M.L. NOHRIA, BRANCH MANAGER, NATIONAL INSURANCE COMPANY LTD., AMRITSAR Vs. THE GENERAL INSURANCE CORPORATION OF INDIA AND OTHERS

JUDGEMENT

(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:

(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.