IMPORTANT POINT
The various schemes of 1974, 1976, 1977, 1980 as amended in 1985 framed under the General Insurance Business (Nationalisation) Act, 1972 are constitutionally valid. Though made retrospective in effect.

Headnote:(i) Constitution of India-Article 32-Writ petitions under challenging various schemes framed under the General Insurance Business (Nationalisation) Act, 1972-Schemes of 1976 and 1977-Whether are illegal in view of Ajay Kumar Banerjee case (No, as enactment amended to make it valid)-Whether retrospective effect could be given to amendment? (Yes).
       Held : In Ajay Kumar Banerjee case [1984(3) SCR 252], this Court pointed out that though there is power in the Government to revise the pay scales it cannot exercise the power more than once at the time of merging different companies for the purpose of rationalisation this power could have been exercised and for no further. But now the enactment itself specifically provides that every scheme framed or purporting to have been framed by the Central Government under Section 16(1) of the Principal Act and every notification made or purporting to have been made thereunder in so far as such scheme or notification provides for rationalisation or revision of pay scales or other terms and conditions of the officers and other employees of the Corporation are deemed always to have been for all purposes as valid and effective as made under Section 17A of the Act. The retrospective effect given to the scheme is only to overcome the difficulty pointed out by this Court in Ajay Kumar Banerjee s case. That lacuna having been overcome it is not open to the Petitioners to contend that retrospective effect given is violative of Articles 14, 19 and 21 of the Constitution. Validation of invalid rule by amending the main enactment under which it is made is a well known legislative device approved by this Court. (Para 19)
       (ii) Constitution of India-Article 32-Writ petitions under challenging various schemes framed under the General Insurance Business (Nationalisation) Act, 1972-Amendment Act of 1985-Made retrospective from appointed date of Principal Act i.e. 2.1.1973-Whether arbitrary and violated Articles 14, 19 and 21? (No) case law referred 1982(1) SCC 205 relied on.
       Held : The appointed date fixed for coming into force of the Amendment Act is 2.1.1973. It is clear that the scheme for reorganisation of the general insurance business were to come into effect from that date. Therefore, necessarily effect should have been given from that date. It is difficult to envisage that the rights arising under Article 14, 19 and 21 are affected. Vide proviso to Section 17-A(7)(2) amendments are made to the Schemes framed in 1976 and 1977 by specifically excluding the 1980 Scheme from the retrospective operation given to the 1985 Amendment Act. When different patterns in different companies existed necessarily rationalisation had to be effected and the position obtaining in several institutions such as the Life Insurance Corporation and the nationalised banks had been taken note of and a common pattern had been adopted. Different patterns were operating in different companies earlier and the area where the adjustment had been made is a small area. When the provision, which enables the schemes to be modified from time to time retrospectively is being subject to several controls and as such schemes have to be approved by high-powered officer and ultimate control is exercised by Parliament, the action is good. It is only in particular cases if the schemes framed are discriminatory or otherwise arbitrary, the same could be challenged under Articles 14 and 16 of the Constitution. (Para 20)
       Applying [1982(1) SCC 205] the same logic to the present case by reason of the impugned rules all that have been made is to achieve certain rationalisation. Thus the contention advanced by Shri Rao either as to retrospective application of the amendment or otherwise does not stand to reason. (Para 21)
       (iii) Constitution of India-Article 32-Writ petitions under challenging various schemes framed under the General Insurance Business (Nationalisation) Act, 1972-Original Scheme of 1974 modified in 1976, 1977, 1980 and 1985-Whether paralyses the Trade Unions in insurance business? (No)-Whether modifications would seriously affect the petitioners? (No).
       Held : Though the nationalisation process commenced some time in 1973 the process of merger was not over even in the year 1978. The contention that the Petitioners are subjected to hostile discrimination by reason of exclusion of the GIC employees from the Industrial Disputes Act being made applicable to them is also rejected. The contention that the Industrial Disputes Act is abrogated is not correct and what was done was to regulate the working of the provisions of the scheme in the larger interest of the insurance business. (Para 27)
       The contention that the exclusion of the Industrial Disputes Act will affect their rights under Article 19(1)(c) of the Constitution and thereby to their right to collective bargaining is not justified. The right to form union is still available as provided under Article 19(1)(c) of the Constitution and collective bargaining as such is not barred. It is not as though the Industrial Disputes Act is applicable to every industry. The Industrial Disputes Act itself makes several exemptions. The statute as such does not exclude collective bargaining. Therefore, we find no substance in that contention also. (Para 28)
       Held also : So far as modification of some of the benefits granted as to the extent of the gratuity whether it may be based on 10 of the basic and personal pay or some other amount at 8 is too small an area which on rationalisation would not affect the rights of the parties. Broadly looked at, we do not think that it is justifiable for the Petitioners to contend that the modification of the scheme in this regard will seriously or at all affect their rights. The scheme provides for the sickness leave but certain adjustments have been made in the manner it is made available. This modification has been made to bring out uniformity in service conditions in similar institutions. Such adjustment cannot seriously affect the Petitioners. (Paras 29 & 30)
       After discussing case Law held finally : Thus none of the contentions raised on behalf of the petitioners can be accepted. Therefore, these petitions deserve to be dismissed. No costs. (Para 32)

JUDGMENT

Rajendra Babu, J.-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 v. Union of India1. 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 employee

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2001 Supreme(SC) 498

IMPORTANT POINTThe various schemes of 1974, 1976, 1977, 1980 as amended in 1985 framed under the General Insurance Business (Nationalisation) Act, 1972 are constitutionally valid. Though made retrospective in effect.

Cases Referred (9)

IMPORTANT POINT
The various schemes of 1974, 1976, 1977, 1980 as amended in 1985 framed under the General Insurance Business (Nationalisation) Act, 1972 are constitutionally valid. Though made retrospective in effect.