Life Insurance Corporation of India & ANR Vs. S.S. Srivastava & Ors [1987] INSC 151 (5 May 1987)
1987 Latest Caselaw 150 SC

Life Insurance Corporation of India & ANR V. S.S. Srivastava & Ors [1987] INSC 151 (5 May 1987)

VENKATARAMIAH, E.S. (J) VENKATARAMIAH, E.S. (J) SINGH, K.N. (J) CITATION: 1987 AIR 1527 1987 SCR (3) 180 1988 SCC Supl. 1 JT 1987 (2) 529 1987 SCALE (1)975

CITATOR INFO : F 1987 SC1706 (16)

ACT:

Life Insurance Corporation of India (Staff) Regulations 1960-Retirement of Class I and Class II Employees appointed on or after September 1, 1956 at 58 years--Whether valid and legal.

Life Insurance Corporation Act, 1956---Section 11(2)--Fixation of 60 years as age of superannuation for transferred employees-Whether unreasonable.

Constitution of India, 1950--Articles 14 and 16--Different ages of retirement for Class I and II Officers--Classification of employees into two categories for fixing of age of superannuation depending on dates of entry into service--Whether valid and legal.

HEADNOTE:

The Life Insurance Corporation was established on September 1, 1956 under the Life Insurance Act of 1956 (Act 31 of 1956) by amalgamating about 200 insurers carrying on life insurance business in the country. It had no employees of its own to carry on the vast business which had been taken over and the nature of the work was such that the Corporation required the services of employees with experience and expertise in running life insurance business. In order to meet the above need, Section 11 of the Act came to be enacted. Sub-section (1) provided that with effect from September 1, 1956, every whole time employee of the erstwhile insurers would become an employee of the Corporation and hold office therein by the same tenure, at the same remuneration, and upon the same terms and conditions and with the same rights and privileges as to pension and gratuity and other matters as he would have held on September 1, 1956, had the Act not been passed.

The conditions of service of the employees whose services were transferred to the Corporation under Section 11(1) were not uniform. The conditions governing the retirement of those employees were also diverse and different. In some cases the age of retirement had been fixed at 55 years, in some at 58 years and in some others at 60 years. In many cases, the insurers had permitted their employees to continue in 181 their services even beyond 60 years depending upon their efficiency and physical capacity.

For the purposes of rationalising the pay scales of the transferred employees, under sub-section (2) of Section 11 the Central Government was empowered to alter the terms of service of the employees as to their remuneration in such manner as it thought fit. The sub-section was amended by Acts 17 and 36 01' 1957.

Clause (bb) of sub-section (2) 01' Section 49 conferred power on the Corporation to make regulations with the previous approval of the Central Government as regards 'the terms and conditions of service of persons who had become employees of the Corporation under subsection (1) 01' Section 11'.

Under clauses (b) and (bb) of Section 49(2) 01' the Act, Regulations were framed prescribing the ages of retirement of the employees of the Corporation belonging to different categories with the previous approval of the Central Government and were incorporated in the Life Insurance Corporation of India (Staff) Regulations, 1960 made by the Corporation which came into effect on July, 1960.

Under Regulation 19(1), all transferred employees were entitled to remain in service till they completed 60 years of age but the appointing authority was empowered to retire any such transferred employee on completion of 55 years of age or at any time thereafter, if his efficiency was found to have been impaired. Under Regulation 19(2) employees appointed to the service of the Corporation on or after September, 1956, were required to retire on completion of 58 years of age but the appointing authority was empowered to retire any such employee on completion of 55 years of age or thereafter if his efficiency was found to have been impaired.

In the case of the transferred employees this regulation was made in conformity with the 'standardisation order' passed in respect of Class III and Class IV transferred employees. in whose case the age of retirement was fixed at 60 years.. The result was that the regulation made a clear and distinct classification 01' all the employees of the Corporation belonging to all classes into two groups---transferred employees and the employees appointed after September 1, 1956 for purposes of the age of retirement having regard to the historical reasons.

182 Consequent upon the settlement arrived at, upon an industrial dispute which arose between Class III and Class IV employees who were appointed subsequent to September 1, 1956 in the Corporation. Regulation 19 of the Life Insurance Corporation of India (Staff) Regulations 1960 which came into force w.e.f. July 1, 1960 was amended and the employees of the Corporation were divided both longitudinally and latitudinally insofar as the age of retirement was concerned. Longitudinally, all the transferred employees belonging to Class I and II became entitled to continue in service till they attained the age of 60 years, the Corporation being empowered to retire any of them prematurely on completion of 55 years of age if his efficiency was found to have been impaired, and all the Class I and Class II officers appointed to the service of the Corporation on or after September 1, 1956 had to retire on completion of 58 years of age subject again to the power of the Corporation to retire any such employee on completion of 55 years of age or at any time thereafter if his efficiency was found to have been impaired. Latitudinally, the employees were divided into two groups and all the employees belonging to Class III and Class IV, irrespective of the tact whether they were transferred employees or employees appointed after September 1, 1956 were entitled to continue in service till 60 years of age, but the employees belonging to Class I and Class II who were appointed to the service of the Corporation on or after September 1, 1956 had to retire on the completion of 58 years of age subject to the usual clause relating to premature retirement.

Sub-regulation (2) of Regulation 19 was modified empowering the appointing authority to extend at its discretion of service of any employee of the Corporation belonging to Class I or Class II categories appointed to service on or after September 1, 1956 for one year at a time upto 60 years of age. The power to extend the service of employees belonging to Class I and Class II appointed on or after September 1, 1956 beyond 58 years or' age was withdrawn from January 21, 1977 and the Corporation was permitted to retire an employee on completion of 50 years of age.

The first respondent joined the Corporation as a Class III employee on March 22, 1957. Subsequently, he was promoted to a Class I post and ultimately as Assistant Divisional Manager. Since he was born in the month of June, 1926, notice was issued to him in February, 1984 of his retirement which was due on June 30, 1984 on his completing the age of 58 years. Before the date of his retirement, he instituted a writ petition in the High Court questioning the validity of Regulation 19(2) of the (Staff) Regulations, 1960, as it stood then and prayed for the issue 183 of writ of mandamus directing the Corporation not to retire him before he attained the age of 60 years.

It was contended by the first respondent before the High Court that there was no justification to prescribe two different ages of retirement one for the transferred employees belonging to Class I and Class II categories and the other for the employees who joined the service of the Corporation alter September 1, 1956 and who also belonged to Class I and Class II categories, and that in regard to those who joined the service after being appointed to Class III post after September 1, 1956, there could not be any reduction of age of retirement from 60 to 58 years on their being promoted to a Class I or Class II post. Since he had the right to continue in service if he had remained in Class III only till he attained the age of 60 years as a Class III employee, age of retirement could not be reduced to 58 years only because he had been promoted to a Class I post.

It was urged on behalf of the Corporation and the Union of India that the transferred employees and the employees who joined the service after September 1, 1956 belonged to two distinct and separate classes which had been treated differently throughout for valid reasons. Since there was no uniformity in the establishments in which the transferred employees were working prior to nationalisation of the life insurance business, it became necessary to fix the age of retirement of the transferred employees on a lair, equitable and just basis. In the circumstances, the classification of the employees into two categories, namely, transferred employees and others who joined on or after September 1, 1956 for the purposes of age of superannuation was a valid classification and Articles 14 and 16 of the Constitution had not been violated. It was further submitted that the discrimination made between the employees belonging to Class I and Class II on the one hand and the employees belonging to Class III and Class IV on the other in the matter of the age of superannuation was not invalid since they belonged to two different categories of employees who were governed by different conditions of service as regards pay, perquisites, allowances, administrative powers etc.

The High Court did not find any unconstitutionality in a rule or regulation providing the age of retirement at 60 years of employees who had been absorbed from the service of the erstwhile insurers and to that extent it held that the grouping being reasonable the Court might not travel into the domain of legislative policy. It, however, found that when once a transferred employee belonging to Class III and an employee appointed after 1st September, 1956 by the Corporation to a Class III post is promoted to Class I, the distinction of the transferred employee and direct appointee could not be maintained, as on promotion they became persons belonging to the same category of employees enjoying the same conditions of service. Hence the age of retirement should be the same in the case of both such promotees. It accordingly held that the first respondent was entitled to continue till he attained the age of 60 years as other Class I employees belonging to the category of transferred employees. The Writ Petition was allowed and Regulation 19(2) was struck down as being violative of Articles 14 and 16 of the Constitution of India and the Corporation was directed not to retire the first respondent before he attained the age of 60 years.

Allowing the appeals, by special leave, of the Life Insurance Corporation of India and the Union of India, this Court,

HELD: 1.1 The decision taken by the Corporation and the Central Government as regards the ages of retirement of the different classes of the employees of the Corporation is a bona fide one and cannot be characterised as unreasonable and it is not, therefore, liable to be upset by a decision of the Court. [222G]

1.2 In the instant case, the High Court erred in striking down Regulation 19(2) of the L.I.C. (Staff) Regulations 1960 as amended in the year 1977 and in directing the Corporation to continue the first respondent in its service till he completed the age of 60 years. [223A]

2.1 Classification of employees into two categories for purposes of fixing the age of superannuation depending upon the date of entry into service is not something which is unusual, and such classification becomes necessary on account of historical facts and the need for treating the employees in a fair and just way. [220G]

2.2 Merely because the pay, allowances and other perquisites drawn by the transferred employees and by the employees appointed after September 1, 1956 by the Corporation are the same, it cannot be said that the transferred employees and the other employees had been integrated so as to form one cadre. So far as the age of retirement is concerned, they are being treated differently right from the date on which the Corporation was established. [221G]

2.3 In the instant case, since the classification of the employees for the purpose of age of retirement into two categories is reasonable 185 and not arbitrary and there is a reasonable nexus between the classification and the object to be attained thereby, it is not possible to ho1d that Regulation 19(2) is violative of Articles 14 and 16 of the Constitution. [222C]

3. The Act itself made a distinction between the transferred employees and the employees recruited to the service of the Corporation after September 1, 1956 by making amendments in Section 11 and in clauses (b) and (bb) of subsection (2) of Section 49 of the Act. In the (Staff) Regulations, 1956 and the (Staff) Regulations, 1960 there was again a distinction made between the transferred employees and the employees recruited alter September 1, 1956. The distinction between the two classes Is recognised by Parliament even as late as 1981 which it amended Section 49 of the Act by deleting clause (bb) of sub-section (2) thereof and by amending Section 48. of the Act by introducing clause (cc) in sub-section (2) and the new sub-section (2A) in it.

At no point of time the transferred employees were integrated into one cadre along with employees appointed after September 1, 1956 as such and the transferred employees have retained their birth-marks throughout. The tact that the pay, allowances and other conditions or services have been made the same in respect of both the transferred employees and the employees of the Corporation recruited after September 1, 1956 has not brought about the integration of the two Classes of employees into one single cadre. [214GH;

215A: E-F]

4.1 The determination of 58 years as age of superannuation, in the case of the employees, who entered service after September 1, 1956 by itself cannot be considered to be arbitrary since in almost all the public sector corporations, Central services and the State services, 58 years age is considered to be a reasonable age at which officers can be directed to retire from their service. [212C]

4.2 Regarding the discrimination in the age or' retirement between employees belonging to Class I and Class II on the one hand and Class III and Class IV on the other, it is true that originally employees belonging to Class III and Class IV categories amongst the transferred employees were given the benefit of retirement at the age of 60 years, but the employees belonging to Class III and Class IV categories after 1st September, 1956 were required to retire on the completion of 58 years of age. Pursuant to the settlement arrived at between the Management and the Class III and IV employees recruited after September 1, 1956. this discrimination was removed and Regulation 19 was amended w.e.f. June 19, 1965. [212D-F] 186

4.3 Having regard to the lower emoluments and other benefits which the employees belonging to Class III and Class IV are entitled to get from the Corporation and the higher emoluments and other benefits to which officers belonging to Class I and Class II are entitled to and also the nature of their work and the powers enjoyed by them, fixation of different ages of retirement to the different classes of employees could not by itself be violative of Articles 14 and 16 of the Constitution. [212F-G]

5. Having regard to different conditions of service that were prevailing in the various establishments whose business was taken over by the Corporation, fixation of age of superannuation is one of the essential parts or' the process of transfer and integration to which sub-section (2) of Section 11 of the Act is applicable. The fixation of 60 years as the age of superannuation in the case of transferred employees cannot be considered to be unreasonable in view of the history of this case. [208C-D]

6. The transferred employees who are treated favourably belong to a vanishing group and, perhaps, within a period of two years none of them would be in the service of the Corporation. Thereafter, only one class of employees would be in the service of the Corporation, namely, those appointed subsequent to September 1, 1956 by the Corporation in respect of whom the Corporation has fixed the age of retirement as 58 years which corresponds to the age or' retirement in almost all the public sector establishments, the Central Government services and the State Government services.

[221C-E]

7. The High Court was right in holding that it was not discriminatory to extend the benefit of the age of 60 years to the transferred employees. However, it was not correct in holding that on promotion from Class III to Class I, the transferred employees and the directly recruited employees would lose their birth-marks. The intention of Parliament was that even as late as in 1981 the two groups of employees, namely, the transferred employees and employees recruited after September 1, 1956 in the Corporation should be kept separate. In these circumstances, the High Court was in the error in holding that when employees are recruited to a lower grade from two sources, no favourable treatment should be extended to recruits from one source on their promotion to the higher grade. The fact that an employee had entered the service of the Corporation after September 1, 1956 in a Class III post and is later on promoted to a Class I post does not make any difference. [216E-H; 217D] 187 8. In the instant case, when the first respondent was promoted to the Class I post in 1963 the age of retirement of officers in the Class I post had been fixed at 58 years and was not different from the age of retirement of Class III employees. It was only in 1965 under the settlement, the age of retirement of employees in Class III and Class IV who joined service after September 1, 1956 was raised to 60 years. If he felt that the conditions of service ill' Class I officers were likely to be prejudicial to him, he could have refused the promotion offered to him. Having accepted the promotion along with the higher benefits flowing from it he cannot contend after several years that he had been prejudicially affected by the condition relating to the age of retirement applicable to Class I officers appointed after September 1, 1956. That apart, the higher emoluments and other perquisites to which Class I employees may be entitled to and the better conditions of work which are enjoyed by them substantially compensate the effect of the lowering of the age of retirement from 60 years to 58 years. [213E-G] Christopher Pimenta and Others v. Life Insurance Corporation of India, A.I.R. 1958 Bombay 451; Life Insurance Corporation of India v. D.J. Bahadur & Ors., [1981] 1 S.C.R. 1083; Ram Lal Wadhwa & ANR v. The State of Haryana & 0rs.,[1973] 1 S.C.R. 608; State of Punjab v. Joginder Singh, [1963] Supp. 2 S.C.R. 169; Tejinder Singh and Another v. Bharat Petroleum Corporation Ltd. and ANR., [1986] 4 S.C.C. 237; Roshan Lal Tandon v. Union of India, [1968] 1 S.C.11. 185; Miss Lena Khan v. Union of India and Ors., Jt. [1987] 2 S.C. 19; Railway Board v. A. Pitchumani, [1972] 2 S.C.R. 187; Manindra Chandra Sen v. Union of India & Ors., A.I.R.

1973 CAL. 385; M/s British Paints (India) Ltd. v. The Workmen, [1966] 2 S.C.R. 523; Mohammad Shujat Ali & Ors. etc. v. Union of India & Ors. etc. [1975] 1 S.C.R. 449; Workmen of the Bharat Petroleum Corporation Ltd. (Refining Division) Bombay v. Bharat Petroleum Corporation Ltd. and Another, [1984] 1 S.C.R. 251; Tamil Nadu Education Department Ministerial & General Subordinate Service Association v. State of Tamil Nadu & ANR., [1980] 1 S.C.R. 1026, referred to.

Civil Appellate Jurisdiction: Civil Appeal No. 10761077 of 1987.

From the Judgment and Order dated 17.8.1985 of the Allahabad High Court in C.M. Writ No. 6849 of 1984.

K. Parasaran, B. Datta, P.P. Rao, K.L. Hathi, Anil Nauriya, S.R. Aggarwal, Y. Ramachandran, U.J. Rana, R.P. Srivastava, Hemant Sharma, P. Parmeshwaran, Ms. Sushma Suri and C.V. Subba Rao for the Appellants.

M.K. Ramamurthy, C.S. Vaidyanathan, S. Ravindra Bhatt, Mohan, S.R. Setia and Probir Choudhary for the Respondents.

The Judgment of the Court was delivered by VENKATARAMIAH J. The question involved in these appeals by special leave which are filed against the judgment dated August 17, 1985 of the High Court of Allahabad in Civil Miscellaneous Writ No. 6849 of 1984 relates to the constitutional validity of regulation 19(2) of the Life Insurance Corporation of India (Staff) Regulations, 1960 (hereinafter referred to as 'the (Staff) Regulations, 1960'), as amended on 21.1. 1977 by the Life Insurance Corporation of India (hereinafter referred to as 'the Corporation') which provides that an employee belonging to Class I or Class II appointed to the service of the Corporation on or after 1st September, 1956 shall retire on completion of 58 years of age but the competent authority may, if it is of the opinion that it is in the interest of the Corporation to do so, direct such employee to retire on completion of 50 years of age and at any time thereafter on giving him three months' notice or salary in lieu thereof.

Prior to January,. 1955 there were more than 200 insurers carrying on life insurance business in India. As it came to the notice of the Government that the Indian life insurers, with a few exceptions, were virtually controlled by few individuals who were utilising the funds of those companies to the detriment of the industry and the policyholders, the Government decided to nationalise the life insurance business. Pursuant to the said decision, the President of India promulgated the Life Insurance (Emergency Provisions) Ordinance, 1956 on January 19, 1956 providing for the vesting of the management of the life insurance business (which was called the controlled business under the Ordinance) which was being carried on by any insurer in India on that day in the Central Government and providing for its management. On the passing of the said Ordinance the management of the controlled business of all the insurers in India thus vested in the Central Government and pending the appointment of the custodians for the controlled business of any insurer the person in charge of the management of such business immediately before the passing of the Ordinance was required to be in charge of the management of the business for and on behalf of the Central Government. The Ordinance contained detailed provisions for the carrying on of the life insurance business by 189 the Government for the time being. The Ordinance was replaced by the Life Insurance (Emergency Provisions) Act, 1956 which was published on 21st of March, 1956. The said Act was followed by the Life Insurance Corporation Act, 1956 (Act 31 of 1956) (hereinafter referred to as 'the Act') which was published in the Gazette on 18th June, 1956. The Act, however, came into force on 1st July, 1956. The Act provided for the establishment and incorporation of the Corporation. The Corporation was accordingly established on 1st September, 1956. Under the Act the expression 'appointed day' is defined as the date on which the Corporation is established.

The appointed day for the purposes of the Act is, therefore, September 1. 1956. By virtue of section 7 of the Act on the appointed day all the assets and liabilities appertaining to the controlled business of all insurers, the management of which it had been taken over earlier by the Central Government, stood transferred to and vested in the Corporation.

When the Corporation thus came into existence it had no employees of its own to carry on the vast business of the large number of insurers which had been taken over by it.

It, therefore, became necessary to transfer the services of the existing employees of the insurers to the Corporation because without the services of those employees it was almost impossible for the Corporation to run the life insurance business in India which involved management of the various offices situated in different parts of India, servicing of lakhs of insurance policies, the administration of the assets taken over from the insurers and several other activities connected with the life insurance business. The nature of the work of the Corporation was such that it required the services of the employees with sufficient experience and expertise in running the life insurance business. In order to meet the above need section 11 of the Act came to be enacted. Section 11 of the Act originally stood as follows:

"11. Transfer of service of existing employees of insurers to the Corporation-(1) Every whole-time employee of an insurer whose controlled business has been transferred to and vested in the Corporation and who was employed by the insurer wholly or mainly in connection with his controlled business immediately before the appointed day shall, on and from the appointed day, become an employee of the Corporation, and shall hold his office therein by the same tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to pension and gratuity and other matters as he would have held the same on the appointed day if this Act had not been passed, and shall continue to do so unless and until his employment in the Corporation is terminated or until his remuneration, terms and conditions are duly altered by the Corporation:

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

(2) Notwithstanding anything contained in sub-section (1) or in any contract of service, the Central Government may, for the purposes of rationalising the pay scales of employees of insurers whose controlled business has been transferred to and vested in it or for the purpose of reducing the remuneration payable to employees in cases where in the interest of the Corporation and its policyholders a reduction is called for, alter the terms of service of the employees as to their remuneration in such manner as it thinks fit; and if the alteration is not acceptable to any employee the Corporation may terminate his employment on giving him compensation equivalent to three months' remuneration unless the contract of service with such employee provides for a shorter notice of termination.

Explanation: The compensation payable to an employee under this sub-section shall be in addition to and shall not affect any pension, gratuity, provident fund money or any other benefit to which the employee may be entitled under his contract of service.

(3) If any question arises as to whether any person was a whole-time employee of an insurer or as to whether any employee was employed wholly or mainly in connection with the controlled business of an insurer immediately before the appointed day the question shall be referred to the Central Government whose decision shall be final.

(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947), or in any other 191 law for the time being in force, the transfer of the services of any employee of an insurer to the Corporation shall not entitle any such employee to any compensation under that Act or other law, and no such claim shall be entertained by any Court, tribunal or other authority." Sub-section (1) of section 11 of the Act provided that every whole-time employee of an insurer whose controlled business had been transferred to and vested in the Corporation and who was employed by the insurer wholly or mainly in connection with the controlled business immediately before the appointed day, i.e., September 1, 1956, would on and from the appointed day become an employee of the Corporation, and would hold his office therein by the same tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to pension and gratuity and other matters as he would have held the same on the appointed day if the Act had not been passed, and would continue to do so unless and until his employment in the Corporation was terminated and until his remuneration, terms and conditions were duly altered by the Corporation. The proviso to that sub-section provided that nothing contained in sub-section (1) of section 11 of the Act would apply to any such employee who had by notice in writing given to the Central Government prior to September 1, 1956 intimated his intention of not becoming an employee of the Corporation. The whole-time employees of the erstwhile insurers whose services were thus transferred to the Corporation are hereinafter referred to as 'the transferred employees' of the Corporation. As mentioned earlier, there were more than 200 insurers whose controlled business had been taken over by the Corporation and we are informed that there were about 27,000 whole-time employees working in them. The conditions of service of these transferred employees of the Corporation whose services were transferred to the Corporation under section 11(1) of the Act were not uniform. It was naturally difficult to continue after the establishment of the Corporation in the cases of all the transferred employees, the conditions of service enjoyed by them when they were in the employment of the former insurers. The conditions governing the retirement of those officials with which we are concerned in these appeals were also diverse and different. In some cases the age of retirement had been fixed at 55 years, in some at 58 years and in some others at 60 years. In many cases the insurers had permitted their employees to continue in their service even beyond 60 years depending upon their efficiency and physical capacity.

The conditions of service of employees and in particular the terms of remuneration prevalent in some of the former 192 insurance organisations were also disadvantageous to the policyholders. It, therefore became necessary to bring about uniformity in the conditions of service of the transferred employees. Parliament therefore, enacted sub-section (2) of section 11 of the Act which provided that notwithstanding anything contained in sub-section (1) of section 11 or in any contract of service, the Central Government might for the purposes of rationalising the pay scales of employees of insurers whose controlled business had been transferred to and vested in it or for the purposes of reducing the remuneration payable to those employees in cases where in the interest of the Corporation and its policyholders a reduction was called for, alter the terms of service of the employees as to their remuneration in such manner as it thought fit and if the alteration was not acceptable to any employee the Corporation might terminate his employment on giving him compensation equivalent to three months' remuneration unless the contract of service with such employee provided for a shorter notice of termination. Doubts arose as regards the meaning of sub-section (2) of section of the Act. In Christopher Pimenta and Others v. Life Insurance Corporation of India, A.I.R. 1958 Bombay 451 the High Court of Bombay opined that under section 11(2) of the Act the Central Government could alter the terms and conditions of service of the employees only as to the remuneration and that the said sub-section had no reference to the other terms and conditions of the service. The above decision of the Bombay High Court was delivered on 16.4.1957. It is stated that there were cases pending in other courts also questioning the scope and ambit of sub-section (2) of section 11 of the Act as it stood originally. Hence in order to remove all doubts the President of India promulgated an ordinance (which was replaced by Act 17/1957) substituting a new sub-section in the place of the original sub-section (2) of section II of the Act making it more comprehensive and thus enabling the Central Government to alter suitably all conditions of service of the transferred employees. The new sub-section (2) of section 11 of the Act was further modified by Act 36 of 1957. Thereafter sub-section (2) of section 11 of the Act read as follows:

"(2) Where the Central Government is satisfied that for the purpose of securing uniformity in the scales of remuneration and the other terms and conditions of service applicable to employees of insurers whose controlled business has been transferred to, and vested in the Corporation, it is necessary so to do, or that, in the interest of the Corporation and its policy-holders, a reduction in the remuneration payable, or a revision of the other terms and 193 conditions of service applicable, to employees or any class of them is called for, the Central Government may, not with standing anything contained in sub-section (1), or in the Industrial Disputes Act, 1947, or in any other law for the time being in force, or in any award, settlement or agreement for the time being in force, alter (whether by way of reduction or otherwise) the remuneration and the other terms and conditions of service to such extent and in such manner as it thinks fit, and if the alteration. is not acceptable to any employee, the Corporation may terminate his employment by giving him compensation equivalent to three months' remuneration unless the contract of service with such employee provides for a shorter notice of termination.

Explanation--The compensation payable to an employee under this sub-section shall be in addition to, and shall not affect, any pension, gratuity, provident fund money or any other benefit to which the employee may be entitled under his contract of service." Section 49(1) of the Act conferred powers on the Corporation to make with the previous approval of the Central Government regulations not inconsistent with the Act and the rules made there under. It provided for making regulations to provide for all matters for which provision was expedient for the purposes of giving effect to the provisions of the Act. Clause (b) of sub-section (2) of section 49 of the Act in particular conferred power on the Corporation to make regulations as regards the method of recruitment of employees and agents of the Corporation and the terms and conditions of such employees or agents. It was felt that clause (b) of section 49(2) of the Act was not in terms applicable to the transferred employees who became the employees of the Corporation under sub-section (1) of section 11 of the Act but only referred to the employees and agents of the Corporation who were employed after the Corporation was established, that is, after 1st September 1956. To remove the above doubt by Act 17 of 1957 section 49 of the Act was amended by introducing clause (bb) in sub-section (2) of section 49 of the Act which expressly conferred power on the Corporation to make regulations with the previous approval of the Central Government as regards 'the terms and conditions of service of persons who have become employees of the Corporation under sub-section (1) of section 11'. The above clause was introduced into the Act with retrospective effect along with the new sub194 section (2) of section 11 of the Act. It is this to be seen that the conditions of service of the transferred employees were to be regulated by the provisions of the Act, by an order made by the Central Government under section 11(2) of the Act and the regulations made under clause (bb) of section 49(2) of the Act. Even before clause (bb) was actually introduced into the Act with retrospective effect by Act 17 of 1957 the Corporation had promulgated the Life Insurance Corporation of India (Staff) Regulations, 1956 (hereinafter referred to as 'the (Staff) Regulations, 1956'). Under regulation 21 of the (Staff) Regulations, 1956 provision was made regarding superannuation and retirement of the employees of the Corporation. Regulation 21 reads as follows:

"21. An employee shall retire at fifty-five years of age provided that the appointing authority may at its discretion extend the service every year upto 60 years of age.

Provided, however, that in respect of some of the employees of insurers who are allowed to continue in service beyond age 60 because of the terms and conditions of employment having not 'been favourable in the past, the Executive Committee may at its discretion extend their service every year upto age 65.

Provided further that during the three years, beginning from 1st September, 1956, the Executive Committee may, at its discretion, extend the service of a class I employee, who has completed sixty years of age for such period as may be specified but not exceeding one year at a time if such extension is considered necessary in the interest of the Corporation.

Explanation--Notwithstanding anything contained in this Regulation, where an employee has privilege leave earned but not availed of as on the date of retirement as prescribed in the above Regulation he may be permitted to avail of the leave and in that case the employee will be deemed to retire from service at the expiry of the leave." The above regulation fixed the age of retirement of an employee at 55 years while empowering the authority to extend the service of an employee, at its discretion, every year upto 60 years of age. The first proviso to regulation 21 of the (Staff) Regulations, 1956, however, 195 authorised the Corporation to allow some of the employees of insurers who were allowed to continue in service beyond the age of 60 years for the reasons mentioned therein. The above regulation thus made a distinction between an employee who entered the service of the Corporation after it was established, i.e., after 1st September, 1956 and the transferred employees insofar as the age of retirement was concerned.

Pursuant to the power conferred on it under sub-section (2) of section 11 of the Act the Central Government issued an order on 1.6.1957 called the Life Insurance Corporation of India (Alteration of Remuneration and other Terms & Conditions of Service of Employees) Order, 1957 which came into force retrospectively from 1st September, 1956. This order is called the 'standardisation order'. This Order applied to all transferred employees who had become employees of the Corporation under section 11(1) of the Act and who were in supervisory, clerical and subordinate grades (now classified as Class III and Class IV employees) of the erstwhile insurers on 31st August, 1956. Clause 13 of the above Order, which related to the age of superannuation read as follows:

"13. Retirement:

The normal age of retirement shall be 60. But the Corporation may require any employee who has attained the age of 55 to retire if his efficiency is found to have been impaired." Clause 13 of the above Order, therefore, modified regulation 21 of the (Staff) Regulations, 1956 to the extent indicated therein with effect from the commencement of the Corporation. After the promulgation of the Order the transferred employees to whom it applied were entitled to continue in the service of the Corporation till they attained the age of 60 years subject to the Corporation exercising its powers to retire a transferred employee on his attaining the age of 55 years if his efficiency was found to have been impaired. In the case of the other employees who joined service subsequent to 1st September, 1956 regulation 21 of the (Staff) Regulations, 1956, which prescribed the age of retirement at 55 years subject to the appointing authority at its discretion extend the age of retirement to 60 years as provided therein, continued to apply. This Order applied to the members of the staff of the Corporation belonging to Class III and Class IV categories. As regards the transferred officers belonging to the Class II category, 196 namely, the Field Officers, a standardisation order was made under sub-section (2) of section 11 of the Act on 30th December, 1957. Clause 6 of that order originally read as follows:

"6. Leave and retirement--In the matter of leave and retirement, Field Officers shall be governed by the same regulations as are applicable to Class I officers of the Corporation." The above clause 6 was substituted by a new clause on 25.11.1962 which read as follows:

"6. Leave and retirement--In the matter of leave and retirement, Development Officers shall be governed by the Life Insurance Corporation of India (Staff) Regulations, 1960, as amended from time to time." It may be noted that the Field Officers referred to in the former clause 6 had been redesignated as the Development Officers before it was substituted by the later clause 6 of the standardisation order. Insofar as the transferred officers belonging to Class I were concerned, the question of determination of their age of superannuation was taken up for consideration by the Services and Budget Committee of the Corporation on 20th November, 1959. Para 9 of the office note circulated amongst the members of that committee gave a true picture of the conditions prevailing then. It read thus:

"9. As regards retirement, the Government has mentioned that the Department of Expenditure has objected to raising the date of superannuation to 58 years of age on the ground that other statutory Corporations are also demanding the same benefit on the analogy of the Life Insurance Corporation's proposal. Standardisation Order provides that an employee shall retire at 60 years of age, but the competent authority may require an employee to retire at any time after 55 years of age if his efficiency is found to have been impaired. In the amended Regulations approved by the Board, this provision of the Standardisation Order was incorporated as far as employees in Classes III & IV are concerned but in the case of transferred officers and Field Officers, the retirement age was fixed at 55 extensible to 58 with a further proviso that in special circumstances only the competent authority may extend the services 197 beyond age 58 and upto 60 years of age. The Board has also decided that administratively we shall grant extension upto 60 liberally till the end of 1963. Most of the insurers permitted their officers to continue in service upto 60 years of age and even beyond, depending upon their efficiency. There is no reason why there should be distinction between officers and staff in this matter as both of them had similar privileges with regard to retirement in the past. There is thus a strong case for extending the provisions of the Standardisation Order regarding retirement to the transferred officers also. As regards new recruits, it was thought that there was no justification to bring down the retirement age from 60 to 55 all of a sudden nor was it considered necessary to maintain any distinction between officers and staff. All the employees have often represented that the age of retirement should be raised to 60. A compromise was, therefore, struck by fixing the age at 58. In the light of the above it is suggested that the provisions of the Standardisation Order may be extended to transferred officers and the retirement age may be retained at 58 for persons recruited on or after 1st January 1959. It may be added that this would mean a modification of the earlier decision of the Board in this matter." After the matter was duly considered by the Services and the Budget Committee and by the Corporation, regulations were framed under clauses (b) and (bb) of section 49(2) of the Act prescribing the ages of retirement of the employees of the Corporation belonging to different categories with the previous approval of the Central Government and were incorporated in the (Staff) Regulations, 1960 made by the Corporation which came into effect on July 1, 1960. Regulation 19 of the (Staff) Regulations, 1960 dealt with the subject of superannuation and retirement of the employees of the Corporation. It reads thus:

"Super annution and Retirement:

19(1). A transferred employee shall retire on completion of age 60; but the appointing authority may direct such employee to retire on completion of 55 years of age or at any time thereafter, if his efficiency is found to have been impaired.

(2) An employee appointed to the service of the 198 Corporation on or after 1st September, 1956 shall retire on completion of 58 years of age; but the appointing authority may direct such employee to retire on completion of 55 years of age or at any time thereafter, if his efficiency is found to have been impaired.

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It is seen from the above regulation that the cases of all transferred employees were dealt with by sub-regulation (1) of regulation 19 and the cases of employees appointed to the service of the Corporation that year after 1st September, 1956 were dealt with by sub-regulation (2) of regulation 19. All the transferred employees were entitled to remain in service till they completed 60 years of age but the appointing authority was empowered to retire any such transferred employee on completion of 55 years of age or at any time thereafter if his efficiency was found to have been impaired. All employees appointed to the service of the Corporation on or after 1st September, 1956 were required to retire on completion of 58 years of age but the appointing authority was empowered to retire any such employee on completion of 55 years of age or at any time thereafter if his efficiency was found to have been impaired. This regulation was made in supersession of all other earlier regulations. In the case of the transferred employees the regulation was in conformity with the standardisation order passed in respect of Class III and Class IV transferred employees in whose case the age of retirement was fixed at 60 years.

The result was that the regulation made a clear and distinct classification of all the employees of the Corporation belonging to all classes into two groups--transferred employees and the employees appointed after 1st September, 1956, for purposes of the age of retirement having regard to the historical reasons. It would appear that an industrial dispute arose between the Class III and Class IV employees who entered the service of the Corporation on or after 1st September, 1956 and the Corporation and one of the points of dispute related to the age of retirement. These employees demanded that their age of retirement should also be fixed at 60 years as in the case of Class III and Class IV employees belonging to the category of transferred employees. The dispute ultimately ended in a settlement which was incorporated in the Memorandum of Settlement arrived at under section 2(p) and section 18(1) of the Industrial Disputes Act, 1947 and rule 58 of the Industrial (Central) Disputes Rules, 1957 dated 29th January, 1965. The relevant part of the settlement arrived at between the parties to the said industrial dispute as regards the age of retirement of class III and class IV employees who entered the service of the Corporation on or after 1st September, 1956 read as follows:

"1. Retirement age for new employees:

There will be no distinction between Class 111 and Class IV 'transferred employees' and Class III and Class IV employees who entered the service of the Corporation on or after 1.9.1956 in regard to retirement age which shall be 60" After the above settlement was arrived at regulation 19 of the (Staff) Regulations, 1960, which had been brought into force with effect from July 1, 1960, was suitably amended to bring it in conformity with the settlement. The relevant part of the amended regulation 19 which was notified on 19.6.1965 read thus:

"19(1). An employee belonging to Class III or Class IV and a transferred employee belonging to Class I or Class II shall retire on completion of age 60; but the appointing authority may direct such employee to retire on completion of 55 years of age or at any time thereafter, if his efficiency is found to have been impaired.

(2) An employee belonging to Class I or Class II appointed to the service of the Corporation on or after 1st September, 1956 shall retire on completion of 58 years of age, but the appointing authority may direct such employee to retire on completion of 55 years of age or at any time thereafter, if his efficiency is found to have been impaired.

(2A) Notwithstanding what is stated in sub-regulations (1) and (2) above, an employee may be permitted to retire at any time after he has completed age 55.

.........................." On account of the settlement arrived at between Class III and Class IV employees, who were appointed subsequent to 1st September, 1956 and the Corporation, which was followed up by the amendment of the (Staff) Regulations with effect from 19.6.1965, the employees of the Corporation were divided both longitudinally and latitudinally insofar as the age of superannuation was concerned. The longitudinal division of the employees was as follows. All the transfer200 red employees belonging to Class I and Class II became entitled to continue in service till they attained the age of 60 years subject of course to the power of the Corporation to retire any of them prematurely on completion of 55 years of age if his efficiency was found to have been impaired and all the Class I and Class II officers appointed to the service of the Corporation on or after 1st September, 1956 had to retire on completion of 58 years of age subject again to the power of the Corporation to retire any such employee on completion of 55 years of age or at any time thereafter if his efficiency was found to have been impaired. The employees of the Corporation were divided latitudinally into two groups. All the employees belonging to Class III and Class IV irrespective of the fact whether they were transferred employees or employees appointed after 1st September, 1956 were entitled to continue in service till 60 years of age, but the employees belonging to Class I and Class II, who were appointed to the service of the Corporation on or after 1st September, 1956 had to retire on the completion of 58 years of age subject to the usual clause relating to premature retirement. Sub-regulation (2) of regulation 19 which affected the employees belonging to Class I and Class II appointed to the service of the Corporation on or after 1st September, 1956 was substituted by a new sub-regulation which was notified on September 3, 1966.

This new sub-regulation (2) of regulation 19 read as follows:

"(2). An employee belonging to the Class I or Class II appointed to the service of the Corporation on or' after 1st September, 1956 shall retire on completion of 58 years of age, but the appointing authority may at its discretion, extend his service for one year at a time upto 60 years of age. The appointing authority may, however, direct an employee to retire on completion of 55 years of age or at any time thereafter if his efficiency is found to have been impaired." The modification made by the new sub-regulation (2) of regulation 19 empowered the appointing authority to extend at its discretion the service of any employee of the Corporation belonging to the Class I or Class II categories appointed to the service of the Corporation on or after 1st September, 1956 for one year at a time upto 60 years of age.

Since the Corporation found that the discretion conferred on the appointing authority to extend the services of Class I or Class II officers beyond 58 years of age at its discretion was not being exercised satisfactory but very often abused, sub-regulation (2) was again amended on 21.1.1977 withdrawing the power to extend the service of 201 employees belonging to Class I and Class 11 appointed to the service of the Corporation on or after 1st September, 1956 beyond 58 years of age. It also provided that in the interest of the Corporation, the Corporation could retire an employee after completion of 50 years of age. The relevant part of regulation 19 amended on 21.1.1977 reader thus:

"19(1). An employee belonging to Class III or Class IV and a transferred employee belonging to Class I or Class II shall retire on completion of age 60; but the competent authority may, if it is of the opinion that it is in the interest of the Corporation to do so, direct such employee to retire on completion of 55 years of age or at any time thereafter, on giving him three months' notice or salary in lieu thereof.

(2). An employee belonging to Class I or Class II appointed to the service of the Corporation on or after 1st September, 1956 shall retire on completion of 58 years of age, but the competent authority may, if it is of the opinion that it is in the interest of the Corporation to do so, direct such employee to retire on completion of 50 years of age or at any time thereafter on giving him three months' notice or salary in lieu thereof." The 1st Respondent S.S. Srivastava entered the service of the Corporation as a Class III employee on 22.3.1957 on which date he was appointed as an Assistant in the Corporation. From the said Class III post he was promoted to the Class I post (since there was no necessity to pass through a Class II post before entering a Class I post) on 8.10.1963 and was appointed as Assistant Branch Manager (Admn.). From the post of Assistant Administrative Officer he was promoted to the post of Administrative Officer in June, 1971 and was further promoted as Assistant Divisional Manager on 18.7.1978. Since he was born in the month of June, 1926, notice was issued in February, 1984 to Respondent No. 1 of his retirement which was due on 30th June, 1984 on his completing the age of 58 years. Before the date of his retirement, he instituted a writ petition out of which these appeals arise in Civil Miscellaneous Writ No. 6849 of 1984 on the file of the High Court of Allahabad questioning the validity of regulation 19(2) of the (Staff) Regulations, 1960 as it stood then and praying for the issue of a writ in the nature of mandamus to the Corporation not to retire him before he completed the age of 60 years. The High Court 202 issued 'an interim order of stay of his retirement on May 22, 1984. Hence, he was not retired on the 30th June, 1984 as originally notified and allowed to continue in service.

The Writ Petition was allowed striking down regulation 19(2) as being violative of Articles 14 and 16 of the Constitution of India and the Corporation was directed not to retire the 1st Respondent before he attained the-age of 60 years. By virtue of the judgment of the High Court, the 1st Respondent continued in the service of the Corporation till he completed 60 years of age. He was retired from service on 30th of June, 1986 during the pendency of these appeals.

In the Writ Petition filed by the 1st Respondent it was contended that there was no justification to prescribe two different ages of retirement one for the transferred employees belonging to Class I and Class II categories and the other for the employees who joined the service of the Corporation after 1st September, 1956 and who also belonged to Class I and Class II categories. It was also contended that whatever may be the position in respect of persons who were appointed directly to any post belonging to Class I or Class II category after 1st September, 1956, as regards those who joined the service of the Corporation on being appointed to a Class III post after 1st September, 1956 there could not be any reduction of the age of retirement from 60 years to 58 years on their being promoted to a Class I post or Class II post. In other words the contention of the 1st Respondent before the High Court was that since he had the fight to continue in service if he had remained in Class III only till he attained the age of 60 years as a Class III employee by virtue of the settlement and the amendment of the regulation 19 in the year 1965, the age of retirement in his case could not be reduced to 58 years only because he had been promoted to a Class I post. The Writ Petition was contested by the Corporation and the Union of India. It was urged on behalf of the Corporation and the Union of India that the transferred employees and the employees who joined the service after 1st September, 1956 belonged to two distinct and separate classes which had been treated differently throughout for valid reasons. It was pleaded by them that on the establishment of the Corporation under the Act it became necessary to continue the services of the employees of the erstwhile insurers whose life insurance business was taken over by the Corporation to run the business of the Corporation because the Corporation had no employees of its own in the month of September, 1956 when it was established. Since as regards the age of retirement there was no uniformity in the establishments in which the transferred employees were working prior to the nationalisation of the life insurance business 203 and as in some cases the age of retirement had been fixed at 55 years, in some other cases it was 58 years, in few other cases at 60 years and in many cases there was no age of retirement and the employees could continue as long as they were found to be physically and mentally fit, it became necessary to fix the age of retirement of the transferred employees on a fair, equitable and just basis. The Central Government and the Corporation felt that 60 years of age could be a proper age of retirement in the circumstances in respect of the transferred employees and that was the reason why by regulation 19 and the standardisation order issued earlier in the case of certain classes of transferred employees under section 11(2) of the Act the retirement age was fixed at 60 years and this was done with a view to retaining the services of the experienced employees of the erstwhile insurers. It was pleaded on behalf of the Corporation and the Union of India that in the circumstances the classification of the employees into two categories, namely, transferred employees and others who joined the service of the Corporation on or after 1st September, 1956 for the purposes of the age of superannuation was a valid classification and Articles 14 and 16 of the Constitution of India had not been violated. It was further pleaded that the discrimination made between the employees belonging to Class I and Class II on the one hand and the employees belonging to Class III and Class IV on the other in the matter of the age of superannuation was not invalid since they belonged to two distinct categories of employees who were governed by different conditions of service as regards pay, perquisites, allowances, administrative powers etc. After heating the arguments of both the sides the learned Judges of the High Court allowed the Writ Petition. The High Court did not find any unconstitutionality in a rule or regulation providing the age of retirement at 60 years of employees who had been absorbed from the service of the erstwhile insurers and to that extent it observed that one could say that the grouping being reasonable the Court might not travel into the domain of legislative policy. It, however, found that when once a transferred employee belonging to Class III and an employee appointed after 1st September, 1956 by the Corporation to a Class III post are promoted to Class I the distinction of transferred employee and direct appointee could not be maintained as on promotion they became persons belonging to the same category of employees enjoying the same conditions of service. Hence the age of retirement should be the same in the case of both such promoters. It accordingly held that the 1st Respondent was entitled to continue till he attained the age of 60 years as other Class I employees belonging to the category of transferred employees. Aggrieved by the judgment of 204 the High Court the Corporation and the Union of India have filed these appeals by special leave.

It should be stated at the outset that some of the questions raised before us are already covered by pronouncements made by this Court. The object of enacting section 11 of the Act is dealt with in. detail by this Court in the Life Insurance Corporation of India v. D.J. Bahadur & Ors., [1981] 1 S.C.R. 1083 which unfortunately was not brought to the notice of the High Court. Krishna Iyer, J. at pages 1098-1099 has observed in the course of the said decision thus:

"The Corporation, to begin with, had to take over the staff of the private insurers lest they should be thrown out of employment on nationalisation. These private companies had no homogenous policy regarding conditions of service for their personnel, but when these heterogenous crowds under the same management (the Corporation) divergent emoluments and other terms of service could not survive and broad uniformity became a necessity. Thus, the statutory transfer of service from former employers and standardization of scales of remuneration and other conditions of employment had to be and were taken care of by s. 11 of the Life Insurance Corporation Act, 1956 (for short, the LIC Act). The obvious purpose of this provision was to enable the Corporation initially to absorb the motley multitudes from many companies who carried with them varying incidents of service so as to fit them into a fair pattern, regardless of their antecedent contracts of employment or industrial settlements or awards. It was elementary that the Corporation could not perpetuate incongruous features of service of parent insurers, and statutory power had to be vested to vary, modify or supersede these contracts, geared to fair, equitable and, as far as possible, uniform treatment of the transferred staff.

Unless there be unmistakable expression of such intention, the ID Act will continue to apply to the Corporation employees. The office of s. 11 of the LIC Act was to provide for a smooth take-over and to promote some common conditions of service in a situation where a jungle of divergent contracts of employment and industrial awards or settlements confronted the State. Unless such rationalisation and standardization were evolved the ensuing chaos would itself have spelt confusion, conflicts and difficulties. The functional focus of s. 11 205 of the LIC Act will dispel scope for interpretative exercises unrelated to the natural setting in which the problem occurs." Pathak, J. (as he then was) in his judgment in the same case observed at pages 1134 to 1136 thus:

"The first question is whether the new clause (9) of the Standardisation Order succeeds in defeating the claim of the workmen. To determine that, s. 11 of the Corporation Act must be examined. Sub-s. (1) guarantees to the transferred employee the same tenure, at the same remuneration and upon the same terms and conditions on the transfer to the Corporation as he enjoyed on the appointed day under the insurer, and he is entitled to them until they are duly altered by the Corporation or his employment in the Corporation