- (1.) This Life Insurance Corporation was constituted under the Life Insurance Corporation Act 31 of 1956 (hereinafter to be referred to as "the Act"). On 1-6-1957, the Central Government issued, under S. 11 (1) of the Act, an order prescribing the pay scales, dearness allowance and conditions of service applicable to class III and IV employees. Among conditions it is stated that no bonus would be paid but amenities like insurance and medical treatment free of cost would be provided. On 26-6-1959, an order was passed by the Central Government under S. 11 (2) of the Act, amending para 9 of the 1957 Order inasmuch as it was provided that bonus other than profit sharing bonus would be paid to the employees drawing the salary not exceeding Rs. 500/- per month. On 2nd of July 1959, there was a settlement between the L. I. C. and the employees providing for payment of cash bonus at the rate of one-and-half month's basic salary which was to be effective from 1-9-1956 and valid upto 31-12-1961. In July 1960, regulations were framed under Section 49 to regulate the conditions of service of classes of employees and regulation 58 provided for payment of non-profit sharing bonus to the employees. Orders were again passed on 14-4-1962 and 3rd August 1963, the effect of which was to remove the restriction of Rs. 500/- for eligibility for payment of bonus. On 29th January 1963, another settlement was arrived at between the L. I. C. and its employees for payment of cash bonus at the rate of one-and-a-half month's basic salary. This was to continue in operation until 31st March 1969. On 20th June 1970, a third settlement was reached for payment of cash bonus at the same rate which was to be effective upto 31st March 1972. On 26-6-1972, a fourth settlement for payment of cash bonus at the rate of 10 per cent of gross wages (basic and special pay and dearness allowance) was made effective from 1st April 1972 to 1973. On 21st January 1974 and 6th February 1974, settlements for payment of each bonus at 15 per cent of gross wages, valid for four years from 1st April 1973 to 31st March 1977, were reached. It is clear that this so called "bonus" did not depend upon profits earned but was nothing short of increased wages. The settlements were approved by the Board of directors of the L.I.C. and also by the Central Government. On 29th March, 1974, a circular was issued by the L. I. C. for payment of bonus in accordance with the settlement along with the salary in April. In April 1974, the payment of bonus for the year 1973-74 was actually made in accordance with the settlement. Again, in April 1975, bonus for the year 1974-75 was made in accordance with the settlements. On 25th September 1975, however, a Payment of Bonus Amendment Ordinance was promulgated. On 26-9-1975, the L. I. C. issued a circular stating that, the payment of bonus was being reviewed in the light of the Ordinance, and, on 22nd of March, 1976, payment of bonus for the year 1975-76 was to be withheld until a final decision was taken. Against this, a writ petition was filed in the High Court of Calcutta. On 21st May 1976, the Calcutta High Court passed an order recognising the right of petitioners to payment of bonus for the year 1975-76 which had become payable along with the salary in April 1976 and ordered that it must be paid to the employees. Apparently, bonus was treated as part of the right of the petitioners to property protected by Arts. 19 (1) (f) and 31 (1) of the Constitution. On 29th May 1976, the Life Insurance Corporation Modification of Settlement Act 1976, was enacted by Parliament denying to the petitioners the right which had been recognised by the settlements, approved by the Central Government and acted upon by the actual payment of bonus to the employees, and, finally, converted into right under the decision of the Calcutta High Court on 21st May 1976.
(2.) Provisions of S. 11 (2) read as follows: "(2) Where the Central Government is satisfied that for the purpose of securing uniformity in the scales of remuneration and the other terms and conditions of service applicable to employees of insurers whose controlled business has been transferred to, and vested in, the Corporation, it is necessary so to do, or that, in the interest of the Corporation and its policy-holders, a reduction in the remuneration payable, or a revision of the other terms had conditions of service applicable, to employees or any class of them is called for, the Central Government may, notwithstanding anything contained in sub-s. (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. Explanation:- The compensation payable to an employee under this sub-section shall be in addition to, and, shall not affect, any pension, gratuity, provident fund money or any other benefit to which the employee may be entitled under his contract of service." Section 11 (2) of the Act shows that the Central Government had ample power to revise the scales of remuneration and other terms and conditions of service if it was satisfied that the interest of the Corporation or the policy-holders demanded this. Of course, such orders has to be passed as a result of satisfaction upon material placed before the Central Government relating to the interests of the Corporation or its policy holders. But, no such order was passed. What was actually done was that the Act was passed to set aside the terms of the settlements which had been incorporated in the Judgment inter partes of the Calcutta High Court.
(3.) The objects and reasons of the Act were set out as follows: "The provisions of the Payment of Bonus Act, 1965 do not apply to the employees employed by the Life Insurance Corporation of India. However, the Corporation has, as a matter of practice, been paying bonus to its employees. The bonus to Cl. I and Cl. II employees is being paid in pursuance of agreements between the Corporation and such employees. The bonus to Class III and Class IV employees is being paid under the terms of settlement arrived at between the Corporation and such employees from time to time. In terms of the settlement arrived at between the Corporation and its Class III and Class IV employees on 24th January, 1974 under the Industrial Disputes Act, 1974, which is in force upto the 31st March. 1977, bonus is payable by the Corporation to its Class III and Class IV employees at the rate of fifteen per cent of their annual salary without any maximum limit. 2. It is proposed to set aside with effect from the 1st April, 1973, these provisions of the settlement arrived at between the Corporation and its Class III and Class IV employees on 24th January, 1974 to enable the Corporation to make ex gratia payments to such employees at the rates determined on the basis of the general Government policy for making ex gratia payments to the employees of the noncompeting public sector undertakings. 3. The bill seems to achieve the above object.";