Sukhdev Singh Kang, J. - (1.) IN order to give effect to the policy of the State towards securing the principles enshrined in Clause (C) of Article 39 of the Constitution of India and to nationalise the general insurance business in the country, Parliament passed the General Insurance Business (Nationalisation) Act, 1972 (hereinafter called 'the Act'). It provided, inter alia, for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to better serve the needs of the economy by securing the development of general insurance business in the best interest of the community and to ensure that operation of the economic system does not result in the concentration of wealth to the common detriment. Section 3 of the Act is the dictionary giving definitions of various terms and expressions. It defines "Indian insurance company" to mean an existing insurer having a share capital who is a company within the meaning of the Companies Act. The "scheme" is defined to mean the scheme framed under Section 16. By virtue of Section 4, all the shares in the capital of every Indian insurance company shall, on the appointed day, stand transferred to and vested in the Central Government free of all trusts, liabilities and encumbrances affecting them. Section 5 provides for the transfer of undertaking of every existing insurer, who is not an Indian insurance company to and vesting in the Central Government. It further provides that the Central Government shall immediately thereafter provide for the transfer to end vesting in such Indian insurance company as it may specify in the notification, of that undertaking. Section 6 spelled out the effect of transfer of the undertakings. Provision is made in Section 7 for the transfer of services of existing officers and other employees of the existing insurers, other than the Indian insurance companies, to the Indian insurance company in which the undertaking of that insurer vested. This section also provided for the protection of the conditions of service of such officers and employees. Section 9 enjoined the Central Government to form a Government company, in accordance with the provisions of the companies Act, to be known as the General Insurance Corporation of India for the purpose of superintending, controlling and carrying on the business of general insurance. Chapter IV, which includes Sections 11 to 15, took care of compensation that was to be paid for the acquisition of the undertakings of the insurers and the transfer of the shares of the Indian insurance companies. Section 16 of Chapter, v. makes provision for there organisation of General Insurance Company and also makes provision for framing of one or more schemes providing for the merger in one Indian insurance company of any other Indian insurance company, or the formation of a new company by the amalgamation of two or more Indian insurance companies ; the transfer to and vesting in the acquiring company of the undertaking of any Indian insurance company which ceased to exist by reason of the scheme ; the constitution, name and registered office and the capital structure of the acquiring company and the issue and allotment of shares ; the constitution of a board of management for the management of the acquiring company ; the alteration of the memorandum and articles of association of the acquiring company ; the continuance in the acquiring company of the services of all officers and other employees of the Indian insurance company on the same terms and conditions by which they were governed ; the rationalisation or revision of pay scales and other terms and conditions of service of officer and other employees wherever necessary and other provisions for more efficient carrying on of the general insurance business.
(2.) IT will be apposite to read the relevant provisions of Section 16 of the Act in extenso: 16. Scheme for merger of companies etc. -(1). If the Central Government is of opinion that for the more efficient carrying on of general insurance business it is necessary so to do, it may by notification frame one or more schemes providing for all or any of the following matters: (a) the merger in one Indian insurance company of any other Indian insurance company, or the formation of a new company by amalgamation of two or more Indian insurance companies; (b) the transfer to and vesting in the acquiring company of the undertaking (including all its business, properties, assets and liabilities) of any Indian insurance company which ceased to exist by reason of the scheme; (c) xxx xxx xxx xxx (d) xxx xxx xxx xxx (e) xxx xxx xxx xxx (f) the continuance in the acquiring company of the services of all officers and other employees of the Indian insurance company which has ceased to exist by reason of the scheme, on the same terms and conditions which they were getting or, as the case may be, by which they were governed immediately before the commencement of the scheme ; (g) the rationalisation or revision of pay scales and other terms and conditions of service of officers and other employees wherever necessary ; (h) xxx xxx xxx xxx (i) xxx xxx xxx xxx (j) such incidental, consequential and supplemental matters as are necessary to give full effect to the scheme. (2) In framing schemes under Sub -section (1), the object of the Central Government shall be to ensure that ultimately there are only four companies (excluding the Corporation) in existence and that they are so situate as to render their combined services effective in all parts of India. (3) Where a scheme under section (1) provides for the transfer of any property or liabilities, then, by virtue of the scheme, the property shall stand transferred to and vested in, and those liabilities shall be transferred to and become the liabilities of, the acquiring company. (4) If the rationalisation or revision of any pay scale or other terms and conditions of any scheme is not acceptable to any officer or other employee, the acquiring company may terminate his employment by giving him compensation equivalent to three months' remuneration, unless the contract of service with such employee provides for a shorter notice of termination. Explanation -The compensation payable to an officer or other employee under this Sub -section shall be in addition to, and shall not effect, any pension, gratuity, provident fund or other benefit to which the employee may be entitled under his contract of service. (5) Notwithstanding anything contained in the Industrial disputes Act, 1947 or in any other law for the time in force, the transfer of the services of any officer or other employee of an Indian insurance company to the acquiring company shall not entitle any such officer or other employee to any compensation under that Act or other law, and no such claim shall be entertained by any court, tribunal or other authority. (5) The Central Government may, by notification, add to, amend or vary any scheme framed under this section. (7) The provisions of this section and of any scheme framed under it shall have effect notwithstanding anything to the contrary contained in any other law or any agreement, award or other instrument for the time being in force. Section 17 of the Act postulates that a copy of every scheme and amendment thereto framed under Section 15 shall be laid, as soon as may be, after it is made, before each House of Parliament. The rest of the provisions in the Act are not relevant for the purpose of this petition. The Central Government formed an opinion that for the more efficient carrying on the general insurance business, it was necessary to frame schemes for the merger of Indian insurance companies and in exercise of the powers conferred by Sub -section (1) of Section 16 of the Act, it framed a scheme called the National Insurance Company Limited (Merger) Scheme, 1973 ('1973 Scheme' for short). Nine companies, including the Hindustan General Insurance Society Ltd. ('Society' for short) which, according to the definition in the Scheme, became a trans -free company. Under paragraph 3 of the scheme, the undertakings of the merged companies stood transferred and vested in the transferee company on the day specified. The 1973 Scheme was to come into force on January 1, 1974, and this date was also declared to be the specified day. The salient features of the Scheme are that the undertakings of every merged Company shall stand transferred to and vested in the transferee Company on the specific date. Paragraph 4 of the Scheme is an articulation of the effect of the transfer of the undertakings under Clause (3) ibid. Paragraph 5 deals with the transfer of service of existing employees. It reads: 5. Transfer of service of existing employees. - Every whole -time officer or other employee of any merged company who was employed by such company immediately before the specified day shall on and from that day become an officer or other employee, as the case may be, of the transferee company and shall hold his office or service under the transferee company on the same terms and conditions and with the same rights as to pension, gratuity and other matters as would have been admissible to him if there had been no such transfer as referred to in paragraph 3 and shall continue to do so, unless and until his employment in the transferee company is terminated or until his remuneration, terms and conditions are duly altered by the transferee company or by any other scheme framed under the Act.
(3.) SHRI M.L. Nohria, the writ Petitioner, had joined service with the Society as Office Superintendent in 1964 and on the opening of a branch of the Society at Patiala, he was designated as Officer -in -charge of the branch. Subsequently, the Branch was designated as a Division and the Petitioner's designation was changed to Divisional Manager. He was the only officer managing the Patiala Branch of the Society. The Society has three grades for its Divisional Managers and the Patiala Branch being the smallest and the Petitioner being the junior -most officer, was placed in the 'C' grade On the merger of the Society with the National Insurance Company Ltd. (hereinafter referred to as 'the Company'), the Petitioner, by operation of law, became an employee of the latter.;