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PETITIONER: AMAR KRISHNA GHOSE

       Vs.

RESPONDENT: LIFE INSURANCE CORPORATION OF INDIA & ANR.

DATE OF JUDGMENT14/11/1972

BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. CHANDRACHUD, Y.V.

CITATION:  1973 AIR  250            1973 SCR  (2) 998  1973 SCC  (2) 352

ACT: Life Insurance (Emergency Provisions) Ordinance, 1 of  1956- Cl.  3(2)  ’deemed’ termination  of  service-Life  Insurance Corporation Act, 31 of 1956, Sec. 11(1) & 11(3). Life Insurance Corporation Rules, 1956 Rule  12-A--Exclusive jurisdiction  of  the Life Insurance  Tribunal-Whether  word "liability  of  the controlled business  of  insurer"  cover questions  of  arrears  of pay  and  deemed  termination  of erstwhile employees.

HEADNOTE: Appellant,  an  employee  of  an  erstwhile  Life  Insurance Company filed a suit against the L.I.C. in the Calcutta High Court inter alia, claiming that the purported termination of his service was void and for a declamation that he continued to be in service of the Corporation after the vesting of the business  in  the life Insurance  Corporation.   He  further claimed  the arrears of rent and other dues  accrued  before the  vesting  and  salary for the  subsequent  period.   The Calcutta  High Court split the two set of reliefs  and  held that  under  Rule 12-A-the Life Insurance Tribunal  had  the exclusive jurisdiction to decide whether the Corporation was liable as a successor to the said companies for the  earlier liabilities  or not.  The High Court ’further held that  the question as to whether the employment of the appellant stood terminated by virtue of sec. 3(2) of the Ordinance was  also within  the exclusive jurisdiction of the  Tribunal.   Since the  relief for declaration of the continuation  of  service and   subsequent  salary  depended  upon  the  question   of termination of service under sec. 3(2) of the Ordinance, the High Court ordered that part of the claim may stand over and considered after the Tribunal’s decision on the first set of issues.   The  court  gave liberty  to  the  Corporation  to agitate  (at  such an adjourned hearing)  that  the  Central Government has the exclusive jurisdiction under sec. 11(1) & 11(3)  of Act to adjudicate the question of continuation  of employment. On appeal the Court, HELD:     (1)  The  expression "controlled business  of  the insurer"  in,  Rule 12A means the  life  insurance  business carried on by an insurer before its management became vested in  a  custodian  under  the  ordinance  and  then  in   the

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Corporation., The appellant was not right in contending that the past liabilities do not relate to "controlled business". Therefore  the Tribunal was the proper authority  to  decide question of arrears of pay and other dues. [1003 E] (2)  Rule  12-A confers on the Tribunal the jurisdiction  to try  "any  question  of any nature  whatsoever  in  relation to .... liabilities pertaining to controlled business."  ’Me question,  whether  the  services  of  the  appellant  stood terminated  by cl. 3(2) of the Ordinance is related  to  the liability’  of the "controlled business" and is  covered  by the  wide wording of Rule 12-A.  The Tribunal alone had  the jurisdiction to decide the said question. [1005 D] (3)  The  High Court was right in splitting the  appellants’ claim  into two, one triable by the Tribunal and  the  other not, and retaining with it 999 that part of the suit which did not fall within the scope of R.  12-A with liberty to the parties to raise later  on  the question  whether that part was triable by the court  or  by the Central Government under S. 11 (3) of the Act. [1O05 G] Appeal dismissed.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1331  of 1967. Appeal  by  certificate from the judgment  and  order  dated February 28, 1966 of the Calcutta High Court in Appeal  from Order No. 88 of 1965. M.   C.  Setalvad and Ram Prosanna Bagchi and Sukumar  Ghose for the appellant. F.   S.  Nariman, Additional Solicitor General of India,  K. L. Hathi and P. C. Kapur for the respondent No. 1. The Judgment of the Court was delivered by SHELAT, J.  This appeal, founded on the certificate  granted by   the  High  Court  of  Calcutta,  raises  questions   of interpretation of sec. 3(2) of the Life Insurance (Emergency Provisions)  Ordinance,  1  of 1956, sec.  11  of  the  Life Insurance Corporation Act, 31 of 1956 and R. 12A of the Life Insurance  Corporation Rules, 1956 made under s. 48  of  the said Act. These questions arise in the following circumstances Prior  to January 1, 1956 the appellant was employed as  the Principal Officer of the Bengal Insurance and Seal  Property Co.  Ltd., respondent 2 in this appeal. It was not  disputed in the    High  Court  that by  Principal  Officer  the appellant meant that he   was the Managing Director. His salary as such officer was Rs. 2630 per mensum which  on and from January 1, 1956 was raised to Rs. 3000 per  mensum. On January 19, 1956, respondent2 issued in favour of the appellant four cheques for Rs. 5436-6-0 in          all representing  his salary for November and December 1955  and for certain other dues. On that very day, i.e., January  19, 1956,  the Life Insurance (Emergency Provisions)  Ordinance, 1956  came into force, under which January 19, 1956 was  the appointed day. The management of the life insurance business carried  on by all concerns including that of  respondent  2 was  taken  over and became vested in  custodians  appointed under the Ordinance. Cl. 3(2) of the Ordinance provided that  "any contract, whether express or  implied,  providing for the management  clof  the controlled business  of  an insurer  made before the appointed day between  the  insurer and any person in charge of the management of such  business immediately before the appointed day shall be  deemed   to

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have terminated on the appointed day". The Ordi- 1000 nance  was  substituted  by the  Life  Insurance  (Emergency Provisions)  Act,  9 of 1956 which came into force  as  from March  21,  1956.   The said  cheques,  when  presented  for payment,  were not honoured by the Bank on the  ground  that they were not signed by the custodian. On  June  18,  1956, Parliament passed  The  Life  Insurance Corporation  Act, 31 of 1956, which came into force as  from July 1, 1956.  A Notification, dated August 30, 1956, issued thereunder  fixed  September 1, 1956 as the  appointed  day, that is the date when the Corporation was established  under sec. 3 of the Act.  Sec. 7 of the Act reads as follows :                "7(1)  On  the appointed day there  shall  be               transferred  to and vested in the  Corporation               all the assets and liabilities appertaining to               the controlled business of all insurers.               (2)The    assets   appertaining   to    the               controlled  business  of an insurer  shall  be               deemed  to include all rights and powers,  and               all  property, whether movable  or  immovable,               appertaining   to  his  controlled   business,               including   in  particular,   cash   balances,               reserve  funds investments, deposits  and  all               other  interests and rights in of arising  out               of  such property as may be in the  possession               of the insurer...... and liabilities shall  be               deemed  to include all debts, liabilities  and               obligations of whatever kind then existing and               appertaining to the controlled business of the               insurer." Sec 11(1) of the Act provides that every whole-time employee of an insurer whose controlled business has been transferred to and vested in the Corporation and who was employed by the insurer  wholly or mainly in connection with his  controlled business   immediately  before  the  appointed   day   (i.e. September  1,  1956)  shall on and from  the  appointed  day become  an  employee of the Corporation and shall  hold  his office  therein on the same terms and conditions as  he  was having on the appointed day, unless and until his employment in  the Corporation is terminated by the Corporation.   Sub- sec. (3) of s. II provides that if any question arises as to whether  (a)  any  person was a whole-time  employee  of  an insurer,  or  (b) as to whether any  employee  was  employed wholly or mainly in connection with the controlled  business of  an  insurer immediately before the appointed  day  (i.e. September  1, 1956) that question shall be referred  to  the Central Government, whose decision shall be final.  Under s. 17, the Central Government has been empowered to  constitute one  or  more  tribunals.   Sec.  48  empowers  the  Central Government  to  make rules, and in  particular  among  other subjects on the subject of jurisdiction of                  1001 the tribunals constituted under s. 17.  Rule 12A of the Life Insurance Corporation Rules, 1956 made under s. 48 reads  as under :               "12A.  Jurisdiction of Tribunal.               The Tribunal may exercise jurisdiction in  the               whole of India and shall have power to  decide               or  determine  all  or any  of  the  following               matters, namely,               (1)   any  question  whether of  title  or  of               liability,  or  of any  nature  whatsoever  in               relation   to  the  assets   and   liabilities               pertaining  to the controlled business of  the

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             insurer  transferred  to  and  vested  in  the               Corporation." It  seems clear from s. 11(3) of the Act and the  said  rule 12A (1) that on a question whether a person was a whole-time employee of an insurer or whether any employee was  employed wholly or mainly in connection with the controlled  business of such insurer immediately before the appointed day,  i.e., September 1, 1956, it is the Central Government which is the deciding authority and whose decision is final, and (2) that where a question, whether of title or of liability or of any nature whatsoever in relation to the assets and  liabilities pertaining  to  the  controlled  business  of  the   insurer transferred to and vested in the Corporation, arises, it  is the  tribunal  which  is the  authority  invested  with  the jurisdiction to determine such a question. On January 20, 1959, the appellant filed a suit in the  High Court claiming the following reliefs :               (a)   a decree for Rs. 5436-6-0 as salary  for               November and December 1955;               (b)   declaration    that    the     purported               termination of his contract of service as  the               principal officer of respondent 2 and/or as an               employee of the Corporation was void;               (c)   declaration that he was and continued to               be  the  employee of the Corporation  and  for               reinstatement;               (d)   a  decree  for Rs.  1,01,250  being  his               salary  from January 1956 to December 1958  at               the rate of Rs. 2812-8-0 per mensem;               (e)   in the alternative, for a decree for the               said amount of Rs. 1,01,250 against respondent               2; and               (f ) for interest and costs. The  case of the Corporation was (1) that by reason  of  cl. 3(2) of Ordinance 1 of 1956 the employment of the appellant 1002 with the respondent 2 stood terminated on January 19,  1956, and  (2)  that  as a consequence of  such  termination,  the appellant  was not in the employment of respondent 2  wholly or  mainly  in  connection  with  his  controlled   business immediately  before the appointed day under the  Act,  i.e., September  1, 1956, and therefore, was not entitled  to  the benefit of s. 11( 1) thereof and could not, therefore, claim to  have become an employee of the Corporation.   Therefore, there  was  no question of his employment having  to  be  or having been terminated by the Corporation at all, much  less wrongfully.   Its case further was that so far as the  first relief was concerned since the claim for Rs. 5436-6-0 raised the  question  of pertaining to the controlled  business  of respondent  2,  the jurisdiction was  exclusively  with  the tribunal  as under s. 41 of the Act no civil court  has  the jurisdiction to entertain and adjudicate upon a matter which the  tribunal has been empowered to determine.   That  being so, it was the tribunal which had to decide whether (a)  the appellant’s employment stood terminated on January 19,  1956 by  virtue  of  cl. 3 (2) of Ordinance 1 of  1956,  and  (b) whether  as  a result of the vesting of  the  management  of controlled business in the Custodian or the vesting of  that business  in the Corporation, the Corporation was liable  to Day the arrears of his salary for November and December 1956 and  certain  other  dues.   So far as  the  claim  for  Rs. 1,01,250, on the footing that there was no such  termination of  the  appellant’s  service and  consequently  his  having become and having continued to be the Corporation’s employee under  s. 11(1) of the Act, is concerned, the  Corporation’s

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case  was that part of his case had to be determined by  the Central  Government as under s. 11(3) it is that  Government which  has to decide whether the appellant was a  whole-time employee of respondent 2 wholly or mainly in connection with that  company’s controlled business immediately  before  the appointed  day,  viz.,  September 1,  1956.   That  question depended upon the question whether his employment with  res- pondent  2  stood terminated on January 19, 1956  under  cl. 3(2)  of  the  said Ordinance, for, if it  did,  no  further question  of  his becoming or his having  continued  as  the Corporation’s  employee  under  s. 11(1) of  the  Act  could possibly arise. A  learned single Judge of the High Court, before  whom  the suit  came up for hearing, held that the High Court  had  no jurisdiction  to  entertain or  adjudicate  the  appellant’s claim against the Corporation and dismissed the  appellant’s suit.  In a Letters Patent appeal against that judgment  and decree,  a  Division Bench of the High Court  sustained  the trial   Court’s   finding  that  the  High  Court   had   no jurisdiction in the matter of the appellant’s claim for  Rs. 5436-6-0  and  that  it  was the  tribunal  which  had  that jurisdiction.   But  it  did not uphold  the  trial  Court’s finding as regards the relief for the salary and declaration in respect of the 1003 period  from  September  1,  1956  to  December  1958.   The Division  Bench held that "this part of the case, so far  as the  Life  Insurance Corporation is  concerned,  will  stand adjourned until the determination of the proceedings  before the   Tribunal  mentioned  above.   This  will  be   without prejudice  to  the  rights of the defendants  to  raise  the question  of competency of the Court to decide any  question which  comer, within the scope of sec.  11 (3) of  the  said Act.   So  far as defendant No. 2 is concerned it  has  been held  that  the  Court  has  jurisdiction  and  we  are  not disturbing  that  part of the decree".  What  the  Division Bench in effect decided was that it was the tribunal and not the  High  Court which had the jurisdiction  to  decide  the question  as to the Corporations liability to pay  the  said arrears  of  salary for November and December 1955  as  that liability pertained to the controlled business of respondent 2.  That question would involve the issue as to  whether  or not  the appellant’s contract of service with  respondent  2 stood terminated by virtue of cf. 3(2) of the Ordinance.  As regards his claim for salary for the period from September 1 1956 to December 1958, the Division Bench left the  question open  until the tribunal decide the first part of the  claim including  the  question  arising  under  cl.  3(2)  of  the Ordinance.   But  it left the question,  viz.,  whether  the appellant  be-came and continued to be the employee  of  the Corporation under s. 1 1 ( 1 ) of the Act, open and retained that  part of the appellant’s suit with the High Court  with liberty to the respondents to raise the question of the High Court’s jurisdiction in that regard.  That question would be whether  under  s. 11(3) of the Act it is  for  the  Central Government to determine whether the appellant was the whole- time  employee  of  respondent  2  immediately  before   the appointed day under the Act, viz., September 1, 1956. Mr.   Setalvad   doubted   the  correctness   of   such   an interpretation of R. 12A of the Corporation Rules and argued that  the  Rule conferred jurisdiction on  the  tribunal  on questions  as to the Corporation’s liability in relation  to "the  assets  and liabilities pertaining to  the  controlled business  of  the insurer transferred to and vested  in  the Corporation".  The business transferred to and vested in the

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Corporation  could no longer be the controlled  business  of the insurer and ceased to be so once it became  transferred to and vested in the Corporation under the Act.   Therefore, he  argued,  the  Tribunal could  have  no  jurisdiction  in respect of a liability to which the Corporation succeeded as a result of the assets and liabilities of the insurer having been  transferred  to  and vested in  the  Corporation.   He contended  that being the position, it was not the  tribunal but the civil court which had to decide the question whether the Corporation was liable to pay the arrears of salary  for November and December 1956. a liability, which the Custodian and later on the Corporation were liable to satisfy, 1004 the  former as a result of the management having  vested  in him under the Ordinance,, and the latter as a result of  its having  succeeded  to  the assets  and  liabilities  of  the insurer.  He also contended that the question as to  whether the appellant’s contract of service with respondent 2  stood terminated  on  January  19,  1956 under  cl.  3(2)  of  the Ordinance  would  also  not fall under R.  12A.   The  Addl. Solicitor-General,  on  the  other  hand,  disputed  such  a construction  of R. 12A and contended that the tribunal  had under that Rule the exclusive jurisdiction to determine both the questions, and -the High Court could not. by reason  of S.  41  of the Act entertain or adjudge either  of  the  two questions. The  reliefs  prayed  for by the  appellant  in  his  plaint pertained to two periods; (1) Rs. 5436-6-0 being the arrears of  salary  and other dues for the months  of  November  and December 1955, and (2) Rs. one lac and odd being the  salary from  January  1, 1956 to December 1958.  Under  R.  12A,  a question either of liability or of any nature whatsoever  in relation  to  the assets or liabilities  pertaining  to  the controlled business of the insurer transferred to and vested in  the  Corporation falls within the  jurisdiction  of  the tribunal  and  cannot be entertained and  adjudicated  by  a civil court under S. 41 of the Act.  In respect of the claim for  arrears of salary for November and December  1956,  the question  really would be one of liability in regard  to  or pertaining  to the controlled business of the insurer  which became  transferred to and vested in the Corporation.   That question,  therefore,  fell fairly and squarely  within  the jurisdiction  of the tribunal.  The  expression  "controlled business of the insurer" in R. 12A means the life  insurance business  carried  on by an insurer  before  its  management became  vested in a custodian under the Ordinance and  whose assets  and liabilities became transferred to and vested  in the  Corporation  under the Act.  R.12A clearly  deals  with questions  arising out of and pertaining to such  controlled business.   Under R. 12A, jurisdiction to try  questions  in respect  of  the liability pertaining to such  business  has been vested in the tribunal.  The question of the  liability of  the Corporation in regard to the arrears of  salary  for November and December 1955 clearly related to the controlled business  then carried on by respondent 2.  The  Corporation was  sought  to be made liable to pay those arrears  on  the ground  that liability was transferred to and vested in  the Corporation.  Clearly R. 12A applied to such a question  and the jurisdiction to try such a question was in the  tribunal and not the High Court.  Any question, therefore, as to  the liability   pertaining  to  the  business  which   was   the controlled  business as defined by the Act would have to  be tried by the tribunal. As regards the second claim of the appellant, that claim in- volved  the question as to whether his contract  of  service

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with  respondent 2 stood terminated on January 19,  1956  by viz 1005 of cl. 3 (2) of the Ordinance.’ If it did, he would not be a person  who was employed by the insurer wholly or mainly  in connection. with his controlled business immediately  before the appointed day (which is September 1, 1956 under the Act) as required by s. 11(1) of the Act, and therefore, he  could not claim to be one became and continued to be ;in  employee of the Corporation as envisaged by that sub-section.   Under sub-sec.  (3) of sec. 11, the question whether  an  employee was  employed  wholly  or  mainly  in  connection  with  the controlled  business.of  an insurer immediately  before  the appointed  day  under the Act (i.e., September 1,  1956)  is determinable  by the Central Government and not by  a  civil court.   That  question,  however,  would  depend  upon  the question  whether the appellant’s contract of service  stood terminated  by  reason  of cl. 3 (2) of  the Ordinance  on September   1,  1956.   Has  the  tribunal   the   exclusive jurisdiction  to  decide  that question  ?  The  High  Court thought  so, and in our view rightly because R. 12A  confers on the tribunal the jurisdiction to try, any question-of any nature  whatsoever in relation to-liabilities pertaining  to the  controlled business of the insurer transferred  to  and vested-  in  the Corporation".  These are  very  wide  words which  would include the question whether the  appellant  as the principal officer of respondent 2 continued. lo be  such officer after January 19, 1956 in relation to the controlled business  which  on  and after January 19, 1956  was  to  be managed  in terms of the Ordinance by a custodian  appointed thereunder  and whose assets and liabilities on the  passing of   the  Act  were  transferred  to  and  vested   in   the Corporation.    The   question  whether  his   contract   of employment as the principal officer of the business, defined as the controlled business both under the Ordinance and  the Act,  continued  or not after January 19, 1956  would  be  a question  in  relation to the liability pertaining  to  such controlled business and was therefore within the scope of R. 12A.   But the question as to whether he became an  employee of  the  Corporation under s. 11(1) on and from  January  1, 1956,  though  dependent  on the answer as  to  whether  his contract stood terminated under cl. 3 (2) of the  Ordinance, would  not fall within R. 12A and was not therefore  triable by  the tribunal.  The High Court, therefore, was  right  in splitting the appellants claim into two, one triable by  the tribunal and the other not, and retaining with it that  part of  the suit which did not fall within the, scope of R.  12A with  liberty to the parties to raise later on the  Question whether that Part was triable by the Court or by the Central Government under s. II ( 3 of the Act. The appeal thus fails and is dismissed with costs. S.B.W.                     Appeal dismissed- 1006