{"id":33990,"date":"1978-02-21T00:00:00","date_gmt":"1978-02-20T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/madan-mohan-pathak-vs-union-of-india-ors-etc-on-21-february-1978"},"modified":"2018-09-15T05:58:31","modified_gmt":"2018-09-15T00:28:31","slug":"madan-mohan-pathak-vs-union-of-india-ors-etc-on-21-february-1978","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/madan-mohan-pathak-vs-union-of-india-ors-etc-on-21-february-1978","title":{"rendered":"Madan Mohan Pathak vs Union Of India & Ors. Etc on 21 February, 1978"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Madan Mohan Pathak vs Union Of India & Ors. Etc on 21 February, 1978<\/div>\n
Equivalent citations: 1978 AIR 803, \t\t 1978 SCR (3) 334<\/div>\n
Author: M H Beg<\/div>\n
Bench: Beg, M. Hameedullah (Cj), Chandrachud, Y.V., Bhagwati, P.N., Krishnaiyer, V.R. & Desai, D.A., Fazalali, S.M. & Shingal, P.N.<\/div>\n
           PETITIONER:\nMADAN MOHAN PATHAK\n\n\tVs.\n\nRESPONDENT:\nUNION OF INDIA & ORS.  ETC.\n\nDATE OF JUDGMENT21\/02\/1978\n\nBENCH:\nBEG, M. HAMEEDULLAH (CJ)\nBENCH:\nBEG, M. HAMEEDULLAH (CJ)\nCHANDRACHUD, Y.V.\nBHAGWATI, P.N.\nKRISHNAIYER, V.R.\nFAZALALI, SYED MURTAZA\nSHINGAL, P.N.\nDESAI, D.A.\n\nCITATION:\n 1978 AIR  803\t\t  1978 SCR  (3) 334\n 1978 SCC  (2)\t50\n CITATOR INFO :\n D\t    1980 SC1682\t (67,68)\n RF\t    1980 SC2181\t (149)\n R\t    1982 SC1126\t (2,12,13,17,19)\n D\t    1984 SC1130\t (31)\n F\t    1984 SC1291\t (12)\n D\t    1986 SC1126\t (47,48,49,50)\n APL\t    1989 SC1629\t (17,22,23,24)\n RF\t    1989 SC1741\t (10)\n RF\t    1990 SC 123\t (32)\n R\t    1992 SC 522\t (17)\n\n\nACT:\nLife Insurance Corporation (Modification of Settlement) Act,\n1976-S.\t 3-Validity of-Corporation entered  into  Settlement\nwith  Class  III  and Class IV\temployees  regarding  bonus-\nSettlement   was   subject  to\tthe  approval\tof   Central\nGovernment-During   emergency  Central\t Government   issued\ninstructions not to pay bonus under the settlement-Employees\nfiled Writ Petition in the High Court-A Single Judge allowed\nthe  Writ Petition-The impugned Act was passed when  Letters\nParent Appeal was pending before the High  Court-Corporation\nwithdrew   the\t appeal-Impugned  Act,\t if   absolved\t the\nCorporation  from  obligation  to  carry  out  the  Writ  of\nMandamus issued by the Single Judge.\nConstitution  of  India : Art. 31-Bonus\t payable  under\t the\nSettlement,  if property within the mtaning of\tArt.  31(2)-\nStopping   payment  of\tbonus,\tif  amounts  to\t  compulsory\nacquisition of property without payment of compensation.\n\n\n\nHEADNOTE:\nFrom  time  to time the Life Insurance Corporation  and\t its\nemployees  arrived at settlement relating to the  terms\t and\nconditions  of service of Class III and Class  IV  employees\nincluding bonus payable to them.  Clause (8) of the  Settle-\nment  dated  January 24, 1974, which related to\t payment  of\nbonus,\tprovided-(i) that no profit-sharing bonus  shall  be\npaid but the Corporation may, subject to such directions  as\nthe  Central Government may issue from time to\ttime,  grant\nany  other  kind  of bonus to its Class\t III  and  Class  IV\nemployees; (ii) that an\t      annual cash bonus will be paid\nto  all Class III and Class IV employees at the rate of\t 15%\nof  the\t annual\t salary actually drawn\tby  an\temployee  in\nrespect of the financial year to which the bonus relates and\n(iii)  that  save as provided therein all  other  terms\t and\nconditions  attached  to the admissibility  and\t payment  of\nbonus shall be as laid down in the Settlement on bonus dated\nJune  26, 1972.\t Clause (12) of the Settlement which  refers\nto   the,  period  of  settlement  provided  (1)  that\t the\nSettlement  shall  be  effective from April 1,\t1973  for  a\nperiod\tof  four  years\t and (2)  that\tthe,  terms  of\t the\nSettlement shall be subject to the approval\t  of\t the\nBoard of the Corporation and the Central Government.\nOne  of\t the  administrative  instructions  issued  by\t the\nCorporation in regard to the payment of cash bonus under cl.\n8(ii)  of the Settlement was that in case of  retirement  or\ndeath,\tsalary up to the date of cessation of service  shall\nbe  taken into account for the purpose, of  determining\t the\namount of bonus payable to the employee or his heirs and the\nother was that the bonus shall be paid along with the salary\nfor  the month of April but in case of retirement or  death,\npayment will be made soon after the contingency.\n  The  payment of Bonus (Amendment) Act.  1976\tconsiderably\ncurtailed the rights of the employees to bonus in industrial\nestablishments.\t  But  in  so far as the  employees  of\t the\nCorporation  were  concerned  this Act\thad  no\t application\nbecause by reason of s. 32 of the Payment of Bonus Act,\t the\nCorporation  was outside the purview of its operation.\t The\nCentral\t Government  however decided that the  employees  of\nestablishments which were not covered by the Bonus Act would\nnot be eligible for payment of bonus but exgratia payment in\nlieu  of  bonus\t would be made to them.\t  Pursuant  to\tthis\ndecision the L.T C. was advised by the Ministry of  Finance,\nGovernment  of\tIndia, that no further\tpayment\t of    bonus\nshould\tbe  made to its employees without getting  the\tsame\ncleared\t by  the Government.   The  Corporation\t accordingly\nissued\tadministrative\t\t       instructions  not  to\npay  bonus  to its employees under the\texisting  provisions\nuntil  further\tinstructions.  To the  employees'  assertion\nthat the Corporation was bound to,\n335\npay  bonus  in accordance with the terms of  the  Settlement\nthe-  Corporation  cOntended that payment of  bonus  by\t the\nCorporation  was subject to such directions as\tthe  Central\nGovernment  might  issue from time to time,  and  since\t the\nCentral Government had advised it not to make any payment of\nbonus without its specific approval, bonus could not be paid\nto  the\t employees.   Thereupon,  the  All  India  Insurance\nEmployees'  Association moved the High Court for issue of  a\nwrit directing the Corporation to act in accordance with the\nterms  of  the Settlement dated January 24, 1974  read\twith\nadministrative instructions dated March 29, 1974 and not  to\nrefuse\tto  pay\t cash  bonus  to  Class\t III  and  Class  IV\nemployees.   A\tsingle Judge of the High Court\tallowed\t the\nwrit petition.\tWhile the Letters Patent Appeal was pending,\nParliament    passed   the   Life   Insurance\t Corporation\n(Modification  of  Settlement) Act, 1976 (which is  the\t Act\nimpugned  in this case).  In the Letters Patent\t Appeal\t the\nCorporation stated that in view of the impugned Act ,  there\nwas  no necessity for proceeding with the appeal  and  hence\nthe Division Bench made no order in the appeal.\nSince  the effect of the impugned Act was to  deprive  Class\nIII  and  Class\t IV employees of bonus payable\tto  them  in\naccordance  with  the terms of the Settlement,\ttwo  of\t the\nassociations filed writ petitions in this Court\t challenging\nthe  constitutional  validity of the impugned Act.   It\t was\ncontended  on  their behalf that even if  the  impugned\t Act\nrendered cl. (8) (ii) ineffective with effect from April  1,\n1975  it  did  not have the effect  of\tabsolving  the\tLife\nInsurance  Corporation from its obligation to carry out\t the\nwrit  of Mandamus issued by the High Court and (2) that\t the\nright  of  Class III and Class IV employees to\tannual\tcash\nbonus  for the years 1975-76 and 1976-77 under Cl. 8(ii)  of\nthe  Settlement\t was  property and since  the  impugned\t Act\nprovided  for  compulsory  acquisition\tof  this   property.\nwithout\t payment of compensation, it was violative  of\tArt.\n31(2) of the Constitution.\nAllowing the writ petitions\nBeg C.J. (concurring with the majority)\nHELD   :  Section  3  of  the  Life  Insurance\t Corporation\n(Modification  of  Settlement) Act, 1976 is  struck  by\t the\nprovisions  of Art. 19(1)(f) and is not saved by Art.  19(6)\nof the Constitution. [346 A]\n1.   The  Statement  of\t Objects  and  Reasons\tof  the\t Act\ndiscloses  that the purpose of the impugned Act was to\tundo\nsettlements arrived at between the Corporation and Class III\nand  Class IV employees on January 24 and February  6,\t1974\nand recognised by the High Court.  In Smt.  Indira Gandhi v.\nRaj  Narain<\/a>  this  Court held  that  even  a  constitutional\namendment cannot authorise the assumption of judicial  power\nby  Parliament.\t One of the tests laid down was whether\t the\ndecision is of a kind which requires hearing to be given  to\nthe  parties  i.e.,  whether it\t involves  a  quasi-judicial\nprocedure.  A decision reached by the Central Government  is\nthe  result  of a satisfaction on matters stated  there\t and\nwould  imply quasi-judicial procedure where the terms  of  a\nsettlement  had\t to  be\t reviewed  or  revised.\t  But,\t the\nlegislative  procedure.\t followed  in  this  case  does\t not\nrequire\t that  to,  be done.  It would be  unfair  to  adopt\nlegislative procedure to undo a settlement which had  become\nthe  basis  of\ta  decision  of\t a  High  Court.   Even\t  if\nlegislation can remove the basis of a decision it has to  do\nit by an alteration of general rights of a class but not  by\nsimply\texcluding  two\tspecific  settlements  between\t the\nCorporation  and its employees from the purview of s. 18  of\nthe Industrial Disputes Act, 1947 which had been held to  be\nvalid and enforceable by a High Court. [341 G, H, 342 A-C]\n2(a)  The object of the Act was in effect to take  away\t the\nforce of the judgment of the High Court.  Rights under\tthat\njudgment could be said to, rise independently of Art. 19, of\nthe  Constitution.  To give effect to that judgment  is\t not\nthe  same thing as enforcing a right under Art. 19.  It\t may\nbe  that  a right under Art. 19 becomes linked up  with\t the\nenforceability of the judgment.\t Nevertheless the two  could\nbe  viewed  as\tseparable  sets of  rights.   If  the  right\nconferred by the judgment independently is sought to be\t set\naside s. 3 would be invalid for trenching upon the  judicial\npower. [343 B-D]\n336\n(b)  A\trestriction upon a right may even cover taking\taway\nof  the right to increased remuneration in the interests  of\nthe  general public.  But the present is a pure\t and  simple\ncase  of deprivation of rights of the employees without\t any\napparent nexus with any public interest.\nIn  the\t instant case the impugned Act is  a  measure  which\nseeks  to  deprive  workers of the  benefits  of  settlement\narrived\t at and assented to by the Central Government  under\nthe  provisions\t of  the Industrial Disputes  Act.   Such  a\nsettlement should not be set at naught by an Act designed to\ndefeat the purpose.  In judging the reasonableness of an Act\nthe  prospects\theld  out,  the\t representations  made,\t the\nconduct of the Government and equities arising therefrom may\nall be taken into consideration. [342 E-F, 344 E-F]\n3.   Even though the real object of the Act was to set aside\nthe  result of mandamaus, the section does not mention\tthis\nobject.\t This was perhaps because the jurisdiction of a High\nCourt  and  the effectiveness of its  orders  derived  their\nforce from Art. 226 of the Constitution.  Even if s. 3 seeks\nto  take away the basis of the judgment\t without  mentioning\nit,  yet where the rights of the citizens against the  State\nare concerned the court should adopt an interpretation which\nupholds\t those\trights.\t  Therefore, the  rights  which\t had\npassed\tinto  those embodied in a judgment  and\t become\t the\nbasis of a mandamus from the High Court, could not be  taken\naway in an indirect fashion. [343 D-E].\n4.   Even though the Directive Principles contained in\tArt.\n43, cast an obligation on the State to secure a living\twage\nfor  the  workers  and is part of  the\tprinciples  declared\nfundamental  in the governance of the country, it is  not  a\nfundamental  right which can be enforced.  Even\t though\t the\nDirective   Principles\tgive  a\t direction  in\t which\t the\nfundamental policies of the State must be oriented, yet this\nCourt  cannot  direct either the Central Government  or\t the\nParliament  to\tproceed\t in that  direction.   Even  if\t the\nDirectives  are\t not directly enforceable by  a\t Court\tthey\ncannot\tbe  declared ineffective.  They have  the  life\t and\nforce  of fundamentals.\t The best way to give  vitality\t and\neffect to them is to use them as criteria of reasonableness.\n[344 B-C]\n5(a)  Articles 358 and 359(1A) provide that as soon  as\t the\nProclamation  of  emergency cease to operate the  effect  of\nsuspension  must vanish \"except as respects things  done  or\nomitted to be done before the law so ceases to have effect.'\n[346 B-C]\n(b)  The term \"things done or omitted to be done\", should be\ninterpreted  very  narrowly.  In the present case  it  means\nthat  the settlements are not to be deemed to be wiped\toff.\nAll  that  it  means is that no payment of  bonus  could  be\ndemanded  during the emergency but as soon as the  emergency\nwas over, the settlement would revive and what could not  be\ndemanded during the emergency would become payable even\t for\nthe period of emergency for which payment was suspended.  In\nother  words  valid  claims  cannot be\twashed\toff  by\t the\nemergency  per\tse.   They can only be suspended  by  a\t law\npassed\tduring the operation of Arts. 358 and 359(1A).\t[346\nC-F]\n(Per  Chandrachud, Fazal Ali and Shinghal, JJ.).  Concurring\nwith the majority.\nThe  impugned  Act violates Art. 31(2)\tand  is,  therefore,\nvoid. [369 G] (Per Bhagwati, Iyer and Desai, JJ.)\nIrrespective  whether the impugned Act\tis  constitutionally\nvalid  or not, the Corporation is bound to obey the Writ  of\nMandamus  issued by the, High Court and to pay\tannual\tcash\nbonus  for  the\t year  1975-76 to Class\t III  and  Class  IV\nemployees. [352 D-E]\n1.   Section 3 of the impugned Act merely provided that\t the\nprovisions  of the Settlement, in so far as they related  to\npayment\t of  annual  cash bonus to Class  in  and  Class  IV\nemployees, shall not have any force or effect and shall\t not\nbe  deemed  to have had any force or effect  from  April  1,\n1975.  The writ of Mandamus issued by the High Court was not\ntouched by the impugned Act.  The right of the employees  to\nannual cash bonus' for the year 1975-76 became\n337\ncrystallised in\t    the\t judgment  and this  right  was\t not\nsought to be taken away by the impugned Act.   The  Judgment\ncontinued  to subsist and the corporation was bound  to\t pay\nbonus in obedience to the writ of Mandamus.  By the time the\nLetters Patent Appeal came up for hearing, the impugned\t Act\nhad  already come into force and the Corporation could\thave\nsuccessfully   contended  in  the  appeal  that\t since\t the\nSettlement,  in so far as it provided for payment of  annual\ncash bonus, was annihilated by the impugned Act with  effect\nfrom 1st April, 1975 and so the employees were not  entitled\nto bonus for the year 1975-76 and hence no writ of  Mandamus\ncould  issue  against the Corporation directing it  to\tmake\npayment of bonus.  If such contention had been raised, there\nis little doubt that the judgment of the single Judge  would\nhave been upturned.  But that was not done, and the judgment\nof  the\t single\t Judge\tbecame final  and  binding  oil\t the\nparties. [353 A-F, 355 C]\nShri   Prithvi\t Cotton\t Mills\tLtd.   v.   Broach   Borough\nMunicipality,<\/a>\t[1970]\t1  SCR\t358  and  Patel\t  Gordhandas\nHargovindas v. Municipal Commissioner, Alimedabad,<\/a> [1964]  2\nSCR 608; distinguished and held inapplicable.\n2(a).\tThe argument on behalf of the Corporation that on  a\nproper\tinterpretation\tof  the clauses\t annual\t cash  bonus\npayable\t under cl. 8(ii) was, by reason of cl. 8(i)  subject\nto the directions issued by the Central Government from time\nto time and the Government having stopped further payment of\nbonus, the employees were not entitled to claim annual\tcash\nbonus,\tis erroneous.  The employees had absolute  right  to\nreceive\t annual cash bonus from the Corporation in terms  of\nel. 8(ii) and it was not competent to the Central Government\nto  issue  any directions to the Corporation  to  refuse  or\nwithhold payment of the same. [356 D-H]\n(b)  Although under regulation 58 of the Service Regulations\nnon-profit  sharing  bonus could be granted subject  to\t the\ndirections  of the Central Government and if the  Government\nissues\ta direction to the contrary bonus could not be\tpaid\nby the Corporation, in the instant case, as provided in\t cl.\n12  of the Settlement, the Central Government  approved\t the\npayment of bonus under cl. 8(ii).  That having been done  it\nwas  not competent to the Central Government  thereafter  to\nissue another contrary direction which would have the effect\nof  compelling\tthe Corporation to commit a  breach  of\t its\nobligation  under s. 18(1) of the Industrial  Disputes\tAct,\n1947  to  pay  annual cash bonus under\tclause\t8(ii).\t The\noverriding  power given to the Central Government  to  issue\ndirections  from  time\tto time contained  in  cl.  8(i)  is\nconspicuously  absent in cl. 8(ii).  The power contained  in\ncl. 8(i) cannot be projected or read into cl. 8(ii).   These\ntwo clauses are distinct and independent.  While cl. 8(i) is\na  general provision, el. 8(ii) specifically  provides\tthat\ncash bonus in the manner prescribed therein shall be paid to\nthe employees.\tThis specific provision is made subject only\nto the\t  approval  of\tthe Central  Government,  which\t was\nobtained. [357 A-F]\n(c)  Moreover, under cl. 8(ii) read with the  administrative\ninstruction issued by the     Corporation, annual cash bonus\naccrued\t from  day  to\tday,  though  payable  in  case\t  of\nretirement,  resignation or death on the happening  of\tthat\ncontingency  and otherwise on the expiration of the year  to\nwhich the bonus related, Thus the annual cash bonus  payable\nfor  the  year\t1975-76 was a debt due and  owing  from\t the\nCorporation to each of the employees., On the date when\t the\nimpugned  Act  came  into force each of\t the  employees\t was\nentitled   to  a  debt\tdue  and  owing\t to  him  from\t the\nCorporation. [357 H, 358 A]\n3(a)  The impugned Act must be held to be violative of\tArt.\n31(2)\tsince  it  did\tnot  provide  for  payment  of\t any\ncompensation  for the compulsory acquisition of\t the  debts.\n[369 C]\n(b)  The  direct effect of the impugned Act was to  transfer\nownership of the debts due and owing to Class III and  Class\nIV employees in respect of cash bonus to the Life  Insurance\nCorporation and since the Corporation is a Corporation owned\nby  the\t State,\t the impugned Act was a\t law  providing\t for\ncompulsory acquisition of the debts by the State within\t the\nmeaning of Art. 31(2A). 1369 B-C]\n338\n(c)  Choses in action can be acquired by the State.  So long\nas  the\t acquisition sub-serves a public purpose,  it  would\nsatisfy\t  the  requirement  of\tArt.  31(2).   There  is   a\nfundamental distinction between a chose in action and money.\nA chose in action has not the same mobility and liquidity as\nmoney,\tand  its  value\t is  not  measured  by\tthe   amount\nrecoverable  under it but depends on a variety\tof  factors.\nWhere  money is given as compensation for taking  money\t the\ntheory\tof forced loan may apply, but it is  not  applicable\nwhere a chose in action is taken and money representing\t its\nvalue is given as compensation. [363 A, D-F]\nR.   C.\t Cooper v. Union of India,<\/a> [1970] 3 SCR 530;  Madhav\nRao Scindia v. Union of India : [1971] 3 SCR 9 reiterated.\nState of Bihar v. Kameshwar Singh,<\/a> [1952] S.C.R. 889;  State\nof Madhya Pradesh v. Ranojirao Shinde,<\/a> [1968] 3 S.C.R.\t489;\ndissented;\nDeokinandan Prasad v. State of Bihar,<\/a> [1971]  Suppl.  S.C.R.\n634;  State  of Punjab v. K. R. Erray &\t Sobhag\t Rai  Mehta,<\/a>\n[1973]\t2 S.C.R. 405; State of Gujarat, v. Sri Ambica  Mills\nLtd.,<\/a>  [1974]  3  S.C.R. 760 and Slat(,\t of  Kerala  v.\t The\nGwalior Rayon Silk Mfg. (Wvg.) Co. Ltd.,<\/a> [1974] 1 S.C.R. 671\nfollowed;\nState of Madhya Pradesh v. Ranojirao Shinde,<\/a> [1968] 3 S.C.R.\n489;  State of Bihar v. Kameshwar Singh,<\/a> [1952]\t S.C.R.\t 889\nand  Bombay Dyeing and Manufacturing Co.  Ltd. v.  State  of\nBombay,<\/a>\t [1959] S.C.R. 1122; explained; [1968] 3 S.C.R.\t 489\nand [1952] S.C.R. 889; held no longer good law.\n(d)  The debts due and owing from the Corporation in respect\nof annual cash bonus were clearly property of the  employees\nwithin\tthe  meaning  of  Art.\t31(2)  and  they  could\t  be\ncompulsorily  acquired\tunder Art. 31(2).   Similarly  their\nright to receive cash bonus for the period from the date  of\ncommencement  of the impugned Act upto March 31, 1977 was  a\nlegal right enforceable through Court of law. [360 B-C]\n(a)  Property within the meaning of Arts. 19(1)(f) and 31(2)\ncomprises  every form of property, tangible  or\t intangible,\nincluding  debts  and  choses  in  action  such\t is   unpaid\naccumulation of wages, pension, cash grants etc. [360 A]\nR.   C. Cooper v. Union of India,<\/a> [1970] 3 S.C.R. 530; H. H.\nMaharajadhiraja Madhay Rao Jiwaji Rao Scindia Bahadur & Ors.\nv.  Union  of  India,<\/a> [1971] 3 S.C.R. 9; State\tof  M.P.  v.\nRanojirao  Shinde & Anr.,<\/a> [1968] 3 S.C.R.  489;\t Deokinandan\nPrasad v. State of Bihar,<\/a> [1971] Supp.\tS.C.R. 634; State of\nPunjab\tv.  K. R. Erry & Sobhag Rai Mehta,<\/a> [1973]  2  S.C.R.\n485; and State of Gujarat & Anr v.  Shri Ambica Mills  Ltd.,\nAhmedabad,<\/a> [1974] 3 S.C.R. 760 referred to.\n4(a)  The contention of the Corporation that when  ownership\nof a debt is transferred it continues to exist as a debt but\nthat  when the debt is extinguished it ceases to exist as  a\ndebt  and that extinguishment of a debt does  not  therefore\ninvolve\t transfer of ownership of the debt to the debtor  is\nnot  well founded.  Where, by reason of extinguishment of  a\nright or interest of a person, detriment is suffered by\t him\nand  a\tcorresponding benefit accrues to  the  State,  there\nwould be transfer of ownership of such right or interest  to\nthe  State.   The  question would always be  :\twho  is\t the\nbeneficiary  of the extinguishment of the right or  interest\neffectuated  by\t the law ? If it is the\t State,\t then  there\nwould  be transfer of ownership of the right or interest  to\nthe  State, because what the owner of the right or  interest\nwould  lose  by reason of the extinguishment  would  be\t the\nbenefit accrued to the State [367 H, 368 B-C]\n(b)  Extinguishment  of\t the  debt  of\tthe  creditor\twith\ncorresponding benefit to the State or State owned\/controlled\nCorporation  would  involve  transfer of  ownership  of\t the\namount representing the debt from the former to the  latter.\nThis is the real effect of extinguishment of the debt and by\ngarbing it in the form of extinguishment, the State or State\nowned\/controlled  Corporation cannot obtain benefit  at\t the\ncost of the creditor and yet avoid' the applicability of\n339\nArt.  31(2).  The verbal veil constructed by  employing\t the\ndevice\tof  extinguishment of debt cannot lot  permitted  to\nconceal or hide the real nature of the transaction [368 F-B]\n\n\n\nJUDGMENT:\n<\/pre>\n
ORIGINAL  JURISDICTION: Writ Petitions Nos. 108 and  174-177
\nof 1976.\n<\/p>\n
(Under Article 32 of the Constitution of India).
\nR.   K.\t Garg,\tS. C. Agarwala & Aruneshwar  Gupta  for\t the
\npetitioners in WP 108
\nSomnath\t Chatterjee, P. K. Chatterjee & Rathin Das  for\t the
\npetitioners in 174-77
\nS.   V. Gupte, Attorney Genl., U. R. Lalit, R. N. Sacluhey &
\nA. Subhashini for r. 2 in all the WPs.\n<\/p>\n
S.   V.\t Gupte, Attorney Gent. & D. N. Mishra for rr. 2 &  3
\nin WP 108 and rr. 2-4 in WP 174-77.\n<\/p>\n
P.   S.\t Khera\t for  the  Intervener  (AIN  LIC   Employees
\nFederation)
\nThe following Judgments were delivered
\nBEG,  C.J.-The\tLife Insurance Corporation  was\t constituted
\nunder  the  Life  Insurance  Corporation  Act  31  of\t1956
\n(hereinafter to be referred to as “the Act”).  On  1-6-1957,
\nthe  Central Government issued, under s. 11 (1) of the\tAct,
\nan order prescribing the ‘Pay scales, dearness allowance and
\nconditions  of\tservice\t applicable  to-Class  III  and\t  IV
\nemployees.   Among  these conditions it is, stated  that  no
\nbonus would be paid but amenities like insurance and medical
\ntreatment free of cost would be provided.  On 26-6-1959,  an
\norder was passed by the Central Government under s. 11(2) of
\nthe  Act, amending para 9 of the 1957 Order inasmuch  as  it
\nwas  provided  that bonus other than  profit  sharing  bonus
\nwould  be  paid\t to the employees  drawing  the\t salary\t not
\nexceeding  Rs. 5001- per month.\t On 2nd of July 1959,  there
\nwas.  a\t settlement  between the L.I.C.\t and  the  employees
\nproviding  for\tpayment\t of  cash  bonus  at  the  rate\t  of
\none-and-a-half\t month’s  basic\t salary\t which\twas  to\t  be
\neffective from 1-9-1956 and valid upto 31-12-1961.  In\tJuly
\n1960,  regulations were framed under section 49 to  regulate
\nthe  conditions\t of  service of\t classes  of  employees\t and
\nregulation  58\tprovided for payment of\t non-profit  sharing
\nbonus  to the employees.  Orders were again passed on  14-4-
\n1962 and 3rd August 1963, the effect of which was to  remove
\nthe restriction of Rs. 5001- for eligibility for payment  of
\nbonus.\tOn 29th January 1963, another settlement was arrived
\nat between the L.I.C. and its employees for payment of\tcash
\nbonus  at the rate of one-and-a-half month’s  basic  salary.
\nThis was to continue in operation until 31st March 1969.  On
\n20th  June 1970, a third settlement was reached for  payment
\nof  cash  bonus at the same rate which was to  be  effective
\nupto 31st March 1972.  On 26-6-1972, a fourth settlement for
\npayment\t of cash bonus at the rate of 10 per cent  of  gross
\nwages  (basic  and special pay and dearness  allowance)\t was
\nmade  effective\t from  1st ‘April 1972\tto  1973.   On\t21st
\nJanuary 1974 and 6th February 1974, settlements for  payment
\nof cash bonus at 15 per cent of gross wages, valid for\tfour
\nyears from 1st April 1973 to 31st March 1977, were  reached.
\nIt is clear that this so called “bonus” did not depend\tupon
\nprofits earned but was nothing short of increas-\n<\/p>\n
340<\/span><\/p>\n
ed  wages.   The settlements were approved by the  Board  of
\nDirectors of the L.I.C. and also by the Central\t Government.
\nOn 29th March, 1974, a circular was issued by the L.I.C. for
\npayment\t of  bonus in accordance with the  settlement  along
\nwith  the  salary in April.  In April 1974, the\t payment  of
\nbonus  for the year 1973-74 was actually made in  accordance
\nwith  the settlement.  Again, in April 1975, *bonus for\t the
\nyear  1974-75 was made in accordance. with the\tsettlements.
\nOn  25th  September  1975,  however,  a\t Payment  of   Bonus
\nAmendment  Ordinance  was promulgated.\t On  26-9-1975,\t the
\nL.I.C.\tissued\ta circular stating that, as the\t payment  of
\nbonus was being reviewed in the light of the Ordinance, and,
\non 22nd of March, 1976, payment of bonus for the year  1975-
\n76  was to, be withheld until a final decision\twas)  taken.
\nAgainst\t this, a writ petition was filed in the; High  Court
\nof  Calcutta.\tOn 21st May 1976, the  Calcutta\t High  Court
\npassed\tan  order recognising the right\t of  petitioners  to
\npayment\t of  bonus  for the year 1975-76  which\t had  become
\npayable along with the salary in April 1976 and ordered that
\nit  must  be paid to the employees.  Apparently,  bonus\t was
\ntreated as part of the right of the petitioners to  property
\nprotected by Article 19( and 31(1) of the Constitution.\t  On
\n29th  May 1976, the Life Insurance Corporation\tModification
\nof Settlement Act 1976 was enacted by Parliament denying  to
\nthe  petitioners the right which had been recognised by\t the
\nsettlements,  approved by the Central Government  and  acted
\nupon  by the actual payment of bonus to the employees,\tand,
\nfinally,  converted  into right under the  decision  of\t the
\nCalcutta High Court on 21st May 1976.\n<\/p>\n
Provisions. of section 1 1 (2) may read as follows
\n\t      “(2) Where the Central Government is satisfied
\n\t      that for the purpose of securing uniformity in
\n\t      the scales of remuneration and the other terms
\n\t      and  conditions.\tof  service  applicable\t  to
\n\t      employees\t of insurers whose controlled  busi-
\n\t      ness  has been transferred to, and vested\t in,
\n\t      the Corporation, it is necessary so to do,  or
\n\t      that, in the interests of the Corporation\t and
\n\t      its   policy-holders,,  a\t reduction  in\t the
\n\t      remuneration  payable,  or a revision  of\t the
\n\t      other   terms   and  conditions\tof   service
\n\t      applicable, to employees or any class of\tthem
\n\t      is  called  for, the Central  Government\tmay,
\n\t      notwithstanding  anything\t contained  in\tsub-
\n\t      section  (1),  or in the\tIndustrial  Disputes
\n\t      Act,  1947, or in any other law for  the\ttime
\n\t      being in force, or in any award, settlement or
\n\t      agreement\t for the time being in force,  alter
\n\t      (whether by way of reduction or otherwise) the
\n\t      remuneration   and  the  other   terms\t and
\n\t      conditions. of service to such extent, and  in
\n\t      such  manner-as  it  thinks fit;\tand  if\t the
\n\t      alteration is not acceptable to any  employee,
\n\t      the  Corporation may terminate his  employment
\n\t      by giving him compensation equivalent to three
\n\t      months’  remuneration unless the\tcontract  of
\n\t      service  with  such employee  provides  for  a
\n\t      shorter notice of termination.\n<\/p>\n
\t      Explanation  :-The compensation payable to  an
\n\t      employee\tunder this sub-section shall  be  in
\n\t      addition\t to,  and  shall  not  affect,\t any
\n\t      pension, gratuity, provident fund money
\n\t      341<\/span>
\n\t      or any other benefit to which the employee may
\n\t      be entitled under his contract of service.”
\nSection 1 1 (2) of the Act shows that the Central Government
\nhad  ample  power to revise the scales of  remuneration\t and
\nother  terms and conditions of service if it  was  satisfied
\nthat  the interest of the Corporation or the  policy-holders
\ndemanded this.\tOf course, such orders had to be passed as a
\nresult\tof  satisfaction  upon material\t placed\t before\t the
\nCentral\t  Government  relating\tto  the\t interests  of\t the
\nCorporation  or its policy holders.  But, no such order\t was
\npassed.\t What was actually done was that the Act was  passed
\nto  set\t aside the terms of the settlements which  had\tbeen
\nincorporated  in the Judgment inter-parties of the  Calcutta
\nHigh Court.\n<\/p>\n
\t      The  objects and reasons of the Act  were\t set
\n\t      out as follows
\n\t      “The  provisions of the Payment of Bonus\tAct,
\n\t      1965 do not apply to the employees employed by
\n\t      the  Life\t Insurance  Corporation\t of   India.\n<\/p>\n
\t      However,\tthe Corporation has, as a matter  of
\n\t      practice, been paying bonus to its  employees.
\n\t      The bonus to Class I and Class II employees is
\n\t      being paid in pursuance of agreements  between
\n\t      the Corporation and such employees.  The bonus
\n\t      to Class III and ,Class IV employees is  being
\n\t      paid under the terms of settlement arrived
\n\t      at between the Corporation and such  employees
\n\t      from time to time.  In terms of the settlement
\n\t      arrived  at  between the Corporation  and\t its
\n\t      Class  III  and  class IV\t employees  on\t24th
\n\t      January,\t1974 under the\tIndustrial  Disputes
\n\t      Act,  1947,  which is in force upto  the\t31st
\n\t      March,   1977,   bonus  is  payable   by\t the
\n\t      Corporation  to  its Class III  and  Class  IV
\n\t      employees at the rate of fifteen per cent,  of
\n\t      their annual salary without any maximum limit.\n<\/p>\n
\t      2.    It is proposed to set aside, with effect
\n\t      from the 1st April, 1975, these provisions  of
\n\t      the   settlement\t arrived  at   between\t the
\n\t      Corporation  and\tits Class III and  Class  IV
\n\t      employees on 24th January, 1974 to enable\t the
\n\t      Corporation to make ex gratia payments to such
\n\t      employees at the rates determined on the basis
\n\t      of the general Government policy for making ex
\n\t      gratia  payments to the employees of the\tnon-
\n\t      competing public sector undertakings.\n<\/p>\n
\t\t3.  The\t bill seems to,\t achieve  the  above
\n\t      object.”\n<\/p>\n
The  statement\tof objects and reasons\tdiscloses  that\t the
\npurpose\t ,of the impugned Act was to undo settlements  which
\nhad  been arrived at between the Corporation and  Class\t III
\nand  Class IV employees on January 24 and February 6,  1974,
\nand  actually recognised by the order of the  Calcutta\tHigh
\nCourt.\t The  question\tcould well arise  whether  this\t was
\nreally\tthe  exercise of a legislative power or of  a  power
\ncomparable to that of an appellate authority considering the
\nmerits\tof  what  had  passed  into  a\tright  to   property
\nrecognised by the This Court has decided in Shrimati  Indira
\nGandhi Vs.  Rai
\n342<\/span>
\nNarain(1)  that\t even  a  constitutional  amendment   cannot
\nauthorise the assumption of a judicial power by\t Parliament.
\nOne of the tests laid down there was whether the decision is
\nof a kind which requires hearing to be given to the parties,
\nor,  in\t other\twords, involves at  least  a  quasi-judicial
\nprocedure, which the Parliament does not, in exercise of its
\nlegislative  power,  follow.   A  decision  reached  by\t the
\nCentral Government, under s. 11(2) of the Act, is the result
\nof  a satisfaction on matters stated there and\twould  imply
\nquasi-judicial procedure where the terms of a settlement had
\nto be reviewed or revised.  But, the legislative  procedure,
\nfollowed here, does not require that to be done.  It  would,
\nin  any event, be unfair to adopt legislative  procedure  to
\nundo  such  a  settlement which had become the\tbasis  of  a
\ndecision  of a High Court.  Even if legislation\t can  remove
\nthe basis of a decision it has to do it by an alteration  of
\ngeneral\t rights of a class but not by simply  excluding\t two
\nspecific   settlements\tbetween\t the  Corporation  and\t its
\nemployees  from\t the  purview  of  the\tsection\t 18  of\t the
\nIndustrial  Disputes  Act, 1947, which had been held  to  be
\nvalid  and  enforceable\t by a High  Court.   Such  selective
\nexclusion could also offend Article 14.\n<\/p>\n
If Parliament steps in to set aside such a settlement, which
\nthe  Central  Government could much  more  reasonably  ‘have
\nexamined  after\t going\tinto  the need for  it\tor  for\t its
\nrevision,  the question also arises whether it violates\t the
\nfundamental right to property guaranteed under Article 19 (1
\n)  (f  ) of the Constitution, inasmuch as the right  to\t get
\nbonus is part of wages and, by its deprivation, a judicially
\nrecognised right to property is taken away and not saved by-
\nthe  provisions\t of Article 19 (6) of the  Constitution?   A
\nrestriction  upon a right may even cover taking away of\t the
\nright  to  increased remuneration in the  interests  of\t the
\ngeneral\t public.  Where was the question of any\t restriction
\nhere  in  the interests of the general public ? it  seems  a
\npure and simple case of a deprivation of rights of Class III
\nand  Class TV employees without any apparent nexus with\t any
\npublic interest.\n<\/p>\n
The  first  hurdle in the way of this attack  upon  the\t Act
\nundoing\t the  settlement  under Article 19 (1)\t(f)  of\t the
\nConstitution  placed  before us what that the  Act  of\t1976
\nnotified  on  29-5-1976\t was passed  during  the  emergency.
\nHence,\t it   was  submitted  that  Article,  358   of\t the
\nConstitution is an absolute bar against giving effect to any
\nright\tarising\t under\tArticle\t 19  of\t the   Constitution.
\nFurthermore, it was submitted that the effect of the Act was
\nto wash off. the liability altogether after 1-4-1975 so that
\nnothing remained to be enforced after 1-4-1975.
\nThe  Act is a very short one of 3 sections.  After  defining
\nthe  settlement as the one which was arrived at between\t the
\nCorporation and their workers on 24-1-1974 under section 18,
\nread  with  clause  (p)\t of section  2,\t of  the  Industrial
\nDisputes  Act,\t1947 and the similar further  settlement  of
\n6-2-1974, section- 3 lays down
\n(1)  [1976](2)S.C.R.347.\n<\/p>\n
343<\/span><\/p>\n
\t      “Notwithstanding\tanything  contained  in\t the
\n\t      Industrial Disputes Act, 1947, the  provisions
\n\t      of each of the settlements, in so far as\tthey
\n\t      relate to the payment of an annual cash  bonus
\n\t      to every Class, III and Class IV employees  of
\n\t      the  Corporation\tat the rate of\tfifteen\t per
\n\t      cent of his annual salary, shall not have\t any
\n\t      force  or\t effect and shall not be  deemed  to
\n\t      have  any force or effect on and from 1st\t day
\n\t      of April, 1975.”\n<\/p><\/blockquote>\n
The object of the Act was, in effect, to take away the force
\nof  the judgment of the Calcutta High Court recognising\t the
\nsettlements in favour of Class III and Class IV employees of
\nthe  Corporation.  Rights under that judgment could be\tsaid
\nto arise independently of Article 19 of the Constitution.  I
\nfind  my self in complete agreement with my learned  brother
\nBhagwati that to give effect to the judgment of the Calcutta
\nHigh Court is not the same thing as enforcing a right  under
\nArticle\t 19  of the Constitution.  It may be  that  a  right
\nunder Article 19 of the Constitution becomes linked up\twith
\nthe  enforceability of the judgment.  Nevertheless, the\t two
\ncould  be viewed as separable sets of rights.  If the  right
\nconferred by the judgment independently is sought to be\t set
\naside,\tsection\t 3  of the Act, would,\tin  my\topinion,  be
\ninvalid for trenching upon the judicial power.
\nI may, however, observe that even though the real object  of
\nthe  Act  may  be to set aside the result  of  the  mandamus
\nissued by the Calcutta High Court, yet, the section does not
\nmention\t this object at all.  Probably this was\t so  because
\nthe  jurisdiction of a High Court and the  effectiveness  of
\nits  orders  derived  their force from Article\t226  of\t the
\nConstitution  itself,  These  could not\t be  touched  by  an
\nordinary  act of Parliament.  Even if section 3 of  the\t Act
\nseeks to take away the basis of the judgment of the Calcutta
\nHigh  Court,  without mentioning it, by\t enacting  what\t may
\nappear\tto be a law, yet, I think that, where the rights  of
\nthe citizen against the State are concerned, we should adopt
\nan  interpretation which upholds those\trights.\t  Therefore,
\naccording  to  the  interpretation, I prefer  to  adopt\t the
\nrights\twhich had passed into those embodied in\t a  judgment
\nand became the basis of a Mandamus from the High Court could
\nnot be taken away in this indirect fashion.
\nApart from the consideration mentioned above there are\talso
\nother considerations put forward, with his usual  vehemence,
\nby  Mr. R. K. Garg who relies upon the directive  principles
\nof  the State Policy as part of the basic structure  of\t our
\nConstitution.\tAt any rate, he submits that in judging\t the
\nreasonableness\tof a provision the directive  principles  of
\nState policy can be used, as this Court has repeatedly done,
\nas criteria of reasonableness, and, therefore, of  validity.
\nMi.  Garg bad relied strongly upon the provisions of Article
\n43 of the Constitution which says :\n<\/p>\n
\t      “43.   The State shall endeavour to secure  by
\n\t      suitable legislation or economic\tOrganisation
\n\t      or   in  any  other  way,\t to   all   workers,
\n\t      agricultural, industrial or otherwise, work, a
\n\t      living  wage,, conditions of work\t ensuring  a
\n\t      decent standard
\n\t      344<\/span>
\n\t      of  life\tand full enjoyment  of\tleisure\t and
\n\t      social  and  cultural  opportunities  and,  in
\n\t      particular,  the\tState  shall  endeavour\t  to
\n\t      promote cottage industries on an individual or
\n\t      co-operative basis in rural areas.”\n<\/p><\/blockquote>\n
He submits that Article 43 casts an obligation on the  State
\nto  secure a living wage for the workers and is part of\t the
\nprinciples  “declared fundamental in the governance  of\t the
\ncountry”.   In other words, he would have us use Article  43
\nas  conferring practically a fundamental right which can  be
\nenforced.   I  do not think that we can go so  far  as\tthat
\nbecause,  even\tthough\tthe directive  principles  of  State
\npolicy, including the very important general ones  contained
\nin Article 38 and 39 of the Constitution, give the direction
\nin  which  the\tfundamental policies of the  State  must  be
\noriented yet, we cannot direct either the Central Government
\nor Parliament to proceed in that direction.  Article 37 says
\nthat  they “shall not be enforceable by any court,  but\t the
\nprinciples therein laid down are nevertheless fundamental in
\nthe  governance of the country and it shall be the  duty  of
\nthe  State to apply these principles in making laws.”  Thus,
\neven  if they are not directly enforceable by a\t court\tthey
\ncannot\tbe  declared ineffective.  They have  the  life\t and
\nforce  of fundamentals.\t The best way in which they can\t be,
\nwithout\t being directly enforced, given vitality and  effect
\nin   Courts  of\t laws  is  to  use  them  as   criteria\t  of
\nreasonableness, and, therefore, of validity, as we have been
\ndoing.\tThus, if progress towards goals found in Articles 38
\nand  39\t and  43  are desired,\tthere  should  not  be\tany,
\ncurtailment of wage rates arbitrarily without disclosing any
\nvalid  reason  for  it as is. the case here.   It  is  quite
\nreasonable, in my opinion, to submit that the measure  which
\nseeks  to  deprive workers of the benefits of  a  settlement
\narrived at and assented to by the Central Government,  under
\nthe provisions of the Industrial Disputes Act, should not be
\nset  at\t naught by an Act designed to  defeat  a  particular
\nsettlement.   If  this\tbe the purpose of  the\tAct,  as  it
\nevidently  is, it could very well be said to be contrary  to
\npublic\tinterest, and, therefore, not protected\t by  Article
\n19(6) of the Constitution.\n<\/p>\n
Furthermore,  I think that the principle laid down  by\tthis
\nCourt in Union of India & Ors. v. M\/s.\tIndo-Afghan Agencies
\nLtd.<\/a>(1)\t can  also  be taken into  account  in\tjudging\t the
\nreasonableness\tof the provision in this case.\tIt was\theld
\nthere (at p. 385) :\n<\/p>\n
\t      “Under our jurisprudence the Government is not
\n\t      exempt   from  liability\tto  carry  out\t the
\n\t      representation  made  by it as to\t its  future
\n\t      conduct  and it cannot on some  undefined\t and
\n\t      undisclosed ground of necessity or  expediency
\n\t      fail to carry out the promise solemnly made by
\n\t      it,  nor\tclaim to be the judge  of  its,\t own
\n\t      obligation  to  the  citizen on  an  ex  parte
\n\t      appraisement of the circumstances in which the
\n\t      obligation has arisen.”\n<\/p><\/blockquote>\n
(1)  [1968] (2)S.C.R.365.\n<\/p>\n
34 5
\nIn that case, equitable principles were invoked against\t the
\nGovernment.   It is true that, in the instant case, it is  a
\nprovision  of  the  Act\t of  Parliament\t and  not  merely  a
\ngovernmental  order whose validity is challenged before\t us.
\nNevertheless, we cannot forget that the Act is the result of
\na proposal made by the Government of the day which,  instead
\nof  proceeding\tunder section 11(2) of\tthe  Life  Insurance
\nCorporation  Act,  chose  to  make  an\tAct  of\t  Parliament
\nprotected  by  emergency  provisions.\tI  think  that\t the
\nprospects  held out, the representations made , the  conduct
\nof  the Government, and equities arising therefrom, may\t all
\nbe taken into consideration for judging whether a particular
\npiece  of legislation, initiated by the Government  and\t en-
\nacted by Parliament, is reasonable.\n<\/p>\n
Mr. Garg has also strongly attacked section 3 of the Act as,
\nviolative  of Article 14 of the Constitution which was\talso
\nnot  available to the petitioners during the emergency.\t  He
\nalleges\t that the Corporation has been making very  handsome
\nprofits\t so that the question of jeopardising the  interests
\nof  the\t Corporation or Policyholders could not\t arise.\t  He
\nsubmits\t that  the  Act\t is  nothing  more  than   selective
\ndiscrimination\tpractised  against the lower levels  of\t the
\nstaff  of  the Life Insurance Corporation.  I do  not  think
\nthat these contentions are devoid of force.
\nI  am sorry that due to the very short interval left for  me
\nto  dictate my opinion in this case I have not been able  to
\nfully set out the reasoning or to cite all the authorities I
\nwould have liked to have done.\tThe pressure of work on hand
\nis  too\t great.\t  I  have  several  judgments  to  pronounce
\ntomorrow,  the last day on which I shall have the  authority
\nto participate as a Judge in the decisions of this Court.  I
\nhave, however, thought it to be my duty to indicate my\tline
\nof  thinking  briefly as I have my  doubts  whether  Article
\n31(2A) is not an effective answer to complete reliance\tupon
\nArticle 31(2) of the Constitution.\n<\/p>\n
It  is true that the right to receive bonus which  had\tbeen
\nrecognised by the Central Government both by its orders\t and
\nconduct\t  under\t a  settlement\tis  a  right  to   property.
\nNevertheless, since acquisition is defined by Article 31(2A)
\nof  the\t ‘Constitution,\t I  seriously  doubt  whether\tthat
\ndefinition  of acquisition really satisfied by the facts  in
\nthe case before us.  The provision reads as follows :\n<\/p>\n
\t      “31(2A)  Where a law does not provide for\t the
\n\t      transfer\t of  the  ownership  or\t  right\t  to
\n\t      possession of any property to the State or  to
\n\t      a\t Corporation  evened or\t controlled  by\t the
\n\t      State,  it shall not be deemed to provide\t for
\n\t      the compulsory acquisition or  requisitioning,
\n\t      of property, notwithstanding that it  deprives
\n\t      any person of his property.”\n<\/p><\/blockquote>\n
I have, however, no doubt that the conclusion reached by  my
\nlearned\t brother Bhagwati is quite correct inasmuch  as\t the
\nbenefits  of  the rights recognised by the judgment  of\t the
\nCalcutta  High Court could not be indirectly taken  away  by
\nsection 3 of the Act selectively directed against  specified
\nsettlements only.\n<\/p>\n
346<\/span><\/p>\n
I think that section 3 of the impugned Act is struck by\t the
\nprovisions of Article 19(1) (f) of the Constitution and\t not
\nsaved  by  Article 19(6) of the Constitution.\tIt  is\talso
\nstruck by Article 14.  If the fundamental rights  guaranteed
\nby Articles 14 and 19 are not suspended, but their operation
\nis  only  suspended, a view which I expressed in  A.  D.  M.
\nJabalpur v. Shivkant Shukla(1) the effect of the  suspension
\nis to restore the status quo ante.  Would this not mean that
\nonly  the validity of an attack based on Articles 14 and  19
\nis  suspended during the Emergency ? But, once this  embargo
\nis  lifted Articles 14 and 19 of the Constitution whose\t use
\nwas suspended, would strike down any legislation which would
\nhave   been  bad.   In\tother  words,  the  declaration\t  of
\ninvalidity  is stayed during the emergency.   Both  Articles
\n358  and 359(1A) provide that, as soon as a proclamation  of
\nemergency  ceases to operate, the effect of suspension\tmust
\nvanish “except as respects things done or omitted to be done
\nbefore the law so ceases to have effect”.\n<\/p>\n
The  things done or omitted to be done could  certainly\t not
\nmean  that the rights conferred under the  settlements\twere
\nwashed\toff  completely\t as  the  learned  Attorney  General
\nsuggested.  To hold that would be to convert the  suspension
\nof  invalidity\tinto  a validation of law  made\t during\t the
\nemergency.   If\t the  law was not  validated  but  only\t its
\ninvalidation  was  suspended, we should not give  any  wider
\neffect to the suspension.     I\t think we  should  interpret
\n“things done or omitted to be done” very     narrowly.\t  If
\nthis be so, it means that the settlements are not to be deemed
\nto  be\twiped  off.   No  doubt\t payments  under  them\twere
\ntemporarily  suspended.\t  This must obviously mean  that  no
\npayment\t could be demanded under them during the  emergency,
\nbut,  as  soon as the emergency was  over,  the\t settlements
\nwould  revive  and  what could not be  demanded\t during\t the
\nemergency  would  become  payable even\tfor  the  period  of
\nemergency  for which payment was suspended.   Otherwise\t the
\nenactment  will\t have effect even after\t the  emergency\t had
\nceased.\t  This\twould  clearly be contrary  to\tthe  express
\nprovisions  of\tArticle 358 and 359(1A).   In  other  words,
\nvalid  claims cannot be washed off by the emergency per\t se.
\nThey  can  only\t be suspended by a  law\t passed\t during\t the
\noperation of Article 358 and 359(1A) of the Constitution.
\nFor the reasons given above, I reach the same conclusion  as
\nmy learned brother Bhagwati although perhaps by a difference
\nroute. concur in the final order made by my learned  Brother
\nBhagwati.\n<\/p>\n
BHAGWATI, J.-These writ petitions are filed by employees  of
\nthe    Life    Insurance   Corporation\t  challenging\t the
\nconstitutional\tvalidity of the Life  Insurance\t Corporation
\n(Modification of Settlement) Act, 1976.\t This unusual  piece
\nof   legislation  was  enacted\tby  Parliament\tduring\t the
\nemergency at a time when there could hardly be any effective
\ndebate\tor discussion and it sought to render ineffective  a
\nsolemn and deliberate Settlement arrived at between the Life
\nInsurance Corporation and four different associations of its
\nemployees  for payment of cash bonus.  It is  necessary,  in
\norder to appreciate the various
\n(1)  A.T.R. 1976 S.C. 1207-[1976] Suppl.  S.C.R. 172.\n<\/p>\n
347<\/span><\/p>\n
contentions  arising in the writ petitions  to\trecapitulate
\nbriefly\t the facts leading up to the enactment of  the\tLife
\nInsurance  Corporation\t(Modification  of  Settlement)\tAct,
\n1976, hereinafter referred to as the impugned Act.
\nThe  Life  Insurance Corporation is  a\tstatutory  authority
\nestablished  under the Life Insurance Corporation Act,\t1956
\nand  under  section  6 it is the general duty  of  the\tLife
\nInsurance  Corporation to carry On life insurance  business,
\nwhether\t in  or\t outside India, and it\tis  required  to  so
\nexercise  its  powers  as  to  secure  that  life  insurance
\nbusiness   is  developed  to  the  best\t advantage  of\t the
\ncommunity.   It\t is not necessary to refer  to\tthe  various
\nprovisions of the Life Insurance Corporation Act, 1956 which
\ndefine\tthe  powers,  duties  and  functions  of  the\tLife
\nInsurance  Corporation Act, since we are not concerned\twith
\nthem  in these writ petitions.\tIt would be enough to  refer
\nto  section  49 which confers power on\tthe  Life  Insurance
\nCorporation  to make regulations.  ‘Sub-section (1) of\tthat
\nsection\t provides that the Life Insurance Corporation  may,.
\nwith  the previous approval of the Central Government,\tmake
\nregulations, not in consistent with the Act, “to provide for
\nall matters for which provision is expedient for the purpose
\nof  giving  effect to the provisions” of the  Act  and\tsub-
\nsection (2) enacts that in particular and without  prejudice
\nto  the generality of the power conferred under\t sub-section
\n(1), such regulations may provide for-\n<\/p>\n
\t      “(b)  the method of recruitment  of  employees
\n\t      and  agents of the Corporation and  the  terms
\n\t      and conditions of service of such employees or
\n\t      agents;\n<\/p><\/blockquote>\n
\t      (bb)  the terms and conditions of\t service  of
\n\t      persons  who  have  become  employees  of\t the
\n\t      Corporation  under subsection (1)\t of  section
\n\t      11;”\n<\/p><\/blockquote>\n
The Life Insurance Corporation has in exercise of the  power
\nconferred under clauses (b) and (bb) of sub-section (2).  of
\nsection\t 49  and with the previous approval of\tthe  Central
\nGovernment,  made  the Life  Insurance\tCorporation  (Staff)
\nRegulations,  1960  defining  the terms\t and  conditions  of
\nservice\t of  its employees.  There is  only  one  Regulation
\nwhich is material for our purpose, and that is Regulation 58
\nwhich is in the following terms
\n\t      “The   Corporation   may,\t subject   to\tsuch
\n\t      directions  as  the  Central  Government\t may
\n\t      issue,  grant non-profit sharing bonus to\t its
\n\t      employees\t and the payment thereof,  including
\n\t      conditions of eligibility for the bonus, shall
\n\t      be  regulated  by instructions issued  by\t the
\n\t      Chairman from time to time.”\n<\/p>\n
We have set out Regulation 58 in its present form as that is
\nthe  form in which it stood throughout the relevant  period.
\nIt  will  be a matter for consideration as to  what  is\t the
\neffect\tof  this  Regulation on the  Settlement\t arrived  at
\nbetween the Life Insurance Corporation and its employees  in
\nregard to bonus.\n<\/p>\n
348<\/span><\/p>\n
It  appears that right from 1959 Settlement were arrived  at
\nbetween\t the  Life Insurance Corporation and  its  employees
\nfrom  time to time in regard to various matters relating  to
\nthe  terms and conditions of service of Class III and  Class
\nIV  employees including bonus payable to them.\tThe last  of
\nsuch  Settlement dated 20th June, 1970, as modified  by\t the
\nSettlement  dated  26th June, 1972, expired on\t31st  March,
\n1973.  Thereupon four different associations of employees of
\nthe  Life Insurance Corporation submitted their\t charter  of
\ndemands for revision of scales of pay, allowances and  other
\nterms  and conditions of service on behalf of Class III\t and
\nClass IV employees.  The Life Insurance Corporation  carried
\non  negotiations with these associations. between July\t1973
\nand January 1974 at which there was free and frank  exchange
\nof  views  in  regard  to  various  matters  including\t the
\nobligation of the Life Insurance Corporation to the  policy-
\nholders\t  and;.\t  the\tcommunity   and\t  ultimately   these
\nnegotiations culminated in a Settlement: dated 24th January,
\n1974  between  the  Life  Insurance  Corporation  and  these
\nassociations.  The Settlement having been arrived at other–
\nwise  than  in the course of  conciliation  proceeding,\t was
\nbinding on the parties under section 18, sub-section (1)  of
\nthe  Industrial\t Disputes  Act,\t 1947  and  since  the\tfour
\nassociations  which  were  parties to  the.  employees,\t the
\nSettlement was binding on the Life Insurance Corporation and
\nall  its Class III and Class IV employees.   The  Settlement
\nprovided  for  various\tmatters relating to  the  terms\t and
\nconditions of: service but we are concerned only with Clause
\n(8)  which made provision in regard to bonus.\tThat  clause
\nwas in the following terms
\n\t      “(i)  No profit sharing bonus shall  be  paid.
\n\t      However, the Corporation may, subject to\tsuch
\n\t      directions as the Central Government may issue
\n\t      from  time  to time, grant any other  kind  of
\n\t      bonus to its Class III & IV employees.\n<\/p>\n
\t      (ii)  An annual cash bonus will be paid to all
\n\t      Class III and’ Class IV employees at the\trate
\n\t      of  15% of the annual salary (i.e.  basic\t pay
\n\t      including of,special pay, if any, and dearness
\n\t      allowance\t and additional dearness  allowance)
\n\t      actually\tdrawn by an employee in\t respect  of
\n\t      the financial year to which thebonus relates.\n<\/p>\n
\t      (iii) Save as provided herein all other  terms
\n\t      and  conditions attached to the  admissibility
\n\t      and payment of bonus shall be as laid down  in
\n\t      the Settlement on bonus dated tile 26th, June,
\n\t      1972.”\n<\/p>\n
It  is also necessary to reproduce here Clause (12) as\tthat
\nhas some bearing on the controversy between the parties
\n“PERIOD OF SETTLEMENT:\n<\/p>\n
(1) This Settlement shall be effective from 1st April,\t1973
\nand  shall  be for a period of four years,  i.e.,  from\t 1st
\nApril,, 1973 to 31st March, 1977.\n<\/p>\n
349<\/span><\/p>\n
\t      (2)  The\tterms of this  Settlement  shall  be
\n\t      subject  to the approval of the Board  of\t the
\n\t      Corporation and the Central Government.\n<\/p>\n
\t      (3)   This  Settlement  disposes\tof  all\t the
\n\t      demands raised by the workmen for revision  of
\n\t      terms and conditions of their service.\n<\/p>\n
\t      (4)   Except as otherwise provided or modified
\n\t      by this Settlement, the workmen shall continue
\n\t      to be governed by all the terms and conditions
\n\t      of  service as set forth and regulated by\t the
\n\t      Life  Insurance Corporation of  India  (Staff)
\n\t      Regulations,  1960 as also the  administrative
\n\t      instructions issued from time to time and they
\n\t      shall,  subject  to  the\tprovisions   thereof
\n\t      including\t any period of\toperation  specified
\n\t      therein\tbe   entitled\tto,   the   benefits
\n\t      thereunder.”\n<\/p>\n
It was common ground between the parties that the Settlement
\nwas approved by the Board of the Life Insurance\t Corporation
\nas also by the Central Government and the Chief of Personnel
\nby  his\t Circular dated 12th March, 1974  intimated  to\t the
\nZonal  and  Divisional\tManagers that the  approval  of\t the
\nCentral\t Government to the Settlement having  been  received
\nthe  Life Insurance Corporation should proceed to  implement
\nthe  terms of the Settlement.  The Executive  Director\talso
\nissued\t a  circular  dated  29th  March,  1974\t  containing
\nadministrative\tinstructions in regard to, payment  of\tcash
\nbonus  under  clause  8\t (ii)  of  the\tSettlement.    These
\nadministrative instructions set out directions in regard  to
\nVarious\t matters  relating to payment of cash bonus  and  of
\nthese, two are material.  One was that in case of retirement
\nor  death,  salary up to the date of  cessation\t of  service
\nshall  be taken into account for the purpose of\t determining
\nthe  amount of bonus payable to the employee, or  his  heirs
\nand  the other was that the bonus shall be paid\t along\twith
\nthe salary for the month of April, but in case of retirement
\nor death, payment will be made “soon after the contingency”.
\nThere  was  no\tdispute that for the first  two\t years,\t 1st
\nApril, 1973 to 31st March, 1974 and 1st April, 1974 to\t31st
\nMarch,\t1975, the Life Insurance Corporation paid  bonus  to
\nits Class III and Class IV employees in accordance with\t the
\nprovisions  of Clause 8(ii) of the Settlement read with\t the
\nadministrative\tinstructions  dated 29th March,\t 1974.\t But
\nthen  came the declaration of emergency on 26th\t June,\t1975
\nand troubles began for Class III and Class IV ,employees  of
\nthe Life Insurance Corporation.\n<\/p>\n
On 25th September, 1975 an Ordinance was promulgated by\t the
\nPresident  of India called the Payment of Bonus\t (Amendment)
\nOrdinance, 1975 which came into force with immediate effect.
\nSubsequently, this Ordinance was replaced by the Payment  of
\nBonus  (Amendment)  Act, 1976 which was brought\t into  force
\nwith  retrospective effect from the date of  the  Ordinance,
\nnamely,\t  25th\t September,   1975.    This   amending\t law
\nconsiderably curtailed the rights of the employees to  bonus
\nin industrial establishments, but it had no impact so far as
\nthe  employees\tof  the\t Life  Insurance  Corporation\twere
\nconcerned  since the original Payment of Bonus Act  was\t not
\napplicable  to the life Insurance Corporation by  reason  of
\nsection 32 which exempted the Life Insurance
\nL5-277SCI\/78
\n350<\/span>
\nCorporation  from  its operation.  The\tCentral\t Government,
\nhowever, decided that the employees of establishments  which
\nwere  not covered by the Payment of Bonus Act would  not  be
\neligible for payment of bonus but ex-gratia cash payment  in
\nlieu  of  bonus would be made “as may be determined  by\t the
\nGovernment  taking  into account the wage  level,  financial
\ncircumstances  etc.  in each case and such payment  will  be
\nsubject\t to a maximum of 10% and pursuant to this  decision,
\nthe  Life Insurance Corporation was advised by the  Ministry
\nof  Finance that no further payment of bonus should be\tmade
\nto  the employees “without getting the same cleared  by\t the
\nGovernment”.   The Life Insurance Corporation  thereupon  by
\nits  Circular  dated 26th September, 1975 informed  all\t its
\noffices\t that  since the question of payment  of  bonus\t was
\nbeing  reviewed\t in the light of the Bonus  Ordinance  dated
\n25th  September,,  1975,  no bonus should  be  paid  to\t the
\nemployees  “under  the\texisting  provisions  until  further
\ninstructions”.\t  The’\t All-India   Insurance\t  Employees’
\nAssociation  protested against this stand taken by the\tLife
\nInsurance   Corporation\t and  pointed  out  that  the\tLife
\nInsurance  Corporation was bound to pay bonus in  accordance
\nwith  the terms of the Settlement and the direction  not  to
\npay  bonus  was clearly illegal and  unjustified.  The\tLife
\nInsurance  Corporation\tconceded that payment of  bonus\t was
\ncovered by the settlement but contended that it was  subject
\nto  such  directions as the Central Government\tmight  issue
\nfrom  time  to\ttime and since the  Central  Government\t had
\nadvised\t the  Life  Insurance Corporation not  to  make\t any
\npayment\t of bonus without their specific approval, the\tLife
\nInsurance Corporation was justified in not making payment to
\nthe  employees.\t This stand was taken by the Life  Insurance
\nCorporation in its letter dated 7th February, 1976 addressed
\nto, the All India Insurance Employees’ Association and\tthis
\nwas   followed\tby  a  Circular\t dated\t22nd   March,\t1976
\ninstructing   all   the\t offices  of  the   Life   Insurance
\nCorporation not to make payment by way of bonus.
\nThe  All-India\tInsurance Employees’  Association  and\tsome
\nothers thereupon filed writ petition No. 371 of 1976 in\t the
\nHigh   Court  of  Calcutta  for\t a  writ  of  Mandamus\t and
\nProhibition directing the Life Insurance Corporation to\t act
\nin  accordance with the terms of the Settlement\t dated\t24th
\nJanuary.  1974\tread with  the\tadministrative\tinstructions
\ndated  29th  March,  1974  and\tto  rescind  or\t cancel\t the
\nCirculars dated 26th September, 1975, 7th February, 1976 and
\n22nd  March,  1976 and not to refuse to pay  cash  bonus  to
\nClass III and Class IV employees along with their salary for
\nthe  month of April 1976 as provided by the Settlement\tread
\nwith the administrative instructions.  The writ petition was
\nresisted  by  the  Life\t Insurance  Corporation\t on  various
\ngrounds\t to which it is not necessary to refer since we\t are
\nnot  concerned with the correctness of the judgment  of\t the
\nCalcutta High Court disposing of the writ petition.  Suffice
\nit to state, and that is material for our purpose, that by a
\njudgment dated 21st May, 1976 a Single Judge of the Calcutta
\nHigh  Court allowed the writ petition and issued a  writ  of
\nMandamus and Prohibition as prayed for in the writ petition.
\nThe  Life Insurance Corporation preferred a  Letters  Patent
\nAppeal against the judgment of the learned Single Judge\t but
\nin  the\t mean time the impugned Act bad\t already  come\tinto
\nforce  and it was, therefore, stated on behalf of  the\tLife
\nInsurance  Corporation before the Division Bench that  there
\nwas
\n351<\/span>
\nno  necessity for proceeding with the appeal and  hence\t the
\nDivision Bench made no order in the appeal.  The result\t was
\nthat  the  judgment  of the learned  Single  Judge  remained
\nintact\t: with what effect, is a matter we  shall  presently
\nconsider.\n<\/p>\n
On  29th  May,\t1976 Parliament\t enacted  the  impugned\t Act
\nproviding  inter  alia for modification’ of  the  Settlement
\ndated  24th  January,  1974  arrived  at  between  the\tLife
\nInsurance  Corporation and its employees.  The impugned\t Act
\nwas a very short statute consisting only of three  sections.
\nSection 1 gave the short title of the impugned Act,  section
\n2  contained  definitions  and\tsection\t 3,  which  was\t the
\noperative section, provided as follows :\n<\/p>\n
\t      “Notwithstanding\tanything  contained  in\t the
\n\t      Industrial Disputes Act, 1947, the  provisions
\n\t      of the settlement in so far as they relate  to
\n\t      the  payment of an annual cash bonus to  every
\n\t      Class  III  and  Class  IV  employees  of\t the
\n\t      Corporation  at the rate of fifteen per  cent,
\n\t      of his annual salary, shall not have any force
\n\t      or effect and shall not be deemed to have\t had
\n\t      any force or effect on and from the 1st day of
\n\t      April, 1975.”\n<\/p><\/blockquote>\n
Since  the  impugned Act did not set at\t naught\t the  entire
\nsettlement  dated  24th January, 1974  but  merely  rendered
\nwithout force and effect the provisions of the Settlement in
\nso  far as they related to payment of annual cash  bonus  to
\nClass  III and Class IV employees and that too not from\t the
\ndate  when  the\t Settlement became operative  but  from\t 1st
\nApril, 1975, it was said to be a statute modifying the\tpro-
\nvisions\t of the Settlement.  The plain and undoubted  effect
\nof  the impugned Act was to deprive Class III and  Class  IV
\nemployees  of  the  annual cash bonus  to  which  they\twere
\nentitled under clause 8(ii) of the Settlement for the  years
\n1st April, 1975 to 31st March, 1976 and 1st April, 1976 to 3
\n1  St  March, 1977 and therefore, two  of  the\tassociations
\nalong with their office bearers field the present writ peti-
\ntions\tchallenging  the  constitutional  validity  of\t the
\nimpugned Act.\n<\/p>\n
There were two grounds on which the constitutionality of the
\nimpugned  Act was assailed on behalf of the petitioners\t and
\nthey were as follows :\n<\/p>\n
\t      A.    The\t right\tof Class III  and  Class  TV
\n\t      employees\t to annual cash bonus for the  years
\n\t      1st  April, 1975 to 31st March, 1976  and\t 1st
\n\t      April,  1976 to 31st March, 1977 under  clause
\n\t      8(ii) of the Settlement was property and since
\n\t      the  impugned  Act  provided  for\t  compulsory
\n\t      acquisition  of this property without  payment
\n\t      of   compensation,   the\timpunged   Act\t was
\n\t      violative of Article 31(2) of the Constitution
\n\t      and was hence null and void.\n<\/p>\n
\t      B.     The impugned Act deprived Class III and
\n\t      Class IV employees of the right to annual cash
\n\t      bonus  for the years 1st April, 1975  to\t31st
\n\t      March, 1976 and 1st April, 1976 to 31st March,
\n\t      1977  which  was vested in them  under  clause
\n\t      8(ii)   of  the  Settlement  and\tthere\twas,
\n\t      therefore,   clear   infringement\t  of   their
\n\t      fundamental right under Article
\n\t      3 52
\n\t      19(1)  (f) and since this deprivation  of\t the
\n\t      right to annual cash bonus, which was  secured
\n\t      under  a Settlement arrived at as a result  of
\n\t      collective bargaining and with full and mature
\n\t      deliberation on the part of the Life Insurance
\n\t      Corporation  and the Central Government  after
\n\t      taking  into  account  the  interests  of\t the
\n\t      policy-holders  and the community and  with  a
\n\t      view  to approximating towards the goal  of  a
\n\t      living wage as envisaged in Article 43 of\t the
\n\t      Constitution,  amounted  to  an\tunreasonable
\n\t      restriction, the impugned Act was not saved by
\n\t      Article  19(5) and hence it was liable  to  be
\n\t      struck down as invalid.\n<\/p>\n
We  shall proceed to consider these grounds in the order  in
\nwhich we have set them out, though we may point out that  if
\neither ground succeeds, it would be unnecessary to  consider
\nthe other.\n<\/p>\n
But  before we proceed, further, it would be  convenient  at
\nthis  stage  to\t refer\tto  one\t other\tcontention  of\t the
\npetitioner based on the judgment of the Calcutta High  Court
\nin  Writ Petition No. 371 of 1976.  The contention was\tthat
\nsince the Calcutta High Court had by its judgment dated 21st
\nMay,  1976  issued  a writ of Mandamus\tdirecting  the\tLife
\nInsurance Corporation to pay annual cash bonus to Class\t III
\nand Class IV employees for the year 1st April, 1975 to\t31st
\nMarch, 1976 along with their salary for the month of  April,
\n1976 as provided by the Settlement and this judgment had be-
\ncome  final  by reason of withdrawal of the  Letters  Patent
\nAppeal preferred against it, the Life Insurance\t Corporation
\nwas  bound  to obey the writ of Mandamus and to\t pay  annual
\ncash bonus for the year 1st April, 1975 to 31st March,\t1976
\nin  accordance\twith  the  terms  of  clause  8(ii)  of\t the
\nSettlement.   It is, no doubt, true, said  the\tpetitioners,
\nthat  the impugned Act, if valid, struck at clause 8(ii)  of
\nthe Settlement and rendered it ineffective and without force
\nwith  effect  from 1st April, 1975 but it did not  have\t the
\neffect of absolving the Life Insurance Corporation from\t its
\nobligation  to carry out the writ of Mandwnus.\t There\twas,
\naccording  to the petitioners, nothing in the  impugned\t Act
\nwhich  set  at\tnaught the effect of  the  judgment  of\t the
\nCalcutta High Court or the binding character of the writ  of
\nMandamus  issued  against the  Life  Insurance\tCorporation.
\nThis   contention  of  the  petitioners\t  requires   serious
\nconsideration and we are inclined to accept it.
\nIt is significant to note that there was no reference to the
\njudgment  of  the Calcutta High Court in  the  Statement  of
\nObjects\t and Reasons, nor any non-obstante clause  referring
\nto  a judgment of a court in section 3 of the impugned\tAct.
\nThe  attention\tof Parliament does not appear to  have\tbeen
\ndrawn  to the fact that the Calcutta High Court had  already
\nissued\ta  writ of Mandamus commanding\tthe  Life  Insurance
\nCorporation  to\t pay the amount of bonus for  the  year\t 1st
\nApril,\t 1975  to  31st\t March,\t 1976.\t It   appears\tthat
\nunfortunately  the  judgment  of  the  Calcutta\t High  Court
\nremained almost unnoticed and the impugned Act was passed in
\nignorance  of that judgment.  Section 3 of the impugned\t Act
\nprovided that the provisions of the Settlement in so far  as
\nthey relate to payment of annual cash bonus to Class III
\n353<\/span>
\nand  Class IV employees shall not have any force  or  effect
\nand shall not be deemed to have had any force or effect from
\n1st  April,  1975.  But the writ of Mandamus issued  by\t the
\nCalcutta High Court directing the Life Insurance Corporation
\nto  pay the amount of bonus for the year 1st April, 1975  to
\n31st March, 1976 remained untouched by the impugned Act.  So
\nfar  as\t the right of Class III and Class  IV  employees  to
\nannual\tcash  bonus  for the year 1st April,  1975  to\t31st
\nMarch,\t1976  was concerned, it became crystallised  in\t the
\njudgment and thereafter they became entitled to enforce\t the
\nwrit  of Mandamus granted by the judgment and not any  right
\nto annual cash bonus under the settlement.  This right under
\nthe,  judgment\twas  not  sought to be\ttaken  away  by\t the
\nimpugned  Act.\t The judgment continued to subsist  and\t the
\nLife  Insurance\t Corporation was bound to  pay\tannual\tcash
\nbonus  to Class III and Class IV employees for the year\t 1st
\nApril, 1975 to 31st March, 1976 in obedience to the writ  of
\nMandamus.   The\t error\tcommitted by  the  Life.   Insurance
\nCorporation  was that it withdrew the Letters Patent  Appeal
\nand  allowed  the judgment of the learned  Single  Judge  to
\nbecome final.  By the time the Letters Patent Appeal came up
\nfor  hearing, the impugned Act had already come\t into  force
\nand  the Life Insurance Corporation could,  therefore,\thave
\nsuccessfully  contained in the Letters Patent  Appeal  that,
\nsince  the Settlement, in as far as it provided for  payment
\nof  annual cash bonus, was annihilated by the  impugned\t Act
\nwith  effect  from 1st April, 1975, Class III and  Class  IV
\nemployees  were\t not entitled to annual cash bonus  for\t the
\nyear  1st April, 1975 to 31st March, 1976 and hence no\twrit
\nof  Mandamus  could  issue  directing  the  Life   Insurance
\nCorporation  to\t make  payment\tof  such  bonus.   If\tsuch
\ncontention  had been raised, there is little doubt,  subject
\nof course to any constitutional challenge to the validity of
\nthe  impugned Act, that the judgment of the  learned  Single
\nJudge  would  have  been  upturned  and\t the  Writ  petition
\ndismissed.   But  on account of\t some  inexplicable  reason,
\nwhich  is  difficult  to  appreciate,  the  Life   Insurance
\nCorporation did not press the Letters Patent Appeal and\t the
\nresult\twas  that the judgment of the learned  Single  Judge
\ngranting  writ of Mandamus became final and binding  on\t the
\nparties.  It is difficult to see how in these  circumstances
\nthe  Life Insurance Corporation could claim to\tbe  absolved
\nfrom the obligation imposed by the judgment to carry out the
\nWrit of Mandamus by relying on the impugned Act.
\nThe  Life  Insurance  Corporation  leaned  heavily  on\t the
\ndecision of this Court in Shri Prithvi Cotton Mills Ltd.  v.
\nBroach Borough Municipality<\/a>(‘-) in support of its contention
\nthat  when  the\t settlement in so far  as  it  provided\t for
\npayment\t of  annual  cash bonus was set\t at  naught  by\t the
\nimpugned Act with effect from 1st April, 1975, the basis  on
\nwhich  the judgment proceeded was fundamentally altered\t and
\nthat  rendered the judgment ineffective and not\t binding  on
\nthe  parties.  We do not think this decision lays  down\t any
\nsuch  wide proposition as is contended for and on behalf  of
\nthe  Life  Insurance  Corporation.  It\tdoes  not  say\tthat
\nwhenever  any  actual  or  legal  situation  is\t altered  by
\nretrospective legislation, a judicial decision rendered by a
\ncourt on the basis of such factual or legal situation  prior
\nto the alteration, would
\n(1)  [1970]1 S.C.R. 388.\n<\/p>\n
354<\/span><\/p>\n
straightaway,  without\tmore,  cease  to  be  effective\t and
\nbinding on the parties.\t It is true that there, are  certain
\nobservations  in this decision which seem to suggest that  a
\ncourt  decision may cease to be binding when the  conditions
\non  which it is based are so fundamentally altered that\t the
\ndecision   could  not  have  been  given  in   the   altered
\ncircumstances.\t But these observations have to be  read  in
\nthe  light of the question which arose for consideration  in
\nthat case.  There, the validity of the Gujarat Imposition of
\nTaxes by Municipalities (Validation) Act, 1963 was  assailed
\non behalf of the petitioners.  The Validation Act had to  be
\nenacted\t because  it  was  held\t by  this  Court  in   Patel
\nGordhandas    Hargovindas   v.\t  Municipal    Commissioner,
\nAhmedabad<\/a>(1)   that   since  section  73   of\tthe   Bombay
\nMunicipality Boroughs Act, 1925 allowed the Municipality  to
\nlevy a ‘rate? on buildings or lands and the term ‘rate?\t was
\nconfined  to, an imposition on the basis of  annual  letting
\nvalue,\ttax  levied  by\t the  Municipality  on\tlands,\t and
\nbuildings  on  the  basis  of  capital\tvalue  was  invalid.
\nSection\t  3   of   the\t Validation   Act   provided\tthat
\nnotwithstanding\t anything contained in any judgment,  decree
\nor  order of a court or tribunal or any other authority,  no
\ntax  assessed  or  purported  to have  been  assessed  by  a
\nmunicipality on the, basis of capital value of a building or
\nland and imposed, collected or recovered by the municipality
\nat  any time before the commencement of the  Validation\t Act
\nshall  be  deemed  to  have  invalidly\tassessed,   imposed,
\ncollected  or  recovered and the imposition,  collection  or
\nrecovery of the tax so assessed shall be valid and shall  be
\ndeemed to have always been valid and shall not be called  in
\nquestion merely on the ground that the assessment the tax on
\nthe  basis of capital value of the building or land was\t not
\nauthorised by law and accordingly any tax so assessed before
\nthe  commencement of the Validation Act and leviable  for  a
\nperiod\tprior  to  such commencement but  not  collected  or
\nrecovered  before  such\t commencement may  be  collected  or
\nrecovered in accordance with the relevant municipal law.  It
\nwill  be  seen\tthat by section 3 of the  impugned  Act\t the
\nLegislature retrospectively imposed tax on building or\tland
\non  the\t basis of capital value and if the tax\twas  already
\nimposed,  levied  and  collected on  that  basis,  made\t the
\nimposition  levy, collection and recovery of the tax  valid,
\nnotwithstanding the declaration by the Court that as  ‘rate,
\nthe  levy was incompetent.  This was clearly permissible  to
\nthe Legislature because in doing so, the Legislature did not
\nseek   to  reverse  the\t decision  of  this  Court  on\t the
\ninterpretation\tof  the\t word  ‘rate,,\tbut  retrospectively
\namended\t the law by providing for imposition of tax on\tland
\nor building on the basis of capital value and validated\t the
\nimposition,  levy,  collection and recovery of tax  on\tthat
\nbasis.\t The decision of this Court holding the levy of\t tax
\nto  be\tincompetent  on\t the basis  of\tthe  unamended\tlaw,
\ntherefore, became irrelevant and could not stand in the\t way
\nof  the tax being assessed, collected and recovered on\tthe,
\nbasis  of  capital value under the  law\t as  retrospectively
\namended.   That is why this Court held that  the  Validation
\nAct  was effective to validate imposition, levy,  collection
\nand  recovery  of tax on land or building on  the  basis  of
\ncapital\t value.\t  It is difficult to see bow  this  decision
\ngiven  in the context of a validating statute can be of\t any
\nhelp to the life Insurance Corporation.\t Here, the  judgment
\ngiven by the
\n(1)  [1964] 2S.C.R.608.\n<\/p>\n
355<\/span><\/p>\n
Calcutta   High\t  Court,  which\t is  relied  upon   by\t the
\npetitioners,  is not a mere declaratory judgment holding  an
\nimpost\tor tax to be invalid, so that a\t validation  statute
\ncan  remove the defect pointed out by the judgment  amending
\nthe  law with retrospective effect and validate such  impost
\nor tax.\t But it is a judgment giving effect to the right  of
\nthe petitioners to annual cash bonus under the Settlement by
\nissuing\t a  writ of Mandamus directing\tthe  Life  Insurance
\nCorporation  to pay the amount of such bonus.  If by  reason
\nof  retrospective,  alteration\tof  the\t factual  or   legal
\nsituation,  the judgment is rendered erroneous,\t the  remedy
\nmay  be\t by  way of appeal or review, but  so  long  as\t the
\njudgment stands, it cannot be disregarded or ignored and  it
\nmust  be obeyed by the Life Insurance Corporation.  We\tare,
\ntherefore,  of the view that, in any event, irrespective  of
\nwhether\t the impugned Act is constitutionally valid or\tnot,
\nthe Life Insurance Corporation is bound to obey the writ  of
\nMandamus issued by the Calcutta High Court and to pay annual
\ncash bonus for the year 1st April, 1975 to 31st March,\t1976
\nto Class III and Class IV employees.  Now, to the grounds of
\nconstitutional challenge
\nRe: Ground A :\n<\/p>\n
This ground raise-& the question whether the impugned Act is
\nviolative  of  clause,\t(2)  of\t Article  31.\tThis  clause
\nprovides   safeguards  against\tcompulsory  acquisition\t  or
\nrequisitioning of property by laying down conditions subject
\nto  which  alone property may be  compulsorily\tacquired  or
\nrequisitioned  and  at the date when the  impugned  Act\t was
\nenacted, it was in the following terms
\n\t      “No  property shall be, compulsorily  acquired
\n\t      or requisitioned save for a public purpose and
\n\t      save by authority of a law which provides\t for
\n\t      acquisition or requisitioning of the  property
\n\t      for  an amount which may be fixed by such\t law
\n\t      or which may be determined in accordance\twith
\n\t      such  principles and given in such  manner  as
\n\t      may be specified in such law; and no, such law
\n\t      shall  be called in question in any  court  on
\n\t      the  ground  that\t the  amount  so  fixed\t  or
\n\t      determined  is not adequate or that the  whole
\n\t      or  any  part of such amount is  to  be  given
\n\t      otherwise than in cash
\nClause (2) in this form was substituted in Article 31 by the
\nConstitution (Twenty-fifth Amendment) Act, 1971 and by\tthis
\namending Act, clauses (2A) and (2B) were also introduced  in
\nArticle 31 and they read as follows :-\n<\/p>\n
\t      “(2A)  Where a, law does not provide  for\t the
\n\t      transfer\t of  the  ownership  or\t right\t to,
\n\t      possession of any property to the State or  to
\n\t      a\t corporation  owned  or\t controlled  by\t the
\n\t      State,  it shall not be deemed to provide\t for
\n\t      the  compulsory acquisition or  requisitioning
\n\t      of Property, notwithstanding that it does\t any
\n\t      person of his property.<\/p><\/blockquote>\n
\t      (2B)  Nothing in sub-clause (f) of clause\t (1)
\n\t      of Article 19 shall effect any such law as  is
\n\t      referred to in clause (2)
\n356<\/span>
\nThe argument of the petitioners was that the right of  Class
\nIII  and Class IV employees to annual cash bonus’  for\tthe,
\nyears  1st  April, 1975 to 31st March, 1976 and\t 1st  April,
\n1976  to 31st March, 1977 under Act provided for  Insurance,
\nCorporation  12,  it  was a  law  providing  for  compulsory
\nacquisition of property as contemplated under clause (2A) of
\nArticle\t 31  and  it was, therefore, required  to  meet\t the
\nchallenge  of  Article\t31,  clause  (2).   The\t  compulsory
\nacquisition of the right to annual cash bonus’ sought to  be
\neffectuated  by the impugned Act, said the petitioners,\t was
\nnot  supported by public purpose nor did the  impugned\tAct.
\nprovide\t for  payment of any compensation for the  same\t and
\nhence  the impugned Act was void as contravening clause\t (2)
\nof Article 21.\n<\/p>\n
The  first question which arises for consideration on  this.
\ncontention  is whether the right of Class III and  Class  IV
\nemployees  to ‘annual cash bonus’ for the years\t 1st  April,
\n1975 to 31st March, 1976 and 1st April, 1976 to 31st  March,
\n1977 under the Settlement was property so as to attract\t the
\ninhibition  of Article 31, clause (2).\tThe  Life  Insurance
\nCorporation  submitted that at the date when  the,  impugned
\nAct  was  enacted, Class III and Class IV employees  had  no
\nabsolute  right\t to receive ‘annual cash bonus’\t either\t for
\nthe,  year  1st April, 1975 to 31st March, 1976 or  for\t the
\nyear  1st  April, 1976 to 31st March, 1977  and\t there\twas,
\ntherefore,, no property which could be compulsorily acquired
\nunder the impugned Act.\t The argument of the Life  Insurance
\nCorporation was that the Life Insurance Corporation  (Staff)
\nRegulations,  1960 which laid down the terms and  conditions
\nof  services inter alia of Class III and Class IV  employees
\ndid  not contain any provision for payment of  bonus  except
\nRegulation  58\tand since under this  Regulation,  grant  of
\nannual\tcash  bonus by the life\t Insurance  Corporation\t was
\nsubject\t to such directions as the Central Government  might
\nissue,\tthe  right of Class III and Class  IV  employees  to
\nreceive\t annual\t cash  bonus  could not be  said  to  be  an
\nabsolute right.\t It was a right which was liable to, be\t set
\nat  naught  by any directions that might be  issued  by\t the
\nCentral\t Government and in fact the Central  Government\t did
\nissue  a direction to the life Insurance Corporation not  to
\nmake payment of bonus to the employees “without getting\t the
\nsame cleared by the Government” and consequently, Class\t III
\nand Class IV employees had no absolute right to claim bonus.
\nThe  result,  according to the Life  Insurance\tCorporation,
\nalso  followed on a proper interpretation of clauses  8\t (i)
\nand  8(ii) of the Settlement, for it was clear on  a  proper
\nreading of these two clauses that annual cash bonus  payable
\nto Class III and Class IV employees under clause 8 (ii) was,
\nby  reason of clause 8 (i) , subject to such  directions  as
\nthe Central Government might issue from time to time and the
\nCentral\t Government having directed that no further  payment
\nof  bonus  should be made to the employees,  Class  III\t and
\nClass  TV employees were not entitled to claim\tannual\tcash
\nbonus from the Life Insurance Corporation.  This argument of
\nthe  Life Insurance Corporation is plainly erroneous and  it
\nis,  not possible to accept it.\t Regulation  58\t undoubtedly
\nsays  that  non-profit sharing bonus may be granted  by\t the
\nSettlement  was property and since the impugned transfer  of
\nthe  ownership of this right to the Life which\twas  ‘State’
\nwithin the meaning of Article
\n35 7
\nthe Life Insurance Corporation to its employees, subject  to
\nsuch  directions  as the Central Government may\t issue\tand,
\ntherefore,  if the Central Government issues a direction  to
\nthe  contrary, nonprofit sharing bonus cannot be granted  by
\nthe  Life Insurance Corporation to any class  of  employees.
\nBut here, in the present case, grant of annual cash bonus by
\nthe  Life  Insurance Corporation to Class III and  Class  IV
\nemployees under clause 8(ii) of the Settlement was  approved
\nby  the Central Government as provided it clause 12 and\t the
\n‘direction  contemplated by Regulation 58 was given  by\t the
\nCentral Government that annual cash bonus may be granted  as
\nprovided  in  clause 8(ii) of the Settlement.\tIt  was\t not
\ncompetent  to  the Central Government  thereafter  to  issue
\nanother\t contrary direction which would have the  effect  of
\ncompelling the Life Insurance Corporation to commit a breach
\nof  its obligation under section’18, sub-section (1) of\t the
\nIndustrial  Disputes Act, 1947 to pay annual cash  bonus  in
\nterms of clause 8 (ii) of the Settlement.  Tumina to  clause
\n8(i)  of the Settlement, it is true that under this,  clause
\nnon-profit  sharing  bonus  could be  granted  by  the\tLife
\nInsurance  Corporation\t‘subject to such directions  as\t the
\nCentral\t Government  may issue from time to time  but  these
\nwords  giving overriding power to the Central Government  to
\nissue directions from time to time are conspicuously  absent
\nin clause 8(ii) and it is difficult to see bow they could be
\nprojected or read into that clause,.  Clauses 8(i) and\t8(ii
\nare  distinct and independent clauses and while clause\t8(i)
\nenacts a general provision that non-profit sharing bonus may
\nbe  paid by the Life Insurance Corporation to Class III\t and
\nClass IV employees subject to such directions as the Central
\nGovernment might issue from time to time, clause 8(ii) picks
\nout  one kind of non-profit sharing bonus  and\tspecifically
\nprovided  that annual cash bonus shall be paid to all  Class
\nIII and Class IV employees at the rate of 15 per cent of the
\nannual\tsalary\tand  this specific provision  in  regard  to
\npayment\t of  annual cash bonus is made subject to  only\t the
\napproval  of  the Central Government  which  was  admittedly
\nobtained.  It is, therefore, clear that Class III and  Class
\nIV employees had absolute right to receive annual cash bonus
\nfrom the Life Insurance Corporation in terms of clause 8(ii)
\nof  the Settlement and it was not competent to\tthe  Central
\nGovernment  to\tissue any directions to the  Life  Insurance
\nCorporation to refuse or withhold payment of the same.
\nIt  is\ttrue that under clause 8(ii) of the  Settlement\t the
\nannual\tcast bonus for a particular year was payable at\t the
\nrate of 15 per cent. of the annual salary actually drawn  by
\nthe  employee in respect of the financial year to which\t the
\nbonus, related and it would, therefore, seem that the  bonus
\nwas  payable at the end of. the year and not before, but  it
\nwas not disputed on behalf of the Life Insurance Corporation
\nthat  even an employee who retired or resigned\tbefore\tthe,
\nexpiration  of\tthat year, as also the heirs of\t a  deceased
\nemployee  who  died during the. currency of the\t year,\twere
\nentitled  to  receive,\tproportionate  bonus  and  the\tLife
\nInsurance  Corporation\tin fact recognised this\t to  be\t the
\ncorrect\t position in its administrative\t instructions  dated
\n29th  March, 1974 and actually paid proportionate  bonus  to
\nthe  retiring- or resigning employee and the heirs;  of\t the
\ndeceased  employee.   The annual cash  bonus  payable  under
\nclause 8(ii) of the Settlement, therefore, accrued
\n358<\/span>
\nfrom  day  to-day,  though payable  in\tcase  of  retirement
\nresignation  or death, on the happening of that\t contingency
\nand  otherwise, on the expiration of the year to  which\t the
\nbonus related.\tThere was thus plainly and unquestionably  a
\ndebt in respect of annual cash bonus accruing to each  Class
\nIII or Class IV employees from day-to-day and  consequently,
\non the expiration of the year 1st April, 1975 to 31st March.
\n1976,  the annual cash bonus payable under clause  8(ii)  of
\nthe  Settlement\t was  a debt due and  owing  from  the\tLife
\nInsurance Corporation to each Class III or Class IV employee
\nand  so\t also at the date when the impugned  Act  came\tinto
\nforce, each Class III or Class IV employee was entitled to a
\ndebt   due  and\t owing\tto  him\t from  the  Life   Insurance
\nCorporation  in\t respect of the annual cash bonus  from\t 1st
\nApril,\t1976 upto that date.  The question is whether  these
\ndebts due and owing from the Life Insurance Corporation were
\nproperty  of  Class III and Class IV  employees\t within\t the
\nmeaning\t of Article 31(2).  So also, was the right  of\teach
\nClass III and Class IV employee to receive annual cash bonus
\nfor the period from the date of commencement of the impugned
\nAct  upto  31st\t March, 1977 property  for  the\t purpose  of
\nArticle\t 31(2)\t? These questions we shall  now\t proceed  to
\nconsider,   for\t  on  the  answer  to\tthem   depends\t the
\napplicability of Article 31(2).\n<\/p>\n
It  is clear from the scheme of fundamental rights  embodied
\nin  Part III of the Constitution that the guarantee  of\t the
\nright  to property is contained in Article 19 (1 )  (f)\t and
\nclauses\t (  1 ) and (2) of Article 31. It stands  to  reason
\nthat  ‘property’  cannot have one meaning in  Article  19(1)\n<\/p>\n
(f),  another in Article 31 clause (1) and still another  in
\nArticle\t 31,  clause  (2).  ‘Property’ must  have  the\tsame
\nconnotation  in all the three Articles and since  these\t are
\nconstitutional\tprovisions intended to secure a\t fundamental
\nright, they must receive the widest interpretation and\tmust
\nbe  held  to  refer  to\t property  of  every  kind.    While
\ndiscussing the scope and content of Entry 42 in List III  of
\nthe  Seventh  Schedule to the  Constitution,  which  confers
\npower  on Parliament and the Legislatures to legislate\twith
\nrespect\t to “acquisition and requisitioning of property”  It
\nwas  J., speaking on behalf of the majority in\tR.  India(1)
\nthat   property\t which\tcan  be\t compulsorily\taquired\t  by
\nlegislation  under this Entry means the\t “highest  anything,
\nbeing\tthat  right  which  one\t has  to  with\trespect\t  to
\n“acquisition  and requisition of property”, it\twas  pointed
\nout by Shah, C. Cooper v. Union of<\/a> acquired by legislative a
\nman can have to lands or tenements, goods or chattels  which
\ndoes  not  depend  on  another’s  courtesy  :  it   includes
\nownership,  estates and interests in corporeal\tthings,\t and
\nalso  rights  such as trade-marks, copyrights,\tpatents\t and
\neven rights in persona capable of transfer or  transmission,
\nsuch,  as  debts; and signifies a beneficial right to  or  a
\nthing  considered as having a money value,  especially\twith
\nreference  to transfer or succession, and to their  capacity
\nof   being  injured”.\tIt  would,  therefore,\tseem   that,
\naccording to the decision of the majority in R. C. Cooper’.s
\ncase, debts and other rights in personam capable of transfer
\nor  transmission  are property which can form  the  subject-
\nmatter of compulsory acquisition.  And this would seem to be
\nunquestionable\ton principle, since  even  jurisprudentially
\ndebts  and other rights of action are property and there  is
\nno
\n(1)  [1970] 3 S.C.R. 530.\n<\/p>\n
359<\/span><\/p>\n
reason\twhy they should be excluded from the  protection  of
\nthe  constitutional  guarantee.\t  Hidayatullah,\t C.J.,\t had
\noccasion  to  consider\tthe true nature of  debt  in  H.  H.
\nMaharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur & Ors.
\nv.  Union  of India<\/a>(1) where the question  was\twhether\t the
\nPrivy  Purse payable to the Ruler was property of  which  he
\ncould  be said to be deprived by the Order of the  President
\nwithdrawing  his  recognition as Ruler.\t The  learned  Chief
\nJustice,  making  a very penetrating analysis of  the  jural
\nrelationship involved, in a debt, pointed out that ” a\tdebt
\nor  a  liability to pay money passes  through  four  stages.
\nFirst  there  is a debt not yet due.  The debt has  not\t yet
\nbecome\ta  part of the obliger’s ‘things’  because.  no\t net
\nliability  has\tyet arisen.  The Second stage  is  when\t the
\nliability  may have arisen but is not either ascertained  or
\nadmitted.   Here again the amount due has not become a\tpart
\nof the obligor’s things, The third stage is reached when the
\nliability  is  both ascertained and admitted.\tThen  it  is
\nproperty proper of the debtor in the creditor’s hands.\t The
\nlaw  begins  to recognise such property\t in  insolvency,  in
\n,dealing   with\t it  in\t fraud\tof   creditors,\t  fraudulent
\npreference  of\tone creditor against  another,\tsubrogation,
\nequitable  estoppel, stoppage intransitive etc.\t  A  credit-
\ndebt  is then a debt fully provable and which is  fixed\t and
\nabsolutely owing.  The last stage is when the debt becomes a
\njudgment debt by reason of a decree of a Court.” and  apply-
\ning  this  test,  concluded that the Privy  Purse  would  be
\nproperty   and\t proceeded  to\tadd  :\t“As,  soon   as\t  an
\nAppropriation  Act is passed there is established a  credit-
\ndebt and the outstanding Privy Purse becomes the property of
\nthe  Ruler  in the hands of Government.\t It is\talso  a\t sum
\ncertain\t and  absolutely payable.” Since the effect  of\t the
\nOrder  of  the President was to deprive the,  Ruler  of\t his
\nPrivy Purse which was his property the learned Chief Justice
\nheld that there was infringement of the fundamental right of
\nthe  Ruler under Article 3 1 (2).  Hegde, J.,  also  pointed
\nout  in\t a separate but concurring judgment that  since\t the
\nright to get the Privy Purse was a legal right\t“enforceable
\nthrough\t the  courts”, it was undoubtedly property  and\t its
\ndeprivation  was  sufficient to, found a petition  based  on
\ncontravention  of Article 31(2).  It was also held  by\tthis
\nCourt in State of Madhya Pradesh v. Ranajirao Shinde &\tAnr.<\/a>
\n(2)  that  a right to receive cash grant annually  from\t the
\nState was property within the, meaning of that expression in
\nArticle 19(1)(f) and clause (2) of Article 31.\tThe right to
\npension\t was  also regarded as property for the\t purpose  of
\nArticle\t 19(1)\t(f)  by\t the  decisions\t of  this  Court  in
\nDeokinanda  Prasad v. State of Bihar(1) and State of  Punjab
\nv. K. R. Erry & Sobhag Rai Mehta<\/a>(4).  This Court adopted the
\nsame line of reasoning when it said in State of Gujarat\t and
\nAnr.  v. Shri Ambica Mills Lid., Ahmedabad<\/a>(5)  that  “unpaid
\naccumulations represent the obligation of the, employers  to
\nthe  employees and they are the property of the\t employees”.
\nMathew,\t J., speaking on behalf of the Court, observed\tthat
\nthe obligation to, the employees owned by the employers was
\n(1)  [1968] 3 S.C.R. 489.\n<\/p>\n
(3)  [1971] Supp.  S.C.R. 634.\n<\/p>\n
(4)  [1973] 2 S.C.R. 405.\n<\/p>\n
(5)  [1974] 3 S.C.R. 760.\n<\/p>\n
(2)  [1968] 3 S.C.R. 9.\n<\/p>\n
360<\/span><\/p>\n
“property from the standpoint of the employees”.  It  would,
\ntherefore,  be\tseen  that Property within  the\t meaning  of
\nArticle\t 19(1)(f)  and clause (2) of  Article  31  comprises
\nevery  form of property, tangible or  intangible,  including
\ndebts and chooses in action, such as unpaid accumulation  of
\nwages,\tpension, cash grant and\t constitutionally  protected
\nPrivy  Purse.\tThe  debts  due\t and  owing  from  the\tLife
\nInsurance Corporation in respect of annual cash bonus  were,
\ntherefore,  clearly  property  of Class\t III  and  Class  IV
\nemployees within the meaning of Article 31, clause (2).\t And
\nso also was their right to receive annual cash bonus for the
\nperiod; from the date of commencement of the impugned.\t Act
\nupto   31st  March,  1977,  for\t that  was  a  legal   right
\nenforceable  through  a court of law by issue of a  writ  of
\nMandamus, Vide the observation of Hegde, J., at page 194  in
\nthe Privy Purse case.\n<\/p>\n
But  a\tquestion  was raised on behalf\tof  the\t Respondents
\nwhether\t debts\tand  choses in\taction,\t though\t undoubtedly
\nproperty,  could  form\tthe  subject-matter  of\t  compulsory
\nacquisition  so as to attract the applicability\t of  Article
\n31,  clause  (2).  There is divergence\tof  opinion  amongst
\njurists in the United States of America on this question and
\nthough\tin the earlier decisions of the American courts,  it
\nwas  said  that\t the  power  of\t eminent  domain  cannot  be
\nexercised  in  respect of money and choses  in\taction,\t the
\nmodern trend, as pointed by Nicholas on Eminent Domain, Vol.
\n1,  page 99, para 2, seems to be, that the right of  eminent
\ndomain\tcan be exercised on choses in action.  But  even  if
\nthe preponderant view in the United States were that  choses
\nin action cannot come within the power of eminent domain, it
\nwould  not be right to allow us to be unduly  influenced  by
\nthis  view in the interpretation of the scope and  ambit  of
\nclause\t(2)  of Article 31.  We must interpret\tArticle\t 31,
\nclause (2) on its own terms without any preconceived notions
\nborrowed from the law in the United States on the subject of
\neminent domain.\t Let us see how this interpretative exercise
\nhas been performed by this (Court in the decisions that have
\nbeen  rendered\tso  far and what light\tthey  throw  on\t the
\nquestion as to whether choses in action can be\tcompulsorily
\nacquired  under clause (2) of Article 31.  We shall  confine
\nour attention only to the question of compulsory acquisition
\nof  choses  in\taction and not say  anything  in  regard  to
\ncompulsory  acquisition of money, for in these\tappeals\t the
\nquestion arises only in regard to choses in action and it is
\nnot  necessary\tto  consider  whether  money  can  form\t the
\nsubject-matter\tof  compulsory acquisition.   This  question
\ncame to be considered by a constitution Bench of this  Court
\nin  State of Bihar v. Kameshwar Singh<\/a>(‘,).  Section 4(b)  of
\nthe  Bihar  Land  Reforms Act,\t1950,  which  provided.\t for
\nvesting\t in  the State, of arrears of rent due to  the\tpro-
\nprietors or tenure holders for the period prior to the\tdate
\nof  vesting  of\t the estates or tenures\t held  by  them,  on
\npayment\t of only 50 per cent of the amount as  compensation,
\nwas  challenged\t as constitutionally invalid on\t the  ground
\nthat there was no public purpose for which such\t acquisition
\ncould  be  said\t to  have  been\t made.\t The  necessity\t for
\nexistence  of public purpose was not sought to be spelt\t out
\nfrom  Article  31, clause (2), because even  if\t there\twere
\nviolation of that
\n(1)  [1952] S.C.R. 889.\n<\/p>\n
361<\/span><\/p>\n
clause,\t it would be protected by Article 31A and the  Ninth
\nSchedule read with Article 31-B, the.  Act being included as
\nItem   in  the Ninth Schedule, but it was said\tthat  public
\npurpose\t was an essential element in the very nature of\t the
\npower of acquisition and even apart from Article 31,  clause
\n(2), no acquisition could be made save for a public purpose.
\nIt  was\t in the context of this argument that  Mahajan,\t J.,
\nobserved that money and choses in action could not be  taken
\nunder  the power of compulsory acquisition, since  the\tonly
\npurpose\t which such taking would serve would be\t to  augment
\nthe  revenues of the State and that would clearly not  be  a
\npublic purpose.\t The learned judge pointed out at pages 942-
\n944 of the Report :\n<\/p>\n
\t      “It is a well accepted proposition of law that
\n\t      property of individuals cannot be appropriated
\n\t      by  the  State under the power  of  compulsory
\n\t      acquisition  for the, mere purposes of  adding
\n\t      to  the, revenues of the State-no instance  is
\n\t      known in which it has been taken for the\tmere
\n\t      purpose  of  raising  a revenue  by  sale,  or
\n\t      otherwise\t Taking\t money under  the  right  of
\n\t      eminent domain, when it must be compensated in
\n\t      money afterwards is nothing more or less\tthan
\n\t      a forced loan Money or that which in  ordinary
\n\t      use  passes as such and which  the  Government
\n\t      may  reach  by  taxation-and  also  rights  in
\n\t      action  which can only be available when\tmade
\n\t      to  produce money, cannot be taken under\tthis
\n\t      power”.\n<\/p><\/blockquote>\n
for  the  taking  would not be for  a  public  purpose,\t and
\nproceeded  to  and  that the only purpose,  to\tsupport\t the
\nacquisition of the arrears of rent was “to raise revenue  to
\npay compensation to some of the zamindars whose estates\t are
\nbeing  taken”  and  this purpose did  not  fall\t within\t any
\ndefinition, however, wide, of the phrase ‘public purpose and
\nthe  law  was, therefore, to this  extent  unconstitutional.
\nMukherjea,  J., came to the same conclusion and observed  at
\npage 961 of the Report
\n\t      “Money  as such and also rights in action\t are
\n\t      ordinarily excluded from this List by American
\n\t      jurists and for good reasons.  There could  be
\n\t      no  possible  necessity for taking  either  of
\n\t      them under the power of eminent domain.  Money
\n\t      in  the hands of a citizen can be\t reached  by
\n\t      the exercise of the power of taxation, it\t may
\n\t      be  confiscated  as a penalty  under  judicial
\n\t      order-But,  as Cooley has pointed out,  taking
\n\t      money  under the right of eminent domain\twhen
\n\t      it  must\tbe compensated by  money  afterwards
\n\t      could  be nothing more or less than  a  forced
\n\t      loan and it is difficult to say that it  comes
\n\t      under the head of acquisition and is  embraced
\n\t      within its ordinary connotation.”\n<\/p>\n
Chandrasekhara\tAiyer, J., also took the same view and\theld
\nthat money. and choses in action were exempt from compulsory
\nacquisition  “not  on  the  ground  that  they\tare  movable
\nproperty,  but on the ground that generally  speaking  there
\ncould be no public purpose in their
\n362<\/span>
\nacquisition”.\tPatanjali Sastri, C.J., and Das, J., on\t the
\nother hand held that the arrears of rent constituted a\tdebt
\ndue by the tenants.  It was nothing but an actionable claim,
\nagainst\t the  tenants  which was undoubtedly  a\t species  of
\n‘property’  which  was assignable and, therefore,  it  could
\nequally be acquired by the State as a species of ‘property’.
\nThese two rival views were referred to by Venkatarama Aiyer,
\nJ.  speaking  on  behalf of the Court  in  Bombay  Dyeing  &
\nManufacturing Co.   Ltd.  v. The State of Bombay  &  Ors.<\/a>(1)
\nbut the learned Judge did not treat  the  majority  view  as
\nfinally settling the law on the subject.     It appears that
\nin  the\t subsequent  case  of State  of\t Madhya\t Pradesh  v.
\nRanajirao Shinde<\/a> (supra) Hegde, J., delivering the  judgment
\nof  the Court observed that the majority view  in  Kameshwar
\nSingh’s\t case was followed by this Court in Bombay Dyeing  &
\nManufacturing  Co.’s  case, but we do not  think  that\tthis
\nobservation correctly represents what was decided in  Bombay
\nDyeing\t& Manufacturing Co’s case.  Venkatarama\t Aiyer,\t J.,
\nrested\this decision in Bombay Dyeing &\t Manufacturing\tCo’$
\ncase  on  alternative  grounds : if,  the  impugned  section
\nprovided  for the acquisition of money, and if\tmoney  could
\nnot be acquired, then the section was void under Article  19
\n(1) (f) as imposing an unreasonable restriction on the right
\nto  hold  property.  If, on the other hand, money  could  be
\nacquired  ,  the section was void as offending\tArticle\t 31,
\nclause (2) since the section did not provide for payment  of
\ncompensation.  The decision in Bombay Dyeing & Manufacturing
\nCo.’s  case  did  not, therefore, lay down  that  money\t and
\nchoses\tin  action could not be acquired under\tArticle\t 31,
\nclause (2).\n<\/p>\n
But  in State of Madhya Pradesh v. Ranojirao Shinde<\/a>  (supra)
\nthis  Court did hold that money and choses in  action  could
\nnot form the subject-matter of acquisition under Article 31,
\nclause\t(2) and the reason it gave for taking this view\t was
\nthe same as that which prevailed with the majority judges in
\nKameshwar  Singh’s case.  This Court held that the power  of
\ncompulsory  acquisition conferred under Article\t 31,  clause
\n(2)  could not be utilised for enriching the coffers of\t the
\nState;\tthat  power  could be exercised only  for  a  public
\npurpose and augmenting the resources of the State could\t not
\nbe  regarded  as  public purpose.  Hegde,  J.,\tspeaking  on
\nbehalf of the Court, pointed out that if it were  otherwise,
\n“it would be permissible for the legislatures to enact\tlaws
\nacquiring  all\tpublic\tdebts due from\tthe  State,  annuity
\ndeposits  returnable by it and provident fund payable by  it
\nby providing for the payment of some nominal compensation to
\nthe  persons whose rights are acquired, as the\tacquisitions
\nin  question would augment the resources of the State”,\t but
\nnothing so bad could be said to be within the  contemplation
\nof  clause  (2)\t of Article 31.\t Let  us  first\t examine  on
\nprinciples  whether this reasoning qua choses in  action  is
\nsound and commends itself for our acceptance.
\nThis  premise on which this reasoning is based is  that\t the
\nonly  purpose for which choses in action may be acquired  is
\naugmenting  the\t revenues of the State and there can  be  no
\nother purpose for such
\n(1)  [1958] S.C.R. 1122.\n<\/p>\n
363<\/span><\/p>\n
acquisition.   But this premise is plainly incorrect and  so
\nis  the reasoning based upon it.  Why can choses  in  action
\n‘not be acquired for a public purpose other than mere adding
\nto  the revenues of the State ?\t There may be debts due\t and
\nowing  by poor and deprived tillers, artisans  and  landless
\nlabourers  to  moneylenders and the State may  acquire\tsuch
\ndebts  with  a\tview to relieving  the\tweak  and  exploited
\ndebtors\t from  the harassment and oppression to\t which\tthey
\nmight be subjected by their economically powerful creditors.
\nThe  purpose of the acquisition in such a case would not  be
\nto enrich the coffers of the State.  In fact, the coffers of
\nthe State would not be enriched by such acquisition, because
\nhaving regard to the financial condition of the debtors,  it
\nmay  not  be  possible for the State  to  recover  much,  or
\nperhaps anything at all, from the impoverished debtors.\t The
\npurpose of such acquisition being relief of the distress  of
\nthe  poor  and helpless debtors would be  clearly  a  public
\npurpose.  We have taken one example by way of  illustration,
\nbut  in\t a modern welfare State, dedicated  to\ta  socialist
\npattern of society, myriad situations may arise where it may
\nbe  necessary  to acquire choses in action for\tachieving  a
\npublic purpose.\t It is not correct to say that in every case
\nwhere  choses  in  action may be acquired,  the\t purpose  of
\nacquisition  would necessarily and always be  augmenting  of
\nthe revenues of the State and nothing else.  Even the theory
\nof  forced  loan may break down in case\t of  acquisition  of
\nchoses in action.  There is a fundamental difference between
\nchose  in action and money, in that the former has  not\t the
\nsame mobility and liquidity as the latter and its values  is
\nnot  measured  by the amount recoverable under\tit,  but  it
\ndepends\t on  a\tvariety of factors  such  as  the  financial
\ncondition of the person liable, the speed and  effectiveness
\nof the litigative process and the eventual uncertainty as to
\nwhen  and to what extent it may be possible to\trealise\t the
\nchose  in  action.   Even  after  the  chose  in  action  is
\nacquired,  the State may not be able to recover\t the  amount
\ndue under it and there may even be cases where the chose  in
\naction\tmay be released by the State.  Where money is  given
\nas  compensation for taking of money, the theory  of  forced
\nloan  may apply,. but it is difficult to see how it  can  be
\napplicable  where  chose  in  action  is  taken\t and   money
\nrepresenting  its value, which in a large majority of  cases
\nwould be less than the amount recoverable under it, is given
\nas compensation.  Moreover, the theory of forced loan stands
\nconsiderably  eroded  after  the amendment  of\tArticle\t 31,
\nclause (2) by the Constitution (Twenty-fifth Amendment) Act,
\n1971,  because under the amended clause, even if  an  amount
\nless  than the just equivalent is given as compensation\t for
\nacquisition  of property, it would not be violative  of\t the
\nconstitutional guarantee.  It is true, and this thought\t was
\nalso  expressed\t by  Krishna Iyer, J.,\tand  myself  in\t our
\nseparate  but concurring Judgment in the State of Kerala  v.
\nThe  Gwalior  Rayon Silk Manufacturing\t(Wvg.)\tCo.  Ltd.<\/a>(1)
\nthat, notwithstanding the amended clause (2) of Article\t 31,
\nthe  legislature  would\t be expected,  save  in\t exceptional
\nsocio-historical  setting to provide just  compensation\t for
\nacquisition   of  property,  but  if  for  any\treason\t the
\nlegislature   provides\ta  lesser  amount  than\t  the\tjust
\nequivalent, it would not be open to challenge on the  ground
\nof infringement of clause (2) of Article
\n(1)  [1974] 1 S.C.R.671.\n<\/p>\n
364<\/span><\/p>\n
31.  Then,  how\t can the theory of forced  loan\t apply\twhen
\nchose  in action is acquired and what is paid for it is\t not
\nthe  just equivalent but a much lesser amount, which  is  of
\ncourse\tnot  illusory.\tMoreover, there is  also  one  other
\nfallacy underlying the argument that there can be no  public
\npurpose\t in the acquisition of choses in action and that  is
\nbased on the assumption that the public purpose contemplated
\nby Article 31, clause (2) lies in the use to which the\tpro-
\nperty  acquired is to be put as for example, where  land  or
\nbuilding  or  other movable property is acquired  for  being
\nused  for  a  public purpose.  But this\t assumption  is\t hot
\njustified by the language of Article 31, clause (2), because
\nall that this clause requires is that the purpose for  which
\nthe  acquisition  is made must be a public purpose,  or,  in
\nother  words,  the, acquisitions must be made to  achieve  a
\npublic\tpurpose.   Article 31, clause (2) does\tnot  require
\nthat the property acquired must itself be used for a  public
\npurpose.   So  long as the acquisition\tsubserves  a  public
\npurpose,  it would satisfy the requirement of clause (2)  of
\nArticle\t 31  and,  therefore, if it can be  shown  that\t the
\nacquisition  of choses in action is for subserving a  public
\npurpose,  it  would be constitutionally valid.\t Hegde,\t J.,
\nexpressed  an  apprehension in State of\t Madhya\t Pradesh  v.
\nRanojirao Shinde<\/a> (supra) that if this view were accepted, it
\nwould  be  permissible\tfor the legislature  to\t enact\tlaws
\nacquiring  the public debts due from the State, the  annuity
\ndeposits returnable by it and the provident fund payable  by
\nit by providing for payment of some nominal compensation  to
\nthe  persons  whose rights were acquired.  We do  not  think
\nthis  apprehension is well founded.  It is difficult to\t see
\nwhat  public purposes can possibly Justify a  law  acquiring
\nthe  public debts due to the State or the  annuity  deposits
\nreturnable  by it or the provident fund payable by  it.\t  If
\nthe  legislature enacts a law acquiring any of these  choses
\nin  action, it could only be for the purpose  of  augmenting
\nthe revenues of the State or reducing State expenditure\t and
\nthat  would  clearly  not  be  a  public  purpose  and\t the
\nlegislation would plainly be violative of the constitutional
\nguarantee  embodied  in Article 31, clause (2).\t  We  would,
\ntherefore, prefer the minority view of Das, J., in Kameshwar
\nsingh’s\t case  (supra)\tas  against  the  majority  view  of
\nMahajan, J., Mukherjea, J. and Chandrasekhara Aiyer, J.
\nSo  much on principle.\tTurning now to the  authorities,  we
\nfind  that,  apart from the view of the majority  judges  in
\nKameshwar  Singh’s  case and the decision in  the  State  of
\nMadhya\tPradesh\t v. Ranojirao Shinde<\/a> (supra),  there  is  no
\nother  decision of this Court which has taken the view\tthat
\nchoses\tin  action  cannot be  compulsorily  acquired  under
\nArticle\t 31,  clause  (2).  There  are\tin  fact  subsequent
\ndecisions  which clearly seem to suggest the, contrary.\t  We
\nhave already referred  to R. C. Cooper’s case.\tThe majority
\njudgment case gives the widest meaning to ‘property which of
\nShah, J., in that can be, compulsorily acquired and includes
\nwithin\tit  ::rights  in personam  capable  of\ttransfer  or
\ntransmission, such as debts. The majority view in  Kameshwar
\nSingh’s\t case  (supra) and the decision in State  of  Madhya
\nPradesh\t v.  Ranojirao Shinde<\/a> (supra) on this point  can  no
\nlonger be regarded as good law in view of this statement  of
\nthe law in the majority judgment of Shah, J. Then again,  in
\nthe Privy Purse case (supra),
\n365<\/span>
\nHidayatullah,  C.J., held that the Privy Purse payable to  a
\nRuler  was  a  credit-debt owned by him\t and  since  he\t was
\ndeprived  of  it by the Order of the  President,  there\t was
\nviolation of his- fundamental right under Article 31, clause
\n(2).  The learned Chief Justice thus clearly recognised that
\ndebt  or  chose in action could form the subject  matter  of
\ncompulsory acquisition under Article 31, clause (2).  Hegde,
\nJ.,  also took the same view in his separate but  concurring
\njudgment  in the Privy Purse case.  It will,  therefore,  be
\nseen  that  the trend of the recent decisions  has  been  to
\nregard\tdebt  or chose in action as property  which  can  be
\ncompulsorily acquired under clause (2) of Article 31. We are
\naccordingly  of the view that the debts due and\t owing\tfrom
\nthe Life Insurance Corporation to Class III and Class IV em-
\nployees\t in  respect of annual cash  bonus  were  ‘property’
\nwithin the meaning of Article 3 1, clause (2) and they could
\nbe compulsorily acquired under that clause.
\nThe question, however, still remains whether by the impugned
\nAct  there  was compulsory acquisition of the debt  due\t and
\nowing  from the Life Insurance Corporation to Class III\t and
\nClass IV employees in respect of annual cash bonus.  It\t was
\nnot  disputed  on behalf of the Life  Insurance\t Corporation
\nthat  if  the impugned Act had the  affect  of\tcompulsorily
\nacquiring  these debts belonging to Class III and  Class  IV
\nemployees, it would be void as offending Article 31,  clause
\n(2), since it admittedly did not provide for payment of\t any
\ncompensation.\t The  Statement\t of  Objects   and   Reasons
\nundoubtedly  said that the provisions of the  Settlement  in
\nregard to payment of annual cash bonus were being set  aside
\nwith effect from 1st April, 1975 with a view to enabling the
\nLife Insurance Corporation to make ex-gratia payment to\t the
\nemployees  “at\tthe  rates determined on the  basis  of\t the
\ngeneral\t Government policy for making ex-gratia payments  to
\nthe, employees of non-competing public sector  undertaking”.
\nBut  the impugned Act did not contain any provision to\tthat
\neffect and Class III and Class IV employees were deprived of
\nthe debts due and owing to them without any provision in the
\nstatute for payment of compensation.  The learned  Attorney-
\nGeneral\t on  behalf  of\t the  Life  Insurance\tCorporation,
\nhowever, strenuously contended that there was no  compulsory
\nacquisition  of\t the debts due and owing to, Class  III\t and
\nClass IV employees under the impugned Act, but all that\t the
\nimpugned   Act\tdid  was  to  extinguish  those\t  debts\t  by
\nannihilating  the provisions of the Settlement in regard  to
\npayment\t of  annual cash bonus with effect from\t 1st  April,
\n1975.\tThe  debts  due and owing from\tthe  Life  Insurance
\nCorporation  to Class III and Class IV employees,  said\t the
\nlearned\t  Attorney-General,   were  extinguished   and\t not
\ncompulsorily  acquired and hence there was no  contravention
\nof  Article 31, clause (2).  Now, prior to the\tConstitution
\n(Fourth Amendment) Act, 1955, which introduced clauses\t(2A)
\nand (2B) in Article 3 1, there was considerable\t controversy
\nas  to the inter-relation between clauses (1) and.  (2)\t and
\nthat  coloured\tthe  interpretation  of\t the  words   “taken
\npossession  of or acquired” in clause (2) as it stood  prior
\nto  the amendment.  The majority view in The State  of\tWest
\nBengal\tv.  Subodh  Gopal  Bose\t &  Ors.<\/a>(1)  and   Dwarkadas
\nShrinivas of
\n(1) [1954] S.C.R. 587.\n<\/p>\n
6-277SCI\/78
\n366<\/span>
\nBombay v. The Sholapur Spinning & Weaving Co. Ltd. & Ors<\/a>:(1)
\nwas that clauses (1) and (2) of Article 31 were not mutually
\nexclusive;   but  they\tdealt  with  same  topic   and\t the
\ndeprivation  contemplated in clause (1) was no,\t other\tthan
\nthe compulsory acquisition or taking possession of  property
\nreferred  to in clause (2) and hence where  the\t deprivation
\nwas so substantial as to amount to compulsory acquisition or
\ntaking\t possession,   Article\t31   was   attracted.\t The
\nintroduction  of  clause (‘-)A) in Article, 31\tsnapped\t the
\nlink  between  clauses\t(1)  and (2)  and  brought  about  a
\ndichotomy  between these two clauses.\tThereafter,  clause.
\n(2)    alone   dealt   with   compulsory   acquisition\t  or
\nrequisitioning of property by the State and clause (1) dealt
\nwith  deprivation of property in other ways and what  should
\nbe  regarded as compulsory acquisition or requisitioning  of
\nproperty for the Purpose of clause (2) was defined in clause
\n(2A).  It was if clause (2A) supplied the dictionary for the
\nmean  of  ‘compulsory  acquisition  and\t requisitioning\t  of
\nproperty  in  clause (2).  Clause (2A) declared that  a\t law
\nshall\tnot  be\t deemed,  to  provide  for  the\t  compulsory
\nacquisition  or requisitioning of property, if it  does\t not
\nprovide\t for  the  transfer of the  ownership  or  right  to
\npossession of the property to the State or to a\t corporation
\nowned  or controlled by the State.  It is only where  a\t law
\nprovides   for\tthe  transfer  of  ownership  or  right\t  to
\npossession of any property to the State or to a\t corporation
\nowned or controlled by the State that it would have to\tmeet
\nthe challenge of clause (2) of Article 31 as a law providing
\nfor  compulsory acquisition or requisitioning  of  property.
\nWhenever, therefore, the constitutional validity of a law is
\nchallenged on the ground of infraction of Article 31, clause
\n(2),  the question has to be asked whether the law  provides
\nfor the transfer of ownership or right to possession of\t any
\nproperty  to  the  State  or  to  a  corporation  owned\t  or
\ncontrolled   by\t the  State.   Here,  the   Life   Insurance
\nCorporation  is\t a  corporation owned by the  State  as\t its
\nentire capital has been provided by the- Central Government.
\nThe debts due, and owing to Class III and Class IV employees
\nfrom  the  Life\t Insurance  Corporation\t are  cancelled\t  or
\nextinguished  by  the  impugned Act.  Does  that  amount  to
\ntransfer of ownership of any property to the Life  Insurance
\nCorporation within the meaning of clause (2A) of Article  31
\n? If it does, Article 31, clause (2) would be attracted, but
\nnot  otherwise.\t That depends on the true interpretation  of
\nArticle 31, clause (2A).\n<\/p>\n
Now, whilst interpreting Article 31, clause (2A), it must be
\nremembered  that  the interpretation we place upon  it\twill
\ndetermine   the\t scope\tand  ambit  of\tthe   constitutional
\nguarantee  under  clause  (2) of Article 31.  We  must\tnot,
\ntherefore, construe clause (2A) in a narrow pedantic  manner
\nnor  adopt  a  doctrinaire  or\tlegalistic  approach.\t Our
\ninterpretation must be guided by the substance of the matter
\nand not by lex scripts.\t When clause (2A) says that in order
\nto attract the applicability of clause\t(2)  the  law\tmust
\nprovide for the transfer of ownership of property to the  State
\nor to a corporation owned or controlled by the State, it  is
\nnot  necessary that the law should in so many words  provide
\nfor  such  transfer.  No particular verbal formula  need  be
\nadopted.   It is not a ritualistic mantra which is  required
\nto be repeated in the law.  What
\n(1)  [1954] S.C.R. 674.\n<\/p>\n
3 67
\nhas to be considered is the substance of the law and not its
\nform.  The question that is to be asked is : does the law in
\nsubstance  provide for transfer of ownership-  of  property,
\nwhatever  be the linguistic formula employed ? What  is\t the
\neffect\tof  the\t law  : does  it  bring\t about\ttransfer  of
\nownership of property ? Now, ‘transfer of ownership is\talso
\na  term of wide import and it comprises every mode by  which
\nownership  may\tbe transferred from one person\tto  another.
\nThe  mode of transfer may vary from one kind of property  to
\nanother\t : it would depend on the nature of the property  to
\nbe transferred.\t And moreover, the court would have to\tlook
\nto  the substance of the transaction in order  to  determine
\nwhether there is transfer of ownership involved in what\t has
\nbeen brought about by the law.\n<\/p>\n
There is no doubt that in the present case the impugned\t Act
\nextinguished  or put an end to the debts due and owing\tfrom
\nthe  Life  Insurance Corporation to Class III and  Class  IV
\nemployees. that was the, direct effect of. the impugned\t Act
\nand  it\t can,  therefore,  be  legitimately  said  that\t  in
\nsubstance  the impugned Act provided for  extinguishment  of
\nthese  debts,  though it did not say so in  so\tmany  words.
\nThis  much  indeed was not disputed on behalf  of  the\tLife
\nInsurance  Corporation\tand  the  controversy  between\t the
\nparties\t  only\tcentred\t round\tthe  question  whether\t the
\nextinguishment\tof  these  debts involved  any\ttransfer  of
\nownership  of  property to the Life  Insurance\tCorporation.
\nThe learned Attorney General on behalf of the Life Insurance
\nCorporation   sought   to   make   a   distinction   between
\nextinguishment\tand  transfer  of ownership of\ta  debt\t and
\ncontended  that when ownership of a debt is transferred,  it
\ncontinues to exist as a debt in the hands of the transferee,
\nbut when a debt is extinguished it ceases to exist as a debt
\nand it is not possible to say that the debtor has become the
\nowner of the debt.  There can be no transfer of ownership of
\na  debt, said the learned Attorney-General unless  the\tdebt
\ncontinues  to exist as such in the hands of the\t transferee,
\nand,  therefore, extinguishment of a debt does\tnot  involve
\ntransfer  of  ownership\t of the debt to\t the  debtor.\tThis
\ncontention   of\t  the\tlearned\t  Attorney-General,   though
\nattractive  at\tfirst  blush, is, in our  opinion  not\twell
\nfounded.   It  is not correct to say that there\t can  be  no
\ntransfer  of  ownership of a right or interest\tunless\tsuch
\nright or interest continues to have a separate\tidentifiable
\nexistence  in  the  hands  of the  transferee.\t It  is\t not
\ndifficult  to find instances where ownership of a  right  or
\ninterest  may be transferred from one person to, another  by
\nextinguishment.\t  Take for example, a case where the  lessor
\nterminates  the\t lease\tgranted\t by him\t to  the  lessee  by
\nexercising his right of forfeiture or the lessee  surrenders
\nthe lease in favour of the lessor.  The lease would in\tsuch
\na  case come to an end and the interest of the lessee  would
\nbe  extinguished and correspondingly, the reversion  of\t the
\nlessor\twould be enlarged into full ownership by the  return
\nof the leasehold interest.  There would clearly be  transfer
\nof the lease-hold interest from the lessee to the lessor  as
\na  result  of  the  determination  of  the  lease  and\t the
\nextinguishment\tof  the interest of the\t lessee.   The\tsame
\nwould be the position where A law provides for cancellation,
\nof the lease and in such a case, if the lessor is the  State
\nor a corporation owned or controlled by the State, it  would
\namount\tto compulsory acquisition of the leasehold  interest
\nof the lessees within meaning of clause (2A) of Article\t 31.
\nIt was in fact to held by this
\n368<\/span>
\nCourt  and in our opinion rightly in Ajit Singh v. State  of
\nPunjab(1)  where  sikri,  J.,  speaking\t on  behalf  of\t the
\nmajority, pointed out at page 149 that if “the State is\t the
\nlandlord of an estate and there is a lease of that  property
\nand a law provides for the extinguishment of leases held  in
\nan  estate-it  would  properly fall under  the\tcategory  of
\nacquisition   by  the  State  because  the  beneficiary\t  of
\nextinguishment\twould  be the State”.  Where  by  reason  of
\nextinguishment of a right or interest of a person, detriment
\nis  suffered by him, and a corresponding benefit accrues  to
\nthe  State,  there would be transfer of\t ownership  of\tsuch
\nright  or interest to the State.  The question would  always
\nbe  : who is the, beneficiary of the extinguishment  of\t the
\nright  or  interest effectuated by the law?  If\t it  is\t the
\nState,\tthen  there would be transfer of  ownership  of\t the
\nright  or interest to the State-, because what the owner  of
\nthe  right  or\tinterest would have lost by  reason  of\t the
\nextinguishment\twould be the benefit accrued to\t the  State.
\nThis  was  precisely the reason why Hegde, J.,\tspeaking  on
\nbehalf of the Court observed in the State of Madhya  Pradesh
\nv. Ranojirao Shinde<\/a> (supra) that it was possible to view the
\nabolition  of  cash  grants under  the\tMadhya\tPradesh\t law
\nimpugned in that case “as a statutory transfer of rights  of
\nthe grantees to the State”.  It was pointed out in that case
\nthat there was no difference between taking by the State  of
\nmoney  that is in the hands of others and the abrogation  of
\nthe liability of the State to make payment to others, for in
\nthe  former  case  the State would  be\tcompulsorily  taking
\nothers’ property, while in the latter it would be seeking to
\nappropriate to itself the property of others which is in its
\nhands.\t It  is, therefore, clear that when a debt  due\t and
\nowing  by the State or a corporation owned or controlled  by
\nthe  State  is\textinguished by law, there  is\ttransfer  of
\nownership  of  the  money representing\tthe  debt  from\t the
\ncreditor   to  the  State  or  the  State   owned\/controlled
\ncorporation.   So long as the debt is due and owing to,\t the
\ncreditor,   the\t  State\t or   the   State   owned\/controlled
\ncorporation  is under a liability to pay the amount  of\t the
\ndebt  to the creditor and, therefore, if the amount  of\t the
\ndebt is X, the total wealth of the creditor would be A\tplus
\nX,  while  that\t of  the  State\t or  State  owned\/controlled
\ncorporation  would  be\tB  minus  X.  But  if  the  debt  is
\nextinguished,  the  total wealth of the\t creditor  would  be
\nreduced by X and that of the State or State owned\/controlled
\ncorporation augmented by the same amount.  Would this not be
\nin  substance and effect of transfer of X from the  creditor
\nto  the\t State or State owned\/controlled corporation  ?\t The
\nextinguishment\t of   the   debt  of   the   creditor\twith
\ncorresponding benefit to the State or State owned\/controlled
\ncorporation  would plainly and indubitably involve  transfer
\nof  ownership of the amount representing the debt  from\t the
\nformer\t to  the  latter.   This  is  the  real\t effect\t  of
\nextinguishment of the debt and by garbing it in the form  of
\nextinguishment,\t the State or State owned\/controlled  corpo-
\nration cannot obtain benefit at the cost of the creditor and
\nyet avoid the applicability of Article 31, clause (2).\t The
\nverbal\t veil  constructed  by\temploying  the\t device\t  of
\nextinguishment\tof  debt cannot be permitted to\t conceal  or
\nhide the real nature of the transaction.  It is necessary to
\nremember  that\twe  are dealing here with  a  case  where  a
\nconstitutionally  guaranteed right is sought to be  enforced
\nand the protection of such right should not be allowed to be
\ndefeated or rendered illusory by legis-\n<\/p>\n
3 69
\nlative\tstratagems.  The courts should be ready to rip\topen
\nsuch  stratagems and devices and find out whether in  effect
\nand substance the legislation trenches upon any\t fundamental
\nrights.\t  The encroachments on fundamental rights are  often
\nsubtle and sophisticated and they are disguised in  language
\nwhich apparently seems to steer clear of the  constitutional
\ninhibitions.   The need for a perspective and alert Bar\t is,
\ntherefore,  very  great and the courts too have to  adopt  a
\nbold and dynamic approach, if the fundamental rights are  to
\nbe protected against dilution or erosion.
\nIn   the  light\t of  this  discussion,\tthe  conclusion\t  is
\ninevitable that the direct effect of the impugned Act was to
\ntransfer  ownership of the debts due and owing to Class\t III
\nand  Class IV employees in respect of annual cash  bonus  to
\nthe Life Insurance Corporation and since the Life  Insurance
\nCorporation  is\t a  corporation\t owned\tby  the\t State,\t the
\nimpugned Act was a law providing for compulsory\t acquisition
\nof  these  debts by the State within-the meaning  of  clause
\n(2A)  of Article 31.  If that be so, the, impugned Act\tmust
\nbe  held to be violative of Article 31, clause (2) since  it
\ndid not provide for payment of any compensation at ail.\t for
\nthe compulsory acquisition of these debts.
\nRe : Ground (B)
\nSince  the  impugned  Act has been held\t void  as  offending
\nArticle 3 1, clause (2) under Ground (A), it is\t unnecessary
\nto  consider Ground (B) based on infraction of Article 19  (\n<\/p>\n
1)  (f). It is the settled practice of this Court to  decide
\nno  more than what is absolutely necessary for the  decision
\nof a case.  Moreover, once it is held that-the impugned\t Act
\nfalls within Article 31, clause (2), its validity cannot  be
\ntested\tby  reference  to Article 19 (1) (f)  by  reason  of
\nclause\t(2B)  of  Article 31. Hence  we\t do  not-propose  to
\ndiscuss the very interesting arguments advanced before us in
\nregard to Article 19 (1) (f).\n<\/p>\n
We accordingly allow the writ petitions and declare the Life
\nInsurance Corporation (Modification of Settlement) Act, 1976
\nvoid as offending Article 31, clause (2) of the Constitution
\nand  issue a writ of Mandamus directing the union  of  India
\nand   the  Life\t Insurance  Corporation\t to  forebear\tfrom
\nimplementing or enforcing the provisions of that Act and to,
\npay  annual cash bonus for the years 1st April, 1975 to 3  1
\nst  March, 1976 and 1 st April, 1976 to 3 1 st\tMarch,\t1977
\nto, Class III and Class IV employees in accordance with\t the
\nterms of clause 8(ii) of the Settlement dated 24th  January,
\n1974.\tThe  respondents  will pay the\tcosts  of  the\twrit
\npetitions to the petitioners.\n<\/p>\n
\t\t\t   ORDER
\nWe agree with the conclusion of Brother Bhagwati but  prefer
\nto  rest  our decision on the ground that the  impugned\t Act
\nviolates the provisions of Article 31(2) and is,  therefore,
\nvoid.  We consider it unnecessary to express any opinion  on
\nthe  effect  of the judgment of the Calcutta High  Court  in
\nW.P. No. 371 of 1976.\n<\/p>\n
P.B.R.\t\t    Petitions allowed.\n3 70\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Madan Mohan Pathak vs Union Of India & Ors. Etc on 21 February, 1978 Equivalent citations: 1978 AIR 803, 1978 SCR (3) 334 Author: M H Beg Bench: Beg, M. Hameedullah (Cj), Chandrachud, Y.V., Bhagwati, P.N., Krishnaiyer, V.R. & Desai, D.A., Fazalali, S.M. & Shingal, P.N. PETITIONER: MADAN MOHAN PATHAK Vs. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-33990","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nMadan Mohan Pathak vs Union Of India & Ors. 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