1963 (11) TMI 103 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the orders passed by the Life Insurance Corporation of India (LIC) terminating the services of its employees.
2. Applicability and interpretation of Section 11 of the Life Insurance Corporation Act, 1956.
3. Compliance with the procedural requirements under Clause 10 of the Life Insurance Corporation Field Officers' (Alteration of Remuneration and other Terms and Conditions of Service) Order, 1957.
4. Validity of termination orders in light of paragraph 4(h) of the circular issued by the Managing Director on December 2, 1957.

Issue-Wise Detailed Analysis:

1. Validity of the Orders Terminating Services:
The central issue in these appeals is whether the orders passed by the Life Insurance Corporation of India (LIC) terminating the services of its employees were valid. The respondents, who were employees of the Metropolitan Insurance Co. Ltd. before its business was taken over by LIC, challenged the termination orders. The Calcutta High Court quashed the termination orders, and this decision was upheld by the Division Bench. The appellants contended that the High Court erred in holding the termination orders invalid.

2. Applicability and Interpretation of Section 11 of the Life Insurance Corporation Act, 1956:
Section 11(1) of the Act stipulates that every whole-time employee of an insurer whose controlled business has been transferred to LIC shall become an employee of LIC on the same terms and conditions as before. Section 11(2) grants the Central Government the power to alter the remuneration and other terms and conditions of service of such employees. The Court noted that under Section 11(1), employees became LIC employees with the same tenure, remuneration, and terms and conditions as before, until altered by LIC. Section 11(2) allows the Central Government to make alterations, and if unacceptable to the employee, LIC may terminate their employment with compensation.

3. Compliance with Procedural Requirements under Clause 10 of the Order:
Clause 10(a) of the Order specifies that in cases of unsatisfactory performance, negligence, or misconduct, the employee's remuneration may be reduced, or their services terminated after giving them an opportunity to show cause and conducting an enquiry. Clause 10(b) allows termination without assigning any reason, provided it has the prior approval of the Chairman of LIC. The Court emphasized that termination of services must conform to Clause 10(a) or 10(b). In the present cases, it was common ground that no enquiry was held, and no opportunity was given to the employees as required by Clause 10(a), nor was the termination effected under Clause 10(b).

4. Validity of Termination Orders in Light of Paragraph 4(h) of the Circular:
Paragraph 4(h) of the circular issued by the Managing Director on December 2, 1957, deals with the performance of Field Officers and provides that if their performance is less than 50% of the revised quota, their cases will be referred to a Committee. The Committee may decide to terminate their services if their poor performance was not due to circumstances beyond their control. The Court held that if paragraph 4(h) is interpreted to confer an independent authority to terminate services, it would be inconsistent with Clause 10 of the Order and thus invalid. The termination of services must be effected in the manner prescribed by Clause 10 of the Order.

Conclusion:
The Supreme Court confirmed the High Court's orders, holding that the termination orders were invalid as they did not comply with the procedural requirements of Clause 10 of the Order. The appeals were dismissed with costs.