies  in  the  New  India  Assurance  Company Limited. The  preambles of  the merger schemes in respect of the other three companies were on similar 264 lines. These  four companies are subsidiaries of the General Insurance  Corporation   of  India.  The  companies  started functioning from 1st January, 1973 and the process of merger of  the  various  companies  into  one  of  the  other  four companies was completed by I st January, 1974, when the said four schemes  came into force. The said schemes provided for the  transfer  of  officers  and  employees  of  the  merged companies to  the transferee Company. The memorandum and the articles of  association of  the four  Companies  were  also suitably altered  by the  said schemes. Thereafter there had been no merger or amalgamation of any insurance company. The petitioners stated  that there had been no reorganisation of general insurance  business either.  This position is not in dispute.      By a notification dated 27th May, 1974, the Ministry of Finance (Department  of Revenue  and Insurance Government of India,  framed  a  ’scheme’  called  the  General  Insurance (Nationalisation  and  Revision  of  Pay  Scales  and  other Conditions  of   Service  of   Supervisory,   Clerical   and Subordinate Staff)  Scheme, }974,  and the  preamble of  the scheme stated that "whereas the Central Government is of the opinion that  for the  more efficient  carrying  on  general insurance business,  it is  necessary to  do", therefore, in exercise of  the powers conferred by Section 16(1)(g) of the aforesaid Act, the Central Government framed the ’scheme’ to provide for  the rationalisation  and revision of pay scales and other  terms  and  condition  of  service  of  employees working in  supervisory, clerical  and subordinate  position under the insurers. The said scheme governed the pay scales, dearness allowance,  other allowances  and other  terms. and conditions of the general insurance employees.      It dealt,  inter alia,  with nature  and hours of work, fixation, retirement, provident fund and gratuity. Paragraph 23 of the 1974. scheme provided that the ’New scales of pay’ shall remain  in force  initially upto and inclusive of 31st December, 1976 and thereafter. shall continue to be in force

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unless modified  by the  Central Government.  The scheme was framed after  negotiations with  the parties  concerned. The petitioners further  state that  the scheme was purported to have been made under Section 1611)(g) of the said Act and it was treated  as one  made under Section 16(1) as part of the four merger  schemes. The  petitioners state that otherwise, it would have been invalid.      The petitioners further state that the employees of the insu- 265 rance  companies   serving  throughout   the  country  were, however, subsequently  not satisfied  with the  pay  scales, dearness allowance,  other terms and conditions available to them  on   account  of   several.  factors.   Through  their associations, they  submitted their  charters of  demands to the General  Insurance Corporation  of India in 1977 for the revision  of   terms  and   conditions  of   their  service. Negotiations were held between the management and the unions for the  upward revision  but according  to the petitioners, nothing happened.  Industrial dispute was raised between the management of General Insurance Corporation of India and the class III and IV employees. On the demand of revision of pay scales, dearness  allowance and other allowances and service conditions.  The   Chief  Labour   Commissioner   (Central), Government of India, Ministry of Labour, issued conciliation notice dated  11th  September,  1980  under  the  Industrial Disputes Act,  1947 to the Chairman of the General Insurance Corporation and  the general  secretaries of  the employees’ associations. There  were several  meetings. It was decided, according to  the petitioners,  that in  the meanwhile until the talks  were resumed  the employees  would not  resort to strike. There  was representation  to the respondents not to change the  conditions of  service pending  the conciliation proceedings. It  is not  necessary to refer in detail to all these, which  have been set out in the petition. But nothing fruitful  happened.   The   Labour   Commissioner   in   the circumstances sent  a failure  report under  the  Industrial Disputes Act,  1947 to  the Secretary,  Government of India, Ministry of  Labour, stating that there was failure to bring about amicable  settlement of    disputes.  The  petitioners contend that  no further  action was  taken and according to them the  conciliation proceedings were still pending. This, however, is  not accepted  by the  respondents, according to whom  there   was  failure   report  and   the  conciliation proceedings   ended   thereafter.   The   scheme   mentioned hereinbefore,  which   is   under   challenge   was   issued thereafter. We  will have  to deal  with the scheme in great detail as  the same  is the  subject matter  of challenge is these petitions under Article 32 of the Constitution.      After the  1974 scheme, in 1976, the Board of Directors approved of  promotion policy.  On 1st  June,  1976  another scheme  by  which  there  were  amendments  with  regard  to Provident Fund, was introduced. As mentioned before in 1977, major unions submitted charters of demands to the respondent No. 2,  seeking revision  in the  terms  and  conditions  of service of the employees with retrospective 266 effect. Between  10th  March,  1977  to  30th  March,  1977, memorandum was  addressed by  the  employees  of  all  India Association to the Union Finance Minister.      In the  memorandum addressed, it was stated that in the normal circumstances  on the expiry of the prescribed period of operation  of an  agreement,  settlement  of  award,  the unions usually  submitted charters  of demands  and the said charters of  demands  were  settled  either  through  mutual

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negotiations or  as a  result  of  award  of  an  industrial tribunal, built  as the  pay scales  and other conditions of service of the employees in general insurance industry were, however, governed  by a scheme or scheme to be formulated by the Central  Government and  it was  the Central  Government which could amend these, the unions submitted that there was justification for  making upward  revision  the  scheme  and shifting the base years from 1960 to 1970-71 for the purpose of prescribing  pay  scales.  This  point  was  stressed  by counsel appearing  for the  General  Insurance  Company,  in order to  emphasis  that  the  unions  always  accepted  the position prior to the present petitioner that the government had the  power to  amend or  make further  schemes under the provisions of  the Nationalisation  Act. On  30  July,  1977 scheme amending  the provisions  regarding  sick  leave  was introduced. In  .  1978  Promotion  Policy  was  revised  by General  Insurance   Company.  Between  1979-80  there  were discussions between  the management  of the  Corporation and the representatives  of the  Trade Unions which were held on 8th, 9th,  10th October,  1979, 7th,  8th, 9th, April, 1980, 12th and  13th June  and 1st  August 1980. The management of the Corporation after several rounds of discussions with the Unions sought  to narrow  down the  area of  differences and submitted to  the Government  the demands made by the Unions and the  managements recommendations.  The General Insurance Corporation submitted  before us that the Central Government after finally considering the demands and recommendations of the management  of the  Corporation framed  and notified the scheme under challenge on 30th September, 1980.      It was  contended on behalf of the petitioners that the said notification had been issued by the Government suddenly and  unilaterally,   without  any   notice  to  the  parties concerned.  The   employees  were  taken  unawares.  It  was contended that  from the provisions of the said notification the  service  conditions  of  the  employees  including  the petitioners employees, particularly with regard 267 to dearness allowance, stagnation increments, retirement age and other  increments  had  become  worse  than  before  and detrimental to  the  employees.  While  the  employees  were eagerly awaiting  improvement in  their service  conditions, this  notification  had  unilaterally  altered  the  service conditions to their prejudice petitioners in their petitions had alleged  certain facts  by certain  illustrations, which according  to   them,  indicated  that  employees  had  been affected adversely,  inter alia, in gross starting salary of different group  of employees,  salary  on  confirmation  of assistants who are graduates etc. It was further stated that retirement age  was 60 years for all the employees under the 1974 scheme.  But under  the new  scheme, retirement age was reduced to  58 years  for employees joining on or after I st January,  1979.   Clause  7  of  the  impugned  notification prescribed  different   ages  of   retirement,  though   the employees were  of the  same class  and  similarly  situated according to  the petitioners.  Para 12(1)  of the  impugned scheme - provided that an employee who was in service before the commencement  of the said scheme would retire at the age of 60  years but  provided  that  an  employee  joining  the service on  or after  the commencement  of the  said  scheme would retire  from service on attaining the age of 58 years. This was discriminatory, according to the petitioners, being violative of Article 14 of the Constitution.      lt was  further alleged that stagnation increments that is increments after reaching the maximum of the grade to all cadres up  to maximum  of 3  for every  two years of service

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were given  before, but  now under  the present notification clause  S  substituted  paragraph  7  and  provided  for  no stagnation increment except only one increment for two years to the  employees in  record clerk  cadre. Previously, there was no  maximum limit on salary. Now maximum limit was fixed at Rs.  2750. Earlier,  according to  the petitioners, House Rent Allowance  was given  to all  employees irrespective of Having official  accommodation, under  the new scheme, house rent ; allowance was withdrawn for employees having official accommodation.  Earned   leave  earlier   could  have   been accumulated upto  180 days,  but the  new scheme limited the accumulation of earned leave upto 180 days tor the employees retiring at  the age  of 58  years  and  120  days  for  the employees retiring  at the age of 60 years. It was stated in the  petitions  that  this  had  substantially  reduced  the emoluments of  the general  insurance employees,  and it had adversely affected the employees throughout the country. 268      The main  ground of  the challenge is that the impugned notification is  illegal as  the Central  Government has  no power to issue it under  Section 16 of the said Act and such as the  notification framing  the present  "scheme" is ultra vires  Section  16(1)  of  the  General  Insurance  Business (Nationalisation) Act  1972. According  to the  petitioners, once the  merger of  the insurance  companies took place and the process  of reorganisation  was complete on 1st January, 1974 as  mentioned before  by  forming  the  four  insurance companies by  the four schemes already framed in 1973, there could be  no  further  schemes  except  in  connection  with further reorganisation of general insurance business and the merger of  more. insurance  companies as  mentioned in  sub- section (1)  of Section  16 of  the said Act. By the present alleged  scheme   there  was  no  merger  or  reorganisation contemplated,  unlike   1974  scheme,   according   to   the petitioners. The  petitioners  contend  that  merely  making amendment to  the terms  and conditions  of service  of  the employees  unconnected  with  or  not  necessitated  by  the reorganisation of the. business or merger or amalgamation of the companies  would not fall within Section 16(1)(g) of the Act. According  to the petitioners, the only properly called schemes sanctioned  under Section  16(1)  are    those  four merger schemes of 1973 as would be evident from the preamble to the Act.      The petitioners  further contend  that under  the  life Insurance Corporation Act, Banking Companies Act. etc. there were   power   to   frame   regulations   independently   of reorganisation. But there is no such power, according to the petitioners,   under    the   General   Insurance   Business (Nationalisation) Act, 1972. The said notification therefore is without  the authority of law. It is, further, submitted. that  the   present  service  conditions  of  the  employees unrelated to  reorganisation of  general insurance  business merger or  amalgamation of  insurance companies,  could  not form part  of any scheme or notification under section 16 of the aforesaid  Act. Section  16(7) of the Act would not come into play and the provisions or the Industrial disputes Act, 1947 including  section 94  were applicable  to the  general insurance industry.  Therefore if  the companies  wanted  to change the  service condition  of their  employees affecting them adversely,  they should  have  given,  the  petitioners contend,  notice   of  changes   under  section  9A  of  the Industrial Disputes Act, 1947, negotiated with the employees and  arrived   at  some   settlement  or   had  the  dispute adjudicated upon  under the  said Act.  Since. this  has not been done, particularly when the conciliation proceed-

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269 ings were  still pending  in  the  absence  of  Government’s acknowledgement  of   failure  report  of  the  conciliation officer,  the  action  of  the  Government  in  issuing  the unilateral notification  is bad  in  law.  It  is  submitted further that  impugned notification  is  ultra  vires  being violative of  Article 14  of  the  Constitution  because  it discriminated   between    employees   similarly   situated, particularly  in   the  matter  of  dearness  allowance  and retirement age.      The petitioners  contend that  under the  Sick  Textile Undertakings (Nationalisation)  Act, 1974,  the Coking  Coal Mines (Nationalisation)  Act, 1972  etc., separate companies had been  formed on  nationalisation. The employees of those companies were  entitled to  have their  service  conditions regulated  under  Industrial  Disputes  Act,  1947.  In  the present case,  the  employees  have  been  deprived  of  the existing   benefits   without   following   the   procedures prescribed  under   the  Industrial   Disputes  Act,   1947. Therefore. there was discrimination and violation of article 14 of  the Constitution.  The petitioners  therefore contend that the  terms and conditions of service enunciated in 1974 being as  a result  of bilateral  agreement,  could  not  be changed unilaterally,  to the  detriment of  the  employees’ fundamental rights to carry on their employment for gain and as such  violative of article 19(1) (g) of the Constitution. It is  stated that the notification was illegal, being ultra vires section  16  of  the  Act.  Since,  according  to  the petitioners, such  notification deprived  the rights  of the employees to  receive dearness  allowance etc. with the rise in the  cost of  living  index  without  any  limit,  it  is deprivation of  property without  providing for compensation and  is   thus  also  violative  of  article  31(2)  of  the Constitution. The  petitioners, further,  contend  that  the Constitution 44th amendment deleting 1 Articles 31 and 19(1) (f) cannot  save the  scheme since  that Amendment came into force  only   on  20th  June,  1979,  whereas  the  impugned notification  affecting  the  rights  of  the  employees  to emoluments takes  effect from  1st  January,  1979.  It  was further urged  that the  protection of  article 31 read with Ninth Schedule  of the Constitution was not available to any scheme or  notification  much  less  the  present  one,  The present  notification,   according   to   the   petitioners, disregarded the  directive principles  enunciated in Article 43 of  the Constitution.  The petitioners  therefore ask for quashing the  said notification  by  these  petitions  under Article 32 of the Constitution.      The second  batch of  Writ applications  (Writ Petition Nos. 5434-37 of 1980) are on behalf of the employees as well as the 270 General Insurance  Employees All India Association challenge the -  scheme of  1980 more  or less  on the same though not identical grounds mentioned in Writ Petition Nos. 5370-74 of 1980. Interim  order was  passed  in  the  said  application regarding payment of dearness allowance as would appear from the Court’s  order  dated  25.8.1981.  In  the  said  order, directions were  given for  payment  of  dearness  allowance payable under the old scheme from the beginning of 1981 with quarter April,  as well as quarter beginning from July, 1981 within certain  time mentioned  in the  said order.  lt  was further, directed  that subsequent  dearness allowances will be paid in accordance with the directions to be given at the time of disposal of these writ applications.      In the  Writ Petitions Nos. 5370-74 of 1980, there is a

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petition on  behalf of  All India National General Insurance Employees Association  for  intervention.  It  represents  a Trade Union  of workmen  working in  the offices  of General Insurance Corporation  of  India,  Bombay  as  well  as  its subsidiaries.  They,   inter  alia,  allege  that  the  main petitions have  challenged the  scheme  of  1980  on  purely technical grounds and though it would be correct to say that the scheme  of 1980  does not  meet the  aspirations of  the workers wholly  as reflected  in  the  various  charters  of demands submitted to the management, they are of the opinion that the  same is not completely bereft of any merit so that the same  may be  quashed  by  this  Court.  They  mentioned certain additional  benefits available in the said scheme of 1980 in  paragraphs 15,  16, 17,  18  and  19  of  the  said application. .  They therefore  claim right  to intervene in the said  Writ application  Nos. 5370-74  of 1980.  There is also an  application by  Senior Assistants  of the New India Assurance Company Ltd. and National Confederation of General Insurance Employees, represented by its Vice-president under order XLVII  Rule 6  of the  Supreme  Court  Rules  of  1966 praying, for  permission to  intervene in  these  petitions. Upon this  an interim order was passed on 24.10.1580 staying the operation  of the  scheme (operation of the Notification dated 30th  September, 1980)  and notice  was issued  in the stay application.      All these will be disposed of by this judgment.      It will, therefore, be necessary, before we examine the contentions raised  in these  petitions, to briefly consider the scheme  of 1980.  As mentioned  before, this  scheme  is called the General Insurance 271 (Rationalisation  and  Revision  of  Pay  Scales  and  other Conditions  of   Service  of   Supervisory,   Clerical   and Subordinate Staff)  Second Amendment  Scheme, 1980. Some new definitions have been provided by paragraph 2 of 1980 scheme which included  the meaning  of the  ’Company’ and under the scheme it  mentioned that  the ’Company’ would mean the four nationalised companies,  National Insurance Company Limited, the New  India Assurance  Company Limited, the oriental Fire and General  Insurance Company  Limited and the United India Insurance Company Limited. Sub paragraph (ii) of paragraph 2 of the said scheme defines ’Net monthly emoluments’. By sub- paragraph (ii),  the amended  definition of ’Revised terms’, (Revised Scales  of  Pay)  was  inserted.  By  paragraph  3, adjustment of  pay was  stipulated on the coming into effect of operation  of 1980  scheme. How  the basic  pay is  to be fixed is  provided by  1980 scheme.  lt also  makes detailed provisions as to how the adjustment allowance is to be dealt with so  far  as  Dearness  Allowance,  overtime  allowance, Contribution to Provident Fund and other retirement benefits are concerned.  Paragraph  5  deals  with  the  ’Increments. Paragraph 6  deals with Earned Leave and other Encasement of leave at the time of retirement and death. Paragraph 7 deals with ’Retirement’  and’ stipulates  that an employee who was in service of the Corporation before the commencement of the scheme of  1980 should  retire from  service when he attains the age  of 60 years. But an employee, who joins the service of the  Corporation after  the commencements  of the  scheme will retire on his attaining the age of 58 years. It further stipulates that an employee would retire on the afternoon of the last  day of the month in which he attains the age of 60 years or  58 years as the case might be. Clause 8 deals with ’Gratuity’. Clause 10 provides the duration of revised terms and stipulates that the revised terms should be continued to be in  force unless modified by the Central Government. Then

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the  Second   Schedule  of  1974  scheme  which  dealt  with Travelling Allowance  category, Travel by Road and different allowances for the same, transfer grant were amended and the new Fourth  Schedule included  scales of pay to be fixed, on the revised scales of pay indicated therein.      It is  not necessary  to set out further details of the actual provisions  of 1980  scheme. While  on behalf  of the petitioners, it was contended that the revised scales of pay and the  terms included  therein were  highly detrimental to the employees concerned, on the other hand, it was contended on behalf of the Union of India as well 272 as the  General Insurance  Company that  on the  whole,  the revised scales of pay provided for better pay and allowances and better opportunities to the employees concerned. One of. the intervener  unions also  states that  the 1980 scheme is not completely  devoid  of  Merit.  Parties  have  taken  us through in  detail by  help of  charts and  other figures in support of  the respective  cases and contentions. It is not necessary, in  view of  the nature of the contentions raised before us,  to express any opinion on the merits or demerits of the  rival contentions  of the  parties in respect of the details of  either or  both the schemes. It may, however, be stated that  there has  been a  ceiling on  increase of  pay automatically with  the increase  of the rise in the cost of index. The  respondents, namely,  the union of India as well as  the   General  Insurance   Company,  contended  that  in comparison with  other employees  is governmental sectors or public sectors,  the  employees  of  the  general  insurance companies were ’High wage islanders’ and it was necessary to put a ceiling on the emoluments and other amenities in order to facilitate  better functioning of the insurance companies concerned as  well as subserve the object and purpose of the nationalisation policy.  The various  detailed items  of the scheme  of   1974  and  1980  have  to  be  viewed  in  this background.      The-basic and,  in our opinion, the main questions are- has the  Government and  the respondents  power  in  law  to introduce the  1980 scheme and if they have that power, have they exercised  that power  in any  arbitrary and  whimsical manner to  deny to  the petitioners  any of  the fundamental rights and  whether the  petitioners have been discriminated against? These,  therefore, are  the questions and it is not necessary, in  our opinion, to detain ourselves with lengthy extracts from  the scheme  of 1974 and 1980 to examine which is better or which is detrimental and if so, to what extent. On these, there will be and are divergent views.      The scheme  of 1980  has been  framed  by  the  Central Government under  the authority given to it by the Act under General Insurance  Business (Nationalisation) Act, 1972. The scope of  that authority  has, therefore,  to be found under Chapter V  containing Sections  16 &  17 of the Act. We have set out  hereinbefore the  terms of  Sections 16  & 17. Sub- section (1) of Section 16 authorises the Central Government, if it  is of  the  opinion  that  "for  the  more  efficient carrying on  of general  insurance business, it is necessary to do  so, may,  by notification, frame one or more schemes" providin for 273 all or  any of  the  matters  enumerated  in  the  different clauses of  Section 16(1)  of the  said Act, and the matters have been  set out in the different clauses of the said sub- section. For  the present  purpose, clause  (g) is relevant, which gives  authority to  the Central  Government to  frame scheme for  rationalisation or  revision of  pay scales  and

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other terms  and conditions of service of officers and other employees wherever  necessary. Clause  (j) of  the said sub- section gives  authority to  the Central  Government also to frame  scheme   for  such   incidental,  consequential   and supplemental matters as are necessary to give full effect to the scheme.  Therefore, the  question that  is necessary for this purpose  to determine,  is, whether  the power given to the Central Government by clause (g) for the rationalisation or revision  of pay scales and other terms and conditions of service  a   of  officers   and  other  employees,  wherever necessary can be said to authorise the Central Government to frame the  present scheme  under consideration. This must be judged in  conjunction with  sub-section (6)  of  Section-16 which authorises the Central Government, by notification, to add, to amend or to vary any scheme framed under section 16. The point  at issue, is, whether rationalisation or revision of pay  scales and  other terms and conditions of service of officers  and   other  employees   wherever  necessary   can authorise the  Central Government  to frame  scheme like the scheme of  1980, which  is unconnected  with or unrelated to the merger  of one  Indian insurance  company  with  another insurance company  or the  formation of a new company by the amalgamation of  two or  more Indian insurance companies. In order to  find  that  out,  it  is  necessary  to  read  the provisions of  this Act  as a whole. Primarily, if the words are intelligible  and can  be given full meaning, we should. not cut  down their  amplitude.  Secondly,  the  purpose  or object of the conferment of the power must be borne in mind. The first  indication of the said object in this case, as is often in similar statutes, can be gathered from the preamble to the Act. We have noticed the preamble of the present Act. This preamble  has also  to be  read in  the light  of  sub- section (2)  of Section 16 which provides that the object of the Central  Government in  framing the  schemes under  sub- section (1)  was to give authority to the Central Government to frame  schemes, to  ensure that ultimately there are only four insurance  companies  (excluding  the  Corporation)  in existence and  that they  are so  situate as to render their combined services  effective in  all parts  of  India.  Sub- section (2),  therefore, to a large extent circumscribes the amplitude of  the  power  given  under  sub-section  (1)  of Section 16  of the  Act As  framing  of  the  scheme  is  an exercise of the delegated 274 authority  by   the  Central   Government,  the   memorandum regarding delegated  legislation submitted to the Parliament along with  the General insurance Business (Nationalisation) Bill, 1972  will provide.  some guidance  also. As  we  have noticed that  clause 16  of the  said Bill  which  later  on became  Section  16  of  the  Act  explained  the  need  for delegated authority  and stated  the object as ’to frame one or more  scheme for  the  merger  of  one  Indian  insurance company with  another or  for the amalgamation of the two or more insurance  companies and  for matters  consequential to such merger  or amalgamation  as the case might be’. Bearing in mind  that this is a delegated legislation and keeping in mind that  the authority  to frame  the scheme must be found within the  object of the power given under Chapter V of the Act and reading the entire connected provisions together, it appears to  us, that  the only  authority or  power to frame scheme given  was for  the purpose  of merger  of one Indian insurance company  with another  for amalgamation  of two or more   Indian    insurance   companies   and   for   matters consequential to  such merger  or amalgamation  as the  case might be.  Any scheme  though, it might come within the wide

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expressions used in sub-section (6) or Section 16 as well as clause (g)  or clause  (j) of  sub-section (1) of Section 16 which is  unrelated to  or unconnected with the amalgamation of  the   insurance  companies  or  merger  consequent  upon nationalisation would be beyond the authority of the Central Government. This  has to  be so  if read in conjunction with sub-section (2) of Section 16 of the Act. It is evident from the scheme  of 1980  that it is not connected with or is not for the  purpose to  ensure that  ultimately there  are only four insurance companies existing and they are so situate as to render combined services effective in all parts of India. It is  true that  subsequent  to  the  merger  of  the  four insurance  companies,  scheme  as  indicated  herein-before, dealing with  Provident Fund, Gratuity etc. have been framed but these,  in our  opinion, are irrelevant when judging the question of the authority to frame a particular scheme which is impugned.  It is also true that the scheme of 1974 so far as pay  scale was concerned as indicated in the scheme as we have set  out herein-before  provided that  the scheme would remain in  force initially  for a period upto 31st December, 1976 and  thereafter shall  continue to  be in  force unless modified by the Central Government. It is also true that the employees themselves,  as  indicated  herein-before,  wanted revision of  pay scales  and claimed  through their numerous charters of demands amending or framing of a fresh scheme by the Government  on the  basis that  the  Central  Government alone had  the authority  to frame the scheme under the Act. Certain amount of revision of pay scale and other terms and 275 conditions become  inevitable  from  time  to  time  in  all running business  or administrations.  Clause  (g)  of  sub- section (1)  of Section 16 authorises the Central Government to frame  scheme for  rationalisation and  revision  of  pay scales  and  other  terms  and  conditions  of  services  of officers and  other employees  wherever necessary. But it is evident that  the scheme of 1980 impugned in these petitions is not related to the object envisaged in sub-section (2) of Section 16  of the  Act. In  order to  be warranted  by  the object  of   delegated  Legislation   as  explained  in  the memorandum to  the Bill which incorporated Section 16 of the Act, read  with the  preamble of  the Act,  unless it can be said that  the scheme  is  related  to  sub-section  (2)  of Section 16  of the  Act, it  would be  an exercise  of power beyond delegation.  The duty of the Court in interpreting or construing  a   provision  is   to  read  the  section,  and understand its  meaning in  the context. Interpretation of a provision or statute is not a mere exercise in semantics but an attempt  to find  out the meaning of the legislation from the words  used, understand  the context  and the purpose of the expressions  used and  then to  construe the expressions sensibly.      There is  another aspect  which has to be kept in mind. The scheme  is an exercise of delegated authority. The scope and ambit  of such delegated authority must be so construed, if possible,  as not  to make  it bad because of the vice of excessive delegation  of legislative power. In order to make the power  valid,  we  should  so  construe  the  power,  if possible, given  under Section  16 of the Act in such manner that is  does not  suffer from  the vice  of  delegation  of excessive legislative authority.      It is  well-settled that  unlimited right of delegation is not  inherent in the legislative power itself. This Court has reiterated the aforesaid principle in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. The Asstt. Commissioner of Sales Tax & Ors. The growth of Legislative power of the executive is a

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significant development  of the  20th century. The theory is iaissez-faire  has   been  given   a  go-by  and  large  and comprehensive powers  are being  assumed by the State with a view of  improve  social  and  economic  well-being  of  the people. Most of the modern socioeconomic legislations passed by the  legislature lay  down the  guiding principles of the Legislative policy.  The legislatures, because of limitation imposed upon them 276 and the  time factor,  hardly can  go into  the  matters  in detail. The  practice of  empowering the  executive to  make subordinate legislation  within  he  prescribed  sphere  has evolved out  of practical  necessity and  pragmatic needs of the modern welfare State.      Regarding delegated  legislation, the  principle  which has been  well-established is that legislature must lay down the guidelines,  the principles  of policy for the authority to whom  power to make subordinate legislation is entrusted. The legitimacy  of delegated  legislation depends  upon  its being used  as ancillary  which the legislature considers to be necessary  for the  purpose of exercising its legislature power  effectively  and  completely.  The  legislature  must retain in  its own  hand the  essential legislative function which consists  in declaring  the legislative policy and lay down the standard which is to be enacted into a rule of law, and what  can  be  delegated  is  the  task  of  subordinate legislation which by very nature is ancillary to the statute which delegates  the power to make it effective provided the legislative policy  is enunciated  with sufficient clearness a standard laid down. The courts cannot and do not interfere on  the   discretion  that   undoubtedly  rests   with   the legislature  itself   in  determining   the  extent  of  the delegated power  in a  particular case.  lt is  true that in this  case   under  Section   16(1)(g),  rationalisation  or revision of  pay scales  and other  terms and  conditions of service of  officers and  other employees wherever necessary is one  of the purpose for which scheme can be, framed under Section 16(1)  of the  Act. It is also true that incidental, consequential and  supplementary matters as are necessary to give full  effect to  the scheme  are also  authorised under clause (j)  of sub-section (1) of Section 16. It has also to be borne in mind that scheme and every amendment to a scheme framed under  section 16  shall be  laid as  soon as  may be after it  is made  before each House of Parliament. The last provision is indicative of the power of superintendence that the legislature  maintains over  the subordinate legislation of scheme  framed by  the delegate under the authority given under the  Act. From  that point  of view, it is possible to consider  as   indeed  it   was  argued  on  behalf  of  the respondents in  this case,  that having  regard to  the fact that one  of the  objects of  the Preamble is regulation and control of  general insurance  business  and  other  matters connected therewith  or incidental thereto and having regard to the  fact that rationalisation and revision of pay scales whenever necessary  was one  of the  objects envisaged under sub-section (1)  alongwith clause  (j) of sub-section (1) of Section 16 of Section 16 read with the safeguards of section 277 17 as  we have set out herein-before in case of revision and rationalisation of  pay scales whenever it becomes necessary as in this case, according to the respondents, it had become necessary, the  scheme of  1980 was  permissible within  the delegated  authority.   But  we   must  bear   in  mind  the observations of  Mukherjea, J. in The Delhi Laws case to the following effect:

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         "The essential  legislative function  consists  in      the determination or choosing of the legislative policy      and of  enacting that  policy into  a binding  rule  of      conduct. It is open to the legislature to formulate the      policy as broadly and with as little or as much details      as it thinks proper and it may delegate the rest of the      legislative work  to a  subordinate authority  who will      work out  of the  details within  the framework of that      policy".      But as  explained before  the Act  must be  read  as  a whole. The Act must be read in conjunction with the preamble to the  Act and in conjunction with the memorandum in Clause No. 16 of the Bill which introduced the Act in question. But above all  it must  be read  in conjunction with sub-section (2) of  Section 16  of the  Act which  clearly indicated the object of framing the scheme under Section 16(1) of the Act. The authority  and scope  for subordinate legislation can be read in  either of  the two  ways; namely  one which creates wider delegation and one which restricts that delegation. In our opinion,  in vies  of the language of sub-section (2) of Section 16  and the  memorandum to  the Bill in the peculiar facts of  this case  the one  which restricts the delegation must be preferred to the other. So read, in our opinion, the authority under  Section 16  under the  different clause  of sub-section (1)  must be to subserve the object as envisaged in sub-section (2) of Section 16 of the Act, and if it is so read than  framing of  a scheme  for purposes  mentioned  in different clause  of sub-section  (1) of  Section 16 must be related to  the amalgamation  or  merger  of  the  insurance companies as  envisaged both  in the memorandum on delegated legislation as well as sub-section (2) of Section 16. We may mention in  this connection that in the case of A.V. Nachane & Another  v. Union  of India  & Another, this contention of delegated legislation  was adverted  to. In  that  case  the Court was concerned with Life 278 Insurance Corporation (Amendment) Act, 1981 where the policy of the  Act as  stated in  the preamble of the Amendment Act was that  "for securing  the interests of the Life Insurance Corporation of  India and  its policy-holders and to control the cost of administration, it is necessary that revision of the  terms  and  condition  of  service  applicable  to  the employees and agents of the Corporation should be undertaken expendiously. That  was the  object of  the Act in question. Unfortunately that is not the object indicated as the object of the power to frame scheme under Section 16 of the present Act. In  view of  that object mentioned in the said decision and for  other reasons in the case of A.V. Nachane & Another v. Union  of India  & Another  (supra), this Court held that the Act  in  question  did  not  suffer  from  the  vice  of excessive delegation. In view of what we have stated herein- before, the  scheme of  1980 so  far as it is not related to the amalgamation or merger of insurance companies, it is not warranted by  sub-section (1)  of Section 16. If that be so, the scheme must be held to be bad and beyond authority.      This being the position, it is not necessary to examine the various  other contentions  raised in this case. Various contentions have  been made.  Both sides  relied on  various decisions in  support of  their respective contentions. Both sides relied  on the decisions dealing with the employees of the  Life   Insurance  Corporation  and  the  Acts  and  the amendments in  connection with their terms of employment. We will just  note the  decisions. Reliance  was placed  on the decision in the case of Madan Mohan Pathak v. Union of India & Ors,  Etc. The  question in  that decision  was  that  the

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validity of  Section 3  of the  Life  Insurance  Corporation (Modification  of   Settlement)  Act,  1976.  The  questions involved in  that decision,  in the  view. we  have taken as well as  in the facts of the instant case, are not relevant. In last  mentioned case  there was a writ petition which was allowed by  the learned  single Judge  of the High Court and appeal was preferred from that decision. During the pendency of the appeal, there was an amendment to the Act namely, the Life Insurance Corporation (Modification of Settlement) Act, 1976. 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  the  Division  Bench  of Calcutta High Court made no order on the said appeal. This 279 Court held among other things that the rights of the parties had crystalized  in the  judgment and  became the basis of a Mandamus of the High Court and it could not be taken away by indirect fashion  proposed by the Act under challenge before this Court.      Chandrachud, J., as the learned Chief Justice then was, speaking  for  himself  and  Fazal  Ali  and  Shinghal,  JJ. concurred with  the majority  view on  the  basis  that  the impugned Act  violated Article 31(2) of the Constitution and was therefore void. Bhagwati, J. speaking for himself and on behalf’  of   Iyer  &  Desai,  JJ.  was  of  the  view  that irrespective   of    whether   the    impugned    Act    was constitutionally valid  or not, the Corporation was bound to obey the  writ of  Mandamus issued  by the High Court and to pay the bonus for the year 1975-76 to class III and Class IV employees.  The  said  learned  judges  held  that  writ  of Mandamus was  not touched  by the  impugned Act.  The  other observations of the said Judges as well as the other learned Judges are  not relevant  in the  view  we  have  taken.  In instant case before us we do not have any case of settlement which was  the subject  matter there between the workers and the employers and the rights flowing therefrom.      Reliance was also placed on the decision in the case of The Life  Insurance Corporation  of India  v. D.J. Bahadur & Ors as  well as  the decision  in the  case of  A.V. Nachane Another v.  Union of India & Another (supra). In the view we have taken,  it is  not necessary to examine these decisions in detail.  In those cases, the question under consideration was  the  Life  Insurance  Corporation  Act,  1956  and  the subsequent amendments  thereto as  well as certain orders in respect of the same.      The  basis  upon  which  the  aforesaid  two  decisions proceeded were (a) a right had crystalized by the directions in D.J. Bahadur’s case (supra) and this could not be altered or taken  away except  by a  fresh industrial  settlement or award or  by  relevant  legislation  and  (b)  the  relevant legislation which  was the subject matter of challenge in A. V. Nachane’s case (supra) can not take away the rights which had accrued  to the  employees with retrospective effect. As is evident  from the  facts  of  the  case  before  us,  the situation is  entirely different. We are concerned here with the question  primarily whether  the scheme is authorised by the Act and if it is so authporis- 280 ed,  the   question  is  whether  the  Act  in  question  is constitutionally valid  in the  sense it  had taken away any rights which had crystalized or whether it infringed Article 14 of  the Constitution.  These decisions also deal with the question whether  a special  legislation would  supersede  a general  legislation   and  which   legislation   could   be considered to be a special legislation. It may be noted that

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we are  not concerned  with any settlement or award. In that view of  the matter, it is not necessary to detain ourselves with the  said decisions.  and the various aspect dealt with in the said decisions.      Another aspect that was canvassed before us was whether Section 16  of the  1972 Act  with which we are concerned in any way  affected any  industrial dispute  and  whether  the provisions of  sub-section (5)  of Section 16 or sub-section (7) of Section 16 in any way curtailed any right. in respect of any  industrial dispute  and if  so whether  the  General Insurance Business  (Nationalisation) Act, 1972 is a special legislation or  whether the Industrial Disputes Act, 1947 is a special  legislation in  respect of adjudication of rights between the employees and the employer.      If we  had held that the scheme of 1980 was permissible within the  power delegated  under Section 16 of the General Insurance Business  (Nationalisation) Act,  1972,  it  would have been  necessary for  us to discuss whether there is any conflict between  the provisions  of the  said Act  and  the Industrial  Disputes  Act,  1947  and  if  so,  which  would prevail. Section  16(5) of  the 1972 Act, as we have noticed earlier, stipulates  that notwithstanding anything contained in the Industrial Disputes Act, 1947 or in any other law for the time being in force, the transfer af the services of any officer other employee of an Indian insurance company to the acquiring company  shall not  entitle any  such  officer  or other employee  to any  compensation under that Act or other law, and  no such  claim shall  be entertained by any court, tribunal or  other authority.  This, to  a  certain  extent, clearly excludes  the operation  of the  Industrial Disputes Act, 1947  in respect of disputes arising on the transfer of the business of general insurance. There is no such question before us.  Had it  been possible to hold that the scheme of 1980 was  valid in  proper exercise  of the  authority under Section 16  of the  Act, a  question would have arisen as to whether the ceiling and other conditions on emoluments could be imposed  on the  employees in  the manner  proposed to be done under  the scheme  of 1980  without  reference  to  the procedure for adjudication of these matters under the 281 Industrial Disputes  Act, 1947.  Then the question had to be judged h by reference to sub-section (5) and sub-section (7) of Section  16 of  the 1972  Act. Section  16 empowered  the Government by  notification to  add to,  amend or  very  any scheme framed  under Section  16(1) Sub-section (7) provides that the  provisions of  this section,  namely Section 16 of the 1972  Act and  of any  scheme under it shall have effect notwithstanding anything  to the  contrary contained  in any other law  or any  agreement, award  or other instrument for the time being in force.      We have  noticed the  scheme of  1980. That scheme puts certain new  conditions about  retirement, about  emoluments and other  benefits of  the employees.  It may be noted that the application  of  Industrial  Disputes  Act  as  such  in general is  not abrogated by the provisions of 1972 Act, nor made wholly  inapplicable in  respect of matters not covered by any  provisions of  the scheme.  This aspect is important and must be borne mind.      Wrongful  dismissal,  other  disciplinary  proceedings, unfair labour  practices,  victimization  etc.  would  still remain unaffected by any scheme or any provision of the Act. The only  relevant and  material question  that  would  have arisen, is,  whether in case where a statutory ceiling which one of  the counsel for the petitioners tried to describe as "statutory gherao"  on rise  of increase  in emoluments  and

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other benefits with the rise in the cost of index of prices" affected the  position under  the Industrial  Disputes  Act, 1947. It  may be  noted as we have noted before that this is not a case where any dispute was pending before any tribunal or before  any authority  under the Industrial Disputes Act, 1947  between   the  workmen   concerned  and  he  insurance companies. Though  there was  conciliation proceedings,  the Conciliation proceedings  could’ not reach to any successful solution and  the conciliation  officer has  made  a  report failure of  conciliation. The  Government  had  the  report. Thereafter the  Government has  not referred  the dispute to any industrial tribunal hut has framed a scheme which is the subject matter  of challenge  before us.  It cannot,  in our opinion,  be  said  that  conciliation  proceedings  or  any proceeding under  the Industrial  Disputes Act  were pending and therefore  in the  middle of  the proceedings  under the Industrial Disputes Act, the Government had acted and framed the scheme  and as  such the same was bad and illegal. There were no  proceedings pending  under the  Industrial Disputes Act, 1947. With the finding of the Conciliation officer, the Government 282 had two  options, either  reaching a settlement or framing a scheme on  the one  hand or  to  make  a  reference  to  the tribunal of  the dispute  regarding the  points mentioned in the demands  of the  workmen. There  is one  factual dispute which, in  our opinion,  is not  very material. According to the petitioners,  the Government  had not  acknowledged  the receipt of  the failure  report of the Conciliation officer. According to  the respondents, the receipt was acknowledged; the failure  of the  conciliation proceedings,  however,  is admitted. No  further steps  or proceedings were required as such. The  Government had  to assess  on the failure of tile conciliation proceedings  either to  refer the matter to the tribunal or  to take  such steps as it considered necessary. If the  Government had  not taken  any of the steps, then it was open,  if  the  employees  concerned  were  in  any  way aggrieved,  to  take  appropriate  proceedings  against  the Government for  doing so.  As mentioned  hereinbefore if the scheme was  held to  be valid, then the question what is the general law  and what  is the  special law  and which law in case of  conflict would  prevail would  have arisen and that would have  necessitated the  application of the principle . "Gener alia  specialibus non  derogant". The general rule to be followed in case of conflict between two statutes is that the later abrogates the earlier one. In other words, a prior special law would yield to a later general law, if either of the two following conditions is satisfied.      (i)  The two are inconsistent with each other.      (ii) There is  some express  reference in  the later to           the earlier enactment.      If either  of these  two conditions  is fulfilled,  the later law, even though general, would prevail.      From  the  text  and  the  decisions,  four  tests  are deducible  and  these  are:  (i)  The  legislature  has  the undoubted right  to alter  a law already promulgated through subsequent legislation, (ii) A special law may be altergated or repealed  by a later general law by an express provision, (iii) A  later general law will override a prior special law if the  two are  so repugnant to each other that they cannot co-exist even  though no express provision in that behalf is found in the general law, and (iv) It is only in the absence of a  provision to the contrary and of a clear inconsistency that a  special law will remain wholly unaffected by a later general law. See in this connection.,

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283 Maxwell on "The Interpretation of Statutes" Twelfth Edition, pages 196-198.      The  question  was  posed  in  the  case  of  The  Life Insurance Corporation  of  India  v.  D.J.  Bahadur  &  Ors. (supra) where  at page 1125, Krishna Iyer, J. has dealt with the aspect  of the  question. There  the learned Judge posed the question  whether the  LTC Act was a special legislation or a  general legislation.  Reference in this connection may also be  made on  Craies on  "Statute Law"  Seventh  Edition (1971) paras  377-382, but  it has  to be brone in mind that primary intention  has to  be given  effect to. Normally two aspects of  the question would have demanded answers, if the scheme of  1980 was  held to be valid on the first ground as we have  discussed, one  is whether  the  General  Insurance Business (Nationalisation)  Act, 1972  is a  special statute and the  Industrial Disputes  Act, 1947  is a general Act or vice versa,  and  secondly  whether  there  is  any  express provision    in     the    General     Insurance    Business (Nationalisation) Act,  1972 which  deals with  the subject. Now in  this case  we  have  categorical  reference  to  the Industrial Disputes  Act, 1947  in sub-section  (5) and sub- section (7)  of Section 16 of the General Insurance Business (Nationalisation) Act, 1972. There is, however, one aspect w here it  would have been necessary had we held the scheme to be valid  otherwise, if  there had been no General insurance Business (Nationalisation)  Act, 1972,  then  the  employees would have  been entitled to raise a dispute on the question of increase  of emoluments  and revision  of pay  scale with rise in the cost of index of the prices under the Industrial Disputes Act,  1947. In  such a  situation, the  Government, after conciliation  proceedings, was  empowered  to  make  a reference if it considered so necessary having regard to the nature of the disputes raised. Though it cannot be said that reference was  a matter of right but it was within the realm of power  of the Government and the Government has a duty to act with  discretion on  relevant considerations  to make or not to  make a reference taking into consideration the facts and circumstances  of each  case. To  that limited extent it could have  been said  That this  right or  power  has  been curtailed    by     the    General     Insurance    Business (Nationalisation) Act,  1972, if  the scheme  was  otherwise valid      Having regard  to the context in which the question now arises before us, in our opinion, there is no question as to whether the  provisions of  Industrial  Disputes  Act  would prevail over the provi- 284 sions of  General Insurance  Business (Nationalisation) Act. There is  no industrial dispute pending as such. The General Insurance  Business  (Nationalisation)  Act,  1972  has  not abrogated the Industrial Disputes Act, 1957 as such.      The question  of the  application of  the principle  of "Generalia specialibus  non derogant" has been dealt with in the case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of  U.P. &  Ors.  Some  of  these  aspects  were  also discussed in the case of U.P. State Electricity Board & Ors. v. Hari Shanker Jain and Ors.      Had it  been possible  to uphold  the scheme of 1980 as being within  the power of 1972 Act, it would have been also necessary for  us to  consider whether  such a scheme or Act would have  been constitutionally  valid in  the context  of fundamental rights  under Article  14, article  19(1)(g) and article 31  of the Constitution and the effect of the repeal of article 31 by the 44th amendment of the Constitution. The

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General Insurance  Business (Nationalisation) Act was put in the Nineth  Schedule of  the Constitution as item 95 on 10th August, 1975.  The effect  of putting a particular provision in the  Nineth  Schedule  at  a  particular  time  has  been considered by  this Court  in the  case of   Prag  Ice & Oil Mills &  Anr. Etc.  v. Union  of India.  It was  held by the learned Chief  Justice in  the said decision that on a plain reading of  article 31A,  it could  not  be  said  that  the protective umbrella  of the Nineth Schedule took in not only the. acts  and regulations specified therein but also orders and notifications  issued under  those acts and regulations. Therefore if any rights of the petitioners had been affected by the  scheme of  1980 then  those rights  would not  enjoy immunity from being scrutinised simply because the Act under which the  scheme was  framed has  been  put  in  the  Ninth Schedule. In  any event  any  right  which  accrued  to  the persons concerned  prior to  the placement of the Act in the Nineth Schedule  cannot be  retrospectively affected  by the impugned provisions.      It was contended that the rights of the petitions under article  19(1)(g)   have  been   affected  by  the  impugned legislation and the scheme framed thereunder. Empowering the Government to  frame schemes for carrying out the purpose of the Act, does not, in our 285 opinion, in  the facts and circumstances of the case, in any way,  affect  or  abridge  the  fundamental  rights  of  the petitioners and would not attract article 19(1)(g).      The other  aspect which  was canvassed  before  us  was whether the  Act and the scheme in question violated article 14 of  the Constitution.  This question has to be understood from two  aspects, namely  whether making  a  provision  for salary  and  emoluments  of  the  petitioners  who  are  the employees of  the General Insurance Corporation specifically and differently  from the  employees of other public section undertakings is  discriminatory in any manner or not and the other question,  is, whether  making  a  provision  for  the employees of General Insurance Corporation for settlement of their dues  by schemes  and not leaving the question open to the general  provisions of  Industrial Disputes Act, 1947 is discriminatory and violative of the rights of the employees.      It is  true that  sometimes there  have  been  rise  in emoluments with  the rise  in the  cost of  index in certain public sector  corporations. The legislature however is free to recognise  the  degree  of  harm  or  evil  and  to  make provisions for the same. In making dissimilar provisions for one group of public sector undertakings does not per se make a law discriminatory as such. It is well-settled that courts will  not   sit  as  super-legislature  and  strike  down  a particular classification  on the  ground  that  any  under- inclusion namely  that some  others have been left untouched so  long   as  there   is  no  violation  of  constitutional restraints. It  was contended  that the  application of  the Industrial Disputes  Act not  having been  excluded from the Nationalised Textile  Mills, Nationalised  Coal  and  Coking Coal Mines   and  Nationalised Banks but if and is so far as it excluded  the application of the Industrial Disputes Act, in  case   of  general  insurance  companies,  the  same  is arbitrary and bad. In this connection reliance may be placed on the observations of the learned Chief Justice in the case of ’Special  Courts  Bill  1978’.  The  same  principle  was reiterated by this Court in the case of State of Gujarat and Anr. v.  Shri Ambica  Mills Limited,  Ahmedabad etc. In that case, this  Court was  of the  view that  in the  matter  of economic legislation  or reform,  a provision  would not  be

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struck down  on the  vice of underinclusion, inter alia, for the reasons that the legislature could not be 286 required to  impose upon  administrative agencies task which could not  be carried  out or which must be carried out on a large scale  at a  single stroke.  It was further reiterated that piecemeal  approach to  a general  problem permitted by under-inclusive classifications, is sometimes justified when it is  considered that  legislatures deal with such problems usually on  an experimental  basis. It is impossible to tell how  successful   a  particular   approach  might  be,  what dislocation might  occur, and  what situation  might develop and what  new   evil might  be  generated  in  the  attempt. Administrative  expedients   must  be   forged  and  tested. Legislators recognizing  these factors might wish to proceed cautiously, and  courts must  allow  them  to  do  so.  This principle was  again reiterated  in the  Constitution  Bench decision of  this Court  in the  case of  R. K. Garg etc. v. Union of India & Ors. etc      As there  was no  industrial dispute pending, we are of the opinion  that on  the ground  that the  petitioners have been  chosen   out  of   a  vast   body  of  workmen  to  be discriminated against  aud excluding them from the operation of Industrial  Disputes Act,  there has been no violation of Article 14  of the  Constitution. This question, however, it must be  emphasised again, does not really arise in the view we have taken.      Before us  it was  contended that sick mills which have been nationalised have been treated differently than general insurance employees  under 1972  Act in  Section  16(5)  and Section 16(7)  and in  the scheme  framed under  the General Insurance Business  (Nationalisation) Act,  1972. The object and   purpose    of   the    Sick    Textile    Undertakings (Nationalisation)   Act,   1974,   was   "reorganising   and rehabilitating such  sick  textile  undertakings  so  as  to subserve the  interests of general public by augmentation of the products  and distribution  at fair  prices of different varieties of  cloth and  yarn". The  basic objective  of the said Act  was rehabilitation of the sick textile mills. That was different  from the purpose of the present Act. The sick textile units  had under them the bulk of their employees as workmen those  who came  under the  provisions of Industrial Disputes  Act.  Section  14  of  the  said  Act  statutorily recognises the  special position  of the  workmen as contra- distinguished from  the other employees by enacting separate provisions in  this respect  thereon. Further-more it has to be borne in mind that the aforesaid 287 Act  was   concerned  with  the  ensuring;  augmentation  of production and  distribution of certain cloth and yarn which are commodities  essential to  the  national  economy  being important consumer items Therefore the case of the employees of sick textile undertakings which has been mentioned by the petitioners and  argued before  us  cannot  be  compared  on similar lines  in respect  of this  aspect with  the present petitioners. We  would  have  rejected  this  submission  on behalf of  the petitioners,  had it been necessary for us to do so  but in  the view  that has  been  taken,  it  is  not necessary.      Another item  mentioned before  us was the employees or Coking Coal  Mines Nationalisation  Act, 1972.  lt has to be borne in  mind that  the object covered by the scheme of the Act  was  entirely  different  from  the  General  Insurance Business (Nationalisation)  Act, 1972. The Coking Coal Mines (Nationalisation) Act,  1972 was  enacted to provide for the

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transfer of  the interest  of the  owners of  such mines and also the  transfer of  the interest  of owners  of coke oven plants with a view to "reorganising and re-constructing such coal mines and plants for the purpose of protecting, serving and permitting scientific development of resources of coking coal needed  to meet the growing requirement of iron & steel industry". According  to  the  normal  prevalent  view,  the workmen of  Coking Coal  Mines were  sweated  labour.  These workmen constituted  very large percentage of the employees. The  act   in  question   namely  the   Coking  Coal   Mines (Nationalisation) Act  recognised the  independent existence of the  said workmen  as a  class. It has also to be kept in mind that  coking coal  is a  commodity very  vital  to  the national economy  and prime  raw materials  of iron  & steel industry which  is a basic industry. The workmen employed in the coal  mines were  also  sweated  labour.  Their  special position was  also statutorily  recognised in  the said Act. Coal is  also one of the basic materials required to sustain growth.   The    provisions    of    Coking    Coal    Mines (Nationalisation) Act have been considered in detail and the special feature  has been  taken note of in the case of Tara Prasad Singh  etc. v. Union of India & Ors. According to the respondents, Class III and Class IV employees of the General Insurance Company  are high wage earners. They are islanders by themselves-according  to the respondents. It is true that judges should not bring their personal knowledge into action in deciding  the controversy before the Courts but if common knowledge is any guide, then undoubtedly these 288 employees are very highly paid in comparison to many others. The   object    of   the    General    Insurance    Business (Nationalisation)  Act,   1972  is   to  run   the  business efficiently so  that the  funds available  might be utilised for  socially   viable  and   core  projects   of   national importance. From  one point  of view  the Nationalised Banks and the Insurance Companies for the purpose of applicability or otherwise  of the  provisions of  the Industrial Disputes Act cannot  be treated as belonging to one class. Historical reasons provide  an intelligible  differentia distinguishing Nationalised  Insurance   Companies  from  the  Nationalised Banks. The  reason suggested  by the  respondents  was  that prior to  Banks Nationalisation, Industrial disputes between workmen and  the Banks  were treated since 1950 on All India basis with the totality of the banks being involved therein. Several awards  have been  made treating  them as  such like Shastri Award,  1953. Shastri Award Tribunal was constituted with a  view to  settle the  disputes of  the workmen of the Banks with  all  commercial  Banks  (excluding  Co-operative Banks etc.)  on the one hand and the employees on the other. Desai Award,  1962 bipartite settlement between Indian Banks Association and  the Exchange  Banks Association  on the one hand and  All India Bank Employees Association and All India Bank employees  Federation on  the other,  are some  of  the examples. As  against this,  prior to  the Act  in  question before us,  disputes between  insurance companies  and their workmen were  settled on  independent company  basis with no All India  projections involved.  It may  also be noted that unlike the case of some banks, there is no existing award or settlement with  the petitioners  employees of  the  general insurance companies  and the  four insurance  companies. The financial resources,  structures and  functions of the Banks are different  from those of the insurance companies. It may also be  noted as  was pointed  out to  us on  behalf of the respondents that Bank’s Class III and IV employees are about 4,58,000 in  1982 as  compared to  insurance companies which

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employ about  25,000  Class  Ill  and  Class  IV  employees. Therefore for  the purpose of rationalisation, the insurance companies wanted  to curtail  their emoluments  on  a  small scale. It  cannot be  said that  there are no distinguishing factors  and  that  for  choosing  a  particular  group  for experiment,  the  respondents  should  be  found  guilty  of treating people  differently while  they are  alike  in  all material respects      Differentiation is  not always discriminatory. If there is a  rational nexus  on the  basis of which differentiation has been  made with  the object  sought to  be  achieved  by particular  provision,  then  such  differentiation  is  not discriminatory and does not 289 violate the  principles of  article-14 of  the Constitution. This principle  is too  well-settled now to be reiterated by reference  to   cases.  There   is  intelligible  basis  for differentiation. Whether  the same  result or  better result could have been achieved and better basis of differentiation evolved is within the domain of legislature and must be left to the  wisdom of the legislature. Had it been held that the scheme of 1980 was within the authority given by the Act, we would have  rejected the challenge to the Act and the scheme under article 14 of the Constitution.      It  was   also  urged   before  us  on  behalf  of  the respondents that  the petitioners  being employees of public sector    undertakings,     and    these     are    economic instrumentalities of  the State  and having  regard  to  the contents and  contour of the concept of public employment as developed in  the Indian  legal system,  an  employee  in  a public sector  can be  approximated with  and treated  as  a government servant.  Having regard  to the  principles which govern  the   employer  and  employee  relationship  in  the governmental sectors, the conditions of service of employees in public  employment should  be exclusively governed by the statute and  by the rules and regulations framed thereunder. Predication of  such power  would  necessarily  exclude  the provisions of  Industrial Disputes Act and the principles of collective  bargaining  just  as  these  would  exclude  the principles of  contractual relationship in such matters. The point is  interesting. However,,  in the view we have taken, we need not discuss this aspect any further.      It was  further submitted  on behalf  of the respondent that the  rationale justification and the genesis of the law of  nationalisation   being   the   creation   of   economic instrumentalities  to   subserve  the   constitutional   and administrative goals  of  governance  in  a  social  welfare society,  the  running  of  public  sector  undertakings  is neither for profit earning of the management nor for sharing such profits  with the  workmen alone  but  to  utilise  the investible funds  available as a result of such ventures and undertakings for  socially-oriented goals  laid down  by the governmental policies operating on the said sectors. In this connection reference  was made  before us to the decision in the case  of State  of Karnataka  & Anr.  etc. v. Ranganatha Reddy & Anr. etc 290      Employment is  the public  sector undertakings enjoys a statuh. It was submitted that both historically as well as a matter of  law, the  public sector  undertakings  being  the economic instrumentalities  of the State and discharging the obligations which  the State  have, the  employees  of  such undertakings in  principle cannot be distinguished. from the employees in the government services. In this connection our attention was  drawn to  the case of Sukhdev Singh & Ors. v.

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Bhagat Ram Sardar Singh Raghuvanshi & Anr. It was urged that in all  constitutional democracies. the relationship between the government and the civil service is exclusively governed by the statutory provisions with the power in the Government to unilaterally  alter the  conditions  of  service  of  the government employees.  Reference was  made to  "The  Law  of Civil Service  " by Kaplan. It was further submitted that in India the law is that origin of the Government service might be. contractual  but once  appointed to  a  post  under  the Government, the government servant acquires a status and the rights and  obligations  are  no  longer  dependent  on  the consent of both the parties but by statute.      We would  have considered  these aspects  had  it  been necessary for  us to  do so  but it  is not necessary in the view taken.  We may  reiterate  that  article  14  does  not prevent  legislature  from  introducing  a  reform  i.e.  by applying the  legislation to some institutions or objects or areas only  according to  the exigency  of the situation and further classification  of selection  can  be  sustained  on historical reasons  or reasons of administrative exigency or piece-meal method  of introducing  reforms. The law need not apply to all the persons. in the sense of having a universal application to  all persons.  A law  can be  sustained if it deals  equally   with  the  people  of  well-defined  class- employees of  insurance companies  as such and such a law is not open  to the charge of denial of equal protection on the ground that it had not application to other persons.      In  the  view  we  have  taken  of  the  matter,  these applications succeed and the impugned scheme of 1980 must be held to  be bad  as beyond the scope of the authority of the Central Government  under  the  General  Insurance  Business (Nationalisation) Act, 1972. The operation of the scheme has been restrained  by the  order passed  as inter  in order in these cases.  The impugned  scheme is therefore quashed, and will not be given effect to. The parties will be at 291 liberty to adjust their rights as if the scheme had not been framed. The  application for  intervention is  allowed.  Let appropriate writs  be issued  quashing the  scheme of  1980. This, however,  will not  prevent the  Government, if  it so advised, to  frame any  appropriate legislation  or make any appropriate amendment  giving power to Central Government to frame any  scheme as  it considers  fit and  proper. In  the facts and circumstances of these cases and specially in view of the  fact that petitioners had themselves at one point of time wanted  that  new  scheme  be  framed  by  the  Central Government, we  direct that  parties will pay and bear their own costs  in all these matters. The rules are made absolute to the extent indicated above. N.V.K.                                    Petitions allowed. 292