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C.N. Sharma and ors. Vs. Life Insurance Corporation and ors. - Court Judgment

LegalCrystal Citation
SubjectService
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 587 of 1978
Judge
Reported inILR1979Delhi525
ActsLife Insurance Corporation Act, 1956 - Sections 11(2); Life Insurance Corporation of India (Staff) Regulations, 1960 - Regulation 58
AppellantC.N. Sharma and ors.
RespondentLife Insurance Corporation and ors.
Advocates: R.K. Garg,; V.J. Francis,; G.B. Rai,;
Cases ReferredMotilal Padampat Sugar Mills v. State of U.P.
Excerpt:
life insurance corporation act (1956) - sections 11(2) & 49--life insurance corporation of india (staff) regulation (1960) reg. 58--circular dated 26-9-1975 and 23-6-1976--validity of--non-profit sharing bonus paid to class 1 officers--variation or reduction of--whether valid--receipt of bonus--whether right to property--promissory estoppel--continuation of bonus to class iii employees--whether discriminatory--constitution of india, articles 14, 19 & 31.; as follows :--; (1) the right to receive remuneration cannot be independent of the work for which remuneration is claimed. work must be done first and remuneration can become due only thereafter. the right to be paid bonus is a part of the right to be paid remuneration. section 11(2) of the life insurance act as also the orders.....v.s. deshpande, c.j.(1) the question raised by this writ petition is whether the range and quantum of non-profit sharing bonus paid by the life insurance corporation of india (corporation) (respondent no.1) to its class i officers (some of whom are the petitioners) can be varied or reduced without contravening articles 14, 19 and/or 31 of the constitution. (2) the non-profit sharing bonus is not governed by the payment of bonus act, 1965. further section 32 of the payment of bonus act excludes the employees of the corporation from the applicability of that act. the non-profit sharing bonus is, thereforee, in the nature of an addition to wages paid by the corporation to its employees and is, thereforee, of the same nature as the rest of the wages are. the statutory power to settle the.....
Judgment:

V.S. Deshpande, C.J.

(1) The question raised by this writ petition is whether the range and quantum of non-profit sharing bonus paid by the Life Insurance Corporation of India (Corporation) (respondent No.1) to its class I officers (some of whom are the petitioners) can be varied or reduced without contravening Articles 14, 19 and/or 31 of the Constitution.

(2) The non-profit sharing bonus is not governed by the payment of Bonus Act, 1965. Further section 32 of the Payment of Bonus Act excludes the employees of the Corporation from the applicability of that Act. The non-profit sharing bonus is, thereforee, in the nature of an addition to wages paid by the Corporation to its employees and is, thereforee, of the same nature as the rest of the wages are. The statutory power to settle the terms and conditions of service of its employees by making regulations is conferred on the Corporation by section 49(1) and section 49(2) (b) and (bb) of the Life Insurance Corporation Act, 1956 (the Act). The Life Insurance Corporation of India (Staff) Regulations, 1960 contain regulation 58 relating to bonus which is as follows :

'THECorporation may, subject to such directions as the Central Government may issue, grant non-profit sharing bonus to its employees and the payment thereof, including conditions of eligibility for the bonus, shall be regulated by instructions issued by the Chairman from time to time.'

The power to rescind or amend the regulations is a necessary part. of the power to make regulations. Further, the words 'from time to time' in regulation 58 shows that the Corporation has the power to vary the range and quantum of the bonus which may be granted under regulation 58. If the regulation itself can be rescinded or amended the directions issued there under can also be rescinded or amended.

(3) A positive power to reduce the remuneration payable to its employees 'in the interests of the Corporation and its policy holders' is given to the Central Government by section 11(2) of the Act. Initially by an executive agreement the Corporation agreed to pay bonus to its Class I employees on 17th August, 1977. The administrative instructions were continued till 1970 when they were replaced by the Lic (Bonus to Class I Officers) Instructions, 1966, apparently issued in exercise of the power conferred on the Corporation by regulation 58. though it is not so expressly stated in these instructions.

(4) NON-PROFIT sharing bonus was also granted to Class Iii employees of the Corporation. But the authority for it was totally different. These employees were in the definition of 'workman' within the meaning of section 2(s) of the Industrial Disputes Act. Their trade unions entered into a settlement with the Corporation under section 18 of the Act. The life insurance having become a monopoly of this Corporation the business of the Corporation went on increasing by leaps and bounds. Enormous funds came to the Corporation. All the employees of the Corporation were, thereforee, treated very liberally in the matter of remuneration. Regarding Class Iii employees almost the whole of the increase in the cost of living index was neutralised by increasing grants of dearness allowance and additional dearness allowance. Two results followed:

(5) Firstly, the total remuneration obtained by the Superintendents who were seniormost among the class Iii employees was more than that of the comparatively junior Class I Officers. Secondly, the average remuneration of all Corporation employees was higher than the average remuneration of the employees of the other industries. The anomaly of Class Iii employees getting more remuneration than Class I Officers was highlighted in the Lok Sabha Debates. The Minister for Finance said that the main reasons for this anomaly in the wage structure were as follows:

(1)While the pay-scales of Class Ii and Class Iii employees were revised with effect from 1-4-1973 the pay scales of Class I Officers have remained unchanged since the expiry of the last agreement in 1973 ;

(2)The quantum of adjustment allowance payable to Class I Officers was reduced from Rs. 40 to Rs. 20 with effect from 1-11-1974 for every rise of eight points D; and

(3)Basically these anomalies have arisen on account of the difference in the schemes of dearness allowance applicable to Class I Officers and Class Iii employees. Such distortions also exist in the Reserve Bank of India and the State Bank of India. Secondly, the situation led the Central Government to pass the following resolution on 13th October, 1977 : 'SERIOUSdistortions have crept into the structure of pay, Da and other compensatory allowances of employees in public and private sector. These distortions have been largely the result of ad hoc approach followed in the past to the problem of periodical revision of emoluments in public enterprises and in organized private industry. Moreover, a major part of the employment in the country is in rural sector. The incomes of the vast majority of the people in agricultural sector are low and are also liable to scrious fluctuations. Any rationalisation of the existing pattern of wages and incomes in different sectors can however be attempted only as an element of Integrated Policy on Wages. Incomes and Prices.'

(Bhoothalingam Committee -Report of the Study Group on Wages, Incomes and Prices Page 132). Table 16 on page 120 of the above mentioned report shows that the employees in the insurance Industry are 'an-island of prosperity' as has been alleged by the Corporation in resisting the prevent writ petition. Among the 27 industries listed, the lowest average monthly earnings of Rs. 184 arc found in the Food products industries, while the highest are found among the employees of Banking industry (Rs. 1014), insurance (Rs. 1214), Petroleum (Rs. 1218) and Transport Services (Rs. 1555). The risk to life involved in air carriage and prospecting for oil may partly explain the high remuneration in transport and petroleum industries. But the high monthly earnings in the insurance and banking industries have no such justification. It may be that the Corporation and the Banks arc in possession of huge funds by the very nature of their business. It cannot be said that these funds are in the nature of porfits due to the productivity of the labour. The increase in the business of the Corporation would be due to the economic gains making more and more people insure and not to the productivity of its employees. This is why the employees of the Corporation are paid non-profit sharing bonus as distinguished from payment of profit sharing bonus which is made in other industries in which the labour more directly contributes to the profits of the industry. But the possession of huge funds by the Corporation resulted in the generosity of the Corporation in making the following payments to its employees. Apart from the salary. Class I Officers are paid Dearness Allowance, House Rent Allowance. Adjustment Allowance and City Compensatory Allowance. Class Iii employees are paid Dearness Allowance, House Rent Allowance and City Compensatory Allowance. On the top of all this is paid bonus to all these employees.

(6) In the Report of the National Commission on Labour (1969) pages 225-226, it has been observed that 'The State Governments have generally recognised the need for a change in wage policy. The relative emphasis which according to them is now in favor of labour should be modified and the interest of the consumers should also be taken into account ..........to bring about a fair distribution of income and wealth......... industrial wages should not be out of elignment with (a) per capita national income, (b) wages earned in the agriculture/cottage industries, (c) the general level of earnings of the self-employed, and (d) levels of productivity.'

(7) It is some such consideration as mentioned in the Labour Commission Report and in the reference to Bhoothalingam Committee which seem to have weighed with the Corporation in deciding to rationalise the remuneration paid to its employees. Even the Central Government and the Parliament took steps towards such rationalisation. On 25th September, 1975 the Life Insurance Corporation (Modification of Settlement) Ordinance was promulgated. It was followed by the Life Insurance Corporation (Modification of Settlement Act, 1976, denying to the Class Iii employees of the Corporation the right which had been recognised by the settlements between them and the Corporation to the payment of bonus. On 26th September, 1975 the payment of bonus to Class I and Class Ii employees was stopped until further instructions since the question of payment of bonus was being reviewed in the light of the modification of settlement. This was followed by Circular dated 23rd June, 1976 in which the following order of the Chairman was reproduced:

(1)The employees of the Corporation are not entitled to bonus under the Payment of Bonus Act, 1965 in view of section 32 thereof inserted by the Amending Act No. 23 of 1976 retrospectively from 25th September, 1975.

(2)The Central Government, however, have decided that such employees shall be paid an amount of ex gratia in lieu of bonus, as may be determined by the Central Government, taking into account the wage levels, the financial circumstances and other relevant factors.

(3)The previous instructions regarding the payment of bonus to Class I Officers were repealed.

(4)III view of the Life Insurance Corporation (Modification of Settlement) Act, 1976 the settlements regarding bonus with Class Iii and Iv employees will also cease to have effect.

(8) After getting out of the past commitments the Corporation took steps to pay bonus to its employees. Regulation 58 was amended with effect from 1-6-1978 to read Us below :

'58.No employee of the Corporation shall be entitled to profit sharing bonus. However, the Corporation may, having regard to the financial condition of the Corporation in respect of any year and subject to the previous approval of the Central Government grant non-profit sharing bonus to its employees in respect of that year at such rate as the Corporation may think fit and on such terms and conditions as it may specify as regards eligibility for such bonus.'

The Central Government also amended to the same effect the Lic (Alternation of Remuneration and other Terms and Conditions of Service of Employees) Order, 1957 by substituting a new paragraph 9 therein as under:

'BONUS.9. No employee of the Corporation shall be entitled to profit sharing bonus. However, the Corporation may, having regard to the financial condition of the Corporation in respect of any year and subject to the previous approval of the Central Government, grant non-profit sharing bonus to its employees in respect of that year at such rate as the Corporation may think fit and on such terms and conditions as it may specify as regards the eligibility for such bonus.'

(9) It is thus made further clear that the Corporation would have the sole discretion to grant non-profit sharing bonus to its employees and its payment would be regulated by the Chairman from time to time. On 23rd September, 1978 the Corporation decided to make an exgratia payment in lieu of bonus to the Class I and Class Ii Officers for the year 1975-76 and 1976-77 at the rate' of 81/3 per cent of their salary (basic pay plus special pay plus D.A. plus adjustment allowance). The ex gratia amount will be paid only to those officers who were in receipt of salary (Pay plus D.A. plus AA) up to Rs. 1600 per month. Further the maximum salary (Pay plus Da plus AA) for the purpose of calculation of ex gratia payment will be deemed to be Rs. 750 per month. Thus the range and the quantum of bonus payable to Class I officers were reduced but the payment of bonus to them was not altogether abolished. The Life Insurance Corporation (Modification of Settlement) Act. 1976 was declared void as offending Article 31(2) of the Constitution by the Supreme Court in Madan Mohan Pathak and another v. Union of India and others, : (1978)ILLJ406SC . Bonus was ordered to be paid to Class Iii employees for 1975-76 and 1976-77 in accordance with the settlement dated 24-1-1974. Thereafter the Corporation issued a notice under Section 19(2) of the Industrial Disputes Act on 3-3-1978 terminating the said settlement by the expiry of a period of two months from the dale of receipt of notice by the workmen who were the Class Iii employer's. On the same date the Corporation issued under section 9-A of the Industrial Disputes Act notice changing the conditions of service as follows:

'......WEhereby give notice to all concerned that it is our intention to effect the change specified in the annexure. with effect from the 1st of June, 1978 in the conditions of service applicable to workmen in respect of matters specified in the Fourth Schedule to the said Act.'

The annexure mentioned in the notice contained the following clause :

'ANDwhereas for economic and other reasons it would not be possible for the Life Insurance Corporation of India to continue to pay bonus on the aforesaid basis. Now, thereforee, it is our intention to pay to the employees of the Corporation in terms reproduced hereunder : 'No employee of the Corporation shall be entitled to profit sharing bonus. However, the Corporation having regard to the financial condition of the Corporation in respect of any year and subject to the previous approval of the Central Government, grant non-profit sharing bonus to its employees in respect of that year at such rate as the Corporation may think fit and on such terms and conditions as it may specify as regards the eligibility for such bonus'.'

(10) Class Iii employees of the Corporation challenged the notice terminating the bonus settlement as also the notice of the changing of the service conditions issued by the Corporation under section 19 and 9A of the Industrial Disputes Act respectively by Writ Petition No. 1186 of 1978 before the Allahabad High Court, Lucknow Bench. The Writ petition was allowed on 11-8-1978 by a Division Bench and the Corporation was prohibited from giving effect to the notice changing the service conditions issued under section 9A as also the notification changing the Lic (Staff) Regulation 58 for the purpose of nullifying the settlements dated 24-1-1974 and 6-2-1974 with Class Iii employees. The Special Leave Petition of the Corporation against this decision was admitted by the Supreme Court and the operation of this judgment was stayed. In case the appeal of the Corporation were to be dismissed the Class Iii employees would be entitled to interest on the arrears of bonus payable to them in accordance with the judgment of the Lucknow Bench of the Allahabad High Court.

(11) The present writ petition is filed by the Class I employees impugning the validity of the circular, dated 26th September, 1975 stopping the payment of bonus to them until further orders as also the circular dated 23rd June, 1976 staling that while the employees will not be eligible for bonus under the Payment of Bonus Act or the settlements entered into under section 18 of the Industrial Disputes Act or the previous agreements or administrative instructions relating to payment of bonus, the Central Government have decided to grant them an ex gratia payment in lieu of bonus as may be determined taking into account the wage level, the financial circumstances and other relevant factors.

(12) Shri R, K. Garg, learned counsel for the petitioners has made an ingenious and novel argument in support of the petition. It would be convenient to deal with each one of his arguments one by one. His main proposition was that the right of the petitioners to hold their jobs was property. Reduction of their remuneration by the modification of their bonus was interference with this right of property. It was, thereforee, void, firstly being contrary to Article 19 of the Constitution as being an unreasonable restriction on their right to hold property. Secondly it contravenes Articles 31(2) as the property was taken away without compensation. Lastly, it contravenes Article 14 of the Constitution because no reasonable classification could be made between the Class I and the Class Iii employees of the Corporation. So long as the Corporation is compelled to pay bonus to Class Iii employees at the original rates agreed to in the settlements with them the Corporation is bound to pay to its Class I employees bonus at the original rate as agreed to from time to time and as confirmed by statutory instructions under regulation 58. Changing concept of property

(13) Roscoe Pound was among the first to point out in his 'An Introduction to the Philosophy of Law' (1922), Chapter V. page 191, that property is not confined to claims to the control of corporeal things, but also extends to a claim to freedom of industry and contract as an individual asset, apart from free exercise of one's powers as a phase of personality since in a highly organized society the general existence may depend to a large extent upon individual labour in specialised occupations, and the power to labour freely at one's chosen occupation may be one's chief asset. The idea that a man's right to his job is in the nature of property has been developed by other thinkers like C. B. Macpherson, 'Democratic Theory : Essays in Retrieval' (1973), and Prof Charles A. Reich, 'The New Property' (1963-64) 73 Yale Law Journal 733. Mr. Justice K. K. Mathew, formerly Judge of the Supreme Court of India in his extra-judicial writings (Democracy, Equality and Freedom (1978)) and in his concurring judgment in Sukhdev Singh v. Bhagat Ram, (1971) 1 Scc 421, developed new concept of State action and the rights of the employees though they could not be said to form the subject matter of the judgment of the majority of the court. It has been pointed out that property is increasingly becoming a right to income for work done rather than a mere right to hold a corporeal thing.

(14) More and more of our wealth today takes the form of the right to do work or a secured status as a workman rather than of a tangible goods. The job of an individual is the prime example of property today. It is far more valuable than any house or tangible immovable property. As Justice Mathew has observed (pages 87-88 of his book), 'Most people still have to work for their income. Their property is their right to earn an income whether as self-employed persons or as wage or salary earners. Whichever way they earn their income, they are coming to see their income as their main property. . . . .... They are coming to see that their property is a right to a job, the right to be employed ........ Today, we require a new definition of property for the purpose of Article 19(1)(f). The new definition will comprise not only 'things' but the whole field of economic intefests and expectations'. Justice Mathew quotes Prof- Macpherson as follows :

'WHATis new in this mid-century is that, this fact is being widely perceived and recognised. It was seen in the 19th century only by a handful of radicals and socialists who thought of the worker's main property as their right to the job. This is a considerable transformation in the concept of property. For, to see as one's property, a right to earn an income through employment is to see as one's property a right to access to some of the existent means of labour, i.e., to some of the accumulated productive resources created by past labour, no matter by whom they arc owned.'

(15) The Constitution (Forty-fifth Amendment) Bill, 1978 as passed by the Lok Sabha and amended by the Rajya Sabha, which will become a part of the Constitution after ratification by the States will eliminate fundamental right to property from the Constitution by the deletion of Article 19(l)(f) and Article 31. This is being done in accordance with the objective of the ruling party and in accordance with the declaration made by the Prime Minister Morarji Desai that 'We will remove the property right from the fundamental right but we will make it a legal right assessable and judged by the Court' (The Time, 4th April, 1977 page 13, quoted at page 53 of the Indian Legal System (1978) Chapter on Constitutional Law-1.).

(16) It would appear, however, that property right like other rights of the individual existed even before the Constitution was framed. Even when the fundamental right is suspended the common law, custom and general principles of justice, equity and good conscience and the principles of interpretation of statutes are drawn upon by the courts to protect individual rights, (The Indian Legal System (1978) Chapter on 'The Nature of the Indian Legal System' pages 3, 4 and 5). thereforee, the protection to the right of property would continue even if it were deleted from the Chapter of Fundamental Rights. The expression 'personal liberty' in Article 21 has been construed broadly to include different kinds of rights and liberties of the individual, in a series of cases ending with Smt. Maneka Gandhi v. Union of India, : [1978]2SCR621 , and in appropriate cases the right to property would come to be protected there under in future. We must consider, thereforee, whether the reduction of the range and quantum of the bonus in any way contravenes the right to property of the individuals.

(17) A legal right is something which exists or is vested in the individual. While right to do work as an employee can originate only in a contract, it may be regarded as a status and, thereforee, property when the contract is not variable or terminable at will. But presently we are not concerned with such a right. The right to receive remuneration cannot be independent of the work for which remuneration is claimed. Work must be done first and remuneration can become due only thereafter. The right to be paid bonus is a part of the right to be paid remuneration. Section 11(2) of the Act as also the orders issued there under and regulation 58 including its amendment give the Corporation complete freedom to A reduce the remuneration payable to its employees. Such reduction must, however, be prospective. It cannot be retrospective. Once the work is done under certain rate of remuneration it must be paid for at that rate. But the employer can say that for future work the rate would be less. If the employee is not agreeable he may not do the ' work. He would not then be entitled to ask for the remuneration. Shri Garg argued that if the remuneration of an employee is reduced unreasonably the employee would be able to insist that his right to property has been infringed and the court should quash the order of reduction of remuneration on that ground. He says that the worker is entitled to a living wage and not a dying wage. There are two assumptions underlying this argument which are unwarranted. Firstly, we are not dealing with a workman governed by the Industrial Disputes Act or even with a worker outside it. We are dealing with Class I Officers of the Corporation. The question of living wage, thereforee, does not arise. Secondly, the reduction in the rernkineration effected by the Corporation is only in respect of bonus which is only one of the several kinds of emoluments paid to them by the Corporation. The amount of reduction in the total remuneration by the modification of the bonus is comparatively small. Even if it is assumed for the sake of argument that right to remuneration is right to property the impugned deduction is not at all unreasonable.

(18) The reasonableness of the reduction is obvious. The salaries payable to the petitioners are among the highest in the industrial employees in India. The National Labour Commission and the terms of reference to Bhoothalingam Committee have pointed out the necessity of a national policy of income, wages and prices. Whether the salaries paid to the petitioners are low or high is not to be considered in the vacuum or absolutely. It is to be considered in the context of the per capita income in the country and the average monthly earnings of the employees in other industries. The Supreme Court has recognised in Messrs. Crown Aluminium Works v. Their Workmen, : (1958)ILLJ1SC , that the wage structure in a given industry can be revised to the prejudice of the workmen provided a case for such revision is made out on the merits to the satisfaction of the Tribunal. If this can be don,e in respect of comparatively low wage earners who are included in the definition of 'workman' within the meaning of the Industrial Disputes Act, a fortiori this can be done in respect of Class I Officers of the Corporation. In Express Newspapers (P) Ltd. and another v. The Union of India and others, : (1961)ILLJ339SC onwards the concept of fair wage was considered. According to Marshall the rate of wages prevailing in an occupation is 'fair' if it is 'about on level with the average payment for tasks in other trades which are of equal difficulty and disagreeableness, which require equally rare natural abilities and an equally expensive training'. According to Prof. Pigou wage would be fair in the wider sense when it is equal to the predominant rate for similar work throughout the country in the generality of trades. The Indian National Trade Union Congress itself recognised that the following factors would determine a fair wage, namely:

(I)The productivity of labour ;

(II)The prevailing rates of wages in the same or similar occupations in the same or neighbouring localities ;

(III)The level of the national income and its distribution ; and

(IV)The place of the industry, in the economy of the country.

Again at page 89 and onwards the court observed that the capacity of the industry to pay wages would have to mean one of the three things:

(I)the capacity of a particular unit, (marginal, representative or average) to pay,

(II)the capacity of a particular industry as a whole to pay, or

(III)the capacity of all industries in the country to pay.

(19) In the present case the distortion in the national economy by which disproportionately large monthly remuneration has been paid to the employees of the Corporation as compared to the average monthly remunerations of employees of other industries has led to criticism and dissatisfaction. The Government had, thereforee, to reconsider the wages paid to the employees of the Corporation. The attempt to reduce bonus is a step towards rationalisation and reduction of the distortion which has already taken place. As emphasised by the National Labour Commission Report, the interests of the policy holders have also to be kept in view in considering the wages payable to the employees of the Corporation. A frequent criticism is that the rates of premium charged by the Corporation for life insurance have not been reduced in spite of the increase in the business and the profits earned by the Corporation. It may be that if the present premium rates are reduced some persons might consider discontinuing the policies taken at higher rates of premium and taking up new policies at lower rates. The Corporation would be anxious to avoid such a result and may not, thereforee, have been able to reduce the rates of premium. There is nothing, however, to prevent the Corporation from paying higher rates of bonus on the existing policies bill the increase in the rates of bonus has been outstripped several times by the increase of total remuneration payable to the employees. This would show that the benefit of the increased business has gone disproportionately at the cost of the policy holders. If the Government and the Corporation wish to correct the distortion firstly in the national income, wage? and prices policy by reducing the bonus payable to all its employees it cannot be said that the policy of the Government and the Corporation is so unreasonable as to be contrary to any supposed right of property of the petitioners protected by Article 19(1)(f) of the Constitution.

(20) As for Article 31(2) the acquisition of property of the petitioners by the Corporation can take place only if something which the petitioners are entitled as of right is acquired by the Corporation. The right to the payment of bonus for work which is already done is a vested right of property. But there is no right in the petitioners to insist that the bonus should not be reduced prospectively. No question, thereforee, arises of acquisition of the right to property of the petitioners in respect of the prospective reduction of their bonus. The decision in Madan Mohan Pathak's case (supra) only held that the Class Iii employees being workmen under the Industrial Disputes Act had a vested right to the bonus during the continuance of the settlement under section 18 of the said Act so long as the said settlement was not terminated under section 19 of that Act. The settlement has, however, to be terminated according to the procedure prescribed by section 19 and since the said procedure had not been followed the legislation taking away the benefit of the settlement contravened Article 31(2). This decision can be applied to the reduction of the bonus of the petitioners only in respect of the bonus which was already earned by them. The bonus at the old rates is, thereforee, payable to the petitioners in respect of the year 1975-76. For, the circular dated 26th September, 1975 did not discontinue the payment of bonus, but only suspended it till further orders. The bonus in the old rates, however, is not payable to the petitioners for the year 1976-77 because the circular of 23rd June, 1976 is quite specific. It purports to disallow bonus for the financial year 1975-76, but the said financial year has already elapsed and the petitioners had worked during that year under the then current rates of bonus. Even though the bonus has been suspended the petitioners would be entitled to the declaration that the circular of 23rd June, 1976 did not operate turn the financial year 1975-76 but operated only from the financial year 1976-77.

(21) In urging that the reduction, in bonus by the circular No. 3543/ ASP/76, dated 23rd June, 1976 is an unreasonable restriction on the right to property, namely, to their remuneration enjoyed by Class I Officer it was said that the Class I Officers had earned their right to be paid bonus as the Class Iii and Class Iv employees. This contention ignores the basic distinction between Class I Officers, on the one hand, and the Class Iii and Class Iv employees on the other. The terms and conditions of the former are purely contractual. The power to reduce their remuneration has been given to the Central Government by Section 11(2) of the Act and to the Corporation by regulation 58. Variation of a term of the contract does not amount to restriction on the right to property. Merely because the Corporation at one time agreed to give bonus to Class I employees does not mean that the Corporation cannot later on discontinue the bonus either totally or partially. So long as service is a contract it is open to either of the two parties to propose a change in the terms of the contract. A service contract is not unchangeable by its nature. The element of status or statutory protection to certain terms of such a contract may be introduced by law or the Constitution. So far as Class I Officers of the Corporation are concerned not only the Constitution and the law do not change the terms of their remuneration from contract to status or property, but on the contrary section 11(2) and regulation 58 expressly empower the Government and the Corporation to change the remuneration from time to time and reduce the same.

(22) Reference was also made to promissory estoppel based on decisions culminating in the recent decision by the Supreme Court in Motilal Padampat Sugar Mills v. State of U.P., Ca 1597/72, decided on 12-12-1978 (6) and the various decisions relied upon therein. Promissory estoppel does not apply to a contract between the parties as to the range and quantum of remuneration. It cannot be said that by the offer of the remuneration made by the Corporation the employees change their position to their detriment. The officer is made in the context of the power of the Government and the Corporation to reduce the remuneration. The employees are presumed to know this. There is no representation by the Government that the remuneration will not be varied to the disadvantage of the employees. The, employees do not believe that the remuneration offered to them by the Government would be never reduced. No question, thereforee, of promissory estoppel arises.

(23) It was then said that the only reason why bonus was sought to be taken away from Class I Officers was the wrong belief of the Corporation that it had been taken away from Class Iii and Class Iv employees. But when the Supreme Court held in Madan Mohan of the Corporation could claim to the continuance of bonus was either Don-existent or was not unreasonably restricted.

(24) Since the right to receive bonus was not property the question of its acquisition by the Corporation contrary to Article 31(2) of the Constitution does not arise. The decision of the Supreme Court in Madan Mohan Pathak's case (supra) related to the Class Iii employees whose bonus was a term of the settlement arrived at under section 18 of the Industrial Disputes Act. That settlement was not like an ordinary contract. While the contract of service in respect of the remuneration between the petitioners and the Corporation could be varied to the disadvantage of the petitioner by the Corporation and the Government in exercise of the powers given to them by regulation 58 and section 11(2) of the Act respectively, the settlement between the Corporation and the Class Iii employees could not be varied. It could only be terminated in accordance with section 19 of the Industrial Disputes Act. This was why the right to bonus under the settlement was regarded as property by the Supreme Court and Article 31(2) was held to have been contravened when the bonus to Class Iii employees was appropriated by the Corporation without payment of compensation. This decision has no application to Class I Officers, the contract of whose remuneration is viriable unlike the settlement between the Corporation and the Class Iii employees. This variable contract was varied validly by the Corporation and hence Article 31(2) was not attracted.

(25) Realizing the difficulty of invoking Article 19 and Article 31(2) of the Constitution Shri Garg, learned counsel for the petitioners, concentrated on the argument that the impugned orders are contrary to Article 14 of the Constitution. He developed his argument as follows: For the last many years the Corporation had treated Class I Officers in the same way as Class Hi and Class Iv employees in respect of bonus. It did not deny bonus to Class I Officers merely because their pay scales were higher. So far as the payment of bonus is concerned, no distinction could be made between Class I Officers and Class Iii employees. If the pay scales of Class I Officers were higher the responsibilities and the work was also of a higher character, but both the classes of employees were in need of bonus and the Corporation has pursued a policy of giving bonus to both of them. The annulment of the settlement with Class Iii employees was declared unconstitutional by the Supreme Court. Subsequently, the notices terminating the settlement and of the change in the conditions of contract entered into under section 19 and 9A of the Industrial Disputes Act were also invalidated by the Allahabad High Court. It is true that the operation of the Judgment of the Allahabad High Court has been stayed by the Supreme Court, but the present legal position is that the Class Iii employees have the right to receive bonus from the Corporation. So long as this right continues the Corporation cannot discriminate against Class I Officers in withholding bonus from them. If and when the Corporation is able to discontinue payment of bonus to Class Iii employees it may do so with regard to Class I Officers. Till then the Corporation cannot do so.

(26) Shri G. B. Pai, learned counsel for the Corporation, in his reply to Shri Garg pointed out that a reasonable classification existed already between Class I and Class Iii employees before the impugned orders were passed. This classification has been made by legislation and was fundamental. While Class Iii employees were included in the definition of 'workman' within the meaning of section 2(s) of the Industrial Disputes Act, Class I Officers were not included there under. The following differences flow there from :

(A)The Class I Officers did not have the benefit of collective bargaining, which was the main strength of Class Iii employees in their employment relationship with the Corporation ;

(B)While Class Iii employees could enter into a settlement with the Corporation under section 18 of the Industrial Disputes Act, Class I Officers could not do so;

(C)While Section 11(2) of the Act and regulation 58 operated fully against Class I Officers empowering the Government and the Corporation to reduce their remuneration including bonus, the protection given to settlement arrived at under section 18 of the Industrial Disputes Act effectively checked these powers of the Government and the Corporation;

(D)The pay scales of Class I Officers and Class Iii employes were very different from each other. Class Iii employees had a better case for being paid bonus than Class I Officers. It is well recognised all over the world that it is the less paid people who require State aid rather than the more paid people. The principle of progressive taxation. social insurance and such other measures adopted by the Government are justified only because of this essential difference between the two. If, thereforee, the Corporation and the Government decide to be less generous to Class I Officers than to Class Iii employees in the grant of bonus the differential policy would be justified as a reasonable classification because the difference in the pay scales of the two has a nexus to the object of the policy of payment of bonus, i.e. to increase the wages of Class Iii employees at a higher percentage rate than the rate by which wages of Class I Officers would be increased.

(27) Of course, this policy of generosity to Class Iii employees has also resulted a different anomaly. The seniormost among the Class Iii employees, namely, the Superintendents, get a total remuneration which is higher than the total remuneration payable to the juniormost among the Class I Officers. This is also challenged by Shri Garg as discriminatory and contrary to Article 14. Firstly, such overlapping is inevitable. The senior-most in a lower class service may often get more than the junior-most in the higher class service. But this is justifiable. The senior-most man in the lower service has to put in much longer service than the junior employee in a higher class of service to get the same amount of pay. No discrimination can be found in a few senior persons in the lower class of service arc paid more than a few persons in the higher class of service.

(28) Shri Pal stated during the course of argument that as on 1-4-1978 there are 43,894 Class Iii and Iv employees on the role of the Corporation. Out of this only 16,000 approximately get salary more than Rs. 1,600 per month. On that date there were 732 Superintendents in Class Iii getting more total remuneration than total remuneration of some of the Class I Officers. The strength of the Class I Officers was 4,221. Out of them, only 109 were getting salary less than Rs. 1,600 per month. It would thus be seen that a small portion of the senior-most among Class Iii employees were getting more than the small portion of the junior-most among the Class I Officers. For the application of Article 14 it is the average monthly earnings of Class I Officers and Class Iii employees that is taken into account as applicable to each class as a whole. Just because 109 persons out of Class I Officers were getting less than 1,600 per month it cannot be said that the Class I Officers as a whole were discriminated against in favor of Class Iii employees. At any rate, petitioners are not the ones among Class I Officers who can complain of discrimination.

(29) Further, the Corporation has already decided not to continue the anomaly of some Class Iii employees getting more than some Class I Officers. It may be that the implementation of this policy was delayed due to the decision in Madan Mohan Pathak's case (supra). But this does not mean that the anomaly is likely to continue much longer. Already steps have been taken to issue notices under sections 19 and 9A of the Industrial Disputes Act. The very fact that the operation of the Allahabad High Court judgment has been suspended by the Supreme Court would show that the bonus even to Class Iii employees would now be payable only according to the new policy of the Corporation. This policy aims at the elimination of the anomaly pointed out above. The existing position, thereforee, is that Class Hi employees are getting bonus according to the former range and quantum. No discrimination is thus involved in reducing the range and quantum of bonus of Class I Officers. Prima facie, the Corporation is entitled to change the remuneration of Class Iii employees by the notice given under section 9A of the Industrial Disputes Act subject to section 33 of the Act. It is also entitled to terminate the settlement with them as per section 19 of the Act. The bonus payable by the Corporation to the Class Iii employees would be settled by a new contract and both parties are free to bargain for the fixation of new range and quantum of bonus. Since no conciliation proceedings have been referred to as 'pending in the judgment of the Allahabad High Court prima facie the Corporation has effectively varied the bonus payable to Class Iii employees. This takes away the basis of the argument that as long as the Class Iii employees are paid according to the old range and quantum of bonus the range and quantum of bonus payable to Class I Officers should not be varied. We are not persuaded to hold that any contravention of Article 14 of the Constitution is involved in the implementation of the impugned orders.

(30) For the above reasons the writ petition is only partly allowed. It is declared that the impugned circular dated 23rd June, 1976 would not operate for the year 1975-76 but would operate from the year 1976-77 onwards subject to later circulars or orders. The rest of the writ petition is dismissed. There will be no order as to costs.


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