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CASE NO.: Writ Petition (civil) 3815-19  of  1978

PETITIONER: KISHAN PRAKASH SHARMA & ORS.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT:       19/03/2001

BENCH: G.B. Pattanaik, S. Rajendra Babu, D.P. Mohapatra,Doraiswamy Raju & Shivaraj V.  Patil.

JUDGMENT:

L...I...T.......T.......T.......T.......T.......T.......T..J    [WITH   W.P.(C)   NOS.     8 00-01/1980,       15210-13/1984, 15209/1984,  3394/94A/1985,  15435/1984  and T.C.   (C)  NO. 5/1981]

J  U  D  G  M  E  N  T

RAJENDRA BABU,  J. :

   The  genesis of dispute in these matters is embedded  in the  various  schemes  framed under  the  General  Insurance Business  (Nationalisation)  Act, 1972 (Act 57 of  1972)  as amended  from time to time (hereinafter referred to as  the Act).

   The  Preamble to the Act explains the purpose of the Act as  to provide for the acquisition and transfer of shares in the  Indian  insurance companies and undertakings  of  other insurers  in order to serve better the needs of the  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 concentration  of  wealth  to the common detriment  for  the regulation  and  control  of such business  and  for  matter connected  therewith  or  incidental   thereto.   Section  2 declared  that it was for giving effect to the policy of the State  towards securing the principles specified in  Article 39(c)  of the Constitution and under Section 3(a) 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 been merged or  the company  which has been framed as a result of  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 5 provides for transfer of the undertakings of other existing  insurers.   Section 6 provides for the  effect  of transfer  of undertakings.  Section 8 provides for provident fund,  superannuation,  welfare or any other fund  existing.

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Section  9  stipulates that Central Government shall form  a Government  company in accordance with the provisions of the Companies  Act to be known as 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 on such vesting, stand transferred to and vested in the Corporation.  Chapter 4 deals with the amounts to be made for acquisition.  Chapter 5 of the Act deals with scheme  for re- organisation of general insurance  business. Sections 16 and 17 are important, to which we will advert to later  and by amendment of the Act by an Ordinance issued in 1984  and subsequently replaced by an Act in 1985, the  said provisions  have  been  amended and a  fresh  provision  was introduced  as Section 17-A to which we will advert later in detail.  After the Act came into force, several schemes have been  framed  by the Board of Directors and two schemes  one dated  July 30, 1977 amending the provisions regarding  sick leave  and  another scheme pertaining to the payments to  be made to the provident fund were challenged before this Court in the case of Ajay Kumar Banerjee v.  Union of India, which resulted  in  a reported decision in 1984(3) SCR  252.   The main  ground  of  attack in that writ petition is  that  the amended  notification altering the conditions of service  is illegal  as the Central Government has no power to issue  it under  Section  16 of the Act and as such  the  notification framing  the scheme is ultra vires Section 16(1) of the Act. It  was  contended  that  once  the  merger  of  the  Indian companies had taken place and the process of re-organisation was  complete  on  1st  January, 1974 as  stated  before  by forming  the  4 insurance companies by 4 schemes  framed  in 1973,  there  could  be no further  re-organisation  of  the general  insurance business and the merger of more insurance companies  inasmuch  as in the amended scheme there  was  no merger  or  re-  organisation contemplated unlike  the  1974 scheme.   Mere  amendment  of the terms  and  conditions  of service   of   the  employees   unconnected  with   or   not necessitated  by re- organisation of the business or  merger or  amalgamation  of  the companies could  not  fall  within Section  16(1)(g)  of the Act.  It was also noticed by  this Court  that  under  the Life Insurance Corporation  Act  and Banking  Companies  Act provisions have been made  to  frame regulations  independently of the re-organisation and  there is  no  such comparable power under the Act and,  therefore, the  schemes  impugned herein are made without authority  of the  law.  This contention found favour with this Court.  On interpretation  of the provisions it was held that the power under Section 16(1)(g) to frame scheme for rationalising the provisions   regarding  pay-scales  and   other  terms   and conditions  of  service  of  officers  and  other  employees wherever  necessary if unrelated to the object envisaged  in sub-section  (2)  of  Section 16 of the Act  will  not  fall within  the  scope of exercise of powers and it  would  fall outside the same if the power exercised is beyond delegation and in view of the fact that the scheme of 1980 so far as it does  not  relate  to  the amalgamation  or  merger  of  the insurance  company is not warranted by Section 16(1) of  the Act.  Ultimately, this Court held that the amended scheme of 1980  was  bad as beyond the scope of the authority  of  the Central  Government under the Act.  Further it was also made clear  that  the parties will be at liberty to adjust  their rights  as  if  the scheme had not been framed  and  it  was further  made  clear  that this order will not  prevent  the

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Government,   if  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.

   However,  in that batch of petitions, out of several  of the  cases that were disposed of by this Court in Ajay Kumar Banerjees   case  [supra],  two   matters   [W.P.(C)   Nos. 800-801/80]  have  remained  undisposed of.   In  these  two matters,  a  challenge is to the schemes framed in 1976  and 1977  by which the basis for contribution to provident  fund had  stood  varied by changing it from 8 per cent  of  basic salary,  dearness allowance and personal pay to 10 per  cent of  basic  salary and personal pay and special pay, if  any. The  other  amendment  scheme effected  certain  changes  in relation  to sick leave.  While it is the contention of  the Petitioners  that these two petitions have to be allowed, it is  the stand of the respondents that in view of the changes that  have been effected and the validation made thereto  to the  respective  schemes  these petitions will  have  to  be dismissed.  Inasmuch as the fate of these two petitions will depend  on the view we take in the main matter, it would  be appropriate  to proceed to examine the other petitions  that have been filed.

   In  WP(C)  No.15209/84, All India  Insurance  Employees Association is the Petitioner, while Ummed Singh and another workman are the Petitioners in WP(C) Nos.15210-13/84.  WP(C) No.15209/84  has  been filed in challenging  the  Ordinance, which effected the changes to the Act in question.  Inasmuch as  the said Ordinance has been replaced by the Act, we must hold  that these petitions have become infructuous and shall stand disposed of accordingly.

   As  stated  already,  by  the  Act,  nationalisation  of general insurance business was effected by notification made on September 20, 1972, which brought the Act into force with 2.1.1973 as the appointed date.  On 27.9.1974, the scheme of 1974  was issued by the Central Government purported to have been  issued  under Section 16(1)(g) of the 1972  Act  after discussions  and  negotiations with the employees under  the Industrial  Disputes  Act.  On 1.6.1976, another scheme  was issued by the Central Government, stated to be unilaterally, under  which  the  Provident  Fund benefit  granted  to  the employees  under  the  1974 scheme was modified.   The  1974 scheme  granted  contribution of 8 per cent based  on  basic salary, dearness allowance and the personal pay and this was substituted  with  10 per cent of basic salary and  personal pay.  The Provident Fund Act has been made applicable to the workmen of the GIC from 1970 onwards.  On 30.7.1977, another scheme  was published purportedly under Section 16(1)(g)  of the  1972 Act amending the provisions regarding sick  leave. The  sick leave was available with full pay, but by the  new scheme the same was reduced to only half pay.  On 30.9.1980, the Central Government published another scheme to amend the 1974  scheme by which the existing employees would retire at the  age of 60 years and those who joined the service  after 1980  will  retire at the age of 58 years.  The  ceiling  on salary  including basic, dearness allowance and special pay, if any, was imposed on Class III employees at Rs.2,750/- per month  and  on  Class IV employees at Rs.1,600/-  p.m.   The graduation  increment  was   withdrawn.   Subsequently,  the ceiling   was  increased  to   Rs.3,500/-  p.m.   Class  III employees  and  to  Rs.2117/-   p.m.   Class  IV  employees.

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However,  there is no ceiling at all at present.  After  the decision  in  Ajay Kumar Banerjees case  [supra]  Ordinance 10/84  was promulgated to amend the 1972 Act by  introducing Section  17A, retrospectively and modification of Section 16 of  the  1972  Act.  On 21.9.1984,  the  Central  Government issued  the  Amendment  Scheme  of  1984  purportedly  under Section 17A of the 1972 Act by reviving the 1980 scheme.  It also  imposed  a  condition  of  compulsory  retirement   on completion  of  55  years  of  age.   The  Petitioners  have challenged  the  vires of the Act as well as the schemes  in these proceedings.

   At  this  stage, we may notice the following  amendments effected to the Act :

   a.   In  the  definition  clause in  Section  3(o),  the expression  scheme was altered to mean not only one framed under  Section 16(1) but also a scheme framed under Section 17A.

   b.   Section  16  of the Principal Act  was  amended  by introducing  an additional sub-section (8) after sub-section (7)  to  the effect that the power to frame a  scheme  under sub-section  (1), and the power conferred under  sub-section (6)  to  add to, amend or vary any scheme framed under  this section,  shall include the power to frame such scheme  with retrospective  effect  from  a  date not  earlier  than  the appointed day.

   c.   Section  17A  is introduced in which  a  validation clause  and  some consequential amendments have  been  added which we reproduce hereunder:

   17-A.   (1) The Central Government may, by  notification in  the  Official  Gazette, frame one or  more  schemes  for regulating  the pay scales and other terms and conditions of service  of officers and other employees of the  Corporation or of any acquiring company.

   (2)  A  scheme framed under sub-section (1) may add  to, amend  or vary any scheme framed under section 16 [including any  addition,  amendment  or   variation  made  therein  by notification  under  sub-section  (6) of  section  16]  with respect  to  rationalisation or revision of pay  scales  and other  terms and conditions of service of officers and other employees of the Corporation or of any acquiring company, to provide  for further rationalisation or revision of such pay scales   and   other  terms   and  conditions   of   service notwithstanding   that  such   further  rationalisation   or revision   is  unrelated  to,  or  unconnected   with,   the amalgamation  of insurance companies or merger consequent on nationalisation of general insurance business.

   (3) The Central Government may, by notification, add to, amend or vary any scheme framed under this section.

   (4)  The power to frame a scheme under sub-section  (1), and  the power conferred by sub-section (3) to add to, amend or  vary  any scheme, or, as the case may be, to  make  such addition,  amendment or variation in any scheme framed under this  section,  with  retrospective effect from a  date  not earlier than the appointed day.

   (5) A copy of every scheme, and every amendment thereto, framed  under this section shall be laid, as soon as may  be

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after it is made, before each House of Parliament.

   (6)  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.

   (7)  (1)  Notwithstanding  anything   contained  in  any judgment,  decree  or order of any court, tribunal or  other authority  or  in any other law, agreement, award  or  other instrument  for the time being in force, every scheme framed or  purporting to have been framed with retrospective effect under sub-section (1) of section 16 of the principal Act and every notification made or purporting to have been made with retrospective  effect under sub-section (6) of that  section before  the  commencement of the General Insurance  Business (Nationalisation)  Amendment  Ordinance, 1984 shall be,  and shall  be  deemed always to have been, for all purposes,  as valid  and  effective as if the amendment made in  the  said section  16 by section 3 of this Ordinance had been part  of that  section  and had been in force at all material  times. (2)  Notwithstanding  anything  contained in  any  judgment, decree or order of any court, tribunal or other authority or in  any other law, agreement, award or other instrument  for the time being in force,-

   (a)  every  scheme  framed, or purporting to  have  been framed,  by the Central Government under sub-section (1)  of section 16 of the principal Act:  and

   (b)  every notification made, or purporting to have been made  by the Central Government under sub-section (6) of the said section 16,

   before  the  commencement  of   the  General   Insurance Business  (Nationalisation) Amendment Ordinance, 1984, in so far as such scheme or notification provides (whether with or without  retrospective  effect) for any  rationalisation  or revision  of  pay  scales or other terms and  conditions  of service  of officers and other employees of the  Corporation or  of any acquiring company, otherwise than in relation to, or  in connection with, amalgamation of insurance  companies of merger consequent on nationalisation of general insurance business  shall be, and shall be deemed always to have  bee, for  all purposes, as valid and effective as if section 17A, as  inserted  in  the principal Act by section  4,  of  this Ordinance  had been part of the principal Act, and had  been in  force  at  all  material   times  and  such  schemes  or notification  in so far as it provides as aforesaid had been framed or made, under the said section 17A:

   Provided that nothing in this section shall apply to, or in  relation  to,  the notification dated the  30th  day  of September,    1980,   framing     the   General    Insurance (Nationalisation  and  Revision  of  Pay  Scales  and  other Conditions   of  Service  of   Supervisory,   Clerical   and Subordinate Staff) Second Amendment Scheme, 1980.

   Explanation.-In this section, the expressions acquiring company   and  Corporation  shall   have   the   meanings respectively assigned to them in the principal Act.

   Shri   P.P.Rao,   learned  senior    counsel   for   the Petitioners, submitted that :

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   1.  The schemes of 1976 and 1977 are illegal being ultra vires  the Nationalisation Act of 1972 for reasons given  in Ajay Kumar Banerjees case [supra].

   2.  The said schemes being void ab initio when they were made  could not be revived by giving retrospective effect to the Amendment Act of 1985.

   3.   The  1985 Amendment Act is  unconstitutional  being violative  of  Articles  14, 19 and 21 of  the  Constitution inasmuch  as  it confers unreasonable and unguided power  on the  Central  Government  to  frame  schemes  affecting  the conditions  of service of the workmen without any scope  for collective bargaining.

   4  .  In any event the retrospective effect given to the 1985  Amendment  with effect from 2.1.1973 is arbitrary  and violates  Articles  14, 19 and 21 of the Constitution as  it takes away vested rights.

   5.   Vide  proviso to Section 17-A(7)(2), the Act  makes discrimination  vis-Ã -vis the amendments to the Schemes made in  1976 and 1977 by specifically excluding the 1980  Scheme from the retrospective operation given to the 1985 Act.

   6.   The applicability of the Industrial Disputes Act to the  workmen  of  the  General  Insurance  Business  is  not excluded  by the Nationalisation Act of 1972.  Consequently, the view taken by the Industrial Tribunal in its award dated 1.8.1980  in  ID No.17 of 1980 is liable to be reversed  and the  civil  appeal remanded to the Industrial  Tribunal  for disposal in accordance with law.

   In  elaboration of these submissions and in  challenging the  validity  of  Section 17A of the 1972 Act,  he  further@@                                   JJJJJJJJJJJJJJJJJJJJJJJJJJ submitted as follows :@@ JJJJJJJJJJJJJJJJJJJJJJ

   1.   Nature  of power claimed to impose schemes  without adjudication and or immunity from judicial examination is in the nature of crown prerogative  not to be accountable in courts of law.  It is not admissible under the Constitution.

   2.   The  inevitable consequence of such power is  total destruction  of GIC Workers substantive right to collective bargaining,  even though Banks employees are fully competent to  negotiate  and  enter into binding agreement.   For  the exercising this right both are similarly situate.

   3.   It also destroys the right to procedural safeguards of conciliation, arbitration and adjudication.  Only in case of the General Insurance Employees, although in case of bank employees,  with  no  rational  differentia,  the  right  to collective  bargaining  is recognised and not disturbed  and the right to adjudication was recognised in Bharat Bank case in 1950 has resulted in Shastry Award and long line of other awards  under the Industrial Disputes Act.  Settlement  with the  Bank  employees  are cited by  respondents  to  justify unilateral  arbitrary  changes imposed by  impugned  schemes under invalid Section 17A.

   4.   Discrimination against GIC employees, in matters of social  and economic justice and fair play, is writ large on the  face  of  Section  17A.  The GIC  employees  have  been

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singled  out for denial of their dignity as equal  partners, and   the  constitutional  right  to  participate   in   the management  of  insurance  industry  and to  take  away  the safeguards  of  a just, fair and reasonable  procedure  with well  defined necessary safeguards against arbitrary changes in wage structures and other terms and conditions of service with  retrospective  effect to make lawless schemes  lawful. Injustice  is thereby aggravated.  Article 14 is  flagrantly overtaken in all its dimensions.

   5.   This ignores the role of workers who produce wealth and services for the community.  The history of evolution of industrial  jurisprudence  and   fundamental  constitutional commitments  are  replaced by unguided executive fiat.   The workers  are  trusted to build Modern India but Section  17A imposes  avoidable  humiliation of imposing wage slavery  in sensitive fiscal public sector undertaking where justice and fair play must be the sole concern.

   It  blatantly makes Central Government a substitute  for industrial  Tribunals  but  lays   down  no  guidelines  for exercise  of  powers in fields where binding  principles  of industrial  law  declared by this Court are the law  of  the land.   The procedural and substantive benefits of this  law cannot be taken away to throw the GIC employees at the mercy of the executive.

   6.  The Central Government is obliged to act on relevant facts  ascertained  in a fair enquiry or principles  of  law which  are  available to the employees in other  industries, with  guaranteed protection of binding law and justice  from this Court under Article 136 of the Constitution.

   7.   Section  17A  cannot be read down  to  control  the powers  of the Central Government not to violate the binding principles  of  relevant  law enacted or  declared  by  this Court.

   8.   The artificial classification of GIC employees  has no  rational  differentia nor does it reasonable nexus  with any  constitutionally  permissible  object  to  justify  the amendment in the GIC Nationalisation Act.

   9.   After  nationalisation all industrial disputes  can and  must be dealt with under relevant industrial laws,  and not  in  exercise  of  absolute   power  conferred  on   the Government.   Section 17A imposes hostile discrimination  on GIC employees singled out to be subjected to wage slavery.

   10.   This  amendment  paralyses  the  Trade  unions  in insurance  industry and also the courts and Tribunals for no constitutionally permissible object.  The existence of power and  its exercise both are, therefore, unconstitutional  and hit  by  Article  14, 19(1)(c) and (g) and also  21  of  the Constitution of India.

   Shri  Harish  N.   Salve,   learned  Solicitor   General appearing  for  the Central Government, submitted  that  the background,  in  which the schemes have been framed and  the modifications thereto have been effected, has to be borne in mind.

   Prior  to  1972, there were about 106 general  insurance companies both of Indian and foreign origin.  The conditions

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of  service of the employees of the said insurance companies were governed by the respective contracts of service between the  companies  and  the employees.   The  set-up,  working, management   and  employment  of   staff  by  the  erstwhile insurance  companies  showed no uniformity.   The  erstwhile companies  were managed in diverse managerial systems and no uniform  pattern  of management could be discovered  by  the Central  Government after the nationalisation.  There was  a pronounced  disparity  between one company and the other  at all  levels  in the matter of remuneration and  designations for  similar  posts.  Employees of different companies  were holding different designations and were paid differently for the  same kind of work at the same station.  Some  companies gave  very  high  sounding designations and  paid  salaries, which were not commensurate with the work.  So the necessity for  rationalisation  of  the entire  structure  of  general insurance  business, including designations, pay scales  and other conditions of service arose.

   On  May  13, 1971, the Government of India  assumed  the management  of the general insurance companies under the Act pursuant  to an Ordinance issued at that time.  The preamble of  the  Act  explains  the purpose of the said  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 the economy in  securing the  development  of general insurance business in the  best interest  if the community and to ensure that the  operation of  the economic system does not result in concentration  of wealth  to  the  common detriment, for  the  regulation  and control of such business and for matters connected therewith or  incidental  thereto.  The said Act also deals  with  the scheme for reorganisation of general insurance business in Chapter V.

   The  first  step  the Central Government  took  in  this direction  was to reduce the number of companies carrying on general  insurance business, which was also the main  object of  Section 16(2).  With this object in view, the Government decided  to  retain four companies and all  other  companies were  merged  into  one  or  the  other  of  the  said  four companies.   To  achieve this end, four merger schemes  were framed  and promulgated.  All these schemes came into  force with effect from the 1st day of January, 1974.  Prior to the coming  into  force of the aforesaid schemes, the  different companies,  pending formal merger, had been merged into  one or the other of the said four companies.

   Thereafter,  the  Government  of India  in  exercise  of powers  under  Section 16(1)(g) 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.  As per this scheme,  contribution to the provident fund was to be at the rate  of  8  per  cent  of the  basic  salary  and  dearness allowance   with  an  equal   contribution  by  the  General Insurance  Corporation or any of its subsidiaries, while, at the  same,  time,  they  had maintained  parity  with  other institutions  such as LIC and the nationalised banks and for this  purpose  they had amended the notification  issued  on 1.6.1976 to provide that provident fund shall be contributed by  every employee at the rate of ten per cent of the  basic pay plus personal pay and special pay, if any, in place of 8 per cent of the basic salary and dearness allowance.  It was also  provided that any period of sick leave on half pay may

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be  converted  into sick leave on half pay at the option  of the  employees  but in such cases twice the amount  of  sick leave  was  to be debited against the leave account  of  the employee.   Provision was also made for the grant of special sick  leave for serious ailments like cancer, leprosy, T.B., polymylitis and other serious diseases.

   It is the stand of the respondents that these amendments were made while the process of rationalisation of pay scales and  other service conditions were still in progress and the process had not been finally completed to achieve uniformity and  inter-se  rationalisation  in terms and  conditions  of service  of  different  categories of  employees  of  merged companies.

   The second amendment to the scheme was effected in 1980. This Court in Ajay Kumar Banerjees case [supra] quashed the scheme  merely on the ground that the Central Government had no  power  under Section 16 of the Act to frame the  scheme. However,   this  Court  rejected   the  contentions  of  the Petitioners that the scheme was violative of Articles 14, 16 and  19 of the Constitution of India.  While explaining  the scope  of Section 16(1)(g) of the Act, this Court found that the  same  gives powers to the Central Government  to  frame schemes,  to regulate terms and conditions and pay scales of the  employees  and also to amend and vary the said  schemes from  time  to time.  However, it was held that such  powers can  be exercised only once.  By virtue of the amending Act, now  the Central Government has been empowered to amend  and vary the said schemes from time to time bringing the same in conformity  with the other institutions such as LIC and  the nationalised banks enactment.

   It  is submitted that so far as the question relating to the  fixation of age of retirement is concerned, it is clear from  the provisions made that the age of retirement for the existing  employees has been retained at 60 years and so far as  the employees to be recruited after the notification are concerned, the retirement of age has been fixed at 58 years. Therefore,  the alteration made does not take away any right of  the existing employees and the Petitioners cannot make a grievance of the same in respect of the persons who have not yet  been  taken  in  employment of  any  of  the  insurance companies  and  the  new  recruits  will  be  aware  of  the conditions  of  the service prevailing in the companies  and will take up the employment subject to those conditions.  So far as the ceiling on the maximum salary is concerned, it is submitted that the wage structure in the entire industry has become  lopsided  and has brought about grave inter se  wage distortions  reaching  grave dimensions.  For  example,  the emoluments  (basic  pay  plus  DA) on 1st July,  1984  of  a Superintendent  in Class III employed at the maximum of  his grade,  amounted  to  Rs.  4,082/- and this, if  allowed  to continue,  would create further distortions while emoluments of  a General Manager, amounted to Rs.3,950/- and Rs.4,450/- per   month  at  the  minimum   and  maximum  of  his  grade respectively  and the General Manager is seven steps above a Superintendent.  It is submitted that if the ceiling had not been  imposed, even the emoluments of a Superintendent would have  overtaken those of the Chairman-cum-Managing  Director of a Subsidiary company.  This would not be conducive to the smooth  functioning  of the organisation and would  lead  to distortions.   These  ceilings   were,  however,  thereafter revised  upwards  and  have since  been  removed  altogether during subsequent revisions in the pay scales, allowance and

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other benefits payable to employees in the General Insurance companies.   The  provisions regarding  graduation  benefits were     subsequently       amended       and     graduation increments/allowance are now available to graduate employees in the general insurance companies.

   The  challenge  now to the enactment is that this  Court having  held,  the expression scheme for reorganisation  of general  insurance business will not include a scheme  made after  the  reorganisation,  is complete;  that  no  further schemes, except in connection with the reorganisation of the general  insurance  business  and merger of  more  insurance companies  could be effected and the impugned scheme did not involve  any  such merger;  that therefore, this  scheme  is ultra  vires  the  Act;   that the  provision  enabling  the Central  Government  to  frame  the scheme is  bad  and  the provision  which gives retrospectivity to the said enactment is  equally  bad as there are no guidelines in Section  17A. Though there can be no limitation regarding providing better terms  and conditions of service the same cannot be modified to  the  detriment of the workmen.  The power that has  been conferred  upon  the Central Government to frame the  scheme without guidelines is bad and the guidelines have to be read into  the provisions in such a manner that the benefit which is already given to the workmen should not be taken away and there  should  be  enough scope  for  collective  bargaining particularly  in the absence of consultation and when  there is  no limitation on upward revision, the conferment of  the power upon the authority concerned is bad.

   So  far  as the delegated legislation is concerned,  the case law will throw light as to the manner in which the same has  to  be  understood and in each given case  we  have  to understand  the scope of the provisions and no uniform  rule could  be  laid down.  The legislatures in India  have  been held  to possess wide power of legislation subject, however, to  certain  limitations  such  as  the  legislature  cannot delegate  essential  legislative functions which consist  in the  determination or choosing of the legislative policy and of  formally  enacting  that policy into a binding  rule  of conduct.   The  Legislature cannot delegate uncanalised  and uncontrolled  power.  The Legislature must set the limits of the  power delegated by declaring the policy of the law  and by  laying down standards for guidance of those on whom  the power  to execute the law is conferred.  Thus the delegation is  valid only when the legislative policy and guidelines to implement  it  are adequately laid down and the delegate  is only empowered to carry out the policy within the guidelines laid  down  by the Legislature.  The Legislature may,  after laying  down the legislative policy, confer discretion on an administrative  agency as to the execution of the policy and leave  it  to the agency to work out the details within  the framework of the policy.  When the Constitution entrusts the duty  of  law-making to Parliament and the  Legislatures  of States,  it  impliedly  prohibits them to  throw  away  that responsibility on the shoulders of some other authority.  An area  of compromise is struck that Parliament cannot work in detail  the  various  requirements of giving effect  to  the enactment  and,  therefore,  that area will be  left  to  be filled  in by the delegatee.  Thus, the question is  whether any particular legislation suffers from excessive delegation and  in ascertaining the same, the scheme, the provisions of the  statute  including  its  preamble, and  the  facts  and circumstances  in  the  background of which the  statute  is

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enacted,  the history of the legislation, the complexity  of the  problems which a modern State has to face, will have to be  taken note of and if, on a liberal construction given to a  statute,  a  legislative policy and  guidelines  for  its execution  are brought out, the statutes, even if  skeletal, will  be  upheld  to  be  valid but  this  rule  of  liberal construction  should  not  be carried by the  Court  to  the extent  of  always  trying to discover a dormant  or  latent legislative  policy to sustain an arbitrary power  conferred on  the  executive.  These very tests were adopted  in  Ajay Kumar  Banerjees case [supra] also to examine whether there is  excessive delegation in framing schemes and reading  the preamble,  the  scheme  and  the  other  provisions  of  the enactment  taking note of the general economic situation  in the   country,  the  authorities   concerned  had  to  frame appropriate  schemes.   Therefore,  it is not  open  to  the Petitioners to contend that there is excessive delegation in relation to the enactment to frame schemes.

   In  Ajay  Kumar Banerjee case (supra), this Court  after holding  that there is no excessive delegation observed that the  scheme  framed  was ultra vires the enactment  for  the scheme  could only be framed once.  Now the argument is that once  a scheme is framed no further scheme should be allowed to  be  framed.  If the legislature recognizes the fact  the rationalisation  resulting  from  the   mergers  of  several companies are not yet over and on that basis enacts a law to enable  the  Government to frame appropriate schemes, we  do not  think that such step by the legislature is arbitrary or irrational  as  to  be  violative  of  Article  14  of   the Constitution.   In  Ajay Kumar Banerjee case  (supra),  this Court  pointed  out  that  though  there  is  power  in  the Government  to revise the pay scales it cannot exercise  the power  more  than  once  at the time  of  merging  different companies  for  the  purpose of rationalisation  this  power could  have been exercised and for no further.  But now  the enactment  itself  specifically provides that  every  scheme framed  or  purporting  to have been framed by  the  Central Government  under  Section  16(1) of the Principal  Act  and every  notification  made  or purporting to have  been  made thereunder in so far as such scheme or notification provides for rationalisation or revision of pay scales or other terms and  conditions  of the officers and other employees of  the Corporation  are deemed always to have been for all purposes as valid and effective as made under Section 17A of the Act. The  retrospective  effect  given to the scheme is  only  to overcome  the  difficulty pointed out by this Court in  Ajay Kumar  Banerjees case.  That lacuna having been overcome it is not open to the Petitioners to contend that retrospective effect  given is violative of Articles 14, 19 and 21 of  the Constitution.   Validation  of invalid rule by amending  the main  enactment  under  which  it is made is  a  well  known legislative device approved by this Court.

   We   may  now  consider  whether   in  any   event   the retrospective  effect  given to the 1985 Amendment Act  with effect  from 2.1.1973 is arbitrary and violates Articles 14, 19 and 21 of the Constitution?  The Legislature is given the power  to  make  laws  not   only  prospectively  but   also retrospectively.   If  in  exercise  of  those  powers   the Legislature makes an enactment the same cannot be held to be invalid  for  want of competence.  But the grounds urged  in the  present petitions are arising under Article 14, 19  and 21 of the Constitution.  The appointed date fixed for coming

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into  force  of the Amendment Act is 2.1.1973.  It is  clear that  the scheme for reorganisation of the general insurance business   were  to  come  into   effect  from  that   date. Therefore,  necessarily  effect should have been given  from that  date.   It  is difficult to envisage that  the  rights arising  under  Article  14, 19 and 21 are  affected.   Vide proviso  to  Section 17-A(7)(2) amendments are made  to  the Schemes  framed  in 1976 and 1977 by specifically  excluding the  1980  Scheme from the retrospective operation given  to the   1985  Amendment  Act.    When  different  patterns  in different  companies existed necessarily rationalisation had to  be  effected  and  the  position  obtaining  in  several institutions  such as the Life Insurance Corporation and the nationalised  banks  had  been taken note of  and  a  common pattern had been adopted.  Different patterns were operating in  different  companies  earlier  and the  area  where  the adjustment  had  been  made  is  a  small  area.   When  the provision,  which  enables the schemes to be  modified  from time  to  time retrospectively is being subject  to  several controls  and  as  such  schemes  have  to  be  approved  by high-powered  officer  and ultimate control is exercised  by Parliament,  the  action is good.  It is only in  particular cases  if the schemes framed are discriminatory or otherwise arbitrary,  the  same could be challenged under Articles  14 and 16 of the Constitution.

   This Court in A.V.  Nachane & Anr.  v.  Union of India & Anr.,  1982 (1) SCC 205, considered similar contentions that have  been raised in this case.  It was noticed therein that Section  48(2)(c) of the LIC Act provided that no rule  made under  clause  2(cc) of that scheme touching the  terms  and conditions  of  service of the employees of the  Corporation shall  have effect notwithstanding anything contained in the Industrial  Dispute  Act.  1947.  It was explained that  the rules  framed  thereunder regarding terms and conditions  of service  the right to raise an industrial dispute in respect of matters dealt with by the rules will be taken away and to that  extent  the provisions of the Industrial Disputes  Act will  cease  to  be applicable.  Thus a separate  class  was sought  to  be made and having kept them out of  the  scheme their  claims  would  be  considered  under  the  Industrial Disputes  Act.   It was noticed that the LIC Act as  amended and the rules made after amendment placed the Corporation in the  same position as other undertakings that the advantages being enjoyed by the employees of the Corporation which were not  available  to  similarly situated  employees  of  other undertakings   have  been  taken   away  removing  what  was described  as  discrimination in favour of the employees  of the  LIC.   Therefore, it was accepted that in  the  special features  of  the  matter provision made therein  cannot  be stated to infringe Article 14 of the Constitution.  Applying the same logic to the present case by reason of the impugned rules  all  that  have  been  made  is  to  achieve  certain rationalisation.   Thus the contention advanced by Shri  Rao either  as to retrospective application of the amendment  or otherwise does not stand to reason.

   In  the original Scheme issued under Section 16(1)(g) of the  Act  in 1974, there is an indication that the same  has been  issued  after  discussion and  negotiations  with  the employees  under  the  Industrial Disputes  Act,  1947.   On 1.6.1976,  another Scheme under Section 16(1)(g) of the  Act was  issued  by  the Central Government  unilaterally  under which  the provident fund benefits granted to the  employees under the 1974 scheme was modified.  The 1974 Scheme granted

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contributions of 8% based on basic salary dearness allowance and personal pay, and substituted the same with 10% of basic salary and personal pay.  The calculations based on dearness allowance  were subsequently denied.  The Provident Fund Act was  applicable  to GIC employees from 1970.  On  30.7.1977, another  scheme  was  published  purportedly  under  Section 16(1)(g)  of the 1972 Act amending the provisions  regarding sick leave.  The sick leave was available with full pay, but by the new scheme the same was reduced to only half pay.  On 30.9.1980,  the Central Government published another  scheme to  amend  the 1974 scheme by which the  existing  employees would retire at the age of 60 years and those who joined the service  after 1980 will retire at the age of 58 years.  The ceiling  on  salary including basic, dearness allowance  and special  pay, if any, was imposed on Class III employees  at Rs.2,750/- per month and on Class IV employees at Rs.1,600/- p.m.  The graduation increment was withdrawn.  Subsequently, the  ceiling  was  increased to Rs.3,500/- p.m.   Class  III employees  and  to  Rs.2117/-   p.m.   Class  IV  employees. However,  there  is no ceiling at all at present.   We  have already  adverted to the various provisions relating to  the issue  of the Ordinance X of 1984 replaced by the  Amendment Act.   If that is the stand of the Petitioners, the stand of the  respondents is that on May 13, 1971, the Government  of India  took over the management of the companies engaged  in general  insurance  business  in  India  under  the  General Insurance  Business  Act, 1971.  Prior  to  nationalisation, there  were  nearly 106 general insurance companies both  of Indian and foreign origin.  The conditions of service of the employees  of the said insurance companies were governed  by the  respective  contracts of service between the  companies and  the  employees.  The set- up, working,  management  and employment  of  staff by the erstwhile  insurance  companies showed  no uniformity.  The erstwhile companies were managed in  diverse  managerial  systems and no uniform  pattern  of management  could  be discovered by the  Central  Government after the nationalisation.  There was a pronounced disparity between  one  company  and the other at all  levels  in  the matter  of remuneration and designations for similar  posts. Employees  of  different  companies were  holding  different designations  and were paid differently for the same kind of work  at  the same station.  Some companies gave  very  high sounding  designations  and  paid salaries, which  were  not commensurate   with   the  work.   So  the   necessity   for rationalisation of the entire structure of general insurance business,  including  designations,  pay  scales  and  other conditions of service arose.

   Section  16  of  the Act dealt with this aspect  of  the matter.  In framing schemes under Section 16(1) thereof, the object  of  the Central Government should 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.   If the rationalisation or revision of any pay scale 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.  The preliminary  step  the Central  Government took in this direction was to reduce the number  of  companies  carrying  on  the  general  insurance business  and decided to retain four companies and all other companies were merged into one or the other of the said four

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companies and they are as under :

   1.   The  New  India Assurance  Company  Ltd.   (Merger) Scheme, 1973

   2.   The  United India Fire & General Insurance  Company Ltd.  (Merger) Scheme, 1973

   3.   The Oriental Fire & General Insurance Company  Ltd. (Merger) Scheme, 1973

   4.   The  National  Insurance   Company  Ltd.   (Merger) Scheme, 1973.

   All these schemes came into force on 1.1.1974.

   The  Central  Government,  in  exercise  of  the  powers conferred  under  Section 16(1)(g) of the Act, framed  three schemes for three different categories of employees relating to  (i)  supervisory, clerical and subordinate staff;   (ii) officers;   and  (iii) development staff.  The schemes  also provided,  inter  alia, various provisions like fixation  of pay  on promotion, increments, provident fund and  gratuity, etc.  When the process of categorisation and rationalisation was in progress, it was noticed that as per the 1974 scheme, contribution  to the provident fund was @ 8 per cent of  the basic   salary   and  dearness   allowance  with  an   equal contribution  of  GIC or any of its subsidiaries.   However, LIC  and  nationalized banks were giving provident  fund  at different  rates.   So as to keep parity with other  similar organisations,  the  scheme  was corrected  by  an  amending notification issued on 1.6.1976 and it was provided that the provident fund shall be contributed by every employee at the rate  of 10% of the basic pay plus personal pay and  special pay, if any, in place of 8% of the basic salary and dearness allowance.

   The original scheme of 1974 was silent about the payment of  salary during sick leave.  For that reason, an  addition was  made by the amendment notified on 30.7.1977 in para  10 of the original scheme providing that the employees would be entitled  to draw, while on sick leave, salary equal to half the  aggregate  of basic pay, special pay, personal pay  and that,  in  addition  thereto, he shall  also  draw  dearness allowance,  house  rent  allowance,   CCA  and  hill-station allowance,  wherever  admissible,  appropriate to  half  the aggregate  of such basic pay, special pay and personal  pay. It  was also provided that any period of sick leave on  half pay  may  be  converted into sick leave on half pay  at  the option  of the employees but in such cases twice the  amount of sick leave was to be debited against the leave account of the  employee.   Provision  was also made for the  grant  of special  sick  leave  for   serious  ailments  like  cancer, leprosy, T.B., polymylitis and other serious diseases.

   The  stand  of the respondents is that  amendments  were made  while the process of rationalisation of pay scales and other  service  conditions  were still in progress  and  the process had not been finally completed to achieve uniformity and  inter-se  rationalisation  in terms and  conditions  of service  of  different  categories of  employees  of  merged companies.   In  1977  various  labour  unions  presented  a charter of demands in relation to revision of pay scales and service   conditions.   The  scheme  of  1974  contained   a

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provision  to  the effect that the provisions of the  scheme relating  to  scales of pay, dearness allowance  etc.   will continue  to  be in force till the Government  modified  the same.   After considering the demands of the unions and  the view of the management, the Government formulated guidelines and  requested  the  management to  hold  consultations  and discussions  with  the  unions so that final  views  of  the unions  may  be known and may be taken into account  by  the Government  before modifying the pay scales, etc.  But  this course  will not indicate that there was an obligation  cast on  the  Government to formally negotiate with  the  unions. However,  in  keeping with the democratic tradition  and  to maintain  harmonious industrial relations the management had several rounds of discussions with the four major registered unions.   The procedure of consultations and discussions was adopted  in  order  to narrow down the  differences  to  the minimum  and  to ensure that the viewpoint of the  employees was  kept  in  mind before any scheme was finalized  by  the Government.

   In  1980,  the  said scheme was  amended  providing  for revision of pay scales, allowances, etc.  for the betterment of  the employees and notified the scheme on 30.9.1980.  The employees, however, challenged the said amendment.  But this Court,  in Ajay Kumar Banerjees case [supra], rejected  the contention  of the Petitioners that the scheme was violative of  Articles  14,  16 and 19 of the Constitution  of  India. However,  the scheme of 1980 was quashed making it clear  to frame  any  appropriate legislation or to  make  appropriate amendment  giving  power to the Central Government to  frame any  scheme as it considers fit and proper.  Thereafter, the Act  was amended to remove the lacuna and to promulgate  the said  provision retrospectively from the date originally  it was  introduced.   On  that aspect of the  matter,  we  have already adverted to the various challenges and rejected each one  of them.  Though the nationalisation process  commenced some time in 1973 the process of merger was not over even in the  year  1978.   The contention that the  Petitioners  are subjected  to hostile discrimination by reason of  exclusion of  the GIC employees from the Industrial Disputes Act being made  applicable  to them is also rejected.   While  dealing with  the  question  of  similar nature  with  reference  to Section 48 of the Life Insurance Corporation Act, 1956 which by sub-section (2-C) provided that the rules made thereunder shall  have effect notwithstanding anything contained in the Industrial  Disputes Act, 1947 or any other law for the time being  in  force similar to Section 16(5) of the  Act,  this Court  in  A.V.Nachanes case [supra] noticed the effect  of the  same.   It  was stated that Section 48(2-C)  read  with Section  48(2)(cc) authorises the Central Government to make rules  to carry out the purposes of the Act  notwithstanding the  Industrial  Disputes Act or any other law.  This  means that  in  respect of the matters covered by the  rules,  the provision  of  the Industrial Disputes Act or any other  law will  not be operative.  The argument advanced is that  this provision  introduced in the Principal Act does not lay down any  legislative  policy or supply any guidelines as to  the extent  to which rule-making authority would be competent to override  the  provisions of the Industrial Disputes Act  or other  laws.   This Court answered this question by  stating that  there  are  sufficient guidelines in the  Act  and  an executive  authority  can  be empowered by  the  statute  to modify  either  existing  or  future laws  but  not  in  any essential  feature and relied upon the decision in Rajnarain Singh  vs.   Chairman,  (1955) 1 SCR  290.   Though  certain

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doubts  have been expressed in Ajay Kumar Banerjees case as to  the  effect of the said provision that if there  is  any industrial  dispute pending the same may be affected but  in the  event that there is no such industrial dispute  pending the  amendment  of the rules will not come in the  way  and, therefore, it was held that it would not amount to excessive delegation.   Therefore, the contention that the  Industrial Disputes  Act is abrogated is not correct and what was  done was  to regulate the working of the provisions of the scheme in the larger interest of the insurance business.

   The  Government,  which framed the scheme,  has  neither consulted  any of the parties nor is there any obligation to do  so  under  the Act.  It is only  the  General  Insurance Corporation which supplied the information to the Government of  India  or  consultation with its  employees  in  certain matters.   But that will not confer on the parties to demand such  consultation  each  time there is any  change  in  the scheme.    Moreover,  in  matters   of  legislative   nature consultation  is  not required unless the law  requires  the same  to be done.  The contention that the exclusion of  the Industrial  Disputes  Act  will affect  their  rights  under Article  19(1)(c)  of the Constitution and thereby to  their right  to collective bargaining is not justified.  The right to  form union is still available as provided under  Article 19(1)(c)  of  the Constitution and collective bargaining  as such  is  not  barred.  It is not as though  the  Industrial Disputes   Act  is  applicable  to  every   industry.    The Industrial  Disputes  Act itself makes  several  exemptions. The  statute as such does not exclude collective bargaining. Therefore,  we  find no substance in that  contention  also. All the schemes framed by the Corporation must be taken as a composite  whole and the several schemes framed will  modify the rights of the parties and this Court took notice of this position  in New Bank of India Employees Union v.  Union of India  [supra] and was of the view that in achieving  parity in pay scales in different organisations several adjustments have  to be made and in ironing the differences, some may be at  greater  advantage than the other and that  circumstance itself  may  not  be taken note of in  invalidating  such  a scheme.

   So  far as modification of some of the benefits  granted as  to the extent of the gratuity whether it may be based on 10% of the basic and personal pay or some other amount at 8% is  too  small  an area which on rationalisation  would  not affect  the rights of the parties.  Broadly looked at, we do not  think  that  it is justifiable for the  Petitioners  to contend  that the modification of the scheme in this  regard will seriously or at all affect their rights.

   The  scheme provides for the sickness leave but  certain adjustments  have  been  made  in  the  manner  it  is  made available.   This  modification has been made to  bring  out uniformity  in  service conditions in similar  institutions. Such adjustment cannot seriously affect the Petitioners.

   Now  we  may  briefly  refer to some  of  the  decisions adverted to by the learned counsel.@@                            JJJJJJJJ

   (1)  Shri  Rao relied upon a decision of this  Court  in Kasturi  Lal Lakshmi Reddy v.  State of Jammu and Kashmir  & Anr.,  1980  (3)  SCR 1338, to contend  that  the  Directive Principles  of  State Policy in the Constitution had  to  be

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advanced  or implemented with a view not to earn revenue but for  the purpose of carrying out welfare scheme particularly for  those  deserving it.  We fail to understand as  to  how this  decision would be of any help to the learned  counsel. Undoubtedly,  constitutional  scheme and, in particular  the Directive Principles of State Policy provides for protection of  the  workers  to the extent indicated in  the  Directive Principles  of  State  Policy,  that  is,  participation  of workmen  in  the management of the undertaking.  We  do  not think  that  principle  is in any manner  attracted  to  the present  case.  So is the position in regard to the decision in   National   Textile  Workers   Union  Etc.   v.    P.R. Ramkrishnan & Ors.  1983 (1) SCR 922.

   (2) Reliance was placed on the decision in Jyoti Pershad v.  The Administrator for the Union Territory of Delhi, 1962 (2)  SCR  124,  to  contend   that  in  cases  of  delegated legislation  when  clear guidance in the enactment is  made, the guidance could be derived from the enactment and that it bears  a reasonable and rational relationship to the  object to  be  attained  by  the Act.  We do  not  know,  how  this decision can be of any assistance to the petitioner.

   (3)  In  Hindustan Antibiotics Ltd.  v.  the  Workmen  & Ors., 1967

   (1) SCR 652, a situation where the service conditions of the employees in public sector undertakings were not similar to  those of government employees, there was no security  of service,  the  fundamental rules did not apply to  them  and there  was  no constitutional protection, no  pension,  they were  covered  by standing orders, their service  conditions were  more  similar  to those of employees  in  the  private sector  was  considered.   In that case, it was  found  that industrial adjudication could be appropriate and wages could be  properly revised.  That situation is entirely  different from  the  one  with  which  we are  dealing.   We  are  not comparing  conditions of service in different sectors but in similar  sectors  like  GIC  and LIC, which  are  common  to nationalised  banks, the conditions of service should at any rate be akin or similar.  Therefore, the considerations that applied  in  Hindustan Antibiotics Ltd.  v.  the  Workmen  & Ors.  case (supra) cannot be applied to the present case.

   (4)  When  a  law is made with retrospective  effect  to change  the  character of the earlier statute  or  statutory rules  so that the court would not have rendered a  decision had  the changed situation prevailed at that time would  not mean  suppression  of the judicial power by Legislation  but only the decision stands nullified because the basis of that decision  is taken away.  This aspect was examined in detail by  this  Court  in S.S.  Dola and Ors.  v.   B.D.Sardana  & Ors., 1997 (8) SCC 522.  Applying the same principles to the present  case, the action of the State is only to enact  the law  to  give effect to its policy by rectifying the  defect pointed out by the court with retrospective effect.

   (5)  In cases where amalgamations or mergers take  place question relating to manner in which the service rendered in the transferor bank for the purpose of promotions, seniority in  the transferee bank which was fixed in the ratio of  2:1 were  all challenged before this Court in New Bank of  India Employees Union & Anr.  v.  Union of India & Ors., 1996 (8) SCC 407, and the scheme framed was held to be legislative in character.   Contrary view of such provision had to be  made

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when  the  entire matter was in the state of efflux for  the purpose of rationalisation.  Therefore, we find no substance in this argument.

   (6)  This  Court  in Process Technicians  and  Analysts Union  v.   Union  of India & Ors., 1997 (10) SCC  142,  has taken  the  view  that the scheme as amended by  the  Bharat Petroleum  Corporation Limited (Determination of  Conditions of Service of Employees) was valid though made retrospective in effect.  The challenge was that it had conferred upon the Government  unguided  powers.  It was held that  this  power enabled  the Government to make conditions of service of the employees  comparable  with  those of other  private  sector companies.   Therefore,  it  was  held that it  was  not  an unguided  power.   In the present case, the position is  not different.  Thus none of the contentions raised on behalf of the petitioners can be accepted.  Therefore, these petitions deserve to be dismissed.  No costs.

G.B.PATTANAIK                                                                                         [ S. RAJENDRA BABU

D.P. MOHAPATRA

DORAISWAMY RAJU

SHIVARAJ V. PATIL

March 19, 2001