A.V. NACHANE & ANOTHER versus UNION OF INDIA & ANOTHER

Citation: [1982] 2 S.C.R. 246 · Decided: 28-12-1981 · Supreme Court of India · Bench: A.C. GUPTA · Disposal: Case Partly allowed
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Judgment (excerpt)

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A.V. NACHANE & ANOTHER 
v. 
UNION OF INDIA & ANOTHER 
December 28, 1981 
(A. C. GUPTA, R. S. PATHAK AND 
0. CHINNAPPA RBDDY, JJ.] 
Life Insurance Corporation (Amendment) Act 1981, Life lnsurance Cor-
poration (Ordinance) 1981, and Life Insurance Corporation of India Class III and 
Class IV Employees (Bonus and Dean1ess) Allowance Rules. 
Act and Ordinance whether ultra vires Articles 19(1)(g) and 21 of the 
Constitution-Act whether suffers from excessive delegation of powers. 
Rule 3 of the Rules-Cannot make the writ is.1Ued by the Supreme Court 
nugatory-Can operate only prospectively. 
Constitution of India 1950 : 
Article 14-Hostile discrimination-Burden of proof-On whom lies. 
Article 21-'life'-Whether includes 'livelihood' 
Article 32-Claim based on industrial settlement-Whether a fundamental 
right and enforceable. 
Administrative Law-Delegated legislation-Statutory rule over-tiding existing 
,_ 
/aw-Validity of. 
The Life Insurance Corporation was constituted under the Life Insurance 
Corporation Act 1956, to provide for the nationalisation of life insurance business 
in India by transferring all such business to the Life Insuranc'' Corporation 
of India. 
Under Section II (I) of the Act the services of the employees of the 
insurers whose business had vested in the Corporation were transferred to the 
Corporation. Section 49(1) empowered the Life Insurance Corporation of India 
to make regulations for the purpose of giving effect to the provisions of the Act. 
Two settlements were reached on January 24, 1974 and February 6, 1974 
between the Life Insurance Corporation and its Class III and Class JV employees. 
These settlements covered a large ground including the claim for bonus. These 
were settlements under section 18 read with section 2(p) of the Indus1:rial Disputes 
Act 1947. Under clause 12 of the settlements, the settlements were to be~effective 
from 1st April, 1973 for a period of four years that is, from !st April, 1973 to 
31st March, 1977. In 1975, the Payment of Bonus (Amendment) 0.rdinance was 
promulgated which was subsequently replaced by the Payrne:ot of Bonus 
(Amendment) Act 1976. The Central Government decided that the employees 
of establishments not covered by the Payment of Bonus Act would 1001 be liable 
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A.V. NACHANE v. UNiON 
247 
to get bonus and cx-gratia payment in lieu of bonus. Payment of Bonus for the 
year 1975-1976 to the employees of the Corporation was stopped under instruc-
tions from the Central Government. 
A writ petition filed by the employees of the Corporation in the Calcutta 
High Court was allowed, and the Corporation was directed to act in accordance 
with the terms of the settlement. 
In Madan Mohan Pathak v. Union of India and 
Ors. [1978] 3 SCR 334, the Supreme Court held that the 1976 Act offended Article 
31(2) of the Constitution and was void, and directed the Union of India and the 
Life Insurance Corporation to forbear from implementing or enforcing the provi-
sions of the 1976 Act and to pay annual cash bonus for the years 1st April, 1975 
to 31st March, 1976 and 1st April 1976 to 31st March, 1977, to Class III and Class 
IV employees in accordance with the settlements. 
On March 31, 1978, the Corporation issued a notice under section 19(2) of 
the Industrial Disputes Act declaring its int,;ntion to terminate th~ settlements on 
the expiry of two months from the date of notice. On the same day another 
r.otice was also issued by the Corporation under section 9A of the Industrial 
Disputes Act stating that it proposed to effect a change in the conditions of 
service applicable to the workn,en. These notices were followed by a notifica-
tion issned by the Corporation under section 49 of the Life Insurance Corpora-
tion Act on May 26, 1978 substituting a new regulation for the existing 
regulation No. 58 of the Staff Regulations. Simultaneously the Life Insurance 
Corporation \Alteration of Remuner;;tion and other Terms and Conditions of 
Service of Employees) Order, 1957, was amended by the Central Government, 
substituting a new clause (9) for the original clause concerning bonus, to take 
effect from June 1, 1978, to provide that the employees of the Corporation shall 
not be entitled to profit-sharing bonus. 
The validity of the aforesaid two notices and the notification issued for the 
purpose of nullifying any further claim to annual cash bonus was challenged by 
the workmen in a writ petition in the Allaha
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