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: Civil Appeals Nos. 909 to 923 of 1963

Decision Date: 22 November 1963

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

In the matter titled Life Insurance Corporation of India versus Sunil Kumar Mukherjee and others, the Supreme Court delivered its judgment on 22 November 1963. The opinion was authored by Justice P. B. Gajendragadkar, and the bench consisted of Justices P. B. Gajendragadkar, K. N. Wanchoo and K. C. Das Gupta. The case is reported in 1964 AIR 847 and 1964 SCR (5) 528, with subsequent citations appearing in later reports. The statutory framework relied upon includes the Life Insurance Corporation Act of 1956, specifically sections 7, 11(1) and (2) and 49, as well as the Life Insurance Corporation Field Officers (Alteration of Remuneration and other Terms and Conditions of Service) Order, 1957, clause 10, and the Life Insurance Corporation Regulations of 1958, clauses 4 and 5.

One of the respondents, Mr. S. K. Mukherjee, had been employed by the Metropolitan Insurance Company Limited as an Inspector at the time the Life Insurance Corporation of India took over that company. In February 1958, the corporation directed Mr. Mukherjee to serve as a field officer. Subsequently, on 16 October 1958, an order was issued terminating his services with immediate effect. The order communicated that he would receive his emoluments up to the month of termination and a payment equivalent to one month’s salary in lieu of notice, but it did not afford him an opportunity to show cause against the termination. Acting under Article 226 of the Constitution, Mr. Mukherjee filed a petition in the High Court challenging the validity of the termination order; the learned single judge allowed the petition. An appeal to a Division Bench of the same High Court was unsuccessful, and the corporation then obtained a certificate of appeal and brought the matter before this Court.

The corporation argued that, by invoking paragraph 4(h) of a circular issued by the Managing Director under clause 4(3) of the Life Insurance Corporation Regulation 1958, it possessed the authority to terminate the respondents’ services. The corporation contended that where a case falls within paragraphs 4(h) and 5 of the circular, clause 10 of the Field Officers Order 1957— which empowers the appropriate authority to either reduce the remuneration of a Development Officer or to terminate his services—does not apply, and that nevertheless an opportunity of showing cause must be given before any action is taken. The respondents, on the other hand, maintained that termination could be effected only under clause 10(a) or 10(b) of the Order, and because the termination was not carried out pursuant to those specific provisions, the orders were invalid.

The Court held that (i) the corporation’s power to make regulations is subject to the condition that such regulations must not be inconsistent with the Act and the rules made thereunder; thus, any provision in a regulation made under section 49 of the Act that conflicts with section 11(2) of the Act or with an order made by the Central Government under that same section would be invalid. The Court further explained that (ii) paragraph 4(h) of the circular signifies that for cases falling within its ambit, the services of the officers concerned may be terminated, but such termination must be carried out in the manner prescribed by clause 10 of the Field Officers Order. In this way, paragraph 4(h) of the circular and clause 10 of the Order can be reconciled, and the same reasoning applies to paragraph 5 of the circular. Finally, (iii) the Court observed that the corporation was competent to adopt the circular and thereby set out principles to be followed in placing individual officers within the scheme prescribed by clause 5 of the Order, noting that the total amount of remuneration would inevitably be determined in accordance with those principles.

The Court observed that the corporation’s authority to issue Regulations is limited by the requirement that such Regulations must not be inconsistent with the Life Insurance Corporation Act and the rules made under it. Consequently, if any provision contained in Regulations issued by the corporation under section 49 of the Act is found to be inconsistent either with section 11(2) of the Act or with the order issued by the Central Government under the same provision, that particular regulation would be invalid. The Court further explained that paragraph 4(h) of the Circular indicates that where a case falls within its ambit, the services of the officers concerned may be terminated, and that any termination must be effected in the manner prescribed by clause 10 of the Life Insurance Corporation Field Officers Order. In this way, paragraph 4(h) of the Circular and clause 10 of the Order can be reconciled, and the same interpretation applies equally to paragraph 5 of the Circular. Regarding the competence of the corporation, the Court held that it was within the corporation’s power to adopt the Circular and, consequently, to set out the principles to be followed in placing individual officers within the scheme prescribed by clause 5 of the Order. While the total remuneration of an officer would undoubtedly be determined in accordance with the principles laid down in the Circular, the corporation could not, under the pretext of fitting an officer into those principles, demote a Development Officer to a lower grade; such demotion would exceed the competence of the Regulations. The Court then turned to the orders that terminated the services of the respondents and noted that those orders had not been made in accordance with either clause 10(a) or clause 10(b) of the Order. Because of this procedural defect, the Court declared those termination orders to be invalid. The Court also stated that an employee whose performance is poor may be dealt with under clause 10 of the Order, but the corporation is not empowered to compel that employee to accept an assignment in a lower or different category. The Regulations are authorized merely to determine the employee’s salary within the category of Development Officers, and therefore an order terminating an employee’s service on the ground that he refused to take a lower‑category assignment cannot be justified. The judgment then proceeded to set out the civil appellate jurisdiction, noting that the appeals numbered 909 to 923 of 1963 were filed against the judgment and orders dated 26 July and 1 August 1962 of the Calcutta High Court, which arose from original orders numbered 288, 274‑276, 278, 280, 279, 281, 273, 272, 271, 270, 269, 282 and 292 of 1961. Counsel for the appellants and respondents were listed, and the judgment was delivered on 22 November 1963. The Court described the matter as a group of fifteen appeals raising a common question about the validity of the Life Insurance Corporation of India’s orders terminating the services of its employee‑respondents, and it indicated that the factual circumstances giving rise to the disputes were substantially similar across the cases.

In all fifteen proceedings the parties are essentially the same, therefore the Court found it sufficient to narrate the material facts using a single representative case. One of the respondents in the representative case is Sunil Kumar Mukherjee, who entered the insurance profession in June 1941 and received confirmation of his service from the Metropolitan Insurance Company Limited in March 1950. From around 1953 he served as an Inspector for that company, and on 18 March 1955 he was appointed to the post of Inspector at the Barrackpore office. After the Life Insurance Corporation of India acquired the business previously controlled by the Metropolitan Insurance Company, it issued an order dated 16 October 1958 that terminated Mukherjee’s employment. Mukherjee challenged that order before the Calcutta High Court invoking Article 226 of the Constitution and prayed for a writ of certiorari or any other appropriate writ to set aside the discharge. Justice Sinha, who heard the petition, allowed the relief and directed the issuance of a certiorari writ to quash the impugned order. He also issued a mandamus writ instructing the respondents to the petition not to give effect to the termination. In the petition Mukherjee impleaded eight respondents, the principal defendants being the appellant corporation and the Union of India. Dissatisfied with Justice Sinha’s judgment, the appellant filed an appeal under the Letters Patent before a Division Bench of the same High Court. Chief Justice Bose and Justice Debabrata Mokerjee, hearing the Letters Patent appeal, largely affirmed Justice Sinha’s view and confirmed the order that had been passed. The appellant subsequently obtained a certificate of fitness from the High Court, and relying on that certificate it approached this Court by filing an appeal. On the same factual background the appellant has lodged fourteen additional appeals before this Court, and the learned Solicitor‑General, on behalf of the appellant, contends that the High Court erred in holding the various discharge orders to be invalid. Before addressing the submissions raised in the present appeals, the Court considered it appropriate to set out the specific orders that relate to the appointment and subsequent discharge of Mr Mukherjee.

Mr Mukherjee was appointed as a full‑time Inspector by the Metropolitan Insurance Company Limited on either 18 or 19 March 1955. The terms and conditions governing his employment were communicated to him in a written document comprising fourteen distinct clauses, reproduced as Annexure A to the writ petition. Clause thirteen of that document expressly stipulated that the appointment could be terminated without any notice if the employee was found guilty of any of the following misconducts: These included fraud, misappropriation, breach of discipline, insubordination, conduct detrimental to the interests of the company, disloyalty, or gross neglect of duty. The clause further provided, however, that in situations other than those enumerated, the employee would be entitled to a prescribed notice period, the details of which are set out in the subsequent provision. The remaining clauses of the appointment document dealt with matters such as remuneration, leave entitlement, disciplinary procedure, pension rights, and other service conditions, thereby forming the complete contractual framework governing Mr Mukherjee’s employment. Accordingly, the provision of Clause thirteen operated as a safeguard for the employer, allowing immediate dismissal for serious misconduct, while the complementary notice provision protected the employee in cases of ordinary termination. Thus, the contractual terms distinguished clearly between dismissals for cause, which required no notice, and those requiring reasonable notice.

In the original contract of employment the document contained fourteen clauses; clause 13 allowed termination without notice for certain misconduct, while clause 14 provided that the employee would be entitled to thirty days’ notice if his services were terminated for any reason other than misconduct. Accordingly, under the terms of Mr. Mukherjee’s initial appointment with the Metropolitan Insurance Company, he could be dismissed without notice for misconduct, but he would receive a notice period of thirty days when his services ended for any other reason. When the Life Insurance Corporation assumed control of the Metropolitan Insurance Company’s business, an order dated 14 February 1958 was issued in favour of Mr. Mukherjee. That order referred to Government Order No. 53(1) I.S.N. (1) 57 dated 30 December 1957 and directed that Mr. Mukherjee should serve as a Field Officer. The order also stipulated that he would remain attached to the Barrackpore Branch Office until further orders were issued. The Divisional Manager signed and issued this order. Consequently, after receiving the order, Mr. Mukherjee commenced duties as a Field Officer pursuant to the authority of the cited Government Order. One issue for determination in the present appeal is the legal effect of that appointment order. On 16 October 1958, a second order was passed that terminated Mr. Mukherjee’s services. The termination order stated that, under section 5 of the Categorisation circular dated 2 December 1957, Mr. Mukherjee’s case had been examined by a Special Committee appointed by the Board of the Corporation to review the cases of former Branch Secretaries and similar officers. The order further explained that, based on the Committee’s recommendations, which the Corporation had accepted, his services were to be terminated with immediate effect. The order also informed Mr. Mukherjee that he would receive his emoluments up to the current month and an amount 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 argues that the High Court erred in upholding Mr. Mukherjee’s plea. The background of the nationalisation of life‑insurance business in India is well established. On 19 January 1956, the President promulgated the Life Insurance (Emergency Provisions) Ordinance No. 1 of 1956 to take over, in the public interest, the management of life‑insurance business pending its eventual nationalisation. Subsequently, Act No. 9 of 1956 replaced the Ordinance and came into force on 21 March 1956. That legislation was followed by Act 31 of 1956, hereinafter referred to as “the Act,” which was published on 1 July 1956. The appointed date under section 3 of the Act was 1 September 1956. Section 7 of the Act provides that, on the appointed day, all assets and liabilities relating to the controlled business of the insurers shall be transferred to and vested in the Corporation.

The Court observed that the Life Insurance Corporation took over every asset and liability related to the controlled business of all insurers operating in the country. Consequently, section II was enacted to provide for the transfer of service of the existing employees of those insurers to the Corporation. For the purpose of the appeals, the Court found it necessary to set out the exact wording of sections 11(1) and 11(2). Section 11(1) states: “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) provides that when the Central Government is satisfied that, for the purpose of securing uniformity in the scales of remuneration and other terms of service applicable to employees of insurers whose controlled business has been transferred, it is necessary, or that in the interests of the Corporation and its policy‑holders a reduction in remuneration or a revision of other service conditions is called for, the Central Government may, notwithstanding anything contained in sub‑section (1), the Industrial Disputes Act 1947, any other law then in force, or any award, settlement or agreement then in force, alter (whether by way of reduction or otherwise) the remuneration and other terms and conditions of service to such extent and in such manner as it thinks fit. If an employee does not accept the alteration, the Corporation may terminate his employment by giving him compensation equivalent to three months’ remuneration unless the contract of service provides for a shorter notice of termination. The Court noted that sub‑sections (3) and (4) that follow are not relevant for the present purpose. From these provisions, it follows that under section 11(1) persons who were employed by an insurer wholly or mainly in connection with its controlled business before the appointed day automatically became employees of the Corporation from that appointed day, retaining the same tenure, remuneration, terms, conditions, rights and privileges as they enjoyed before the transfer, until such employment is lawfully ended or altered by the Corporation.

It was recorded that on the appointed day the persons who had been employed by the insurer became employees of the Corporation effective from that date. After their status changed to employees of the Corporation, they continued to hold their positions for the same length of service, received the same remuneration, and were bound by the same terms and conditions, enjoying the same rights and privileges as before. Accordingly, when the Corporation took over the controlled business, the insurer’s employees to whom section 11 (1) applied automatically became employees of the Corporation, but their employment remained governed by the identical terms and conditions that had previously applied. This arrangement was intended to persist until either the employee’s service was terminated or the Corporation lawfully altered his remuneration, terms, or conditions of service. The scheme of section 11 (1) therefore appeared clear: with the transfer of the controlled business from the insurer to the Corporation, the insurer’s employees became employees of the Corporation, yet they remained subject to the same contractual terms until the Corporation effected a change. The proviso to section 11 (1) further clarified that any employee who, by written notice to the Central Government before the appointed day, expressed an intention not to become an employee of the Corporation, would fall outside the operation of section 11 (1). In other words, such a person would not be taken on as an employee of the Corporation and his matter would have to be dealt with separately from sections 11 (1) and 11 (2). The original provision of section 11 (2) had been substantially amended in 1957. After the amendment, the plain effect was that the Central Government was vested with the authority to alter, either by reduction or otherwise, the remuneration and other conditions of service to any extent and in any manner it deemed appropriate. Significantly, this authority could be exercised notwithstanding any limitation contained in section 11 (1), the Industrial Disputes Act, 1947, any other statute, or any existing award, settlement or agreement. The legislature had considered it essential for the efficient functioning of the Corporation to grant the Central Government an overriding power to modify the terms and conditions of those employees who had been wholly or mainly employed by the insurers prior to the appointed day. Having conferred this broad power on the Central Government, section 11 (2) further stipulated that if an employee found the alteration made by the Central Government to his terms and conditions unacceptable, the Corporation could terminate his employment, provided it paid compensation equal to three months’ remuneration unless the employee’s service contract specified a shorter notice period. Thus, regarding cases falling under section 11 (2), if, as a result of an alteration made by the Central Government, any employee...

In this case, the Court explained that when an employee of the former insurers did not wish to continue working for the Life Insurance Corporation, the statutes allowed him to resign and receive the compensation specified in the latter part of section 11(2). The two subsections of section 11 therefore operate in a straightforward manner. Employees of the insurers whose business was taken over automatically became employees of the Corporation; their existing terms and conditions of service remained in force until altered by the Central Government. If the Government‑made alteration was unsatisfactory to an employee, that employee could elect to leave the Corporation and would be paid the compensation prescribed in section 11(2). After the takeover of the insurers’ controlled business under the Act, the Managing Director issued two circulars, one on 30 September 1957 and another on 2 December 1957. The Court noted that these circulars, standing alone, possessed no legal authority, although the second circular would be referred to later. Subsequently, on 30 December 1957, the Central Government exercised the power conferred by section 11(2) and issued an order on blue paper, which the High Court had described as the “blue order”. For convenience the judgment refers to this instrument simply as “the order”. The Government issued the order because it believed that uniformity in pay scales and other service conditions for certain classes of former insurer employees could only be achieved by setting out clear and specific provisions. The purpose of the order 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 their other service conditions. The order applied exclusively to the officers of the insurers who were then termed “Field Officers”, and consequently it was titled the Life Insurance Corporation Field Officers’ (Alteration of Remuneration and other Terms and Conditions of Service) Order, 1957. The order comprised twelve clauses; clause 2, among other matters, gave a definition of a Field Officer. In 1962 the designation “Field Officer” was replaced by “Development Officer”, although the order’s title was not amended to reflect this change. The definition of “Development Officer” includes any person, regardless of his original title before the appointed day, who was primarily engaged in developing new life‑insurance business for the insurer by supervising, either directly or through intermediaries, the work of agents who procured or solicited new life‑insurance business, and who received a regular monthly salary, and

In this case, the Court observed that the definition of a Development Officer expressly applied to a person who had become an employee of the Life Insurance Corporation under section eleven of the Act. The definition deliberately omitted certain categories of employees, a fact that the Court noted meant there was no need to refer to those excluded groups. Consequently, the Court concluded that the Order was intended to set out the terms and conditions of service specifically for Development Officers who were employees of the Corporation pursuant to section eleven (1) of the Act. The Court then proceeded to list the substantive provisions of the Order. Clause three laid down the duties that a Development Officer was required to perform. Clause four prohibited Development Officers from engaging in particular activities that were deemed inconsistent with their position. Clause five specified the scales of pay and the allowances that were applicable to these officers. Clause six dealt with matters of leave and retirement and provided that, for those purposes, Development Officers would be governed by the Life Insurance Corporation (Staff) Regulations of 1960, as amended from time to time. Clause seven addressed the matter of increments, while clause eight concerned the entitlement to a new‑business bonus. Clause nine related to the promotion of Development Officers. Clause ten, which the Court identified as crucial for the present purpose, was reproduced in full. Sub‑clause (a) of clause ten provided that where a Development Officer performed his duties unsatisfactorily, showed negligence, was guilty of misconduct, or was otherwise incapable of discharging his duties to a satisfactory standard, the Corporation could either reduce his remuneration or terminate his service, but only after affording him an opportunity to show cause and after conducting an enquiry in a manner deemed appropriate by the Corporation. Sub‑clause (b) authorized the Corporation, with the prior approval of its Chairman, to terminate the services of any Development Officer without assigning any reason, provided that the officer received three months’ written notice of such termination. Clause eleven stipulated that the actual pay and allowances payable to any Development Officer, as determined under the scale set out in paragraph five, would be fixed in accordance with principles that the Corporation might lay down by regulations made under section forty‑nine of the Act. The final clause of the Order provided that any doubt concerning the interpretation of its provisions would be settled by the Central Government. The Court therefore held that, for those Field Officers who were later redesignated as Development Officers and who became employees after the appointed day, the Order constituted a self‑contained source of the material terms and conditions of their service. Regarding the scales of pay and allowances prescribed in clause five, the Court emphasized that clause eleven required the actual remuneration to be determined according to principles laid down in the relevant regulation, and thus clause five must be read in conjunction with clause eleven and the subsequently framed regulation.

Regarding the remaining terms and conditions of service, the Order contains explicit provisions. Consequently, there is no doubt that any action intended to terminate the services of officers to whom the Order applies must be taken under either clause 10(a) or clause 10(b). Clause 10(a) provides two alternatives: it authorises the appropriate authority to either reduce the remuneration of a Development Officer or to terminate his services. In either alternative, the officer must be given an opportunity to show cause against the proposed action, and an enquiry must be conducted in a manner deemed fit by the Corporation. The Order further states that if the Development Officer is found to be negligent in his work, guilty of misconduct, or otherwise incapable of discharging his duties satisfactorily, the Corporation may reduce his remuneration or may terminate his service, but only after complying with the conditions prescribed in clause 10(a).

Clause 10(b) differs by empowering the Corporation to terminate the services of a Development Officer without assigning any reason, without holding an enquiry, and without giving the officer an opportunity to show cause, provided that the termination order is passed with the prior approval of the Chairman of the Corporation. This power can be exercised independently of clause 10(a) and is not subject to its requirements. Thus, for matters of penalties and termination of service, the Order confers two alternative powers on the authority, which are contained in sub‑clauses (a) and (b) of clause 10.

As envisaged by clause 11 of the Order, the Life Insurance Corporation framed Regulations in 1958 under section 49 of the Act read with clause 11 of the Order. These Regulations consist of five clauses. The first clause gives the title of the Regulations. The second clause defines the “Categorisation Order,” which is identical to the blue Order, and also defines the terms “Corporation” and “Field Officer.” Regulation 3 deals with the conveyance allowance. Regulation 4 sets out the manner of fixing the pay of a Development Officer. In Regulation 4(1), the basic pay in the scale prescribed for Field Officers by the Order must be fixed so that, when combined with dearness allowance and conveyance allowance, it is not less than the total monthly remuneration to which the officer was entitled before 31 August 1956. Regulation 4(2) provides that where the work of the Field Officer is either below or above the adequate standard, the Corporation may fix his basic pay at any stage in the scale that it considers appropriate. Regulation 4(3) requires the Corporation, in judging a Field Officer’s work, to observe the principles contained in the circular issued by the Managing Director on 2 December 1957. Finally, Regulation 5 provides for the computation of the total monthly remuneration that was paid to the officer on 31 August.

It was observed that clause 4(3) of the Regulations incorporated the circular issued by the Managing Director on 2 December 1957 by treating that circular as an annexure to the Regulations and by expressly referring to its provisions for the purpose of determining the remuneration payable to a Development Officer. By this mechanism, a circular that originally possessed no legal authority acquired the status of a valid part of the Regulations issued by the Corporation, the authority for which was derived from section 49 of the Act read with clause 11 of the Order. The incorporated circular comprised five paragraphs. Its material provisions were intended to assess the quality of work performed by a Development Officer so that a proper basis could be established for fixing his remuneration. Paragraph 4 of the circular addressed the problem of placing the various Development Officers within the pay scales prescribed by clause 5 of the Order. That paragraph was divided into eight sub‑clauses, labelled (a) through (h). In the matters presently before the Court, attention was focused on the last sub‑clause, namely sub‑clause (h) of paragraph 4. The text of that sub‑clause read as follows: “If the actual performance is less than 50 per cent 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.”

The Court explained that paragraph 4(h) clearly dealt with individuals whose actual performance fell below fifty per cent of the revised quota and consequently were regarded as ineligible for continued employment by the Corporation. The provision required that such cases be referred to a Committee specially appointed in each Zone. Upon reviewing the records of the concerned officers, the Committee could determine that certain officers could not be retained as Field Officers; in such instances the Committee was empowered to investigate whether any of those officers could be absorbed in an administrative capacity, and, if absorption was feasible, to fix their remuneration in accordance with rules that would be prescribed. Conversely, if the Committee concluded that the poor performance was not attributable to circumstances beyond the officer’s control, or that the officer had made no effort, shown no inclination, or demonstrated no willingness to work, the Committee was mandated to terminate the officer’s services. The Court further noted that paragraph 5 of the circular dealt with the situation of former Branch Secretaries and Supervisory Officers, providing that where their work was found to be unsatisfactory, appropriate action could be taken against them.

The Committee was empowered to recommend that the services of any officer who was judged to be unsuitable should be terminated. In instances where termination was not considered appropriate, the Committee was required to advise whether the inspectors could continue to serve as Field Officers and, if so, to fix the salary that would be payable to them; alternatively, the Committee could propose that the officers be employed in some other capacity within the Corporation and, in that event as well, to determine the remuneration that would apply to the new posting. The Solicitor‑General argued that when the Corporation assumed control of the regulated insurance business in the country on the appointed day, it discovered that a large number of employees classified as Field Officers were either incompetent or unwilling to work efficiently. Accordingly, it was thought desirable, both in the interests of the Corporation itself and in the interests of the policy‑holders, to terminate the services of those officers. For that purpose a scheme was carefully formulated by the circular and incorporated into the Regulations, which set out the principles for evaluating the efficiency of the work performed by the officers. The Solicitor‑General maintained that, by applying the principle laid down in paragraph 4(h) of the circular, the Corporation had the authority to dismiss the respondents, and that such dismissals had indeed been carried out in each of the cases before the Court. To support this submission, reliance was placed on the fact that paragraph 4(h) empowers the Corporation to terminate the services of officers who are found to be incompetent, and that paragraph 5 confers the same power with respect to former Branch Secretaries and Supervisory Officers. The argument advanced was that where a case falls under the provisions of paragraph 4(h) or paragraph 5 of the circular, there can be no requirement to apply the provisions of clause 10 of the Order. Both parties agreed that, prior to terminating the services of the respondents in the present group of appeals, no enquiry had been held and no opportunity had been given to the officers as mandated by clause 10(a) of the Order, and that the terminations had not been effected under clause 10(b) of the Order. The respondents contended that their dismissal could be effected only under clause 10(a) or 10(b) of the Order and, because that procedure had not been followed, the orders terminating their services were invalid. Conversely, the Solicitor‑General maintained that the power to dismiss officers conferred by paragraph 4(h) of the circular was independent of clause 10 of the Order and could be validly exercised in the present circumstances. In assessing the competing positions, it was necessary to consider the true legal hierarchy of the relevant statutory provisions. It was clear that the provisions contained in section 11(2) of the Act were paramount and would override any inconsistent provisions in the Order or the Regulations. Subject to the provisions of section 11(2), the provisions of the Order would therefore apply.

In this case, the Court observed that the Order issued by the Central Government derived its authority from section 11(2) of the Act, and consequently the Order possessed the same legal character as the rules formulated under section 48 of the Act. Accordingly, the provisions of section 11(2) of the Act stood alongside the provisions of the Order. The Court then turned to the Regulations that had been issued by the Corporation pursuant to section 49(1) of the Act, and noted that the power of the Corporation to make such Regulations was subject to the condition that those Regulations could not be inconsistent with the Act itself, the rules framed thereunder, or the Order made by the Central Government under section 11(2). The Court explained that any provision contained in the Corporation’s Regulations that conflicted with either section 11(2) or with the Order would be regarded as invalid. This hierarchy of legal authority formed the framework within which the Court had to resolve the questions raised by the present appeals. The Court recalled that, as soon as the Field Officers and the Development Officers became employees of the Corporation on the appointed day specified in section 11(1), they continued to be governed by their original terms and conditions of service, and that this situation persisted until the Order was issued on 30 December 1957. The Court further noted that the Order set out the terms and conditions of service for matters that fell within its scope. With respect to remuneration, the Order did not settle the issue completely; instead, it left the determination of the precise scale of pay and the allowances payable to each employee to be made by Regulations that the Corporation would frame under the authority conferred by clause 11 of the Order. In contrast, the Order contained a specific provision in clause 10 concerning the termination of service, and the Court held that whenever the Corporation sought to terminate the service of any Development Officer, it was bound to comply with the procedure laid down in clause 10. The Court acknowledged that paragraph 4(b) of the circular asserted that, in cases falling within the last part of that paragraph, the services of the Field Officers would be terminated. The Court warned that if that portion of paragraph 4(h) were interpreted as giving the Corporation an independent power to terminate the service of a Development Officer apart from clause 10, such an interpretation would clash with the specific provision of clause 10 and would therefore be invalid. However, the Court was satisfied that the intended meaning of the said portion of paragraph 4(h) was that, in the situations covered by it, the officers’ services would be liable to termination, but that any termination must be carried out in accordance with the procedure prescribed by clause 10 of the Order. Accordingly, the Court concluded that paragraph 4(h) and clause 10 could be reconciled without conflict.

The Court observed that the relationship between paragraph 5 of the circular and clause 10 of the Order could be harmonised in the same manner as paragraph 4(h). Regarding the determination of remuneration, the Court noted that clause 5 of the Order establishes the pay scales and allowances for Development Officers, while it leaves it to the Regulations to set out the principles for assessing each individual case. Consequently, the Court held that it was entirely within the Corporation’s authority to issue the circular issued by the Managing Director, which in turn laid down the principles that should be applied when fitting individual officers into the scheme prescribed by clause 5. The Court emphasised that the purpose of “fitting” an officer was to continue treating that officer as a Development Officer and to fix the officer’s remuneration accordingly. Although the total remuneration would be calculated according to the principles set out in the circular, the Court stressed that the Corporation could not use those principles as a pretext to demote an officer to a lower grade, as such a demotion would exceed the competence of the Regulations. The Regulations were limited to prescribing the method for fixing the actual pay and allowances that a Development Officer could receive, a limitation expressly contained in clause II of the Order. Within that statutory boundary, the Regulations could validly lay down the necessary principles. The Court further explained that, after remuneration was determined on the basis of those principles, an officer who refused to accept the altered remuneration might give rise to a situation where the Corporation could invoke section 11(2) of the Act to provide compensation as contemplated therein. However, the Court clarified that this possibility was not the matter before it in the present appeals.

The Court turned its attention to the principal issue of the appeals, namely the validity of the orders that terminated the respondents’ services on the ground of incompetence. The Court recognised that, if an officer were found incompetent according to the provisions of paragraph 4(h) of the circular, the termination of that officer’s service could lawfully occur, but only if the termination complied with the procedures set out in clause 10(a) or clause 10(b) of the Order. The Court reiterated the established fact that the impugned termination orders had not been issued in conformity with either clause 10(a) or clause 10(b). Accordingly, the Court concluded that those termination orders must be declared invalid. The respondents had sought relief under article 311(2) of the Constitution and, in their writ petitions, had challenged the validity of both the Order and the Regulations. The Court held, however, that such constitutional claims did not bar the respondents from also asserting an alternative ground—that, even assuming the Order and the Regulations were valid, the specific termination orders were invalid because they failed to comply with clause 10 of the Order.

In this matter the petitioners also sought relief on an alternative ground. They argued that even if the original Order and the Regulations were valid, the specific orders that dismissed their services could not stand because those dismissal orders failed to comply with clause 10 of the Order. The Court therefore concluded that the learned Solicitor‑General could not successfully assert that the dismissal orders were supported by paragraph 4(b) of the Circular, which the Regulations had incorporated as an annexure. The Court found no justification for the Solicitor‑General’s reliance on that provision to sustain the dismissals.

The Court then turned to the remaining point concerning the respondent Haridas Roy, who is the appellant in C.A. No. 917 of 1963. The Solicitor‑General argued that the order removing Mr Roy from service was proper either under paragraph 4(h) of the Circular or under section 11(2) of the governing Act. Mr Roy’s employment history was traced: initially he worked for the Hindustan Co‑operative Insurance Society Limited as an Inspector of Agents before the appointed day. When the Life Insurance Corporation of India assumed control of that business, Mr Roy was appointed a Field Officer under the Order, a appointment communicated to him on 15 February 1958. On 9 August 1958 the Zonal Committee informed him that his case had been examined and that he was to be absorbed as an Assistant, receiving the salary specified in the order. Mr Roy refused this reassignment, insisting on remaining a Field Officer. Consequently, a termination order dated 18 September 1958 was issued. The termination letter explained that the Zonal Committee had carefully reviewed his case, offered him an ex‑gratia position on the administrative side as an Assistant, and, because he declined, terminated his services with payment of one month’s salary in lieu of notice, subject to any deductions. The letter further stated that there were no extenuating circumstances and that his work was assessed as very poor. The Court observed that the Corporation apparently evaluated Mr Roy’s performance according to the principles set out in the Circular and concluded that his situation fell within the final segment of paragraph 4(h). This classification merely indicated that, due to his poor performance, he could be dealt with under clause 10 of the Order. The Court held that the Corporation was not entitled to compel Mr Roy to accept a lower or different post. The Regulations only empowered the Corporation to fix his salary within the Development Officer grade, and therefore the termination order predicated on his refusal to become an Assistant could not be justified. It would have been open

The Court noted that, according to clause five of the Order, if the employee had refused to accept the proposed assignment, such refusal could have created a circumstance whereby the provisions of section 11(2) of the Act would have become operative. In other words, the statutory mechanism for dealing with a refusal to take an assignment might have been triggered under that section. Having examined the facts, the Court concluded that the situation involving Roy did not differ in any material respect from the situations of the other respondents who were part of the same group of appeals. Because the factual matrix and the application of the Order were essentially the same across all cases, the Court found no basis to treat Roy’s case as distinct. Accordingly, the Court affirmed the judgment of the High Court, confirming all the orders that had been passed by that Court. The appellate relief sought by the petitioners was therefore rejected, and the appeals were dismissed with costs awarded against the appellants. The Court further directed that the parties be required to pay a single set of hearing fees in respect of the proceedings. In sum, the appellate proceedings were concluded with the dismissal of the appeals and the affirmation of the High Court’s orders.