MADAN MOHAN PATHAK versus UNION OF INDIA & ORS. ETC.

Citation: [1978] 3 S.C.R. 334 · Decided: 21-02-1978 · Supreme Court of India · Bench: M. HAMEEDULLAH BEG · Disposal: Case Allowed
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Judgment (excerpt)

A 
B 
G 
334 
MADAN MOHAN PATHAK 
v. 
UNION OF INDIA & ORS. ETC. 
February 21, 1978 
/~l. H. BEG, C.J., Y. V. CHANDRACHUD, 1'. N. BHAGWA'IJ, V. R. 
KRISHNA IYER, s. MURTAZA FAZAL ALI, P. N. SHINGII.\t AND 
D. A. DESAI, JJ.J 
Life Insurance Corporation (Modification of Settlen1ent) Act, 1976-S. 3-.... 
Validity of-Corporation entered into Settlement with Class Ill and Class IV 
employees regarding bonus-Settlen1ent was subject to the approval of Central 
Government-During emergency Central Government issued instructions not to 
pay bonus under the settlement-Employees filed Writ Petition 
in the High 
Court-A Single Judge allowed the Writ Petition-The impugned Act was 
passed when Letters Patent Appeal was pending before the High (,'ourt--C'orpo. 
ration withdrew the appeal-Impugned Act, if absolved the Corporation 
fron1 
obligation to carry out the Writ of Mandarnus issued by t!ie Single Judge. 
Constitution of India : Art. 31-Bonus payable under the. Settlement, if 
property within the mtaning of Art. 3)(2)-Stopping payment of bonus, 
tf 
a1110111us tv cnr11pufsory acquisition of property without poy1nen: of con1pe1Ba-
tivn. 
From time to time the Life Insurance Corporation and its employees arrived 
at settlement relating to the terms and conditions of service of Class III and 
Class IV employees including bonus payable to them. Clause (8) of the Settle-
ment dated January 24, 1974, which related to payment of bonus provided-(i) 
that no profit-sharing bonus shall be paid but the Corporation may, subject to 
such directions as the Central Government may issue from time to time, grant 
any other kind of bonus to its Class III and Class IV employees; (ii) that an 
annual cash bonus will be paid to all Class ID and Class IV employees at the 
rate of 15% of the annual salary actually drawn by an employee in respect of 
the financial year to which the bonus relates and (iii) that save as 
provided 
therein all other terms and conditions attached to the admissibility and payment 
of bonus shall be as laid down in the Settlement on bonus dated June 26, 1972. 
Clause ( 12) of the Settlement which refers to the period of settlement provided 
(!) that the Settlement shall be effective from April !, 1973 for a period of four 
years and (2) that the terms of the Settlement shall be subject to the approval 
of the Board of the Corporation and the Central Government. 
One of the administrative instructions issued by the Corporation in regard to 
the payment of cash bonus under cl. S(ii) of the Settlement was that in ca~e of 
retirement or death, salary up to the date of cessation of service shall be taken 
into account for the purpose. of determining the amount of bonus payable to the 
employee or his heirs and the other was that the bonus shall be paid along with 
the salary for the month of April but in case of retirement or death, payment 
will be made soon after the contingency. 
The Payment of Bonus (Amendment) Act. 1976 considerably curtailed the 
rights of the employees to bonus in industrial establishments. 
But in_ so far as 
the employees of the Corporation were concerned this Act had no application 
because by reason of s. 32 of the Payment of Bonus Act, the Corporation was 
outside the purview of its operation. The Central Government however decided 
that the employees of establishments which were not covered by the Bonus Act 
would not be eligible for payment of bonus but exgratia payment in lieu of 
bonus would be made to them. 
Pursuant to this decision the L.IC. was adYised 
by the Ministry of Finance, Goverriment of India, that no further payment of 
bonus should be made to its employees without getting the same cleared by the 
Government. The Corporation accordingly issued administrative 
instructions 
not to pay bonus to its employees under the cxif'ting provisions until further 
instructions. To the employees' assertion that the Corporation was bound to 
) 
MADAN MOHAN PATHAK V. UNION 
335 
pay bonus in accordance with the terms of the Settlement the Corporation con-
tended that payment of bonus by the Corporation was subject to such directions 
as the Central Government might issue from time to time, and since the Central 
Government had advised it not to make any payment of bonus without 
its 
specific approval, bonus could not be paid to the employees. 
Thereupon, the 
All India Insurance Employees' Association moved the High Cou1t for issue of 
a writ directing the Corporation to act in accordance with t
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