S. Krishna Iyer and Others vs The Life Insurance Corporation of India and Others

Kochu Thommen, J.—The Petitioners were employees of the Travancore-Cochin State Insurance Department. With the transfer of the business of the Department to the Life Insurance Corporation of India (''the Corporation'') with effect from 1st September 1956 in terms of Section 7 of the Life Insurance Corporation Act, 1956 (''the Act'') persons like the Petitioners stood transferred to the Corporation. This was effected in terms of Section 11 of the Act, what the Corporation may make which provides:

(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 an 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 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) * * * (3) * * * (4) * * *

(emphasis supplied)

The effect of Section 11(1) is that, except in the case of employees who had given notice of their intention not to become employees of the Corporation, all the others who belonged to the Department became employees of the Corporation as from the appointed day; i.e., 1st September 1956. The Department as such ceased to exist and the posts in which the employees worked were abolished. The employees of the Department were thus completely cut off from their mooring in the Government as from 1st September 1956. However, certain rights and privileges were guaranteed to them as stated in Section 11(1). They held their offices in the Corporation by the same tenure, at the same remuneration, upon the same terms and conditions, and with the same rights and privileges as to pension, gratuity and other matters as they would have held had they not been transferred to the Corporation. This position, however, was to continue only until the Corporation by appropriate regulations altered such remuneration, terms and conditions. Under Sub-section (2) of Section 11, the Central Government is also given power, for the purpose of securing uniformity in the scales of remuneration and other terms and conditions of service, to alter, whether by way of reduction or otherwise, the remuneration and other terms and conditions of service of the employees.

The Corporation has made regulations by virtue of the power conferred upon it u/s 49 in respect of various matters. Section 49(2)(b) says that the Corporation may make regulations in respect of "the terms and conditions of service of persons who have become employees of the Corporation under Sub-section (1) of Section 11." By virtue of this power, the Life Insurance Corporation of India (Staff) Regulations, 1960, were made. They contain a specific provision in regard to pension payable to transferred employees. This is Regulation 78(2) which reads:

In the case of transferred employees who were eligible to pension benefits under the rules of the insurer and who were not members of an approved Superannuation Fund, pension may be granted in respect of service prior to 1st September 1956 on a suitable basis to be determined by the Corporation.

The effect of this regulation is that persons like the Petitioners who became employees of the Corporation as from the appointed day, viz., 1st September 1956 were entitled to pension at the time of their retirement only for the proportionate period of their service under the Government upto the date of transfer. Regulation 78(2) is challenged on the ground that it is ultra vires Section 11(1) of the Act.

Petitioner''s counsel Sri Pirappancode Srcedharan Nair submits that Section 11(1) postulates that "rights and privileges as to pension and gratuity and other matters" would remain unaltered in regard to persons who were transferred from the Department to the Corporation. The Corporation would have No. right, according to counsel, to make any alteration in regard to those matters, unlike in the case of remuneration and terms and conditions of service mentioned in Section 11(1). The reason for this submission is that u/s 11(1), rights and privileges as to pension are dealt with separately from remuneration-and terms and conditions of service, and it is not specifically stated that right to pension is liable to be altered. According to counsel, pension has to be calculated with reference to the total length of service that they would have put in with the Government had they not been transferred on 1st September 1956. Consequently counsel says that up till the age of 55 which is the normal age of retirement by superannuation under the Government, the Petitioners are entitled to claim pension.

The effect of the transfer is that the Petitioners are entitled to all the benefits which the employees of the Corporation enjoy. These benefits include longer service. An employee of the Corporation does not retire until he is 60. There are various other benefits in the Corporation. However, pension is not one of them. No pension is payable under the Corporation. Nevertheless, Section 11(1) protects their right to pension for the period of service with the Government. Section 11(1) provides that until duly altered by the Corporation, the same remuneration, terms and conditions of service which were applicable to the employees in the Department would continue to be applicable to them. It is true, as pointed out by the Petitioners counsel, that pension and gratuity and other matters are specifically stated in relation to rights and privileges as if they stand outside the provisions relating to terms and, conditions. In stating that the terms and conditions are liable to be altered by the Corporation, the section does not refer to rights and privileges as to pension. That by itself, in my view, does not make any difference. Rights and privileges as to pension and gratuity referred to under the section are none other than the terms and conditions of service. When it is provided that the terms and conditions are liable to be altered there can be no doubt that such power takes in pension as well. The Corporation is duly invested with power to make alterations in regard to pension. In the circumstances there is no substance in the contention to the contrary. Regulation 78(2) which limits the right of the transferred employees in regard to pension to the total length of their service with the Government prior to 1st September 1956 is intra vires.

Petitioners'' counsel submits that Regulation 78(2) did not in any event come into force until 1960. There is nothing to indicate that the Corporation has either the power to make regulations retrospectively or that the regulations are intended to operate retrospectively. Counsel therefore contends alternatively that the Petitioners are entitled to pension for the period at least upto the date of the coming into force of the Regulation.

Section 49 has conferred upon the Corporation the power to make regulations with the previous approval of the Central Government. It may make Regulations, consistently with the Act and the rules made thereunder, to provide for all matters for which provision is expedient to give effect to the provisions of the Act. One of the matters which is provided for is what is stated in Section 49(2)(b). This refers to terms and conditions of service of persons who have already become employees of the Corporation on account of the transfer effected on 1st September 1956. The transferred employees have been working with the Corporation long prior to 1960. The Corporation is empowered under the statute to regulate their terms and conditions of service. These terms and conditions must of necessity cover the total length of service in the Corporation, operating prospectively and retrospectively. The power under sub-Clause (bb) of Section 49(2) must therefore relate posterior and interiorly.

It is by virtue of this power that under Regulation 78(2) the Corporation has limited the payment of pension to service prior to 1st September 1956. It has sufficient power to do so. In this connection it has to be observed that in the case of the Petitioner''s pension became payable only subsequent to the date on which the regulation came into effect, for none of them retired prior to 1960. This payment is of course in relation to the service prior to 1st September 1956.

In the circumstances, the challenge against Regulation 78(2) falls. The Original Petition is accordingly dismissed. No costs.