Life Insurance Corporation of India vs Sunil Kumar Mukherjee And Ors.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 15 November 1963

Coram: K.C. Das Gupta, K.N. Wanchoo, P.B. Gajendragadkar

Life Insurance Corporation of India versus Sunil Kumar Mukherjee and others was decided on 15 November 1963 by the Supreme Court of India. The judgment was authored by Justice Gajendragadkar and the bench consisted of Justices K.C. Das Gupta, K.N. Wanchoo and P.B. Gajendragadkar. The matter before the Court comprised a group of fifteen separate appeals that all raised the same legal question: whether the orders issued by the appellant, Life Insurance Corporation of India, terminating the employment of its officers who were the respondents, were valid. Because the factual circumstances underlying each of the fifteen disputes were substantially identical, the Court chose to set out the material facts once, using the case of one respondent, Sunil Kumar Mukherjee, as a representative example. Mukherjee had been engaged in the insurance business since June 1941 and obtained confirmation of his service from the Metropolitan Insurance Company Limited in March 1950. From around 1953 he served as an Inspector of that company and, on 18 March 1955, he was appointed as Inspector at Barrackpore. When the Life Insurance Corporation of India assumed control of the business previously managed by the Metropolitan Insurance Company, it issued an order on 16 October 1958 terminating Mukherjee’s services. In response, Mukherjee filed a petition before the Calcutta High Court under Article 226 of the Constitution, seeking a writ of certiorari or any other appropriate writ or order that would set aside the order of discharge. Justice Sinha, who heard the petition, allowed it and directed the issuance of a certiorari writ to quash the impugned discharge order. He also issued a mandamus directing the parties to the petition not to give effect to the termination. In the petition, Mukherjee had impleaded eight respondents, the principal ones being the appellant corporation and the Union of India.

Feeling aggrieved by Justice Sinha’s decision, the appellants appealed to the Calcutta High Court under the Letters Patent, presenting the case before a Division Bench consisting of Chief Justice Bose and Justice Debabrata Mokerjee. That bench affirmed the view of Justice Sinha and confirmed the earlier order setting aside the termination. Subsequent to that judgment, the appellants obtained a certificate of fitness from the High Court, which enabled them to approach this Court on appeal. On facts that mirrored those of Mukherjee’s case, the appellant filed the remaining fourteen appeals before the Supreme Court. The learned Solicitor‑General, appearing for the appellant, raised a single common issue in all fourteen appeals: whether the High Court had erred in holding that the termination orders issued against each respondent were invalid. Before addressing the arguments raised by the appellant in the present appeals, the Court indicated that it would first recite the relevant orders that had been passed concerning the appointment and discharge of the respondent Mr Mukherjee.

In this case, the Court examined the matters relating to the appointment and later termination of the respondent, Mr. Mukherjee. The record showed that Mr. Mukherjee had been appointed as a whole‑time Inspector by the Metropolitan Insurance Co. Ltd. on either the eighteenth or nineteenth day of March, 1955. The conditions of his employment were set out in a written document that comprised fourteen separate clauses and was annexed to the writ petition as Annexure A. Clause thirteen of that document stipulated that the appointment could be terminated without any notice if the employee was found guilty of fraud, mis‑appropriation, breach of discipline, insubordination, conduct detrimental to the interests of the company, disloyalty, or gross neglect of duty. The clause further provided that, provided the termination was for any reason other than misconduct, the employee would be entitled to a notice period of thirty days. From these provisions, the Court concluded that under the original terms of Mr. Mukherjee’s appointment with the Metropolitan Insurance Company, he could be dismissed without notice for misconduct, while he would be entitled to thirty days’ notice if his services were ended for reasons not involving misconduct.

After the Life Insurance Corporation assumed control of the business of the Metropolitan Insurance Co. Ltd., an order favoring Mr. Mukherjee was issued on the fourteenth day of February, 1958. That order referenced Government Order No. 53(1) I.S.N. (1) 57 dated the thirtieth of December, 1957, and directed that Mr. Mukherjee should serve as a Field Officer. The order also stated that he would remain attached to the Barrackpore Branch Office until further instructions were issued, and it was signed by the Divisional Manager. Consequently, the record indicated that following the issuance of this order, Mr. Mukherjee began performing the duties of a Field Officer in accordance with the relevant government directive. The Court noted that a key issue for determination in the present appeal was the legal effect of this appointment order. Subsequently, on the sixteenth day of October, 1958, an order was passed that terminated Mr. Mukherjee’s services. That order invoked section five of the Categorisation circular dated the second of December, 1957, and indicated that a Special Committee appointed by the Corporation’s Board had examined Mr. Mukherjee’s case, which involved former branch secretaries and similar positions. Acting on the recommendations of that Committee, which the Corporation had accepted, the order terminated his services with immediate effect. The order further informed Mr. Mukherjee that he would receive his emoluments up to the current month as well as a payment equivalent to one month’s salary in lieu of notice. Mr. Mukherjee challenged the validity of this termination order before the Calcutta High Court, and the learned Solicitor‑General argued that the High Court erred in upholding Mr. Mukherjee’s claim. Finally, the Court observed that the background of the nationalisation of life‑insurance business in India was well established, recalling that the Life Insurance (Emergency Provisions) Ordinance No. 1 of 1956 had been promulgated by the President on the nineteenth of January, 1956, for the purpose of taking over the management of life‑insurance operations pending their eventual nationalisation.

The Court explained that the government first dealt with the life‑insurance sector by promulgating the Life Insurance (Emergency Provisions) Ordinance (No 1 of 1956) to assume control over the interest and management of the business pending its nationalisation. Subsequently, Parliament enacted Act No 9 of 1956, which repealed the Ordinance and became operative on 21 March 1956. This legislation was followed by Act 31 of 1956, thereafter referred to as “the Act”, which was published on 1 July 1956. The Act specified, in section 3, that the appointed date for the transfer would be 1 September 1956. Section 7 of the Act stipulated that on that appointed day all assets and liabilities relating to the controlled business of every insurer would be transferred to and vested in the Life Insurance Corporation. Accordingly, the Life Insurance Corporation assumed ownership of all such assets and liabilities throughout the country. In consequence of this transfer, section 11 of the Act introduced provisions governing the shift of service of the insurers’ existing employees to the Corporation. The Court noted that, for the purpose of the present appeals, it was necessary to set out the exact wording of section 11(1) and (2).

Section 11(1) reads as follows: “(1) Every whole‑time employee of an insurer whose controlled business has been transferred to and vested in the Corporation and who was employed by the insurer wholly or mainly in connection with his controlled business immediately before the appointed day shall, on and from the appointed day, become an employee of the Corporation, and shall hold his office therein by the same tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to pension and gratuity and other matters as he would have held the same on the appointed day if this Act had not been passed, and shall continue to do so unless and until his employment in the Corporation is terminated or until his remuneration, terms and conditions are duly altered by the Corporation: Provided that nothing contained in this sub‑section shall apply to any such employee who has, by notice in writing given to the Central Government prior to the appointed day, intimated his intention of not becoming an employee of the Corporation.” Section 11(2) continues: “(2) Where the Central Government is satisfied that for the purpose of securing uniformity in the scales of remuneration and the other terms and conditions of service applicable to employees of insurers whose controlled business has been transferred to, and vested in, the Corporation, it is necessary so to do, or that, in the interests of the Corporation and its policy‑holders, a reduction in the remuneration payable, or a revision of the other terms and conditions of service applicable, to employees or any class of them is called for, the Central Government may, notwithstanding any thing contained in sub‑section (1), or in the Industrial Disputes Act, 1947, or in any other law for the time being in force, or in any award, settlement or agreement for the time being in force, alter (whether by

The provision allows the corporation, after the appointment of a day on which the insurer’s controlled business is transferred, to modify the remuneration and other service conditions of the affected employees in any manner it deems appropriate, including reduction. If an employee finds the modification unacceptable, the corporation is authorized to terminate that employee’s service, provided it pays compensation equal to three months’ remuneration, unless the employee’s service contract stipulates a shorter notice period for termination. The subsequent explanatory clauses and sub‑sections (3) and (4) are not material to the present analysis. Consequently, under section 11(1), every person who was employed by an insurer, whether wholly or mainly, in connection with the insurer’s controlled business before the appointed day automatically became an employee of the corporation as of that appointed day. Upon becoming employees of the corporation, these persons retained their existing positions, tenure, salaries, and all other terms, conditions, rights and privileges that they previously enjoyed. In effect, the takeover of the controlled business caused a mere transfer of employment status, with the employees continuing to serve under identical conditions until either their employment terminated or the corporation lawfully altered their remuneration or other service terms. The legislative scheme of section 11(1) therefore makes clear that the transfer of the insurer’s controlled business results in the insurer’s employees becoming employees of the corporation, while preserving their original employment terms until such terms are lawfully modified by the corporation.

The proviso attached to section 11(1) stipulates that an employee who, before the appointed day, gave written notice to the Central Government expressing an intention not to become an employee of the corporation, is excluded from the operation of section 11(1). In other words, such an employee does not automatically become a corporation employee and his situation must be dealt with outside the framework of sections 11(1) and 11(2). Section 11(2), as originally enacted, was substantially amended in 1957. The effect of the amended sub‑section is to confer on the Central Government the authority to alter, whether by reduction or otherwise, the remuneration and other conditions of service of the relevant employees to any extent and in any manner it deems fit. Importantly, this authority may be exercised notwithstanding any provisions in sub‑section (1), the Industrial Disputes Act 1947, any other existing law, or any award, settlement or agreement that is currently in force. The legislative intent behind granting such overriding power to the Central Government was to ensure the efficient functioning of the corporation, particularly with regard to employees who were wholly or mainly employed by the insurers prior to the appointed day.

In this case the Court explained that Section 11(2) of the Act, after granting the Central Government a broad power to modify the remuneration and other conditions of service of employees who had been mainly employed by the insurers before the appointed day, also contained a safeguard for those employees. The provision stipulated that if an employee found the alteration made by the Central Government unacceptable, the Corporation was authorised to terminate the employee’s service, provided that it paid compensation equal to three months’ wages unless the employee’s contract of service provided for a shorter notice period. Consequently, for employees who fell within the scope of Section 11(2), the Court observed that an employee who did not wish to continue working for the Corporation after a government‑sanctioned alteration could elect to leave the employment and would be entitled to the compensation specified in the terminal clause of Section 11(2). The Court therefore concluded that the two subsections of Section 11 operated in a coherent scheme: employees of insurers whose business had been taken over by the Corporation automatically became employees of the Corporation; their existing terms and conditions continued until a modification was made by the Central Government; and if that modification was not acceptable to them, they could exit the Corporation with the compensation prescribed by Section 11(2). The Court then turned to the events that followed the takeover of the insurers’ controlled business by the Corporation. It noted that the Managing Director issued two circulars, one on 30 September 1957 and another on 2 December 1957. The Court held that these circulars, taken alone, possessed no legal authority and therefore did not require detailed discussion at this stage, although the second circular would be referred to later in the judgment. Subsequently, the Court described an order dated 30 December 1957 that was issued by the Central Government pursuant to the powers conferred by Section 11(2). This order, printed on blue paper and described by the High Court as the “blue order”, was hereafter referred to as “the order”. The Court explained that the Central Government issued the order because it was convinced that uniformity in the scales of remuneration and other service conditions for certain classes of insurer employees could be achieved only by setting out clear and specific provisions. The purpose of the order, as the Court stated, was to protect the interests of the Corporation and its policy‑holders by reducing the remuneration payable to the employees covered by the order and by revising the other terms and conditions of their service. The order applied exclusively to officers of the insurers who were known as “Field Officers”, and accordingly it was titled the Life Insurance Corporation Field Officers’ (Alteration of Remuneration and other Terms and Conditions of Service) Order, 1957. The Court noted that the order comprised twelve clauses, and that Clause 2, among other things, defined the term “Field Officer”.

In the year 1962, the title that had previously been known as “Field Officer” was altered to “Development Officer.” However, the original Order continued to refer to the position as “Field Officer” and did not incorporate a corresponding amendment to reflect the new designation. The definition of “Development Officer” set out in the Order indicated that the term applied to any person who, before the appointed day, had been designated in the earlier manner, was wholly or mainly engaged in developing new life‑insurance business for the insurer, supervised the work of individuals who procured or solicited such business either directly or through intermediaries, received a regular monthly salary, and had become an employee of the Corporation under section 11 of the Act. The definition expressly omitted certain categories of employees, which the Order did not need to mention. Consequently, the Order was intended to prescribe the terms and conditions of service that would govern Development Officers who had become employees of the Corporation under section 11(1) of the Act.

Clause 3 of the Order set out the duties that a Development Officer was required to perform, while clause 4 prohibited Development Officers from engaging in specified activities. Clause 5 dealt with the scales of pay and allowances, and clause 6 addressed matters of leave and retirement, providing that Development Officers would be governed, for those purposes, by the Life Insurance Corporation (Staff) Regulations, 1960, as amended from time to time. Clause 7 provided for the manner of granting increments, and clause 8 related to the award of a new‑business bonus. Clause 9 concerned the promotion of Development Officers. Clause 10, which is especially relevant to the present discussion, read in full as follows: “10. Penalties and termination of service: (a) In case of unsatisfactory performance of duties by a Development Officer or if a Development Officer shows negligence in his work or is guilty misconduct or is otherwise incapable of discharging his duties satisfactorily, his remuneration may be reduced of his services may be terminated, after giving him an opportunity of showing cause against the action proposed to be taken in regard to him and after conducting such enquiry as the Corporation thinks fit. (b) The services of any Development Officer may, with the prior approval of the Chairman of the Corporation, be terminated without assigning any reason after giving the Development Officer three months' notice thereof in writing”. Clause 11 stipulated that the actual pay and allowances admissible to any Development Officer under the scale of pay specified in paragraph 5 would be determined in accordance with principles laid down by the Corporation through regulations made under section 49 of the Act. The final clause of the Order declared that any doubt regarding the interpretation of any provision of the Order would be resolved by the Central Government. Thus, it was evident that for the officers who had originally been designated as Field Officers and were later redesignated as Development Officers and who became employees of the Corporation after the appointed day, the Order provided a self‑contained code governing their material terms and conditions of service.

In this case, the Court observed that for those who were appointed as employees of the Corporation after the appointed day, the Order constituted a complete and self‑contained code governing the material terms and conditions of service of the officers it covered. Regarding the scales of pay and allowances set out in clause 5, the Court explained that clause 11 required the actual pay and allowances payable to any Development Officer to be fixed according to the principles that would be laid down in the appropriate regulation. Consequently, the determination of pay and allowances could not be made by reference to clause 5 alone; clause 5 had to be read together with clause 11 and each had to be correlated with the regulation that would later be framed to give effect to those principles. The Court further noted that, while the Order left the scales of remuneration to be defined by regulation, it contained explicit and unambiguous provisions for all other terms and conditions of service. Because of those clear provisions, the Court held that any intended action affecting the termination of service of the officers falling within the Order could only be undertaken under the authority of clause 10(a) or clause 10(b). Clause 10(a) presented two alternative powers: it authorised the appropriate authority either to reduce the remuneration of a Development Officer or to terminate his service. In either alternative, the officer was required to be given a reasonable opportunity to show cause against the proposed action, and an enquiry had to be conducted in the manner that the Corporation deemed appropriate. The Court explained that a reduction of pay or termination could be justified only when the Development Officer was found to be negligent, guilty of misconduct, or otherwise incapable of performing his duties satisfactorily, and such measures could be taken only after compliance with the procedural safeguards prescribed by clause 10(a).

The Court then turned to clause 10(b), which it described as granting the Corporation a separate power to terminate the services of a Development Officer without assigning any reason, without conducting an enquiry, and without providing an opportunity to show cause, provided that the termination order received prior approval from the Chairman of the Corporation. The Court stressed that this power under clause 10(b) operated independently of clause 10(a) and could be exercised without satisfying the conditions laid down in clause 10(a). Accordingly, the Court concluded that, with respect to penalties and termination of service, the Order conferred two distinct and alternative powers on the authority, embodied in sub‑clauses (a) and (b) of clause 10. Finally, the Court noted that, as envisaged by clause 11, the Life Insurance Corporation framed Regulations in 1958 under section 49 of the Act read with clause 11 of the Order. Those Regulations comprised five clauses: the first clause bore the title of the Regulations; the second clause defined the “Categorisation Order” (identical to the blue Order), the “Corporation”, and the “Field Officer”; the third clause dealt with conveyance allowance; the fourth clause set out the method for fixing the pay of a Development Officer, with sub‑clause 4(1) stipulating that the basic pay in the scale prescribed for Field Officers by the Order must be fixed so that, when combined with dearness allowance and

Regulation 4(1) required that the basic pay of a Development Officer, together with the dearness allowance and the conveyance allowance, must not be lower than the total monthly remuneration to which that Officer had been entitled on 31 August 1956. Regulation 4(2) authorised the Corporation, when it considered that a Field Officer’s work had been either below or above the adequate standard, to fix the Officer’s basic pay at any appropriate stage in the pay scale. Regulation 4(3) prescribed that, in assessing the work of a Field Officer, the Corporation must follow the principles contained in the circular issued by the Managing Director on 2 December 1957. Regulation 5 set out the method for computing the total monthly remuneration that had been paid to an Officer on 31 August 1956. It is evident that clause 4(3) of the Regulations incorporated the Managing Director’s circular of 2 December 1957 by treating it as an annexure to the Regulations and by referring to its provisions for the purpose of determining the remuneration payable to a Development Officer. Consequently, a circular that, at the time of its issuance, possessed no legal authority, acquired validity as part of the Regulations promulgated by the Corporation under section 49 of the Act read with clause 11 of the Order.

The circular in question comprised five paragraphs, the material provisions of which were intended to define the quality of work performed by a Development Officer and thereby provide a basis for fixing his remuneration. Paragraph 4 of the circular addressed the problem of placing the various Development Officers within the pay scales specified in clause 5 of the Order. Paragraph 4 was divided into eight sub‑clauses labelled (a) through (h). The present appeals focused on the final sub‑clause, namely clause (h), which read as follows: “If the actual performance is less than 50 % of the revised quota, the cases of such Field Officers will be referred to a Committee to be specially appointed in each Zone. The Committee will go through the past records of such Field Officers and decide whether they could be continued as Field Officers either as Probationers or on substantially reduced remunerations. In the case of those who cannot be continued as Field Officers, the Committee will examine whether any of them could be absorbed in administration and where this is possible, the Committee will fix the remuneration in accordance with the rules to be prescribed. Where the Committee decides that the poor performance of a Field Officer was not due to circumstances beyond his control or that he has made no efforts and not shown inclination or willingness to work, the services of such Field Officers will be terminated.” This provision makes clear that paragraph 4(h) applies to persons whose actual performance falls below 50 % of the revised quota, rendering them ineligible for regular employment within the Corporation. Their cases must be referred to the Zone‑wise Committee, which will decide on continuation, possible absorption in administrative roles, or termination, depending on the reasons for the poor performance.

It was observed that, after reviewing the service records of the Field Officers, the Committee was authorized to decide that certain officers could not be retained in the position of Field Officer. When such a conclusion was reached, the Committee could investigate whether any of those officers might be transferred to an administrative role within the Corporation. If a transfer was deemed possible, the Committee was required to determine an appropriate salary for the officer in the new position. Conversely, if the Committee found that the officer’s poor performance was not caused by circumstances beyond his control, or that the officer had made no effort and had shown no inclination or willingness to work, the Committee was mandated to terminate the officer’s service. Paragraph 5 dealt with former Branch Secretaries and Supervisory Officers. It provided that, where the work of such officers was judged to be unsatisfactory, the Committee could recommend termination of their employment. In situations that did not fall under the foregoing categories, the Committee was empowered to make recommendations on whether the officers should continue as Inspectors serving as Field Officers, specifying the remuneration if they were to remain, or whether they could be employed in some other capacity within the Corporation, again fixing the appropriate remuneration.

The learned Solicitor‑General contended that, when the Corporation assumed control of the insured business in the country on the appointed day, it discovered a substantial number of Field Officers who were either incompetent or unwilling to work efficiently. Accordingly, in the interests of the Corporation and of the policy‑holders, it was deemed necessary to terminate those officers’ services. To give effect to that policy, a circular was issued and incorporated into the Regulations, laying down principles for assessing the efficiency of the officers’ work. The Solicitor‑General submitted that, by applying the principle set out in paragraph 4(h) of the circular, the Corporation was fully competent to terminate the respondents’ services, and that such terminations had indeed been carried out in each of the cases before this Court. He relied on the authority of paragraph 4(h), which empowers the Corporation to dismiss incompetent officers, and on paragraph 5, which confers the same power with respect to former Branch Secretaries and Supervisory Officers. The submission further argued that, where a case is dealt with under paragraph 4(h) or paragraph 5 of the circular, the provisions of clause 10 of the Order could not be invoked. It was unanimously accepted that, prior to the termination of the respondents’ services in the present group of appeals, no enquiry had been held and the officers had not been afforded an opportunity to be heard, as required by clause 10(a) of the Order. It was also agreed that the terminations had not been effected under clause 10(b) of the Order. The respondents therefore contended that their dismissals could be valid only if carried out under clause 10(a) or 10(b), and that the absence of such a procedure rendered the termination orders invalid. The opposite position was put forward by the Solicitor‑General.

The learned Solicitor‑General argued that the authority to dismiss employees that is granted by paragraph 4(h) of the circular operates independently of clause 10 of the Order, and that this authority has been correctly exercised in the cases before the Court. In order to assess the correctness of these competing arguments, the Court found it essential to consider the proper legal hierarchy of the statutory provisions involved. It is evident that the provisions contained in section 11(2) of the Act occupy the highest position and will prevail over any inconsistent provisions that may appear in either the Order or the Regulations. Subject to the supremacy of section 11(2), the provisions of the Order will dominate, because the Order was issued by the Central Government pursuant to the powers conferred on it by section 11(2) itself. Moreover, the Order, in law, assumes the character of rules that are framed under section 48 of the Act; consequently, immediately after the provisions of section 11(2), the provisions of the Order stand in the statutory order of priority. Following the Order, the next layer consists of the Regulations that were issued by the Corporation under section 49(1) of the Act. However, the Court emphasized that the Corporation’s power to make such Regulations is conditioned on the requirement that those Regulations must not be inconsistent with the Act or with the rules made thereunder. Accordingly, any Regulation made under section 49 that conflicts with either section 11(2) of the Act or with the Order made under that section would be held invalid. This understanding of the legal framework guided the Court in resolving the dispute presented in the present appeals. The Court further observed that, as soon as the Field Officers and Development Officers became employees of the Corporation on the appointed day stipulated by section 11(1), they initially retained the terms and conditions of service that had applied to them previously, and this situation continued until the Order was issued on 30 December 1957. The Court noted that the Order set out the terms and conditions of service for matters within its scope. Regarding remuneration, the Order did not fully settle the issue; instead, it left the determination of the appropriate pay scales and allowances to the Regulations that the Corporation would frame under the authority granted by clause 11 of the Order. In contrast, for the termination of an employee’s service, clause 10 of the Order contains a specific procedure, and the Corporation must follow that procedure whenever it seeks to terminate the service of any Development Officer. The Court acknowledged that paragraph 4(h) of the circular appears to state that, in cases covered by the latter part of that paragraph, the services of the Field Officers will be terminated. The Court therefore examined whether that portion of paragraph 4(h) creates an independent power to terminate or whether it must operate within the framework established by clause 10 of the Order.

In this case the Court observed that if paragraph 4 (h) of the circular were interpreted as giving the Corporation a power to terminate a Development Officer’s service without following clause 10 of the Order, such an interpretation would clash with the express requirement of clause 10 and consequently would be void. The Court, however, concluded that the proper meaning of the said portion of paragraph 4 (h) is that it merely identifies situations in which the officers concerned become liable to termination, and that any termination must be carried out in the manner prescribed by clause 10 of the Order. By construing the two provisions in this way, paragraph 4 (h) and clause 10 can be harmonised. The Court stated that the same interpretation applies equally to paragraph 5 of the circular. Regarding remuneration, the Court explained that clause 5 of the Order establishes the scales of pay and allowances and authorises the Corporation, through regulations, to prescribe the principles for applying those scales to individual cases. Accordingly, it was entirely within the Corporation’s competence to issue the circular issued by the Managing Director and, through that circular, to set out the principles that should guide the placement of individual officers within the remuneration framework prescribed by clause 5. The Court emphasized that the purpose of “fitting” an officer is to keep the officer within the category of Development Officer and to determine his remuneration accordingly; the total remuneration would be calculated according to the principles laid down in the circular. However, the Court clarified that the circular cannot be used as a device to demote an officer to a lower grade, because such a demotion lies beyond the authority of the regulations. The regulations may only lay down the criteria for fixing the actual pay and allowances that a Development Officer is entitled to, as authorized by clause 11 of the Order. Once the remuneration is fixed according to those principles, an officer who refuses to accept the revised amount may give rise to the Corporation’s power under section 11(2) of the Act to pay compensation, although that issue was not before the Court in the present appeals. The principal question before the Court was the validity of the orders that terminated the officers’ services on the ground of incompetence. The Court noted that even if an officer is found incompetent under paragraph 4 (h) of the circular, the termination of his service must still comply with the procedural requirements set out in clause 10 of the Order.

Termination of service could be effected only when the procedure prescribed in clause 10(a) and clause 10(b) of the Order was observed. The Court noted that it was an agreed fact that the orders which had been challenged and which terminated the employment of each of the respondents were not made in conformity with either clause 10(a) or clause 10(b). Because the prescribed requirements were not satisfied, the Court held that those termination orders were invalid. The respondents, in the present writ petitions, had sought relief under article 311(2) of the Constitution and had also contested the legality of both the Order and the Regulations. The Court observed, however, that the respondents were not barred from seeking the same relief on an alternative ground – namely, that even if the Order and the Regulations were upheld, the specific termination orders were void for failing to comply with clause 10 of the Order. Consequently, the Court found that the learned Solicitor‑General was not entitled to argue that the challenged termination orders could be upheld on the basis of paragraph 4(h) of the Circular, which had been incorporated into the Regulations as an annexure.

The Court then turned to the matter of Haridas Roy, who was the respondent in civil appeal No. 917 of 1963. The learned Solicitor‑General had submitted that the order ending Mr Roy’s service was valid either under paragraph 4(h) of the Circular or under section 11(2) of the Act. The factual background recorded that Mr Roy had initially been employed by the Hindustan Co‑operative Insurance Society Ltd. as an Inspector of Agents before the appointed day. When the Corporation assumed control of the insurance company’s business, he was appointed as a Field Officer under the Order, and the appointment order was communicated to him on 15 February 1958. On 9 August 1958, the Zonal Committee informed Mr Roy that his case had been reviewed and that he would be absorbed in the office as an Assistant, with remuneration as specified in the order. Mr Roy refused to accept the new assignment, insisting that he wished to remain a Field Officer. Accordingly, his services were terminated by an order dated 18 September 1958. The termination letter stated that the Zonal Committee had carefully examined his case, offered him an ex‑gratia position on the administrative side as an Assistant, and that because he declined the offer, his services were being ended with payment of one month’s salary in lieu of notice, after any applicable deductions. The same letter indicated that there were no extenuating circumstances and that his work had been assessed as being of very poor quality. The Court inferred that the Corporation had evaluated Mr Roy’s performance according to the principles laid down in the relevant provisions of the Circular and had concluded that his situation fell within the final part of paragraph 4(h) of the said

In evaluating the corporation’s reliance on the circular, the Court observed that the reference to clause 10 of the Order merely indicated that Roy’s poor performance rendered him subject to disciplinary action under that provision. The Court held that the corporation could not compel Roy to accept an assignment in a lower or different category, because the regulations were authorised only to determine his salary within the category of Development Officers. Consequently, the termination of his services on the ground that he refused to assume the position of Assistant could not be justified under the statutory scheme. The Court further noted that the corporation might have fixed Roy’s salary at the minimum level prescribed by clause 5 of the Order, thereby providing a lawful basis for continued employment. Had Roy declined even that minimum salary, the corporation could have invoked section 11(2) of the Act to lawfully terminate his employment. By this reasoning, the Court found no material distinction between Roy’s case and the cases of the other respondents grouped in the present appeals. The analysis therefore led the Court to conclude that the corporation’s actions were not supported by the applicable regulations or statutory provisions.

The Court accordingly affirmed the orders issued by the High Court, confirming the termination and related reliefs. Accordingly, the appeals were dismissed with costs awarded against the appellants, and a single set of hearing fees was imposed. The final disposition reiterated that the appeals were dismissed, thereby upholding the lower court’s decision in full.