MADAN MOHAN PATHAK RAM PARKASH MANCHANDA Vs. UNION OF INDIA

JUDGEMENT

(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:

(3.) The objects and reasons of the Act were set out as follows: