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Padma Menon Vs. General Insurance Corporation of India and ors. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtKerala High Court
Decided On
Judge
Reported in(1979)IILLJ1Ker
AppellantPadma Menon
RespondentGeneral Insurance Corporation of India and ors.
Cases Referred and S.I. Agarwal v. Hindustan Steel Ltd.
Excerpt:
.....1972 (act 57 of 1972). the act is passed to provide for the acquisition and transfer of shares of indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general insurance business in the best interests of the community. (see section 26) a perusal of the other provisions of the act also clearly manifest the continued existance of the company and the application of the companies act to it, subject of course to the modifications introduced by the act 57 of 1972. the modifications are provided only to effectuate the statutory transfer of shares from the share holders to the central government, from the central government to the corporation, merger of some of the indian insurance companies in one..........act, act 57 of 1972 was passed by the parliament. by this act the shares in the capital of every indian insurance company was statutorily transferred to and vested in the central government. the central government was directed to form a government company in accordance with the provisions of the companies act to be known as the central insurance corporation of india for the purpose of superintending controlling and carrying on the business of general insurance. on such formation the shares in the capital of every indian insurance company which got statutorily transferred to and vested in the central government as above were transferred to the corporation. provision was also made enpowering the central government to frame one or more schemes providing for the merger of one insurance.....
Judgment:

Viswanatha Iyer, J.

1. The petitioner entered the service of the Cochin Divisional office of the General Assurance Society Ltd., as a field officer with effect from 1.10.1969. One of the terms of appointment was that she should guarantee a minimum business of Rs. 35,000 in Fire, Motor, Marine and Miscellaneous Insurance and a minimum premium income of Rs. 3,000 per mensem. As part of her duty she has to organise an effective agency force and work in consonance with the provisions of the Insurance Act and the Rules. She was on probation for six months and during that period her appointment was terminable without any notice. She completed her probation successfully and her service was regularised in due course. While so in September, 1972 the General Insurance Business (Nationalisation) Act, Act 57 of 1972 was passed by the Parliament. By this Act the shares in the capital of every Indian Insurance Company was statutorily transferred to and vested in the Central Government. The Central Government was directed to form a Government company in accordance with the provisions of the Companies Act to be known as the Central Insurance Corporation of India for the purpose of superintending controlling and carrying on the business of general insurance. On such formation the shares in the capital of every Indian Insurance company which got statutorily transferred to and vested in the Central Government as above were transferred to the Corporation. Provision was also made enpowering the Central Government to frame one or more schemes providing for the merger of one Insurance company with another or for the formation of a new company by the amalgamation of two or more Insurance companies. On framing such a scheme the undertaking no any Indian Insurance company was to vest of the acquiring company. On such a merger the service of all officers and other employees of the Indian Insurance Company which ceased to exist by reason of the scheme were directed to be continued in the acquiring company on the same terms and conditions which they were getting or as the case may be by which they are governed immediately before the commencement of the scheme. A scheme called National Insurance Compane Ltd., (Merger) Scheme, 1973 was framed by the Central Government which came into force on 1st January, 1974. General Assurancs Society Ltd. was one of the nine companiee which were merged with the National Insurance Company Ltd., under this scheme. Clause 5 of that scheme provided that every whole time officer or other employee of the merged company shall from the date of merger become an officer of the transferee company and shall hold office on the same terms and conditions and with the same rights as to pension, gratuity and other matters as would have been admissible, to him if there had been no such transfer or merger and shall continue to do so unless and until his employment in the transferee company is terminated or until his remuneration, terms and conditions are duly altered by the transferee company or by any other scheme framed under the Act. Under this provision the petitioner became an officer of the National Insurance Co. Ltd., Subsequently all officers of the National Insurance Co. were required to submit a bio data some time in 1975 by the respective units. The petitioner also filed a pro forma showing the details. Thereafter the petitioner was directed to appear before a committee for interview. Though she withdrew advance allowance to proceed to Madras and appear for the interview, she did not go, and according to her this was due to her illness. She wrote a letter on 11.3.1976 expressing her inability to reach Madras and a certificate from a Civil Surgeon was sent along with it. The interview was to take place on 12th March, 1976. On 17th March the Administrative Officer of the Divisional Office met the petitioner at her residence and informed her that her absence for the interview was not appreciated by the Divisional Office. The next day she received a letter from the Divisional Manager intimating her that her failure to appear for the interview will be seriously viewed and the Regional Office will be informed to take appropriate action. On 20th March, 1976 she received that communication. In the meantime she returned the amount drawn by her as advance. On 1st April, 1976 the petitioner received a letter from the Regional Manager informing her that her services have been terminated with effect from 30th March, 1976. Along with that letter a cheque representing payment of dues in lieu of one month's notice had also been enclosed. This order terminating her service is challenged in this petition.

2. It is contended that with the transfer and vesting of shares of Indian Insurance Companies in the Central Government, the formation of a Government company known as the General Insurance Corporation of India and transfer to the Corporation of the shares in the Capital of the Indian Insurance Companies statutorily transferred and vested as above in the Central Government, the General Insurance Corporation and the other companies became 'other Authorities' within the meaning of Article 12 of the Constitution; and the employees of various companies acquired the status of public employment. Alternatively, under Section 16 of the Act reads with the provision of the scheme framed by the Central Government to merge certain Indian Insurance Companies in the National Insurance Company Ltd. the whole time employees of the merged company acquire a statutory status. In either way before terminating the service of the petitioner an opportunity of being heard should have been given before the termination. It is also contended that the termination order in this case is in the nature of a punishment and before imposing that punishment no reasonable opportunity was given to the petitioner for being heard in the matter. Therefore, the order of termination is ultra vires and has to be quashed.

3. In answer respondent, No. 1, namely, the General Insurance Corporation of India and respondent No. 3 the Divisional Manager, National Insurance Company Ltd. have filed affidavits. According to them even after the coming into force of the General Insurance Business (Nationalisation) Act, 1972 and the merger schemes framed under the Act the National Insurance Company Ltd., continued to be a company governed by the companies Act and it is not 'other authority' within the meaning of Article 12 of the Constitution. Further the merger scheme did not in any way affect the terms and conditions of the officers and other employees of the merged companies. They continue to be governed by the same terms and conditions existing before the merger. Consequently there is no element of public employment in the case of the petitioner or any other officer or employees to confer a status of public employment on them. Their relationship continued to be governed by the terms of contract of employment and general law of master and servant alone applies in the matter. Consequently the petitioner cannot claim any notice to show cause against the termination of her service. Nor is the termination of her service a punishment to attract the principles of observance of natural justice before such termination.

4. The first question for consideration is whether the national Insurance Company Ltd., or the General Assurance Society Ltd., will come within the scope of 'other authorities' in Article 12 of the Constitution, To answer this question it is necessary to find out the scope and the effect of the General Insurance Business (Nationalisation) Act, 1972 (Act 57 of 1972). The act is passed to provide for the acquisition and transfer of shares of Indian Insurance Companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general Insurance business in the best interests of the community. By Section 4 of the Act it is provided that all the shares in the capital of every Indian Insurance company shall, stand transferred to and vested in the Central Government on the appointed day. Under Section 9 the Central Government is required 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. On formation, of such a Government company the shares in the capital of the Indian Insurance Companies vested in the Central Government under Section 4 get statutorily transferred to the Corporation and every Indian Insurance Company is required by Section 10 to give effect to such transfer of shares and rectify its register of members by including therein the Corporation as the hold of such shares. Even after such statutory transfer and rectification of the share register the Indian Insurance Companies continued to exist the profits earned by such companies have to be distributed as dividends after making provision for specified matters provided for under Section 20. Section 16 provides for merger in one Insurance company of any other Indian Insurance Company or for the formation of a new company by the amalgamation of two or mote Indian Insurance Companies. On framing the merger scheme all the business properties, assets and liabilities of the merged company will vest in the acquired company. The services of all offices and other employees of the merged company is to continue on the same terms and conditions by which they were governed immediately before the scheme. For the purpose of Indian Income-Tax Act every acquiring company is deemed to be an Indian company and a company in which the public are substantially interested. (See Section 26) A perusal of the other provisions of the Act also clearly manifest the continued existance of the company and the application of the Companies Act to it, subject of course to the modifications introduced by the Act 57 of 1972. The modifications are provided only to effectuate the statutory transfer of shares from the share holders to the Central Government, from the Central Government to the Corporation, merger of some of the Indian Insurance Companies in one Indian Insurance Company so as to reduce the total number of Insurance Companies to four. As a result of the merger scheme a statutory transfer of the undertakings of the companies which ceased to exist by reason of the merger scheme a statutory transfer of the undertakings of the companies which ceased to exist by reason of the merger has also to be provided for and that is what is done by Act 57 of 1972. All these in no way altered the structure of the surviving companies. The surviving companies have a share capital with limited liability, a Board of Directors are under an obligation to distribute the balance of profits as dividends and for the purpose of Income-tax Act, 1961 are Indian Companies in which the public are substantially interested. It follows that the National Insurance Company Ltd. continues to be a company registered under the Companies Act and will not come under 'other authorities' mentioned in Article 12 of the Constitution.

5. In this connection it is necessary to notice the distinction and difference in the provisions relating to the General Insurance Corporation of India framed under Section 9 and to the other Indian Insurance Companies whose shares are taken over by the Government under the Statute from the provisions relating to other Corporations established under some other enactment.

6. The life Insurance business previously carried on by companies was nationalised in 1956 with the passing of the Life Insurance Corporation Act, 1956 (Act 31 of 1956). Section 3 of the Act provides for the establishment of a Corporation called the Life Insurance Corporation of India, a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of property. Under Section 7 all the assets and liabilities pertaining to the controlled business of all insurance were transferred to and vested in the Corporation. Section 11 provided for the transfer of the service of the existing employees of the insurers to the Corporation. The managem3nt of the Corporation is to be attended by the Managing Director or Directors appointed by the Corporation. The balance of profits is to be paid to the Central Government. A reading of the provisions of the Life Insurance Corporation Act clearly shows that the Corporation established under the Act is not a company registered under the Companies Act. Similarly the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 also by Section 3 of that Act it is provided that there shall be constituted such new Banks corresponding to the Banks specified in the Schedule to the Act. The corresponding Banks are not formed or incorporated under the Companies Act and with the taking over of the banking business from the Banking Companies the latter did not get wound up by the status. The corresponding Banks are to be managed by a Board of Directors consisting of representative of employees and depositors and such other persons as may represent the interest of farmers, workers, artisans, etc., as may be provided under the scheme framed by the Central Government under Section 9 of the Act. Similarly Oil and Natural Gas Commission, Industrial Finance Corporation are all Corporations established by statute. They are similar statutory Corporations established by Central and State Acts. Such statutory bodies are corporations or 'other authorities' under Articles 12. The expression 'Authority' herein is understood to mean a public administrative agency or Corporation having quasi-Governmental powers and authorised to administer a Public enterprise. This expression is clearly wide enough to include all bodies created by statute on which powers are conferred to carry out Governmental or functions. That is why in Electricity Board, Rajasthan v. Mohan Lal : (1968)ILLJ257SC , it is held that the expression 'State' in Article 12 of the Constitution is said to comprehend bodies created for the purpose of carrying out a Governmental function.--This principle is again reiterated by the Supreme Court in Sukhdev Singh v. Bhagartam : (1975)ILLJ399SC .

7. It follows from the above discussion that Act 57 of 1972 does not establish any statutory Corporation, it directs only the formation of a Government company under the Companies Act and enacted provisions relating to certain matters of Indian Companies carrying on general insurance. These Indian Companies continue to be companies governed, by the Companies Act to the extent not modified by Act 57 of 1972. By virtue of this enactment officers and employees of the acquired companies to not acquire a statutory status. They continued to be employees of the company just like employees of any other company. I am supported in this conclusion by the decision of the Supreme Court in Sabahjit Tewary v. Union of India : (1975)ILLJ374SC . In that case the Council of Scientific and Industrial Research a society incorporated in accordance with the provisions of the Societies Registration Act was held to be not an 'authority' coming within the scope of 'other authorities' in Article 12 of the Constitution. The Companies governed by Act 57 of 1972 are all Companies having existence independent of the Government.

8. The petitioner's counsel referred to two decisions of the Madras High Court, that is, K.G. Mathew v. Director, N.I.C. Ltd. 1976 I L.L.J. 27 and A.A. Mathan v. U.I. Gen. Ins. Co. 1978 I L.L.J. 259, wherein Ramanujam, J., had taken a view contrary to what I have taken above. With respect I disagree with his conclusions for the reasons stated by me in the earlier paragraphs. The other decision relied on by the petitioner is the decision in Sukhdev Ratilal v. The Chairman (1976) II Service Jaw Reported 184 and Lachhman Dass v. Panjab National Bank (1977) II Service Law Reporter 565. These cases related to the employees of the Bank of Baroda and the Punjab National Bank both coming under the Banking Companies (Acquisition and Transfer of Undertaking Act, 1970). I have earlier pointed out that under the latter Act these Banks were established by Statue to takeover the business of the corresponding Banks functioning under the Banking Companies Act. So these cases are clearly distinguishable from the facts in this case. Strong reliance is placed by the petitioner's counsel on the decision in Sukhdev Singh v. Bhagatram, (supra). This case relates to the employees of Life Insurance Corporation of India. In the above decision it was held that the Life Insurance Corporation is a Corporation established by the statute and the employees of the Corporation acquire a statutory status under the provisions of the Life Insurance Corporation Act and the various Rules and Regulations framed thereunder by the Corporation. That is not the case here. So the principle laid down in that decision has no application. The principles that apply to this case are those stated by the Supreme Court in Sabhajit Tewary v. Union of India : (1975)ILLJ374SC Praga Tools Corporation v. C.A. Imanual : (1969)IILLJ479SC H.E.M. Union v. State of Bihar : (1969)IILLJ549SC and S.I. Agarwal v. Hindustan Steel Ltd. 1970 II L.L.J. 499 : : (1970)IILLJ499SC . In all these cases it has been held that the employees of companies incorporated under the Companies Act do not get any statutory status to complain against any action taken against them by the companies in violation of any contractual provision.

9. Under Article 226 a writ direction can be issued not only against the Government or a statutory body, but also to any person who has to discharge a statutory function and violates the duty imposed by the Statute. No violation of any Statutory duty is urged before me to sustain this petition under Article 226. In spite of the formation of the General Insurance Corporation and the merger of similar insurance companies in the National Insurance Company Ltd. under the scheme framed under Section 16 of Act 57 of 1972 the terms and conditions of service of the petitioner continued to be governed by the contract of appointment. The remedy for breach, if any, of that contract lies elsewhere and not under Article 226 of the Constitution. If follows that the petition under Article 226 is not maintainable.

10. In the light of what I have said above, even if the service of the petitioner was terminated by way of punishment the petitioner is not entitled to any relief in this petition. The petition may be different if I had come to the conclusion that Respondent No. 1 and the National Insurance Company Ltd. are 'other Authorities' within the meaning of Article 12 of the Constitution. Looking at the letter of termination of the service of the petitioner in the background of Exts. P2 and P3 it is possible to draw an inference that the petitioner's service was terminated because she refused to go for the interview on 12.3.1976 given intimation to her by the respondents. Even though the order Ext. P4 does not mention that her service is terminated by way of punishment, if is so is possible to be inferred on the facts and circumstances of this case admittedly no notice was given to her to show cause against the terminates of her service and the order is, therefore, vitiated if her service is in the nature of a public employment or she has obtained the statutory status. I have found that she does not get any of these protections. It follows she is not entitled to any relief simply because her service has been terminated in the way it has been done.

11. In the result this original petition fails, it is dismissed, but in the circumstances I make no order as to costs.


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