1978 (2) TMI 209 - SC - Indian Laws

Issues Involved:
1. Validity of the Life Insurance Corporation (Modification of Settlement) Act, 1976.
2. Whether the right to annual cash bonus is property under Article 31(2).
3. Whether the impugned Act amounts to compulsory acquisition of property without compensation.
4. Effect of the judgment of the Calcutta High Court on the impugned Act.
5. Violation of fundamental rights under Articles 19(1)(f) and 31 of the Constitution.

Detailed Analysis:

1. Validity of the Life Insurance Corporation (Modification of Settlement) Act, 1976:
The primary issue was the constitutional validity of the Life Insurance Corporation (Modification of Settlement) Act, 1976. The Act sought to nullify the settlements between the Life Insurance Corporation (LIC) and its employees regarding the payment of annual cash bonuses. The petitioners argued that this Act violated their fundamental rights under Articles 19(1)(f) and 31 of the Constitution.

2. Whether the Right to Annual Cash Bonus is Property under Article 31(2):
The Court examined whether the right to receive an annual cash bonus constituted property under Article 31(2). It concluded that the right to receive a bonus was indeed a form of property. The Court stated, "debts and other rights in personam capable of transfer or transmission are property which can form the subject matter of compulsory acquisition." This interpretation was in line with previous judgments where the right to receive payments, such as pensions and cash grants, was considered property.

3. Whether the Impugned Act Amounts to Compulsory Acquisition of Property without Compensation:
The Court analyzed whether the impugned Act resulted in the compulsory acquisition of the employees' right to receive the bonus without providing compensation. The Act effectively extinguished the debts owed by the LIC to its employees, which the Court equated to a transfer of ownership of the debt to the LIC. The Court held, "the extinguishment of the debt of the creditor with corresponding benefit to the State or State owned/controlled corporation would plainly and indubitably involve transfer of ownership of the amount representing the debt from the former to the latter." Since the Act did not provide any compensation for this acquisition, it was in violation of Article 31(2).

4. Effect of the Judgment of the Calcutta High Court on the Impugned Act:
The petitioners argued that the judgment of the Calcutta High Court, which had directed the LIC to pay the bonus, remained binding despite the impugned Act. The Court noted that the Act did not specifically address or nullify the judgment of the Calcutta High Court. Therefore, the LIC was still obligated to comply with the High Court's directive to pay the bonus for the year 1975-76. The Court stated, "the judgment continued to subsist and the Life Insurance Corporation was bound to pay annual cash bonus to Class III and Class IV employees for the year 1st April, 1975 to 31st March, 1976 in obedience to the writ of Mandamus."

5. Violation of Fundamental Rights under Articles 19(1)(f) and 31 of the Constitution:
The Court found that the impugned Act violated the fundamental rights of the employees under Article 31(2) as it amounted to compulsory acquisition of property without compensation. Since the Act was found to be void under Article 31(2), the Court deemed it unnecessary to examine the violation under Article 19(1)(f). The Court concluded, "We accordingly allow the writ petitions and declare the Life Insurance Corporation (Modification of Settlement) Act, 1976 void as offending Article 31, clause (2) of the Constitution."

Conclusion:
The Supreme Court declared the Life Insurance Corporation (Modification of Settlement) Act, 1976, void as it violated Article 31(2) of the Constitution by compulsorily acquiring the employees' right to receive an annual cash bonus without providing compensation. The Court also held that the LIC was bound to comply with the Calcutta High Court's judgment directing the payment of the bonus for the year 1975-76. The respondents were directed to pay the costs of the writ petitions to the petitioners.

← Previous Next →