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ORIGINAL JURISDICTION: Writ Petitions Nos. 108 and 174-177 of 1976.

(Under Article 32 of the Constitution of India). R. K. Garg, S. C. Agarwala & Aruneshwar Gupta for the petitioners in WP 108 Somnath Chatterjee, P. K. Chatterjee & Rathin Das for the petitioners in 174-77 S. V. Gupte, Attorney Genl., U. R. Lalit, R. N. Sacluhey & A. Subhashini for r. 2 in all the WPs.

S. V. Gupte, Attorney Gent. & D. N. Mishra for rr. 2 & 3 in WP 108 and rr. 2-4 in WP 174-77.

P. S. Khera for the Intervener (AIN LIC Employees Federation) The following Judgments were delivered BEG, C.J.-The Life Insurance Corporation was constituted under the Life Insurance Corporation Act 31 of 1956 (hereinafter to be referred to as "the Act"). On 1-6-1957, the Central Government issued, under s. 11 (1) of the Act, an order prescribing the 'Pay scales, dearness allowance and conditions of service applicable to-Class III and IV employees. Among these conditions it is, stated that no bonus would be paid but amenities like insurance and medical treatment free of cost would be provided. On 26-6-1959, an order was passed by the Central Government under s. 11(2) of the Act, amending para 9 of the 1957 Order inasmuch as it was provided that bonus other than profit sharing bonus would be paid to the employees drawing the salary not exceeding Rs. 5001- per month. On 2nd of July 1959, there was. a settlement between the L.I.C. and the employees providing for payment of cash bonus at the rate of one-and-a-half month's basic salary which was to be effective from 1-9-1956 and valid upto 31-12-1961. In July 1960, regulations were framed under section 49 to regulate the conditions of service of classes of employees and regulation 58 provided for payment of non-profit sharing bonus to the employees. Orders were again passed on 14-4- 1962 and 3rd August 1963, the effect of which was to remove the restriction of Rs. 5001- for eligibility for payment of bonus. On 29th January 1963, another settlement was arrived at between the L.I.C. and its employees for payment of cash bonus at the rate of one-and-a-half month's basic salary. This was to continue in operation until 31st March 1969. On 20th June 1970, a third settlement was reached for payment of cash bonus at the same rate which was to be effective upto 31st March 1972. On 26-6-1972, a fourth settlement for payment of cash bonus at the rate of 10 per cent of gross wages (basic and special pay and dearness allowance) was made effective from 1st 'April 1972 to 1973. On 21st January 1974 and 6th February 1974, settlements for payment of cash bonus at 15 per cent of gross wages, valid for four years from 1st April 1973 to 31st March 1977, were reached. It is clear that this so called "bonus" did not depend upon profits earned but was nothing short of increas-

ed wages. The settlements were approved by the Board of Directors of the L.I.C. and also by the Central Government. On 29th March, 1974, a circular was issued by the L.I.C. for payment of bonus in accordance with the settlement along with the salary in April. In April 1974, the payment of bonus for the year 1973-74 was actually made in accordance with the settlement. Again, in April 1975, *bonus for the year 1974-75 was made in accordance. with the settlements. On 25th September 1975, however, a Payment of Bonus Amendment Ordinance was promulgated. On 26-9-1975, the L.I.C. issued a circular stating that, as the payment of bonus was being reviewed in the light of the Ordinance, and, on 22nd of March, 1976, payment of bonus for the year 1975- 76 was to, be withheld until a final decision was) taken. Against this, a writ petition was filed in the; High Court of Calcutta. On 21st May 1976, the Calcutta High Court passed an order recognising the right of petitioners to payment of bonus for the year 1975-76 which had become payable along with the salary in April 1976 and ordered that it must be paid to the employees. Apparently, bonus was treated as part of the right of the petitioners to property protected by Article 19( and 31(1) of the Constitution. On 29th May 1976, the Life Insurance Corporation Modification of Settlement Act 1976 was enacted by Parliament denying to the petitioners the right which had been recognised by the settlements, approved by the Central Government and acted upon by the actual payment of bonus to the employees, and, finally, converted into right under the decision of the Calcutta High Court on 21st May 1976.

On 25th September, 1975 an Ordinance was promulgated by the President of India called the Payment of Bonus (Amendment) Ordinance, 1975 which came into force with immediate effect. Subsequently, this Ordinance was replaced by the Payment of Bonus (Amendment) Act, 1976 which was brought into force with retrospective effect from the date of the Ordinance, namely, 25th September, 1975. This amending law considerably curtailed the rights of the employees to bonus in industrial establishments, but it had no impact so far as the employees of the Life Insurance Corporation were concerned since the original Payment of Bonus Act was not applicable to the life Insurance Corporation by reason of section 32 which exempted the Life Insurance L5-277SCI/78 Corporation from its operation. The Central Government, however, decided that the employees of establishments which were not covered by the Payment of Bonus Act would not be eligible for payment of bonus but ex-gratia cash payment in lieu of bonus would be made "as may be determined by the Government taking into account the wage level, financial circumstances etc. in each case and such payment will be subject to a maximum of 10% and pursuant to this decision, the Life Insurance Corporation was advised by the Ministry of Finance that no further payment of bonus should be made to the employees "without getting the same cleared by the Government". The Life Insurance Corporation thereupon by its Circular dated 26th September, 1975 informed all its offices that since the question of payment of bonus was being reviewed in the light of the Bonus Ordinance dated 25th September,, 1975, no bonus should be paid to the employees "under the existing provisions until further instructions". The' All-India Insurance Employees' Association protested against this stand taken by the Life Insurance Corporation and pointed out that the Life Insurance Corporation was bound to pay bonus in accordance with the terms of the Settlement and the direction not to pay bonus was clearly illegal and unjustified. The Life Insurance Corporation conceded that payment of bonus was covered by the settlement but contended that it was subject to such directions as the Central Government might issue from time to time and since the Central Government had advised the Life Insurance Corporation not to make any payment of bonus without their specific approval, the Life Insurance Corporation was justified in not making payment to the employees. This stand was taken by the Life Insurance Corporation in its letter dated 7th February, 1976 addressed to, the All India Insurance Employees' Association and this was followed by a Circular dated 22nd March, 1976 instructing all the offices of the Life Insurance Corporation not to make payment by way of bonus. The All-India Insurance Employees' Association and some others thereupon filed writ petition No. 371 of 1976 in the High Court of Calcutta for a writ of Mandamus and Prohibition directing the Life Insurance Corporation to act in accordance with the terms of the Settlement dated 24th January. 1974 read with the administrative instructions dated 29th March, 1974 and to rescind or cancel the Circulars dated 26th September, 1975, 7th February, 1976 and 22nd March, 1976 and not to refuse to pay cash bonus to Class III and Class IV employees along with their salary for the month of April 1976 as provided by the Settlement read with the administrative instructions. The writ petition was resisted by the Life Insurance Corporation on various grounds to which it is not necessary to refer since we are not concerned with the correctness of the judgment of the Calcutta High Court disposing of the writ petition. Suffice it to state, and that is material for our purpose, that by a judgment dated 21st May, 1976 a Single Judge of the Calcutta High Court allowed the writ petition and issued a writ of Mandamus and Prohibition as prayed for in the writ petition. The Life Insurance Corporation preferred a Letters Patent Appeal against the judgment of the learned Single Judge but in the mean time the impugned Act bad already come into force and it was, therefore, stated on behalf of the Life Insurance Corporation before the Division Bench that there was no necessity for proceeding with the appeal and hence the Division Bench made no order in the appeal. The result was that the judgment of the learned Single Judge remained intact : with what effect, is a matter we shall presently consider.

provide for payment of any compensation for the same and hence the impugned Act was void as contravening clause (2) of Article 21.

The first question which arises for consideration on this. contention is whether the right of Class III and Class IV employees to 'annual cash bonus' for the years 1st April, 1975 to 31st March, 1976 and 1st April, 1976 to 31st March, 1977 under the Settlement was property so as to attract the inhibition of Article 31, clause (2). The Life Insurance Corporation submitted that at the date when the, impugned Act was enacted, Class III and Class IV employees had no absolute right to receive 'annual cash bonus' either for the, year 1st April, 1975 to 31st March, 1976 or for the year 1st April, 1976 to 31st March, 1977 and there was, therefore,, no property which could be compulsorily acquired under the impugned Act. The argument of the Life Insurance Corporation was that the Life Insurance Corporation (Staff) Regulations, 1960 which laid down the terms and conditions of services inter alia of Class III and Class IV employees did not contain any provision for payment of bonus except Regulation 58 and since under this Regulation, grant of annual cash bonus by the life Insurance Corporation was subject to such directions as the Central Government might issue, the right of Class III and Class IV employees to receive annual cash bonus could not be said to be an absolute right. It was a right which was liable to, be set at naught by any directions that might be issued by the Central Government and in fact the Central Government did issue a direction to the life Insurance Corporation not to make payment of bonus to the employees "without getting the same cleared by the Government" and consequently, Class III and Class IV employees had no absolute right to claim bonus. The result, according to the Life Insurance Corporation, also followed on a proper interpretation of clauses 8 (i) and 8(ii) of the Settlement, for it was clear on a proper reading of these two clauses that annual cash bonus payable to Class III and Class IV employees under clause 8 (ii) was, by reason of clause 8 (i) , subject to such directions as the Central Government might issue from time to time and the Central Government having directed that no further payment of bonus should be made to the employees, Class III and Class TV employees were not entitled to claim annual cash bonus from the Life Insurance Corporation. This argument of the Life Insurance Corporation is plainly erroneous and it is, not possible to accept it. Regulation 58 undoubtedly says that non-profit sharing bonus may be granted by the Settlement was property and since the impugned transfer of the ownership of this right to the Life which was 'State' within the meaning of Article 35 7 the Life Insurance Corporation to its employees, subject to such directions as the Central Government may issue and, therefore, if the Central Government issues a direction to the contrary, nonprofit sharing bonus cannot be granted by the Life Insurance Corporation to any class of employees. But here, in the present case, grant of annual cash bonus by the Life Insurance Corporation to Class III and Class IV employees under clause 8(ii) of the Settlement was approved by the Central Government as provided it clause 12 and the 'direction contemplated by Regulation 58 was given by the Central Government that annual cash bonus may be granted as provided in clause 8(ii) of the Settlement. It was not competent to the Central Government thereafter to issue another contrary direction which would have the effect of compelling the Life Insurance Corporation to commit a breach of its obligation under section'18, sub-section (1) of the Industrial Disputes Act, 1947 to pay annual cash bonus in terms of clause 8 (ii) of the Settlement. Tumina to clause 8(i) of the Settlement, it is true that under this, clause non-profit sharing bonus could be granted by the Life Insurance Corporation 'subject to such directions as the Central Government may issue from time to time but these words giving overriding power to the Central Government to issue directions from time to time are conspicuously absent in clause 8(ii) and it is difficult to see bow they could be projected or read into that clause,. Clauses 8(i) and 8(ii are distinct and independent clauses and while clause 8(i) enacts a general provision that non-profit sharing bonus may be paid by the Life Insurance Corporation to Class III and Class IV employees subject to such directions as the Central Government might issue from time to time, clause 8(ii) picks out one kind of non-profit sharing bonus and specifically provided that annual cash bonus shall be paid to all Class III and Class IV employees at the rate of 15 per cent of the annual salary and this specific provision in regard to payment of annual cash bonus is made subject to only the approval of the Central Government which was admittedly obtained. It is, therefore, clear that Class III and Class IV employees had absolute right to receive annual cash bonus from the Life Insurance Corporation in terms of clause 8(ii) of the Settlement and it was not competent to the Central Government to issue any directions to the Life Insurance Corporation to refuse or withhold payment of the same. It is true that under clause 8(ii) of the Settlement the annual cast bonus for a particular year was payable at the rate of 15 per cent. of the annual salary actually drawn by the employee in respect of the financial year to which the bonus, related and it would, therefore, seem that the bonus was payable at the end of. the year and not before, but it was not disputed on behalf of the Life Insurance Corporation that even an employee who retired or resigned before the, expiration of that year, as also the heirs of a deceased employee who died during the. currency of the year, were entitled to receive, proportionate bonus and the Life Insurance Corporation in fact recognised this to be the correct position in its administrative instructions dated 29th March, 1974 and actually paid proportionate bonus to the retiring- or resigning employee and the heirs; of the deceased employee. The annual cash bonus payable under clause 8(ii) of the Settlement, therefore, accrued from day to-day, though payable in case of retirement resignation or death, on the happening of that contingency and otherwise, on the expiration of the year to which the bonus related. There was thus plainly and unquestionably a debt in respect of annual cash bonus accruing to each Class III or Class IV employees from day-to-day and consequently, on the expiration of the year 1st April, 1975 to 31st March. 1976, the annual cash bonus payable under clause 8(ii) of the Settlement was a debt due and owing from the Life Insurance Corporation to each Class III or Class IV employee and so also at the date when the impugned Act came into force, each Class III or Class IV employee was entitled to a debt due and owing to him from the Life Insurance Corporation in respect of the annual cash bonus from 1st April, 1976 upto that date. The question is whether these debts due and owing from the Life Insurance Corporation were property of Class III and Class IV employees within the meaning of Article 31(2). So also, was the right of each Class III and Class IV employee to receive annual cash bonus for the period from the date of commencement of the impugned Act upto 31st March, 1977 property for the purpose of Article 31(2) ? These questions we shall now proceed to consider, for on the answer to them depends the applicability of Article 31(2).