- (1.) The validity of the provisions of the Life Insurance Corporation (Amendment) Act, 1981 and the Life Insurance Corporation (Amendment) Ordinance, 1981 which preceded it is challenged in this batch of writ petitions. The writ petitions have a history behind them which can be conveniently divided into three chapters. However, it will be easier to follow this history if we refer to some of the provisions of the Life Insurance Corporation Act, 1956 first. The Life Insurance Corporation was constituted under the Life Insurance Corporation Act, 1956 to provide for the nationalisation of life insurance business in India by transferring all such business to the Life Insurance Corporation of India. Under S. 11 (1) of the Act the services of the employees of insurers whose business has vested in the Corporation are transferred to the Corporation. Sub-sec. (2) of S. 11 provides : "Where the Central Government is satisfied that for the purpose of securing uniformity in the scales of remuneration and the other terms and conditions of service applicable to employees of insurers whose controlled business has been transferred to and vested in, the Corporation it is necessary so to do, or that, in the interests of the Corporation and its policyholders, a reduction in the remuneration payable, or a revision of the other terms and conditions of service applicable to employees or any class of them is called for, the Central Government may, notwithstanding anything contained in sub-sec. (1), or in the Industrial Disputes Act, 1947, or in any other law for the time. being in force, or in any award, settlement or agreement for the time being in force, alter (whether by way of reduction or otherwise) the remuneration and the other terms and conditions of service to such extent and in such manner as it thinks fit; and if the alteration is not acceptable to any employee, the Corporation may terminate his employment by giving him compensation equivalent to three months' remuneration unless the contract of service with such employee provides for a shorter notice of termination." There is an explanation to this sub-section which is not relevant for the present purpose, S. 48 of the Act empowers the Central Government to make rules to carry out the purposes of the Act. Sub-sec. (2) of S. 48 in Cls. (a) to (m) specifies some of the matters that the rules may provide for. Sub-sec. (3) of S. 48 states : "Every rule-made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule." S. 49 (1) empowers the Life Insurance Corporation of India to make regulations to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of the Act. Cls. (a) to (m) of sub-sec. (2) of S. 49 specify some of the matters the regulations may provide for. The matter referred to in cl. (b) of sub-sec. (2) is "the method of recruitment of employees and agents of the Corporation and the terms and conditions of service of such employees or agents." Cl. (bb) speaks of the terms and conditions of service of persons who have become employees of the Corporation under sub-sec. (1) of S. 11.
(2.) Turning now to the history of the litigation, the first chapter begins with two settlements reached on Jan. 24, 1974 and Feb. 6, 1974 between the Life Insurance Corporation and its Class III and Class IV employees. These were settlements under S. 18 read with S. 2 (p) of the Industrial Disputes Act, 1947. The settlements were identical in terms; four of the five unions of workmen subscribed to the first settlement while the remaining union was a signatory to the second. The settlements cover a large ground including the claim for bonus. Cl. 8 of each of the settlements was as follows :- "Bonus : (i) No profit sharing bonus shall be paid. However, the Corporation may, subject to such directions as the Central Government may issue from time to time, grant any other kind of bonus to its Class III and IV employees. (ii) An annual cash bonus will be paid to all Class III and Class IV employees at the rate of 15 % of the annual salary (i.e. basic pay inclusive of special pay, if any, and dearness allowance and additional dearness allowance) actually drawn by an employee in respect of the financial year to which the bonus relates. (iii) Save as provided herein all other terms and conditions attached to the admissibility and payment of bonus shall be as laid down in the settlement on bonus dated the 26th June, 1972." Cl. 12 of the settlement inter alia provides : "This settlement shall be effective from 1st April, 1973 and shall be for a period of four years, i.e. from 1st April 1973 to 31st March 1977." In 1975 an Ordinance was promulgated called the Payment of Bonus (Amendment) Ordinance which was subsequently replaced by the Payment of Bonus (Amendment) Act, 1976. The reference to this ordinance and the Act would not have been relevant because S. 32 (i) of the original Payment of Bonus Act, 1965 made the said Act not applicable to the employees of the Life Insurance Corporation, but the Central Government appears to have decided also that the employees of establishments not covered by the Payment of Bonus Act would not be eligible to get bonus and ex-gratia cash payment in lieu of bonus would be made. Accordingly payment of bonus for the year 1975-76 to the employees of the Corporation was stopped under instructions from the Central Government. On a writ petition filed by the employees of the Corporation in the Calcutta High Court, a single Judge of that court issued a writ of mandamus directing the Corporation to act in accordance with the terms of the settlement. Thereafter the Life Insurance Corporation (Modification of Settlement) Act, 1976 was passed. Some of the employees of the Corporation challenged the constitutional validity of the Act by filing writ petition in this Court. In Madan Mohan Pathak v. Union of India, (1978) 3 SCR 334 : (AIR 1978 SC 803). This court held that the 1976 Act offended Art. 31 (2) of the Constitution and was as such void and issued a writ of mandamus directing the Union of India and the Life Insurance Corporation to forbear from implementing or enforcing the provisions of the 1976 Act and to pay annual cash bonus for the years 1st April 1975 to 31st March 1976 and 1st April 1976 to 31st March 1977 to Class III and Class IV employees in accordance with the terms of the settlements.
(3.) The second chapter began on Mar, 31, 1978 when the Corporation issued a notice under S. 19 (2) of the Industrial Disputes Act declaring its intention to terminate the settlements on the expiry of the period of two months from the date the notice was served. On the same day another notice was issued by the Corporation under S. 9A of the Industrial Disputes Act stating that it proposed to effect a change in the conditions of service applicable to the workmen. The change proposed was set out in the annexure to the notice which reads : "AND WHEREAS for economic and other reasons it would not be possible for the Life Insurance Corporation of India to continue to pay bonus on the aforesaid basis; Now, therefore, it is our intention to pay bonus to the employees of the corporation in terms reproduced hereunder : "No employee of the Corporation shall be entitled to profit sharing bonus. However, the Corporation may, having regard to the financial condition of the Corporation in respect of any year and subject to the previous approval of the Central Government grant non-profit sharing bonus to its employees in respect of that year at such rate as the Corporation may think fit and on such terms and conditions as it may specify as regards the eligibility for such bonus." " The notices were followed by a notification issued by the Corporation under S. 49 of the Life Insurance Corporation Act on May 26, 1978 substituting a new regulation for the existing Reg. No. 58 of the Staff Regulations. Simultaneously the Life Insurance Corporation (Alteration of Remuneration and other Terms and Conditions of Service of Employees) Order, 1957, called the Standardisation Order, made by the Central Government in exercise of the powers conferred on it by S. 11 (2) of the Life Insurance Corporation Act was amended with effect from June 1, 1978 substituting a new cl. (9) for the original clause concerning bonus. Cl. (9) of the Standardisation Order and Reg. 58 of the Staff Regulations after amendment read as follows : "No employee of the Corporation shall be entitled to profit-sharing bonus. However, the Corporation may, having regard to the financial condition of the Corporation in respect of any year and subject to the previous approval of the Central Government grant non-profit sharing bonus to its employees in respect of that year at such rate as the Corporation may think fit and on such terms and conditions as it may specify as regards the eligibility for such bonus." The validity of the said two notices and the notification issued for the purpose of nullifying any further claim of the workmen to annual cash bonus in terms of the Settlements of 1974 was challenged by the workmen by filing a writ petition in the Allahabad High Court. The High Court allowed the writ petition and the Corporation preferred an appeal to this court. Another writ petition which had been filed in the Calcutta High Court challenging the said notices and the notification was transferred to this court, and the appeal and this writ petition were heard and disposed of by a common judgment. The two cases were Civil Appeal No. 2275 of 1978 : (Life Insurance Corporation of India v. D. J. Bahadur, (1981) 1 SCR 1083 : (AIR 1980 SC 2181)) and Transfer Case No. 1 of 1979 : (Chandrashekhar Bose v. Union of India, (1981) 1 SCR 1083, (AIR 1980 SC 2181)). By a majority the appeal preferred by the Corporation was dismissed and the transfer petition was allowed and a writ was issued by this court to the Life Insurance Corporation directing it "to give effect to the terms of the settlements of 1974 relating to bonus until superseded by a fresh settlement, an industrial award or relevant legislation." The second chapter closed with this decision.;