LIFE INSURANCE CORPORATION OF INDIA versus SUNIL KUMAR MUKHERJEE & ORS .

1963 that of immovable properties, embraced in gross --valuation roll, so also here, it is not possible to separate The . .Provincial from the composite turnover transactions which are Governmerrt .of validly taxed, from those which are not, for that must Madras pertain· to the domain of tax officers and the courts v. have no powers within that domain. Tn our opinion, .'· S. Basappa the High Court was right in declaring the total assess-H' [.d ]ayatu [-. ][-]11 '! [h ].. [J ][menLt? ]and v01d. [be ][affected ][by ][the portion which ][was ][illegal ].

In the result, these appeals fail and are dismissed with costs, one set only. ·

Appeals dismissed

LIFE INSURANCE CORPORATION OF INDIA

1963 LIFE INSURANCE CORPORATION OF INDIA November-15 V. SUNIL KUMAR MUKHERJEE & ORS . . (P.B. GAJENDRAGADKAR, K.N. WANCHOO AND . . K.C. DAS GUPTA JJ.)

. Life Insurance Corporation-Emp/oyees,-Termination of service -Non-compliance with the provisions of the Act and order-Termina-tion if, valid-Life Insurance Corporation Act, 1956 (31 of 1956), sii. 7f 11(1) (2) and 49-Life Insurance Corporation Field Officers (Alteration of Remuneration and other terms and Conditions of Service) Order,: 1957, els . . 10, 11,-Life Insurance Corporation Regulations, 1958, els. 4 and 5.

One of the respondents Mr.· S.K. Mukherjee was an employee of the Metropolitan Insurance Co. Ltd., and had been working as an.!nspe0qfwhen the appellant took over the company. There-after, in February 1958, he was .directed to work as field officer. By the order dated October 16, 1958 his services were terminated with immediate effect and he was informed that he would be paid his emoluments up to the current month and one month's salary in lieu of notice. He was not given an opportunity to show cause against this termination. .His petition before the High Court under Art. 226 of the Constitution challenging the validity of this order was allowed by the learned single Judge. After appealing to Division Bench without success the appellant came in appeal

5 S.C.R. SUPREME COURT REPORTS

to this Court with certificate granted by the High Court. It was urged on behalf of the appellant that .by the application of the principle contained in paragraph 4(h) of the Circular issued by the Managing Director under cl. 4(3) of the Life Insurance Corporation Regulation 1958, it was competent to the corporation to terminate the services of the respondents. It was contended that where cases are dealt with under paragraphs 4(h) and 5 of the Circular, there can be no question of the application of cl. 10 of the Life Insurance Corporation Field Officers Order, 1957, which empowers the appropriate authority to reduce the remuneration of the Develop-ment Officer or to tem1inate his services and in either case, an opportunity of showing cause against the action proposed to be taken has to be given to him. The contention of the respondents was that the termination of their services can be brought about only under cl. lO{a) or IO(b) of the order, and since it has not been so brought about, the impugned orders are invalid.

Life Insurance Corporation of India v.

Sunil Kumar Mukherjee & others

Held: (i) The power of the corporation to make Regulations is burdened with the condition that these Regulations must not bo inconsistent with the Act and the rules framed thereunder , so that if any of the provisions contained in the Regulations made by the corporation under s. 49 of the Act are found to be inconsistent either withs. II (2) or with the order made by the Central Govern-ment under s. 11(2) of the Act, they would be invalid.

(ii) Paragraph 4(h) means that 'in cases falling under it, the services of the officers concerned would be liable to be terminated, and that means that the termination of the services, of the said officers must be effected in the manner prescribed by cl. JO of the Order. That is how paragraph 4(h) of the Circular and cl. IO of the Order can be reasonably reconciled. This applies equally to paragraph 5 of the Circular.

(iii) It was competent to the corporation to adopt the Circular, and in consequence, lay down the principles which should be follow-ed in fitting individual officers into the scheme prescribed by cl. 5 of the order. The total amount of remuneration would undoubtedly be determined in the light of the principles prescribed by the Circular, but under the guise of fitting in particular officer in the light of the said principles it would not be open to the corporation to demote the officer from the grade of Development Officer to lower grade; that would be beyond the competence of the Regulations.

(iv) Since the orders terminating the services of the respective respondents have not been passed in accordance either with cl. JO( a) or (b), they must be held to be invalid.

(v) An employee whose performance is poor is liable to be dealt with under cl. IO of the order. But it is not open to the corporation to requite that person to accept an assignment in lower or different category. What the Regulations are authorised to do is merely to determine his salary in the category of develop-

order of discharge passed against him. Sinha J. 1963 who heard the writ petition allowed the petition and . -directed that writ in the nature of certiorari quashing Life lnsu~ance and/or setting aside the impugned order be issued. Corporatzon of further writ in the nature of mandamus was also India issued directing the respondents to the writ petition v. not to give effect to the said impugned order. To Sunil Kumar the petition filed by the respondent, he had impleaded Mukherjee & eight respondents, the principal amongst them being others the appellant Corporation and the Union of India.

s· J ll

. . . s· J ll ggneve y t ec1s10n o m . t appe ants preferred an appeal under the Letters Patent before Division Bench of the said High Court. Bose C.J. and Debabrata Mokerjee J. who heard the Letters Patent appeal substantially agreed with the view taken by Sinha J. and confirmed the order passed by him. The appellants then applied for and obtained certificate of fitness from the said High Court and it is with the said certificate that they have come to this Court in appeal. On similar facts, the appellants have brought to this Court the other fourteen appeals, and common question which has been raised by the learned Solicitor-General on behalf of the appellants is that the High Court was in error in holding that the orders of discharge passed respectively against the respondents in these appeals were invalid.

Gajendragadkar 1 ·

Before dealing with the points raised by the appellants in the present appeals, it would be con-venient to set out the relevant orders passed in respect of the appointment and discharge of the respondent Mr. Mukherjee . When Mr. Mukherjee was appointed whole-time Inspector by the Metropolitan Insurance Co. Ltd. on the 18th or 19th March, 1955, the terms and conditions of his employment were communicated to him by document which contained 14 clauses (Annexure to the W.P.). Clause 13 of this docu-ment provided that the appointment was subject to termination without notice in case he was found guilty of fraud, mis-appropriation, breach of dis-cipline, insubordination, acting detrimental to the interests of the company, disloyalty or gross neglect

1963 of duty: provided, however, that he would be entitled to 30 days' notice if his services were terminated for Life Insurance any other reason. It is thus clear that under the Corporation of terms and conditions of Mr. Mukherjee's original India appointment with the Insurance Co., he was liable v. to be dismissed for misconduct and was entitled to Sunil Kumar receive 30 days' notice if his services were terminated.

Mukherjee & for reasons other than misconduct.

others When the Life Insurance Corpn. took over the Gajendragadkar business of the Metropolitan Insurance Co. Ltd., J an order was issued in favour of Mr. Mukherjee on · the 14th February, 1958. By this order it was stated that in terms of Government Order No. 53(1) l.S.N. (I) 57 dated 30th December; 1957, he was required to work as· Field Officer. It was also added that he would continue to be attached to Barrackpore Branch Office until further orders. This order was issued by the Divisional Manager. Thus, it appears that after this order was given to Mr. Mukherjee, he began to work as Field Officer by virtue of his appointment under the relevant Government Order. One of the points which we have to consider in the present appeal is : what is the effect of this order of appointment?

On the 16th October, 1958, the impugned order terminating Mr. Mukherjee's services was passed. This order said that in terms of section 5 of the Cate-gorisation circular of the 2nd December, 1957, Mr. Mukherjee's case was examined by the Special Committee appointed by the Board of the Corporation to review the cases of Ex-Branch Secretaries etc., and it was added that in accordance with the recommen-dations of the Committee which had been accepted by the Corporation, it had been decided to terminate his services with immediate effect. Mr. Mukherjee was also told that he would be paid his e:moluments up to the current month and one month"s salary in lieu of notice. It is the validity of this order which has been successfully challenged by Mr. Mukherjee before the Calcutta High Court, and the learned Solicitor-General contends· that the High Court was in error in upholding Mr. Mukherjee's plea.

5 S.C.R.

The history of the nationalisation of the Life 1963 Insurance business in this country is well-known. . --On the 19th January, 1956, the Life Insurance (Erner- Life Insu~ance gency Provisions) Ordinance (No. 1 of 1956) was Corporation °1 promulgated by the President for the purpose of taking India over, in the public interest, the management of the . v. life insurance business, pending nationalisation of Sumi K~mar such business. In due course, Act No. 9 of 1956 Mukher;ee & was passed which took the place of the original Ordi-others nance and it came into effect on the 21st March, -·-1956. This Act was followed by Act 31 of 1956 Gajendragadkar (hereinafter called 'the Act') which was published J. on the !st of July, 1956. The appointed date under s. 3 of this Act was the 1st of September, 1956. Section 7 of the Act provides that on the appointed day there shall be transferred to and vested in the Corporation all the assets and liabilities appertaining to the con-trolled business of all insurers. That is how the Life Insurance Corporation took over all the assets and liabilities appertaining to the controlled business of all the insurers in this country. As result of this taking over, s. 11 proceeded· to make provision for the transfer of service of existing employees of insurers to the Corporation. For the purpose of these appeals, it is necessary to set out sec. 11(1) & (2).

These sub-sections read as under:-

"(l) Every whole-time employee of an insurer whose controlled business has been trans-ferred to and vested in the Corporation and who was employed by the insurer wholly or mainly in connection with his controlled business immediately before the appointed day shall, on and from the appointed day, become an employee of the Corporation and shall hold his office therein by the sam~ tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to pension and gratuity and other matters as he would have held the same on the appointed day

Life Insurance Corporation of India

Sunil Kumar

Mukherjee & others

Gajendragadkar

if this Act had not" been passed, and shall continue to do so unless and until his em-ployment in the Corporation is terminated or until his remuneration, terms and con-ditions are duly altered by the Corpora-tion:

Provided that nothing contained in this sub-section shall apply to any such employee who has, by notice in writing given to the Central Government prior to the appointed day, intimated his intention of not becoming an employee of the Corporation.

(2) Where the Central Government is satisfied that for the purpose of securing uniformity in the scales of remuneration and the other terms and conditions of service applicable to employees of insurers whose controlled business has been transferred to, and vested in, the Corporation, it is necessary so to do, or that, in the interests of the Corporation and its policy-holders, reduction in the remuneration payable, or revision of the other terms and conditions of service appli-cable, to employees or any class of them is called for, the Central Government may, notwithstanding any thing contained in sub-section (1 ), or in the Industrial Disputes Act, 1947, or in any other law for the time being in force, or in any award, settlement or agreement for the time being in force, alter (whether by way of reduction or other-wise) the remuneration and the other terms & conditions of service to such extent and in such manner as it thinks fit, and if the alteration is not acceptable to any employee, the Corporation may terminate his employ-ment by giving him compensation equivalent to three months' remuneration unless the contract of service with such employee provides for shorter notice of termi-nation."

Then follow an explanation and sub-sections (3) 1963 and (4) which are not relevant for our purpose. It -would thus be seen that under s. 11(1), persons who Life Insurance were employed by an insurer wholly or mainly in Corporation of connection with his controlled business before the India appointed day, became the employees of the Corpora-v. tion as from the appointed day. After they thus Sunil Kumar became the employees of the Corporation, they held Mukherjee & their offices by the same tenure, at the same remunera-others tion and upon the same terms and conditions and with the same rights and privileges. In other words, Gajendragadkar on the taking over of the controlled business by the J. Corporation, the employees of the insurers to whom s. 11 (I) applied became the employees of the Corpora-tion, but their employment continued to be on the same terms and conditions as before. This state of affairs was to continue until the employment of the employee was brought to an end or until his remuneration, terms and conditions were duly altered by the Corporation. The scheme of s. 11(1) is thus clear. With the transfer of the controlled business from the insurer to the Corporation, the employees of the former became the employees of the latter, but they were governed by the same terms and con-ditions until they were altered by the latter.

The proviso to s. ll(IJ shows that if any employee had, by notice in writing, conveyed to the Central Government prior to the appointed day his intention not to become an employee of the Corporation his case was outside s. 11 (1 ). In other words, such an employee. would m?t become the employee of the Corporation and his case would have to be dealt with apart from s. 11 (1) & (2).

~ection 11. (2) . as it originally stood was sub-stantially. ~od1fied m .1957,_ and the plain effect of the prov1s1ons contamed m the said sub-section as modified, is that the Central Government is given the power to alter (whether by way of reduction or other.\\'.ise) the re~uneration and the other terms and cond1t1ons of service to such extent and in such manner as it thinks fit. It is significant that this power can

1963 be exercised by the Central Government not-withstanding anything contained in sub'.section (I) Life Insurance or in the Industrial Disputes Act, 1947, or in any Corporation of other law, or in any award, settlement or agreement India for the time being in force. It was thought that for v. proper functioning of the Corporation it was essen-Sunil Kumar tial to confer upon the Central Government an over-Mukherjee & riding power to change the terms and conditions others of employees who were wholly or mainly employed . --by the insurers prior to the appointed day. Having Ga1endragadkar conferred such wide power on the Central Government, J. s. I I (2) further provides that if the alteration made by the Central Government in the terms and conditions of his service is not acceptable to any employee, the Corporation may terminate his employment by giving him compensation equivalent to three months' remuneration unless the contract of service with such employee provides for shorter notice of termination. It is thus clear that in regard to cases which fall under s. 11 (2) if as result of the alteration made by the Central Government any employee does not want to work with the Corporation, he is given the option to leave its employment on payment of compensation provided by the last part of s. 11 (2). Thus, the scheme of the two sub-sections of s. 11 is clear. The employees of the insurers whose controlled business has· been taken over, become the employees of the Corporation, then their terms and conditions of service continue until they are altered by the Central Government, and if the alteration made by the Central Government is not acceptable to them, they are en-titled to leave the employment of the Corporation on payment of compensation as provided by s. 11(2).After the Corporation took over the controlled business of insurers under the Act, two circulars were issued by the Managing Director, the first on the 30th September, 1957 and the second on the 2nd December, 1957. These circulars need not detain us at this stage, because, by themselves, they were without any authority in law. However, we would have occasion to refer to the second circular later on.

On the 30th December, 1957, an order was issued

by the Central Government in exercise of the powers . -conferred on it by s. 11(2) of the Act. This order Life Insurance was issued on blue paper and has been described Corporation of by the High Court as the 'blue order'. We will refer India to this order as 'the order' in the course of this judg-v. ment. This order was issued because the Central Sunil Kumar Government was satisfied that for the purpose of Mukherjee & securing uniformity in the scales of remuneration others and the other terms and conditions of service applica-. -ble to certain classes of employees of insurers, it Ga1endragadkar was necessary to clarify the position by making speci-1· fie and clear provisions in that behalf. The object of the order was to secure the interests of the Corpora-tion and its policy-holders by making reduction in the remuneration payable to the employees governed by the order, and effecting revision of the other terms arid conditions applicable to them. This order was confined in its operation to the officers of the insurers who were known as 'Field Officers', and so, the order was named as the Life Insurance Corpora-tion Field Officers' (Alteration of Remuneration and other Terms and Conditions of Service) Order, 1957. It consists of 12 clauses. Clause 2 defines, inter alia, Field Officer. In 1962, the designation 'Field Officer' was changed into "Development Officer", though curiously enough the title of the Order still refers to the Field Officer and does not incorporate consequential amendment in the said designation. The definition of the "Development Officer" shows that it takes in person however he was designated before the appointed day if he was wholly or mainly engaged in the development of new life insurance business for the insurer by supervising, either directly or through one or more intermediaries, the work of persons procuring or soliciting new life insurance business, and who was remunerated by regular monthly salary, and who has become an employee of the Corporation under s. 11 of the Act. This definition excludes certain categories of employees to which it is not necessary to refer. It is thus clear· that the Order was intended to prescribe the· terms

1963 and conditions of service in respect of Development Officers who had become employees of the Corporation Life Insurance under s. 11 (1) of the Act. Clause 3 of the Order Corporation of prescribes the duties of the Development Officer. India Clause 4 prohibits the Development Officers from v. engaging themselves in certain activities. Clause 5 Sunil Kumar provides for the scales of pay and allowances . Clause Mukherjee & 6 deals with the matter of leave and retirement, and others provides that in the matter of leave and retirement, . Development Officers shall be governed by the Life Ga1endragadkar Insurance Corporation (Staff) Regulations, 1960, as J. amended from time to time. Clause 7 provides for increments, and clause 8 deals with new business bonus, while clause 9 refers to promotion of Develop-ment Officers. Clause 10 is relevant for our purpose and must be set out in full:

"10. Penalties and termination of service:

(a) In case of unsatisfactory performance of duties by Development Officer or if Develop-ment Officer shows negligence in his work or is guilty of misconduct or is otherwise incapable of discharging his duties satisfactorily; his re-muneration may be reduced or his services may be terminated, after giving him an opportunity of showing cause against the action proposed to be taken in regard to him and after conducting such enquiry as the Corporation thinks fit.

(b) The services of any Development Officer

may, with the prior approval of the Chairman of the Corporation, be terminated without assign-ing any reason after giving the Development Officer three months' notice thereof in writing."

Clause 11 prescribes that the actual pay and allowances admissible to any Development Officer under the scale of pay specified in paragraph 5 shall be determined in accordance with such principles as may be laid down by the Corporation by regulations made in this behalf under sec. 49 of the Act. The last clause lays down that if doubt arises as to the interpretation \ of any of the provisions of the Order, the matter will be decided by the Central Government.

It is thus clear that in regard to the Field Officers subsequently designated as Development Officers who became the employees of the Corporation after the appointed day, the Order provides self-contained code in dealing with the material terms and conditions of service of the said Officers. In regard to the scales of pay and allowances which have been prescribed by clause 5, clause 11 contemplates that the actual pay and allowances admissible to any Development Officer will have to be determined in accordance with the principles which the relevant regulation would in that behalf lay down, and so, in the matter of scales of pay and allowances clause 5 read with clause 11 has to be co-related with the relevant regulation which had to be subsequently framed. In regard to the other terms and conditions of service, however, the Order makes specific and clear provisions. That being so, there can be no doubt that in regard to the Officers to whom the Order applies, if any action is intended to be taken for the termination of their services, it has to be taken under clause lO(a) or (b). Clause 10 (a) deals with two alternatives; it empowers the appropriate authority to reduce the remuneration of the Development Officer or to terminate his services; in either case, an opportunity of showing cause against the action proposed to be taken has to be given to him, and an enquiry has to be conducted in the man-ner which the Corporation may think fit. If the Development Officer shows negligence in his work, or is guilty of misconduct, or is otherwise incapable of discharging his duties satisfactorily, the Corporation may reduce his remuneration or may terminate his service·; but that can be done only after complying with the conditions prescribed by clause lO(a).

Life Insurance

Corporation of India

Sunil Kumar Mukherjee & others

Gajendragadkar J.

Clause lO(b) empowers the Corporation to ter-minate the services of the Development Officer without assigning any reason and without holding any enquiry or giving him an opportunity to show cause, provided, of course, the order terminating his services is passed with the prior approval of the Chairman of the Corpora-tion. This power can be exercised without complying

1963 with clause JO(a) and is independent of it. Thus, . in the matter of penalties and termination of service, Life Insu~ance two alternative powers are conferred on the authority Corpora~wn of and they are contained in the sub-clauses (a) and Indw (b) of clause 10.

Sunilv Kumar As envisaged by clause 11 of the Order, Regulations were framed in 1958 by the Life Insurance Corporation Mukherjee & under s. 49 of the Act read with clause 11 of the Order. others These Regulations contain five Clauses; the first Gajendragadkar gives the title of the Regulations; the 2nd defines the J. "Categorisation Order" which is the same as the blue Order, as well as the "Corporation"and the "Field Officer". Regulation 3 deals with the con-veyance allowance. Regulation 4 provides for the manner of fixing the pay of the Development Officer. Regulation 4 (!) lays down that the basic pay in the scale of pay prescribed for Field Officers by the Order shall be· so fixed that the said pay together with the dearness allowance and conveyance allowance is not less than the total monthly remuneration to which the Officer was entitled before the 31st August, 1956. Regulation 4(2) provides that where the work of the Field Officer has been either below or above the ade-quate standard, the Corporation may fix his basic pay at suGh stage in the scale as it may think fit. Regu-lation 4(3) prescribes that in judging Field Officer's work, the Corporation shall observe the principles contained in the circular issued by the Managing Director on the 2nd December, 1957. Regulation 5 provides for the computation of total monthly re-muneration which was paid to the Officer on the 31st August, 1956. It will be noticed that clause 4(3) of the Regulations makes the circular issued by the Manag-ing Director on the 2nd December, 1957 part of the regulation by treating it as its annexure and referring to its provisions for the purpose of determining the remuneration payable to the Development Officer. That is how the said circular which, when it was issued, had no legal authority, has now become valid as part of the Regulations issued by the Corporation under s. 49 of the Act read with clause 11 of the Order.

This circular contains five paragraphs. The object 1963 of the material provisions of this circular is to deter-mine the quality of the work which the Development Life Insurance Officer puts in which would afford basis for fixing Corporation of his remuneration. Paragraph 4 of this circular deals India with the problem of fitting in the respective Develop-v. ment Officers in the pay scales provided by clause Sunil Kumar Kumar 5 of the Order. It consists of eight clauses (a) to (h). Mukherjee & In the present appeals, we are concerned with the last others of these clauses. Paragraph 4, clause (h) reads . --d thus:-· Ga1endraga kar

v. Sunil Kumar Kumar Mukherjee & others . --d Ga1endraga kar J .

"If the actual performance is less than 50-of the revised quota, the cases of such Field Officers will be referred to Committee to be specially appointed in each Zone. The Committee will go through the past records of such Field Officers and decide whether they could be con-tinued as Field Officers either as Probationers or on substantially reduced remunerations. In the case of those who cannot be continued as Field Ofhcers, the Committee will examine whether any of them could be absorbed in administration and where this is possible, the Committee will fix the remuneration in accordance with the rules to be prescribed. Where the Committee decides that the poor performance of Field Officer was not due to circumstances beyond his control or that he has made no efforts and not shown inclination or willingness to work, the services of such Field Officers will be termina-ted."It is clear that paragraph 4(h) deals with the cases of persons whose actual performance is less than 50 % of the revised quota, and as such, who are re-garded as ineligible for fitting in the employment of the Corporation. Their cases are required to be referred to the Committee specially appointed in each Zone, and on examining the record of these Officers, if the Committee comes to the conclusion that some of them cannot be continued as Field Officers, it may enquire whether any of them could be absorbed

1963 in administration, and if yes, their remuneration may . be suitably fixed: if the Committee thought that 1/fe lnsurancf the poor performance was not due to circumstances 0'P;';rwn ° beyond his control, or that he made no efforts or n za showed no inclination or willingness to work, the .v. services of such Field Officer will be terminated. Sumi K~mar Paragraph 5 deals with the question of ex-Branch Muk~er1ee & Secretaries and Supervisory Officers, and it provides ".'..__ ers that if their work is found to be unsatisfactory, the Gajendragadkar Committee may recommend termination of the services J. of the officers concerned. In other cases, the Committee will make recommendations as to whether they should continue such Inspectors as Field Officers and if yes, on what remuneration; or whether their services could be utilised in any other capacity in the Corporation, and if yes, on what remuneration? The learned Solicitor-General has contended that when the Corporation took over the controlled business of insurers in this country on the appointed day, it was found that large number of employees in the category of Field Officers were either incompetent or unwilling to work efficiently, and. so, it was thought desirable, in the interests of the Corporation itself and in the interests of the policy-holders, to terminate their services. That is why well-devised scheme wasframea by the circular and adopted in the Regula-tions laying down principles for determining the effi-ciency of the work done by the said Officers. He urges that by the application of the principle laid down by paragraph 4 (h) of the circular, it was competent to the Corporation to terminate the services of the respondents, and that is what in fact has been done in each of the cases before us. In support ot this plea, he has relied on the fact that paragraph 4 (h) empowers the Corporation to terminate the services of incompetent officers and paragraph 5 also gives the same power in respect of ex-Branch Secretaries and Supervisory Officers. The argument is that where cases are dealt with under the provisions of paragraph 4 (h) or paragraph 5 of the circular, there can be no question of applying the provisions of clause IO of the Order.

5 S.C.R.

It is common ground that before terminating the 1963 services of the respective respondents in the group of appeals before us, no enquiry has been held and Life Insurance no opportunity has been given to the said officers Corporation of as required by clause lO(a) of the Order. It is also India common ground that the impugned termination c,f v. their services has not been effected under clause lO(b) Sunil Kumar of the Order. The respondents' contention is that the Mukherjee & termination of their services can be brought about others only under clause lO(a) or lO(b) of the Order, and --since it has not been so brought about, the impugned Gajendragadkar orders are invalid. On the other hand, the learned J. Solicitor-General contends that the power to terminate services conferred by paragraph 4 (h) of the circular is independent of clause 10 of the Order, and the same can he, and has been, validly exercised in the present cases.In considering the validity of these rival con-tentions, it is necessary to bear in mind the true legal position about the character of the relevant statutory provisions. It is plain that the provisions contained ins. 11(2) of the Act are paramount and would over-ride any contrary provisions contained in the Order or the Regulations. Subject to the provisions of s. 11(2), the provisions of the Order will prevail, because the Order has been issued by the Central Government by virtue of the powers conferred on it by s. 11(2) itself. The provisions of the Order in law partake of the character of the rules framed under s. 48 of the Act. fhus next to the provisions of s. 11(2) of the Act will stand the provisions of the Order. Then we have the Regulations issued by the Corpora-tion under s. 49(1) of the Act.. But it must be borne m mind that the power of the Corporation to make Regulations is burdened with the condition that these regulations must not be inconsistent with the Act and the rules framed thereunder, so that if any of the provisions contained m the Regulations made by the Corporation under s. 49 are found to be inconsistent either with s. 11(2) or with the Order made by the Central Government under s. 11(2), they would be

invalid. It 1s in the light of this legal position that the problem posed before us in the present appeals must

Life Insurance be decided.

Corporation of

India We have already noticed that as soon as .the Field . v. Officers or the Development Officers became the em-Suml K~mar ployees of the Corporation on the ·appointed day Mukher;ee & under s. 11(1 ), they initially carried with them their others original terms and conditions of service, and this state of affairs continued until the Order was issued Gajendragadkar on the 30th December, 1957. As we have already J. seen, the provisions of this Order provide for the terms and conditions of service in matters covered by the Order .. In regard to remuneration, the Order did not completely resolve the problem, but it Jett the determinat10n of the scale or pay and allowances payable to each employee in the light of the Regulations which would be framed by the Corporation in pursuance of the authority conferred on it by clause l l of the Order; but m regard to the termmation of services of the employees, clause IO has made specific pro-vision, and wherever the Corporation wants to ter-minate the services of any Development Officer, clause IO has to be complied with. It is true that paragraph 4(h) of the circular purports to say that m cases falling under the last part of the said paragraph, the services of the Field Officers will be terminated. If the said portion of paragraph 4 (h) is interpreted to mean that it confers on the Corporation an authority to terminate the services of the Development Officer independently of clause IO of the Order, it would be inconsistent with the said clause and would, there-fore, be invalid. We are, however, satisfied that the said portion of para 4 (h) really means that in cases falling under it, the service> of the officers con-cerned would be hable to be terminated, and that means that the termination of the services of the said officers must be effected in the manner prescribed by clause IO of the Order. That is how paragraph 4(h) and clause IO ·can be reasonably reconciled. What we have said about para 4(h) is equally true about paragraph 5 of the circular .

In regard to the fixation of remuneration, however, 1963 the position is that clause 5 of the Order fixes the --scales of pay and allowances and leaves it to the re- Life Insurance gulations to lay down the principles in the light of Corporation of which each individual case should be judged. It was, India therefore, perfectly competent to the Corporation v. to adopt the circular issued by the Managing Director, Sunil Kumar and in consequence, lay down the principles which Mukerjee & should be followed in fitting individual officers into others the scheme prescribed by clause 5 of the Order. But . --it is necessary to emphasise that the scope and purpose Ga1endragadkar of fitting the officers obviously is to treat the officers J. as continuing to remain in the category of Development Officers and prescribe their remunerations accordingly. The total amount of remuneration would undoubt-edly be determined in the light of the principles pres-cribed by the circular, but under the guise of fitting in particular officer in the light of the said principles it would not be open to the Corporation to demote the officer from the grade of Development Officer to lower grade; that would be beyond the competence of the regulations. All that the Regulations can purport to do is to lay down principles for fixing the actual pay and allowances admissible to the Develop-ment Officers. That is the direction contained in clause 11 of the Order and it is within the limits of the said direction that the principles can be validly laid down by the Regulations. After the remuneration is determined in the light of the principles laid down by the Regulations, if any officer is not inclined to accept the said altered remuneration, occasion may arise for the Corporation to exercise its power under s. 11(2) of the Act and pay him compensation as therein contemplated. That, however, is matter with which we are not concerned in the present appeals. What we are concerned with in tbe present appeals is the validity of the orders termiri ating the services of the officers on the ground that they are found to be incompetent. If the officers were found to be incompetent in the light of the pro\i3ions of paragraph 4(h) of the circular, their services could no doubt be terminated, but such termination of services must

1963 conform to the requirements of clause IO(a) or (b) of the Order. As we have already seen, it is common Life Insurance ground that the impugned orders terminating the Corporation of services of the respective respondents have not been India passed in accordance either with clause lO(a) or lO(b), v. and so, they must be held to be invalid. Sunil Kumar Mukerjee & It is true that in the present proceedings the others respondents had claimed relief under Art. 311 (2) of the Constitution and had in their writ petitions challenged Gajendragadkar the validity of the Order and the Regulations. That, J. however, does not dis-entitle the respondents from claiming the same relief on the alternative basis that though the Order and the Regulations may be valid, the impugned orders whereby their services have been terminated· are invalid for the reason that they do not comply with clause 10 of the Order. Therefore, we are satisfied that the learned Solicitor-General is not justified in contending that the impugned orders can be sustained under paragraph 4(h) of the Circular which has been adopted by the Regulations as annexure thereto.There is one more point which has yet to be examined. In regard to the case of Haridas Roy who is the respondent in C.A.No. 917 of 1963, the learned Solicitor-General has contended that the order terminating his services is valid either under para 4(h) of the circular or under s. 11(2) of the Act. Haridas Roy was originally employed by the Hindustan Co-operative Insurance Society Ltd., before the appointed day as an Inspector of Agents. After the Corporation· took over the controlled business of the said Insurance Co., he was appointed as Field Officer under the Order, and the order of his appoint-ment was communicated to him on the 15th February, 1958. It appears that on the 9th August, 1958, he was told that his case had been considered by the Zonal Committee and it had been decided to absorb him in the office as an Assistant on the emoluments mentioned in the order. Haridas Roy declined to accept this assignment and stated that he wanted to continue as Field Officer as before. Thereupon,

his services were terminated by an order dated the 1963 18th September, 1958. In this lettet Roy was told --that his case had been carefully considered by the Life Insurance Zonal Committee and he was offered ex-gratia to be Corporation of absorbed on the administrative side as an Assistant; India since he refused to accept that assignment, his services v · were terminated on payment of one month's salary Sunil Kumar in lieu of notice less deductions, if any. This letter Mukerjee & also told Roy that there were no extenuating circum-others stances in his case and his work was found to be of -very poor quality. It would be noticed that the Gajendragadkar Corporation presumably examined the performance 1· of Roy in the light of the principles laid down by the relevant provisions in the circular and held that his case fell under the last part of paragraph 4(h) of the said circular. That only means that having regard to his poor performance Roy became eligible to be dealt with under clause 10 of the Order. It was not open to the Corporation to require Roy to accept an assignment in lower or different category. What the regulations are authorised to do is merely to deter-mine his salary in the category of Development Officers, and so, we do not see. how the order terminating his services because he refused to take an assignment as an Assistant can be justified. It would have been open to the Corporation to fix Roy's salary at the min:mum in the grade prescribed by clause 5 of the Order and if he had refused to take it, an occasion may have arisen for the operation of s. 11(2) of the Act. Therefore, we are satisfied that the case of Roy cannot be distinguished from the cases of other res-pondents in the present group of appeals.

The result is, the orders passed by the High Court are confirmed, and the appeals are dismissed with costs. One set of hearing fees.

Appeals dismissed.