KISHAN PRAKASH SHARMA Vs. UNION OF INDIA

JUDGEMENT

(1.) 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').

(2.) 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. 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 reorganisation 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 vs. 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 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.

(3.) However, in that batch of petitions, out of several of the cases that were disposed of by this Court in Ajay Kumar Banerjee's 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.