Allahabad High Court
Munna Lal vs State Of U.P. And 4 Others on 20 December, 2024
Author: Saumitra Dayal Singh
Bench: Saumitra Dayal Singh
HIGH COURT OF JUDICATURE AT ALLAHABAD Neutral Citation No. - 2024:AHC:200075-DB Court No. - 39 Case :- WRIT - A No. - 23101 of 2014 Petitioner :- Munna Lal Respondent :- State Of U.P. And 4 Others Counsel for Petitioner :- Ranjeet Asthana Counsel for Respondent :- Arvind Kumar Goswami,Manish Goyal,Vivek Kumar Singh With Case :- WRIT - A No. - 11566 of 2014 Petitioner :- Homendra Kumar Respondent :- Life Insurance Corporation Of India And 3 Others Counsel for Petitioner :- Shesh Kumar,Sunil Dubey Counsel for Respondent :- Arvind Kumar Goswami,Manish Goyal,Manish Goyal(Senior Adv.) With Case :- WRIT - A No. - 19161 of 2024 Petitioner :- Shiv Prasad And Another Respondent :- Union Of India And Others Counsel for Petitioner :- Manu Khare,Ranjeet Asthana Counsel for Respondent :- Manish Goyal With Case :- WRIT - A No. - 23220 of 2015 Petitioner :- Shahid Abbas Ansari Respondent :- Union Of India And 4 Ors. Counsel for Petitioner :- Ashok Khare,Siddharth Khare Counsel for Respondent :- A.S.G.I.,Arvind Kumar Goswami,Chandra Prakash Yadav,D.K.Gupta,Manish Goyal,Siddharth Singhal With Case :- WRIT - A No. - 23224 of 2015 Petitioner :- Kuldeep Sonkar Respondent :- Union Of India And 4 Ors. Counsel for Petitioner :- Ashok Khare,Siddharth Khare Counsel for Respondent :- A.S.G.I.,Arvind Kumar Goswami,Chandra Prakash Yadav,Manish Goyal,Siddharth Singhal With Case :- WRIT - A No. - 23227 of 2015 Petitioner :- Brijesh Kumar Kashyap Respondent :- Union Of India And 4 Ors. Counsel for Petitioner :- Ashok Khare,Siddharth Khare Counsel for Respondent :- A.S.G.I.,Arvind Kumar Goswami,Chandra Prakash Yadav,Manish Goyal,Siddharth Singhal With Case :- WRIT - A No. - 23375 of 2014 Petitioner :- Abhay Raj Saroj Respondent :- Union Of India And 4 Others Counsel for Petitioner :- Ranjeet Asthana Counsel for Respondent :- Arvind Kumar Goswami,Manish Goyal,Siddharth Singhal With Case :- WRIT - A No. - 30491 of 2014 Petitioner :- Hitesh Kumar Goyal Respondent :- Life Insurance Corporation Of India And 3 Others Counsel for Petitioner :- Shesh Kumar,Sunil Dubey Counsel for Respondent :- Arvind Kumar Goswami,Manish Goyal,R.C.Shukla With Case :- WRIT - A No. - 38523 of 2015 Petitioner :- Kshetra Pal Singh Respondent :- Union Of India And 3 Others Counsel for Petitioner :- Shesh Kumar Counsel for Respondent :- A.S.G.I.,Arvind Kumar Goswami,Manish Goyal,Manish Goyal(Senior Adv.) With Case :- WRIT - A No. - 40770 of 2011 Petitioner :- Rajeev Kumar And Others Respondent :- Union Of India And Others Counsel for Petitioner :- Ajay Kumar Chaurasia,S.C.,Sunil Dubey Counsel for Respondent :- Arvind Kumar Goswami,Manish Goyal,Ram Chandra Shukla,S.C. With Case :- WRIT - A No. - 50788 of 2015 Petitioner :- Amit Kumar Respondent :- Union Of India And 3 Others Counsel for Petitioner :- Shesh Kumar Counsel for Respondent :- A.S.G.I.,Arvind Kumar Goswami,Shri Manish Goyal Hon'ble Saumitra Dayal Singh,J.
Hon’ble Donadi Ramesh,J.
1. Heard Sri Ashok Khare, learned Senior Counsel assisted by Sri Siddharth Khare, Sri Shesh Kumar, Sri Ranjeet Asthana, Sri Ajay Kumar Chaurasia, learned counsel for the petitioners (for individual petitioners) Sri Manish Goyal, learned Senior Advocate assisted by Ms. Divya Chaurasiya and Sri Arvind Kumar Goswami, learned counsel for the Life Corporation of India
2. This batch of petitions has been pressed, primarily to challenge the validity of the Rules 6 and 7 of the Life Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service), Rules, 2009 (hereinafter referred to as “the Rules). Though that specific prayer has remained to be made in some of the petitions, we have treated all petitions similarly, and have allowed the grounds of validity of Rules 6 and 7 of the Rules to be tested in all six petitions, for reason of the order passed by the Supreme Court, to which we may presently advert.
3. The matter was earlier heard and decided by a coordinate bench of this Court vide order dated 22.04.2014, passed in the case of Munna Lal (hereinafter referred to as “lead case”). That order reads as below:
“Heard Sri Ranjeet Asthana, learned counsel for the petitioner, Sri R.C. Shukla, learned counsel for the Life Insurance Corporation of India and Sri Arvind Kumar Goswami who has filed his appearance on behalf of respondent no.1.
The petitioner is a Development Officer whose services have been terminated. He filed an appeal which has been dismissed. The ground for termination that has been taken in the impugned order emanates from the powers that have been conferred under sub-rule 8 of Rule 6 of the notified rules dated 12.11.2001. The said rule is extracted hereinunder:-
“(8) Notwithstanding anything contained in sub rules (1) to (7) where the annual remuneration of a Development Officer in any preceding year (hereafter in this sub-rule referred to as the “relevant year”) exceeds 38% of the eligible premium of that year and the aggregate of the annual remuneration in the relevant year and the appraisal year immediately preceding the relevant year exceeds 38% of the aggregate of the eligible premium in those two years, his services shall be liable to be terminated in accordance with rule 7.”
Having examined the said rule, we find that the writ petition nowhere lays down any foundation questioning the correctness of the impugned order as well as the appellate order which is also in detail indicating as to how it suffers from an infirmity as per sub rule 8 extracted hereinabove.
Sri Asthana further attempted to argue that the rules of 2009 were itself not in conformity with law and were liable to be ignored.
We are unable to subscribe to the said argument keeping in view the ratio of the judgment in the case of Vivek Anand Vs. Life Insurance Corporation of India and others decided on 6.12.2012 as pointed out by Sri R.C. Shukla, learned counsel for the Life Insurance Corporation of India.
We are not inclined to entertain any argument on the issue of the vires of the rules inasmuch as we are satisfied that no good ground or new ground has been made out for questioning the same for the reasons already given in the judgment referred hereinabove. Rejected.”
4. The matter was carried to the Supreme Court by means of Civil Appeal No.1343 of 2018 with connected matters. Those Civil Appeals were disposed by a common order dated 30.01.2018. It reads as below:
“1. Leave granted.
2. By the impugned judgment the High Court of Judicature at Allahabad has dismissed the writ petition filed by the appellant-herein against the termination of his services as a Development Officer. Apparently, the appellant had raised several grounds questioning the vires of the Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 2009 (for short, “the Rules”) under which his services were terminated. The writ Petition also concluded with the prayer clause specifically seeking a declaration that the Rules are ultra vires the Constitution. A perusal of the grounds in the writ petition shows a wide range of challenge to the Rules on the basis of several Articles of the Constitution, such as follows:
a) That the authorities have failed to appreciate that the provisions contained in the 2009 Rules and 2009 instructions are totally illegal, unconstitutional and contrary to law;
b)…. The Relevant Rules 6 & 7 of 2009 Rules are ultra vires and against the principles of Articles 14 and 16 Constitution of India:
c) … No opportunity of hearing provided to the petitioner as like as the employees of the State and Central Government are provided in view of Article 311 of the Constitution of India, thus the provisions of the Rule 2009, which is against the provision of Article 14,16 and 21 of the Constitution of India should be declared null and void;
d) …Those provisions which are contrary to the provisions of constitution of India must be declared null and void and this Court may kindly quash Rule 6 and Rule 7 of Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Instructions, 2009;
e) Because the authorities have failed to appreciate that the rules of the LIC in respect of termination of the Service of the petitioner is completely based upon the impractical assessment and a deliberate misuse of their power, that is clearly hit a provision of Article 14 and 21 of the Constitution of India.
However, the Allahabad High Court has disposed of the petition merely on the basis of the its own judgment in the case of Vivek Anand vs. Life Insurance Corporation of India & Ors. decided on 06.12.2012 by observing that “no ground or new ground has been made out for questioning the same for the reasons already given” in Vivek Anand‘s case (supra)
3. We find that the writ petition contained many challenges which were not argued in Vivek Anand‘s case (supra) and, therefore, not decided. Having regard to this, we consider it appropriate to set aside the impugned judgment and remit the matter to the High Court of Judicature at Allahabad for a fresh decision in accordance with law.
4. We request the High Court to decide the matter as expeditiously as possible, preferably not later than one year.
5. We may note that the observations hereinabove are not related to the correctness or otherwise of the judgment in Vivek Anand (supra).
6. Accordingly, the appeal is disposed
7. All issues and contentions are left open
CIVIL APPEAL NO. 1344 OF 2018
(@SLP (C) No. 17161/2015)
CIVIL APPEAL NO. 1347 OF 2018
(@SLP (C) No. 17533/2015)
CIVIL APPEAL NO. 1346 OF 2018
(@SLP (C) No.17410/2015)
CIVIL APPEAL NO. 1345 OF 2018
(@SLP (C) No.17388/2015)
1. Leave granted.
2. These appeals are disposed of in the same terms and observations as passed in civil appeal arising out of SLP (C) No.34670 of 2014.
WP (C) No. 769/2015
1. Learned counsel for the petitioner seeks permission to withdraw this petition with liberty to approach the High Court.
2. Permission sought for is granted.
3. The writ petition is dismissed as withdrawn with the afore-mentioned liberty.”
5. In view of the observations made by the Supreme Court, specifically in paragraph no.3 of the above noted order, we find that the highest constitutional Court has itself treated the challenge to the validity of the Rules, existing in all cases. Thereafter, the matter has been remitted to this Court. Therefore, the technical objection formally raised by Sri Manish Goyal – that the issue of validity may be tested only in such petitions where that prayer has been specifically made and where grounds and pleadings specifically exist, is rejected.
6. For the sake of convenience, we take note of the facts involved in the case of Munna Lal (lead case). On 01.11.2008, Munna Lal was appointed Apprentice Development Officer, by the Life Corporation of India (hereinafter referred to as “the LIC”). He reported for duty at the Principal Sales Training Centre, Varanasi, on 09.11.2008. After successfully completing apprenticeship, Munna Lal was appointed Probationary Development Officer vide appointment letter dated 03.02.2009, w.e.f. 10.02.2009. He joined at the Zonal Office of LIC, at Kanpur Nagar. After extension of that probation, by about 3 months, Munna Lal was confirmed on the post of Development Officer, on 18.05.2010.
7. Claiming to act in conformity to the Rules and other law governing the terms and conditions of his service, appraisal letter dated 20.04.2012 was issued to Munna Lal with respect to his performance for the calender year ending on 30.04.2011, indicating prescribed “expense limit” 24%; “eligible premium” Rs. 6,36,132.60/- and remuneration paid Rs. 2,22,659.91/- @ 35% “cost ratio”. For the next appraisal period ending 30 April 2012, he was issued another appraisal letter dated 27.07.2012 disclosing prescribed “expense limit” 24%; “eligible premium” Rs. 6,02,772.60 and remuneration paid Rs. 2,77,716.59/- @ 46.07% “cost ratio”. Briefly, it may be noted, the said reports were adverse to Munna Lal to the extent, he failed to meet his performance targets. He was issued show cause notice 27.07.2012. On 23.08.2012, Munna Lal raised objections to the appraisal letter stating that his performance targets could not be met for reason of many new agents (recommended by him), rejected by the LIC.
8. Thereafter, on 20.04.2013, a second show cause notice was issued to Munna Lal under Rule 6(8) read with Rule 7 of the Rules to submit his explanation in 30 days. He submitted his reply on 04.06.2013 alleging that the agents under him had not worked for reason of non-payment of their commission, by the LIC. According to Munna Lal, the LIC did not consider his reply and it did not act in accordance with law and issued the termination letter dated 31.07.2013. That has been confirmed in departmental remedies provided to Munna Lal. In such circumstance, Munna Lal approached this Court by means of the present writ petition for the following reliefs:
“i) issue a writ or direction in the nature of Certiorari to quash the impugned termination order dated 31.07.2013 passed by the respondent No.4 and impugned order dated 16.12.2013 passed by the respondent No.3, which contained as Annexure Nos.9 and 14 respectively to the writ petition, in the interest of justice;
ii) issue a writ or direction in the nature of Mandamus commanding to the respondents authorities to resume the petitioner upon his respective post and pay the salary month to month which falls due continuously, during the pendency of the writ petition, in the interest of justice;
iii) issue a writ or direction which is necessary to declare certain provisions of Rule 6 and 7 of Life Insurance Corporation of India Development Officers (Revision of Certain Terms and conditions of service) Instructions 2009 ultra vires;”
9. As noted above, the present petition was initially dismissed by a coordinate bench in view of earlier decision of another coordinate bench in the case of Vivek Anand Vs. Life Corporation of India and others decided on 06.12.2012. The reasoning given in that decision is recorded in paragraph nos.33 and 34 of that order. It reads as below:
“33. Having considered the rival submissions of the learned counsel for the parties, we are of the view that the service conditions of the employees of Life Insurance Corporation of India are governed by the rules and regulations framed in accordance with the provisions of Life Insurance Corporation Act, 1956. Sub-section (1) of Section 48 of the Life Insurance Act, 1956 provides that the Central Government may, by notification in the official Gazette, make rules to carry out the purposes of the Act. Clause (cc) of sub-section (2) of Section 48 enables the Central Government to provide for the terms and conditions of service of the employees and agents of the Corporation, including those who become employees and agents of the Corporation on the appointed date under the said Act. Sub-section (2C) of Section 48 enables the Central Government to frame rules with retrospective effect. The power to unilaterally frame rules with retrospective effect cannot be ignored. We are therefore of the view that the Central Government acted well within its domain while framing the Rules, 2009 and it also had the power to give retrospective effect to the rules. In the given circumstances, by virtue of clause (a) of sub rule (9) of rule 6 of the Rules, 2009, the Life Insurance Corporation was authorized to take into consideration the cost ratio for the appraisal years ending 31.12.2008 and 31.12.2009 in addition to the first appraisal year after the notification of these Rules inasmuch as the cost ratio for the first appraisal year ending 31.12.2010 had exceeded 50%.
34. The contention of the learned counsel for the petitioner that the rules were discriminatory, because they picked up only the Development Officers and left out the Assistant Branch Managers as well as Branch Managers, cannot be accepted. Admittedly, the post of Assistant Branch Manager is a promotion post and is a separate cadre, therefore, the plea of discrimination is unsustainable. Further, in the present day of competitive business environment, if the Central Government is of the view that the Development Officers can be removed for non- performance, it is a policy decision which cannot be lightly questioned without specifically disclosing violation of any constitutional provision or the provisions of the Life Insurance Corporation Act. Accordingly, we do not find any good ground to hold that the provisions of the Rules, 2009 are ultra vires.”
(emphasis supplied)
10. Though such decision may have been initially attempted to be appealed against – before the Supreme Court, it has been stated at the bar that that proceeding was later withdrawn. In any case, the correctness of the decision in Vivek Anand (supra) was not tested, further.
11. Learned Senior Counsel for the petitioner first referred to the appointment letter dated 01.11.2008 appointing Munna Lal, Apprentice Development Officer. Specific reliance has been placed on Clauses 3 and 10 of the said letter. They are read as below:
“3. After completing the field training for 2 ½ months from the date of training as an apprentice, a written test will be held the Sales Training Centre Varanasi to assess your knowledge, skill and proficiency acquired by you during the entire period of training of 2½ months. If you pass the said written test by securing at least 50% marks in each paper separately and if your work and conduct during the apprentice period have been found satisfactory, you will be eligible to be considered for appointment as a Development Officer on probation in the service of the L.I.C. of India on terms and conditions as applicable then, please note that at no time the apprentice period shall count as service for any purpose. However, if you fail in the said written test your recruitment as Apprentice Development Officer will automatically cease from the date of such result and no separate letter for such discharge from apprenticeship will be issued.
10. If you hold a life insurance agency you shall not operate the agency and no new business should be registered there under during the apprentice period. However you may keep the agency in force by paying the renewal license fee for the limited purpose of receiving agency commission, if admissible, in accordance with (Agents) Rules, 1972.”
12. Thus, it has been emphasised, the appointment of the petitioner as Probationary Development Officer arose upon his success at the Written Examination and the Interview Test conducted after completion of apprenticeship. He was then required to complete his training. Thereafter, he was appointed Probationary Development Officer upon assessment of his knowledge, skill and proficiency at a test (for which benchmark was fixed at 50% marks). From the beginning, it was made plain to the petitioner that he shall not operate any agency and not obtain registration of any new business during his apprenticeship period (if the petitioner had a LIC agency).
13. Next, reliance has been placed on the appointment letter dated 03.02.2009 appointing the petitioner Munna Lal, Probationary Development Officer w.e.f. 10.02.2009. Reliance has been placed on various clauses of that appointment letter pertaining to the Probationary Period, Headquarters and Area, Duties and Obligations, Minimum Business, Confirmation and Increments, General Conditions and Staff Regulations. For ready reference, relevant extracts of the appointment letter reads as below:
“PROBATIONARY PERIOD:
You shall be on probation initially a period of twelve months from the date of your joining duties as a probationer, but the Corporation may, in its sole discretion, extend your probationary period, provided that the total probationary period including the extended probationary period shall not exceed 24 months, counted from the commencement of the probationary appointment. During the probationary period which includes extended probationary period. If applicable you shall be liable to be discharged from the services of the Corporation without any notice and without any cause being assigned.
WHOLE TIME EMPLOYMENT:
(i) You shall devote your whole time and undivided attention for development and intensification of Life Insurance business and other duties assigned to you from time to time.
(ii) Without the prior permission of the Competent Authority you shall not contest any election to any office or local body or hold any Honorary or elective office and shall not be associated in any capacity with the promotion or managing of any Firm, Company. Association, or Society (including Co-op. Societies, except the Co-op. Societies formed by and for the sole benefit of the employee of the Corporation.
(iii) You shall not undertake any part-time studies unless permitted to Development Officer so in writing by the Competent Authority. Grant of permission to pursue such studies if given would not confer any right for sanction of leave of any kind, which will always be subject to Office exigencies and at the sole discretion of the Competent Authority.
4. HEADQUARTERS AND AREA:
i) You shall be liable to be posted at or transferred any where in India.
ii) Your headquarters for the time being shall be at Jaspura. You shall confine your operations during the probationary period to the following area. AREA OF OPERATION BANDA.
iii) The Corporation may, in its absolute discretion, curtail or enlarge the area allotted to you or appoint or transfer one or more probationary or other Development Officer or Officer in the area allotted to you.
5. DUTIES AND OBLIGATIONS:
(A) Your duties as a Development Officer shall be
i) To develop and increase the production of Life Insurance business in a planned way as far as may be practicable in the area that may be allotted to you or in which you are allowed to work from time to time through the agents placed under your supervision by the Corporation.
ii) To guide, supervise and direct the activities of the Agents placed under you.
iii) To introduce suitable persons to the Corporation for Appointment as new Agents.
iv) To act generally in such a way as to activise existing. Agents and motivate new Agents, so as to development as stable agency force.
v) To render all such services to policy holder conductive to better policy servicing.
vi) To carry out the investigation of claims revival of lapse policies and liaison work in connection with the salary saving scheme business.
vii) To perform such other duties as may be instructed are assigned to you from time to time.
(B) You shall ensure that the Agents your organization conduct their work and/or business strictly in accordance with the provisions of the Insurance Act, 1938 and Rules framed there under, and such other rules and regulation that the Corporation may issue from time to time LIC of India (Agents) Rules, 1972 read with Insurance Regulatory and Development Authority (Licensing of Insurance Agents) Regulations, 2000 as amended from time to time and in the best interest of the Corporation.
(C) After an agent recruited at your instance, has continuously worked for the Corporation for a period of 5 years or more, and the Chief Manager/Sr./Branch Manager is satisfied that the agent is no longer in need of the help and guidance of any Development Officer, such an agent may be treated as a Direct Agent at the sole discretion of the Corporation.
10. MINIMUM BUSINESS:
1) During the probationary period you shall secure through the agents recruited at your instance minimum completed life business of Rs.3.5 Cr. yielding a Scheduled First Year Premium Income of not less than Rs.10 Lacs provided, however, that in case the pay and/or allowance admissible to you, under Clause 1 are increased during the period, the minimum business and the premium income which you should secure shall be increased proportionately.
ii) The minimum business set out in (i) shall be spread over not less than 750 lives and shall be secured regularly through a network of dependable agencies.
iii) You will be required to recruit minimum of 40 agents out of which all agents should have become active, 15 agents should individually have out in during that period the minimum business required of them in an agency year according to Rule (9) of the LIC of India (Agents) Rules, 1972, and 15 agents should become Productive agents to one who has completed either at least 20 lives on 12 lives with Scheduled First Year Premium income of Rs.1,00,000 in the agency you.
iv) If your probationary period is extended, you shall secure during the extended period such business as may be intimated to you.
11 CONFIRMATION AND INCREMENTS:
i) On your satisfactorily completing the period of probation and your observance and compliance with all conditions set out in this letter of appointment, you will be confirmed in the services of this Corporation in Class II. Your conformation will depend inter alia, upon the fulfillment of the minimum business requirement set out in para 10 above and upon your record of post sales services to the Corporation’s policy holders and other functions performed by you in the area allotted to you to the satisfaction of the Competent Authority.
ii) The grant of increments to your shall be governed by the Targets assigned to you as per this appointment letter send with Regulation 56 of LIC of India (Staff Regulation, 1960) and such other rules as amended from time to time.
12. GENERAL:
i) You have no authority to accept risks or to grant credit or to bind the Corporation in any way.
ii) You are not permitted to advance premiums on behalf of the policy holders or to have policies assigned to you or to any member of your family (i.e. wife, parents and children) by policy holders who are not related to you.
iii) You are strictly forbidden from having any financial dealings with agents or policy holders of the Corporation ог place yourself under pecuniary obligations to any one with whom you are likely to have official dealings as a Development Officer of the Corporation.
iv) You shall not be permitted to act as an insurance agent and you shall not allow any member of your family to act as an insurance agent. Member of the family in relation to you shall be as defined in the Regulation 25 of the Life Insurance Corporation of India (Staff) Regulations, 1960.
v) Operation of the Benami Agency is illegal. If you are found to operate any benami agency in the name of any person or if you are found to pass on any business to any of the agents under your supervision and derive any financial benefit there from for you or for your family, your services shall be liable to be terminated forthwith.
vi) You shall not work directly or indirectly for any insurer carrying on Life Insurance business or General Insurance business or for the National Savings Organization nor shall you engage yourself in any other part-time or whole-time work or any trade, business, or gainful employment of any nature.
vii) You shall carry out all instructions as directions given to you by the Corporation from time to time.
13. STAFF REGULATIONS:
Your appointment as Probationary Development Officer shall be governed specifically by the terms and conditions of this letter and by the Life Insurance Corporation of India (Staff) Regulations, 1960, as amended from time to time.”
(emphasis supplied)
14. The probation was extended by few months. Later, Munna Lal was issued letter dated 08.05.2010, confirming him in service on the post of Development Officer w.e.f. 10.04.2010. For ready reference, that order reads as below :
“Re: Your confirmation
With reference to our letter dated 03/02/2009 issued to you appointing you as a Development Officer on Probation, we have pleasure in confirming you in your appointment w.e.f. 10/04/2010. We are glad to release your Normal Grade Increment due 01/05/2010 as below:
Basic (Rs) 7890.00
DA (Rs) 5552.98
HRA (Rs) 552.30
CA(RS) 1560.00 (with fast conveyance)
Total (Rs) 15555.28
Please note that your work will again be reviewed at the end of 12 months from the date on your confirmation, here in your case, from 01/05/2010 to 30/04/2011 and your future increment date will be 01/05/2011.
The conditions mentioned in the probationary letter of appointment relating to whole time employment, headquarter, area of operation, transfer tours, advance deposits etc., will continue to hold good.
You will be governed by the Life Insurance Corporation of India (staff) Regulations, 1960 now in force and as may be amended from time to time and as per the provisions of Life Insurance Corporation of India Development Officers (Revision of certain Terms & Conditions of service) Rules 2009 as amended from time to time.”
(emphasis supplied)
15. Both sides have relied on the Rules. It would be useful to extract relevant portion of the Rules for the discussion to follow. Rule 2 (c), (e), (g), (i), (k), Rule 3, Rule 4, Rule 6, Rule 7, and Rule 13 read as below:
“c) “appraisal date” means –
(1) in relation to a Development Officer appointed on or after the date of publication of these rules in the Official Gazette,
(A) in the first year of his service, the first day of the month following that in which he completes twelve months of service from the date of his appointment; and
(B) in every subsequent year of his service, the first day of the month following that in which he completes twelve months of service from the last appraisal date;
(II) in relation to a Development Officer appointed prior to the date publication of these rules in the Official Gazette,
(A) in the first year of this service from the date of publication of these rules in the Official Gazette the 1st day of the month following that in which he completes a period of twelve of service from the date on which his last annual increment accrued (whether released or not) in accordance with sub-rule (2) of rule 56 of the Life Insurance Corporation of India (Staff) Regulations, 1960, and
(B) in every subsequent year of service, the first day of month following that in which he completes twelve months of service from the last appraisal date;
(e) “cost ratio” in relation to a Development Officer means the ratio which his annual remuneration in any year bears to the eligible premium of that year and expressed as a percentage of such eligible premium,
(g) Development Officer” means a whole-time salaried employee of the Corporation belonging to Class II appointed as a Development Oficer,
(i) “eligible premium” means such proportion as may be specified by the Corporation from time to time on the first year’s premiums received by the Corporation in respect of the business secured by the agents in the organisation of a Development Officer, which is adjusted in the relevant appraisal year;
(j) “expense limit” in respect of an appraisal year in relation to a Development Officer working in an operational area specified in column (1) of the Table below (hereinafter referred to as the “Table of Expense Limit”) means the percentage of the eligible premium of that year as specified in the corresponding entry in column (2) thereof and it shall apply to the Development Officers who have been confirmed in the services of the Corporation on a date prior to the date of publication of these rules in the Official Gazette:-
TABLE OF EXPENSE LIMIT
If the Development Officer is working in operational area
Percentage of eligible premium
(1)
(2)
A
19%
B
20%
C
21%
D
22%
Provided that in respect of a Development Officer who has been confirmed in service on or after the date of publication of these rules in the Official Gazette, the expense limit applicable shall be as specified in the Table below:
TABLE OF EXPENSE LIMIT
If the Development Officer is working in operational area
Percentage of eligible premium
In the first appraisal year after confirmation
In the second appraisal year after confirmation
In the third and subsequent appraisal years after confirmation
(1)
(2)
(3)
(4)
A
22%
21%
19%
B
23%
22%
20%
C
24%
23%
21%
D
25%
24%
22%
Note:
(1) The expense limit of a Development Officer for any appraisal year is expressed as a percentage of the eligible premium of that year. A Development Officer is said to exceed the expense limit if his annual remuneration in that year is in excess of the expense limit; such excess or the ratio which such annual remuneration bears to the eligible premium of that year may also be expressed as a percentage of the eligible premium;
(2) In the case of a Development Officer who has been confirmed in the services of the Corporation on a date prior to the date of publication of these rules in the Official Gazette, the percentage specified in the above Table shall be increased by the appropriate transitional concessions, if any, as defined in clause (t):
Provided that the transitional concessions shall not apply to those Development Officers who are governed under rule 4.
(k) “operational area” with reference to a Development Officer means the area in which he is posted to work as Development Officer and the area is said to be his operational area if,
(A) he is working in a City or Urban agglomeration or Town with an ascertained population of more than 10 lakhs:
(B) he is working in a City or Urban agglomeration or Town with an ascertained population of 6 lakhs or above but not more than 10 lakhs;
(C) he is working in a City or Urban agglomeration or Town with an ascertained population of less than 6 lakhs; and
(D) he is working in a rural area or remote rural area or any hilly area specified in Explanation (2) and (3) or any other hilly area which the Central Government may in consultation with the Corporation by notification in the Official Gazette specify in this behalf;
3.Tenure:
Subject to the provisions of these rules, a Development Officer shall hold office by the same tenure and in the same manner as any other class of employee in the Corporation:
Provided that he shall conform to the expense limit applicable to him;
Provided further that the services of a confirmed Development Officer shall not be terminated on the ground of poor business production resulting in cost ratio in excess of the expense limit applicable to him, unless he has been given an opportunity to conform to the expense limit as provided in rule 6.
4. Expense limit applicable to Development Officers:
(1) The expense limit applicable to a Development Officer shall be as specified in the Table of Expense Limit as provided in clause (j) of rule 2 and it shall be the expense limit applicable to his operational area as increased by two percent, if, at or before such commencement of the relevant appraisal year, he has completed the age of 55 years;
Provided that the increased expense limit specified in the sub-rule (1) shall apply to relevant appraisal date commencing after the date of publication of these rules in the Official Gazette in respect of operational areas ‘A’, ‘B’, ‘C’ and ‘D’.
(2) In respect of a Development Officer who has been confirmed on a date prior to the date of publication of these rules in the Official Gazette and who has put in more than ten years of service as a Development Officer at the commencement of the relevant appraisal year:-
(a) the expense limit applicable in the first, second and third appraisal years shall be as under, if he has completed 50 years of age and not completed 52 years, at or before such commencement of the relevant appraisal year:
TABLE
Operational Area as defined in clause (1) of rule 2 of the Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 1989
A
B
C
D
E
Expense Limit as provided in the Table of Expense Limit in clause (1) of rule 4 of the Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 1989 so repealed shall be taken as base for providing transitional concessions for the subsequent years based on the date of publication of these rules in the Official Gazette and subsequent years mentioned as under :
23%
24%
25%
26%
27%
a) Expense Limit applicable in the First appraisal year
22%
23%
24%
25%
26%
b) Expense Limit applicable in the Second appraisal year
21%
22%
23%
24%
24%
c) Expense Limit applicable in the Third appraisal year
19%
20%
21%
22%
22%
(b) the expense limit applicable in the first, second and third appraisal years shall be as under, if he has completed 52 years of age and not completed 53 years, at or before such commencement of the relevant appraisal year:
Operational Area as defined in clause (1) of rule 2 of the Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 1989
A
B
C
D
E
Expense Limit as provided in the Table of Expense Limit in clause (1) of rule 4 of the Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 1989 so repealed shall be taken as base for providing transitional concessions for the subsequent years based on the date of publication of these rules in the Official Gazette and subsequent years mentioned as under :
24%
25%
26%
27%
28%
a) Expense Limit applicable in the First appraisal year
23%
24%
25%
26%
27%
b) Expense Limit applicable in the Second appraisal year
21%
22%
23%
24%
25%
c) Expense Limit applicable in the Third appraisal year
19%
20%
21%
22%
22%
(c) the expense limit applicable in the first, second and third appraisal years shall be as under, if he has completed 53 years of age and not completed 54 years, at or before such commencement of the relevant appraisal year:
Operational Area as defined in clause (1) of rule 2 of the Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 1989
A
B
C
D
E
Expense Limit as provided in the Table of Expense Limit in clause (1) of rule 4 of the Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 1989 so repealed shall be taken as base for providing transitional concessions for the subsequent years based on the date of publication of these rules in the Official Gazette and subsequent years mentioned as under :
24%
25%
26%
27%
28%
a) Expense Limit applicable in the First appraisal year
23%
24%
25%
26%
27%
b) Expense Limit applicable in the Second appraisal year
22%
23%
24%
25%
26%
c) Expense Limit applicable in the Third appraisal year
21%
22%
23%
24%
24%
(d) the expense limit applicable in the first, second and third appraisal years shall be as under, if he has completed 54 years of age at or before such commencement of the relevant appraisal year:
Operational Area as defined in clause (1) of rule 2 of the Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 1989
A
B
C
D
E
Expense Limit as provided in the Table of Expense Limit in clause (1) of rule 4 of the Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 1989 so repealed shall be taken as base for providing transitional concessions for the subsequent years based on the date of publication of these rules in the Official Gazette and subsequent years mentioned as under :
25%
26%
27%
28%
29%
a) Expense Limit applicable in the First appraisal year
24%
25%
26%
27%
28%
b) Expense Limit applicable in the Second appraisal year
22%
23%
24%
25%
26%
c) Expense Limit applicable in the Third appraisal year
21%
22%
23%
24%
24%
(3) Notwithstanding anything contained in sub-rule (1) and (2) of rule 4 the percentage specified in column (2) of the Table of Disincentives as provided in sub rule (1) of rule 6 or the percentages specified in sub-rules (8) and (9) of rule 6 shall not be increased.
6. Opportunity to conform to the expense limit:
(1) Where the annual remuneration of any Development Officer in the preceding year or years is in excess of the expense limit, his services shall not be terminated merely on that ground if his case is capable of being subject to the provisions of dealt with by awarding disincentives, subject to the provisions of rule 8, from the relevant appraisal date as provided in the Table of Disincentives; so as to afford him an opportunity to conform to the expense limit:
Provided that for the purpose of award of disincentives in accordance with the Table of Disincentives, his performance shall be appraised with reference to the annual remuneration and the prescribed expense limit applicable to him.
Table of Disincentives
Sl. No.
Where the cost ratio is in excess of prescribed limit.
Disincentives where the cost ratio is in excess of prescribed limit in the appraisal year next preceding the relevant appraisal date.
On the first occasion
On the second successive occasion
On the third and subsequent successive occasion
1.
By not more than 2% (Provided that the cost ratio in the appraisal year is not more than 32%).
NIL
NIL
NIL
2.
By more than 2% but no more than 4% (Provided that the cost ratio in the appraisal year is not more than 32%).
No Increment
No Increment
No Increment
3.
By more than 4% (Provided that the cost ratio in the appraisal year is not more than 32%).
No Increment
No Increment
No Increment and one decrement.
4.
Where the cost ratio in the appraisal year is more than 32% but not more than 35%
No Increment
No Increment and one decrement.
No Increment and two decrements.
5.
Where the cost ratio in the appraisal year is more than 35%.
No Increment and one decrement.
No Increment and two decrements.
No Increment and two decrements.
Note:
For the purposes of this Table:-
(a) “no increment” non grant of increment;
b) “decrement” means reduction in basic pay one or more stage/s
Explanation:
(1)The application of Table of Disincentives shall be subject to the provisions Contained in rule 8 provided the services of the Development Officer are not liable to be terminated under sub-rule (2) or sub-rule (8) of this rule.
(ii) For the purpose of the Table of disincentives, the annual remuneration of a Development Officer shall be deemed to be in excess of the prescribed expense limit on a successive occasion if such remuneration exceeds such expense limit in two consecutive appraisal years even though the excess percentage over the prescribed expense limit may vary and an appraisal year in which the Development Officer exceeds the prescribed expense limit even though there is no disincentive shall be reckoned for ascertaining whether the expense limit is exceeded on successive occasions and the disincentive on the successive occasion shall correspond to the excess of the prescribed expense limit in the appraisal year next preceding the relevant appraisal date.
(iii) The Table of Disincentives shall be repeatedly applied, if, after conforming to the prescribed expense limit, the Development Officer exceeds it again at a later date.
(2) If, as a consequence of the application of the provisions contained in sub- rule (1) the basic pay arrived at falls below the minimum of the grade applicable to the Development Officer, his basic pay shall be fixed at such minimum as applicable to Development Officer:
Provided that the fixation of basic pay at minimum under this sub-rule shall not be allowed more than once during the entire service of a Development Officer and if, on a second occasion, the basic pay so arrived at falls below such minimum, his services shall be liable to be terminated in accordance with rule 7.
(3) Where the basic pay of a Development Officer is reduced or fixed under sub-rule (1) or sub-rule (2) (hereinafter referred to as “the revised basic pay”), he shall be allowed only such allowances and other benefits as are admissible on that basic pay:
Provided that there shall be no protection of the annual remuneration either by granting a personal allowance or otherwise and no arrears of pay or any allowance for the past period consequent on his conforming to the expense limit later on shall be payable.
(4) The appointing authority shall be the competent authority for implementing the provisions of sub-rules (1), (2) and (3) and it shall determine the matters specified in the said sub-rules, as soon as may be, after the expiry of the relevant appraisal year:
Provided that the competent authority concerned shall, before deciding any matter under this rule, give an opportunity to the Development Officer to make a representation.
(5) Where the representation received under proviso to sub-rule (4) discloses,
(a) any factual inaccuracies in the computation of eligible premium or other figures, the competent authority shall revise his decision to the extent it is warranted by the revised figures and pass appropriate orders disposing of the representation;
(b) any cause beyond the control of the Development Officer, such as accident or sickness which warrants relaxation on the expense limit and he pleads that the award of disincentives should not be effected on that ground, the competent authority shall forward the representation to the Zonal Manager, for decision.
(6) If the Zonal Manager is satisfied that there is any merit in the representation, he may consider the facts and circumstances of the case and pass such orders as he may deem fit.
(7) A Development Officer whose representation has been rejected by the Zonal Manager may submit a Memorial to the Chairman in respect of that matter.
(8) Notwithstanding anything contained in sub rules (1) to (7) where the annual remuneration of a Development Officer in any preceding year (hereafter in this sub-rule referred to as the relevant year exceeds 38% of the eligible premium of that year and the aggregate of the annual remuneration in the relevant year and the appraisal year immediately preceding the relevant year exceeds 38% of the aggregate of the eligible premium in those two years, his services shall be liable to be terminated in accordance with rule 7.
7. Termination of service in certain cases:
(1) Where a Development Officer has failed to conform to the expense limit and where no opportunity to conform to such limit could be given under the provisions of rule 6, the Zonal Manager may terminate his services after giving him three months notice or salary in lieu thereof;
Provided that the Development Officer shall be given an opportunity to show cause against such proposed termination of his service.
(2) An appeal against an order passed under sub-rule (1) shall lie to the Managing Director and the provisions of rules 41, 42, 43, 44 and 45 of the staff rules shall, so far as may be, apply to any such appeal
(3) In the case of an appeal under sub-rule (2), the Managing Director shall consider the records of the case and pass orders on merits having regard to the circumstances of the case.
13. Incentives:
The Incentive Bonus may be allowed to a Development Officer for any preceding year under any Scheme approved by the Corporation from time to time.”
(emphasis supplied)
16. In the context of the Rules, the petitioner Munna Lal was visited with a communication dated 28.07.2011 containing appraisal of his performance for year ending 30.04.2011. In that, it was stated as below:
“Re: Life Insurance Corporation of India Development Officers (Revision of Certain Terms and Conditions of Service) Rules, 2009 – Your performance for the appraisal year ended on 30.04.2011
Your performance for the appraisal year ended on 30.4.11 has been assessed as under:
(A) (i) Expense Limit: 24%
(ii) Prescribed Expense Limit: 24%
(iii) Eligible Premium: 636132.60
(iv) Annual Remuneration: 222659.91
(B) Cost Ratio for the relevant appraisal Year on the basis of the Annual Remuneration: 35.00%
(C) In view of your cost ratio as mentioned at ‘B’ above, provisions relating to Rule 6(1) (4) of Rules, 2009 are attracted – No increment. The basic pay admissible to you with effect from 01.05.2011 shall be Rs. 12235.00 p.m. This will be without prejudice to the right of the Corporation to take any other action, if necessary, under the Rules referred to above.”
17. Thereafter, the petitioner was issued communication dated 27.07.2012 based on his appraisal for the year ending 30.04.2012. Therein, it was observed the petitioner’s “cost ratio” was 46.07%. That notice enclosed to the Counter Affidavit reads as below:
“Your performance for the appraisal year ended on 30.04.2012 has been assessed as under
(A) (i) Expense Limit : 24%
(ii) Prescribed Expense Limit : 24%
(iii) Eligible Premium : Rs 602772.40
(iv) Annual Remuneration : Rs.277716.59
(B) Cost Ratio for the relevant appraisal
Year on the basis of the Annual
Remuneration : 46.07%”
18. Thereafter, the LIC issued Show Cause Notice dated 20.04.2013 proposing to terminate the services of Munna Lal. It reads as below:
“Please refer to the letter dated 27.07.2012 of the Sr. Divisional Manager, Allahabad. Your performance for the appraisal year ended on 30.04.2012 has been assessed as under:
(A) (1) Expense Limit: 24% (ii) Prescribed Expense Limit: 24% (iii) Eligible Premium: Rs.602772.40 (iv) Annual Remuneration: Rs. 273154.59, (B) Cost Ratio for the relevant appraisal year on the basis of the Annual Remuneration: 45.31%
It is observed that your annual remuneration for the appraisal year exceeds 38% of the eligible premium of the year. It is also observed that your cost ratio for the immediately preceding appraisal year which ended on 30.04.2011 was 35.00%. As a consequence, your services are liable to be terminated under sub-rule 8 of Rule 6 read with Rule 7 of the Life Insurance Corporation of India (Revision of Certain Terms and Conditions of Service) Rules, 2009.
You are hereby called upon to show cause within 30 days from the date of receipt of this notice, as to why your services should not be terminated in pursuance of the aforesaid provisions of the Life Insurance Corporation of India (Revision of Certain Terms and Conditions of Service) Rules, 2009.
Your reply to this show cause notice of termination should be forwarded within the stipulated period to the undersigned through the Sr. Divisional Manager Allahabad, If no reply is received within the stipulated period, further action will be taken in accordance with aforesaid provisions of the Life Insurance Corporation of India (Revision of Certain Terms and Conditions of Service 2009 by the undersigned, without any further reference to you.”
19. Munna Lal submitted his reply thereto, on 31.07.2013. Thereafter, termination order dated 31.07.2013 was passed. That reads as below:
“Re: Termination of your service
I have considered your reply dated 04.06.2013 to the Show Cause Notice dated 20.04.2013 issued to you in terms of the Life Insurance of India Development Officers (Revision of Certain Terms and Conditions of Services) Rules, 2009.
I am satisfied from the record of your performance as well as your reply dated 04.06.2013 to the show cause notice dated 20.04.2013 that no further opportunity falls to be given to you to confirm to the expense limit in accordance with the provisions of the Life Insurance of India Development Officers (Revision of Certain Terms and Conditions of Services) Rules, 2009.
3. I, therefore, order that your services as a Development Officer shall stand terminated on the expiry of 3 months from the date of receipt of this order by you in terms of the said provisions of the Life Insurance of India Development Officers (Revision of Certain Terms and Conditions of Services) Rules, 2009.
Dated at Kanpur this 31st day of July 2013
Yours faithfully
Sd/-illegible
Zonal Manager”
20. In such facts, it has been submitted that the earlier judgment of a co-ordinate bench in Vivek Anand (supra), had not decided the issue of validity of Rules 6 & 7 of the Rules. Merely because an observation was made in that decision, that the Development Officers constitute of a class apart, it cannot be inferred that the co-ordinate bench had considered or reasoned that there existed an intelligible criteria or reasonable nexus for a valid classification. Referring to Rule 3 of the Rules, providing ‘Tenure’, it has been indicated, there is no distinction between other officers of LIC and Development Officers.
21. Reference has also been made to LIC (Staff) Regulations, 1960 (hereinafter referred to as ‘Regulations’) that apply to Development Officers as well, to indicate that they have to be treated similar to other employees of LIC for the purpose of initiation of conduct of disciplinary proceedings. Further, referring to the Regulations, it has been shown, not only the Development Officers but other officers and employees are also entitled to incentive, bonuses and increments based on performance/ profit earned.
22. These aspects were never considered in Vivek Anand (supra). Therefore, that decision does not constitute or create binding precedent. Any doubt in that regard, stands removed in view of the specific order of the Supreme Court (in these proceedings). The Supreme Court has noted the distinction and set aside the earlier order passed by the co-ordinate bench. Thereafter, it has remitted the matter to this Court, for decision afresh, specifically in light of the other observations that the issue pertaining to the validity of the impugned Rules had not been decided in Vivek Anand (supra).
23. As to the classification and treatment of Development Officers as a class apart, only to enforce the consequence of termination of services, based solely on two years’ appraisal of their work, the same is described as wholly invalid. According to learned Senior Counsel for the petitioners, by creating such a provision to dispense with the services of Development Officers, allegedly on poor performance, it cannot be said that they constitute a class apart. Heavy reliance has been placed on Part-III of the Constitution to submit, even though petitioners are not government employees, and therefore not entitled to protection of Article 311 of the Constitution, at the same time it may not be doubted that they stand under the protective umbrella of Part-III of the Constitution, inasmuch as the LIC is ‘State’ within the meaning of Article 12 of the Constitution. Reliance has been placed on a decision of the Supreme Court in A.L. Kalra v. Project and Equipment Corporation of India Limited; 1984 (3) SCC 316. It is strongly urged that protection available under Part-III of the Constitution is equally strong as may be available under Part-XV of the Constitution of India. To that effect, reliance has been placed on the following observations and reasoning given by the Supreme Court:
“20. It must be conceded in fairness to Mr. Sinha that he is right in submitting that even if the respondent-Corporation is an instrumentality of the State as comprehended in Article 12, yet the employees of the Corporation are not governed by Part XIV of the Constitution Could it however be said that a protection conferred by Part III on public servant is comparatively less effective than the one conferred by Part XIV ? This aspect was examined by this Court in Managing Director, Uttar Pradesh Warehousing Corporation & Anr. v. Vinay Narayan Vajpayee; AIR 1980 SC 840, where O. Chinnappa Reddy, J. in a concurring judgment has spoken so eloquently about it that it deserves quotation:
“I find it very hard indeed to discover any distinction, on principle, between a person directly under the employment of the Government and a person under the employment of an agency or instrumentality of the Government or a Corporation, set up under a statute or incorporated but wholly owned by the Government. It is self evident and trite to say that the function of the State has long since ceased to be confined to the preservation of the public peace, the exaction of taxes and the defence of its frontiers. It is now the function of the State to secure ‘social, economic and political justice’, to preserve ‘liberty of thought, expression, belief, faith and worship’, and to ensure ‘equality of status and of opportunity’. That is the proclamation of the people in the preamble to the Constitution. The desire to attain these objectives has necessarily resulted in intense Governmental activity in manifold ways. Legislative and executive have reached very far and have touched very many aspects of a citizen’s life. The Government, directly or through the Corporations, set up by it or owned by it, now owns or manages, a large number of industries and institutions. It is the biggest builder in the country. Mammoth and minor irrigation projects, heavy and light engineering projects, projects of various kinds are undertaken by the Government. The Government is also the biggest trader in the country. The State and the multitudinous agencies and Corporations set up by it are the principal purchasers of the produce and the products of our country and they control a vast and complex machinery of distribution. The Government, its agencies and instrumentalities, Corporations, set up by the Government under statutes and Corporations incorporated under the Companies Act but owned by the Government have thus become the biggest employers in the country. There is no good reason why, if Government is bound to observe the equality clauses of the constitution in the matter of employment and in its dealings with the employees, the Corporations set up or owned by the Government should not be equally bound and why, instead, such Corporations could become citadels of patronage and arbitrary action. In a country like ours which teems with population, where the State, its agencies, its instrumentalities and its Corporations are the biggest employers and where millions seek employment and security, to confirm the applicability of the equality clauses of the constitution, in relation to matters of employment, strictly to direct employment under the Government is perhaps to mock at the Constitution and the people. Some element of public employment is all that is necessary to take the employee beyond the reach of the rule which denies him access to a Court to enforce a contract of employment and denies him the protection of Arts. 14 and 16 of the Constitution. After all employment in the public sector has grown to vast dimensions and employees in the public sector often discharge as onerous duties as civil servants and participate in activities vital to our country’s economy. In growing realization of the importance of employment in the public sector, Parliament and the Legislatures of the States have declared persons in the service of local authorities, Government companies and statutory corporations as public servants and extended to them by express enactment the protection usually extended to civil servants from suits and prosecution. It is, therefore, but right that the independence and integrity of those employed in the public sector should be secured as much as the independence and integrity of civil servants.”
Therefore, the distinction sought to be drawn between protection of part XIV of the Constitution and Part III has no significance.
24. Further, heavy reliance has been placed on another decision of Supreme Court Delhi Transport Corporation v. DTC Mazdoor Congress & ors; 1991 Supp (1) SCC 600. In the context of power to terminate the service of an employee by a State Corporation, the Supreme Court made following observations:
“263. The main controversy centres round the question whether the employer, Statutory Corporation or instrumentality or other authority under Article 12 of the Constitution has unbridled power to terminate the services of a permanent employee by issue of notice or pay in lieu thereof without inquiry or opportunity, in exercise of the power in terms of contract which include statutory Rules or Regulations or instructions having force of law. It is undoubted that under ordinary law of master and servant, whether the contract of service is for a fixed period or not, if it contains a provisions for termination of service by notice, in terms thereof, it can be so determined and if the contract finds no provisions to give notice and the contract of service is not for a fixed period, law implies giving of a reasonable notice. Where no notice or a reasonable notice was issued, before terminating the contract, the termination of the contract of service is wrongful and the aggrieved employee is entitled at law to sue for damages. But this common law principle could be applied to the employees, appointed by a Statutory Corporation or authority or an instrumentality within the meaning of Article 12 of the Constitution is the square question. It is not disputed that Delhi Road Transport Corporation is a Statutory Corporation under the Act and the Regulations are statutory and its employees are entitled to the fundamental Rights enshrined in Part III of the Constitution. It is well settled law by a heed role of decisions of this Court that the Corporation or a Statutory Authority or an instrumentality or other authority under Article 12 of the Constitution is not free, like an ordinary master (a private employer), to terminate the services of its employees at its whim or caprices or vagary. It is bound by the Act and the Regulation and the paramount law of the land, the Constitution.
…
268. The right to life, a basic human right assured by Article 21 of the Constitution comprehends something more than mere animal existence i.e. dignity of the individual. Field J. in Munn v. Illinois, [1876] 94 US 113 and 154 held that by the term “life” as here used, something more is meant than mere animal existence. The inhibition against its deprivation extends to all those limbs and faculties by which life is enjoyed. The deprivation not only of life but of ….. if it a efficacy be not lettered away by Judicial decision. In Kharak Singh v. State of U.P., [1964] 1 SCR 332 this Court approved the definition of life given by Field J. in his dissenting opinion. In Olga Tellis v. Bombay Munici- pal Corporation, [1985] 2 Suppl. SCR page 51 at 79 this Court further laid that an equally important facet of the right to life is the right to livelihood because no person can live without the means of livelihood. If the right to livelihood is not treated as a part of the Constitutional right to life, the easiest way of depriving a person of his right to life would be to deprive him of his means of live- lihood to the point of abrogation ….. That, which alone can make it possible to live, leave aside which makes life liveable, must be deemed to be an integral component of the right to life ….. The motive force which propels their desertion of their hearths and homes in the village is the struggle for survival, that is the struggle for life….
…
271. The distinguishing feature of public employment is status. In Roshanlal Tandon v. Union of India, [1968] 1 SCR 185 at 195-196 the Constitution Bench held that the legal position of a Government servant is more one of status than of contract. The hall-mark of status is the attachment to a legal relationship of rights and duties imposed by, the public law and not by mere agreement of the parties. The employment of the Government servant and his terms of service are governed by statute or statutory rules. Once he is appointed to the post or office, the Government servant acquires a status and his rights and obligations are no longer determined by consent of both parties but by Statute or Statutory Rules. The relationship between the Government and its servants is not like an ordinary contract of service between a master and servant. The legal relationship is in the nature of status. The duties of statute are fixed by the law and in the enforcement of the duties society has an interest. Status is a condition of membership of a group of which powers and duties are exclusively determined by law and not by agreement between the parties concerned. In Calcutta Dock Labour Board v. Jarfar Imam, [1965] 3 SCR 463 it was held that the statutory scheme of employment confers on the worker a status. An unlawful act is an interference with status. This view was followed in Sirsi Municipality v. Cecelia Kom Francis Tellis, [1973] 3 SCR 348 Beg, J. (as he then was) held that the principles applicable to the relation of a Private Master and servant unregulated by statute, could not apply to the cases of a public statutory body exercising powers of punishment lettered or limited by statute and relevant rules of procedure. This Court in a recent decision extended all the benefits of pay scales to all the Central Government Corporate Sector employees. It is, thus, I hold that the employees of the corporations, statutory authority or instrumentality under Article 12 have statutory status as a member of its employees. The rights and obligations are governed by the relevant statutory provisions and the employer and employee are equally bound by that statutory provisions.
Nature of the right of a permanent employee to a post.
272. In Purushottam Lal Dhingra v. Union of India, [1958] SCR 828 at 84 1-843 it was held that the appointment to a permanent post may be substantive or on probation or on officiating basis. A substantive appointment to a permanent post in a public service confers normally substantive right to the post and he becomes entitled to hold a lien on the post. He is entitled to continue in office till he attains the age of superannuation as per rules or is dismissed or removed from service for inefficiency, misconduct or negligence or any other disqualification in accordance with the procedure prescribed in the rules, and fair and reasonable opportunity of being heard or on compulsory retirement or in certain circumstances, subject to the conditions like re-employment on abolition of post. In Motiram Daka v. General Manager, [1964] 5 SCR 683 at 718-721=AIR 1964 SC 600 at 608 & 609 majority of seven Judges’ Bench held that a permanent post carries a definite rate of pay without a limit of time and a servant who substantively holds a permanent post has a title to hold the post to which he is substantively appointed, and that in terms, means that a permanent servant has a right to hold the post until, of course, he reaches superannuation or until he is compulsorily retired under the relevant rule. If for any other reason that right is invaded and he is asked to leave the service the termination of his service must inevitably mean the defeat of his right to continue in service and as such, it is in the nature of penalty and amounts to removal. In other words, termination of service of a permanent servant, otherwise than on superannuation of compulsory retirement, must per se amount to his removal and so, by Rule 148(3) or Rule 149(3) of Rly. Establishment Rules if such a termination is brought about, the rule clearly contravenes Article 311(2) and must be held to be invalid. A permanent employment assures security of tenure which is essential for the efficiency and incorruptibility of public administration. In Guruder Singh Sidhu v. State of Pepsu, [1964] 7 SCR 587 =AIR 1964 SC 1585 another Constitu- tion Bench held that for efficient administration of the State, it is absolutely essential that permanent public servant should enjoy a sense of security of tenure. The safeguard which Article 311(2) affords is no more than this that in case it is intended to dismiss or remove or reduce them in rank, a reasonable opportunity should be given to them of showing cause against the action proposed to be taken in regard to them. In Motiram Daka‘s case (supra) it was further held that in a modern democratic State, the efficiency and incorruptibility of public administration is of such importance that it is essential to afford to civil servants adequate protection against capricious action from their superior authority. If a permanent civil servant is guilty of misconduct, he should no doubt be proceeded against promptly under the relevant disciplinary rules, subject, of course, to the safeguard prescribed by Article 311(2); but in regard to honest, straight-forward and efficient permanent civil servants, it is of utmost importance, even from the point of view of the State, that they should enjoy a sense of security which alone can make them independent and truly efficient. The sword of damocles hanging over the heads of permanent railway servants in the form of Rule 148(3) or Rule 149(3) would inevitably create a sense of insecurity in the minds of such servants and would invest appropriate authorities with very wide powers which may conceivably be abused. Thereby this Court laid emphasis that a permanent employee has a right or lien on the post he holds until his tenure of service reaches superannuation so as to earn pension at the evening of his life unless it is determined as per law. An assurance of security of service to a public employee is an essential requisite for efficiency and incorruptibility of public administration. It is also an assurance to take independent drive and initiative in the dis- charge of the public duties to elongate the goals of social justice set down in the Constitution.
273. This Court in Daily Rated Casual Labour v. Union of India, [1988] 1 SCR 598–[1988] 1 SCC 122 at 130-131 further held that the right to work, the right to free choice of employment, the right to just and favourable conditions of work, the right to protection against unemployment etc., and the right to security of work are some of the rights which have to be ensured by appropriate legislative and executive measures. It is true that all these rights cannot be extended simultaneously. But they do indicate the socialist goal. The degree of achievement in this direction depends upon the economic resources, willingness of the people to produce and more than all the existence of industrial peace throughout the country. Of those rights the question of security of work is of most importance. If a person does not have the feeling that he belongs to an organisation engaged in production he will not put forward his best effort to produce more. (emphasis supplied) That sense of belonging arises only when he feels that he will not be turned out of employment the next day at the whim of the management. It is for this reason it is being repeatedly observed by those who are in charge of economic affairs of the countries in different parts of the world that as far as possible security of work should be assured to the employees so that they may contribute to the maximisation of production.
274. It must, therefore, be held that a permanent employee of a statutory authority, corporation or instrumentality under Article 12 has a lien on the post till he attains superannuation or compulsorily retired or service is duly terminated in accordance with the procedure established by law. Security of tenure ensures the benefit of pension on retirement. Dismissal, removal or termination of his/her service for inefficiency, corruption or other misconduct is by way of penalty. He/ she has a right to security of tenure which is essential to inculcate a sense of belonging to the service or organisation and involvement for maximum production or efficient service. It is also a valuable right which is to be duly put an end to only as per valid law.
…
276. That apart, the haunting fear of dismissal from service at the vagary of the concerned officer would dry up all springs of idealism of the employee and in the process coarsens the conscience and degrades his spirit. The nobler impulses of minds and the higher values of life would not co-exist with fear. When fear haunts a man, happiness vanishes. Where fear is, justice cannot be, where fear is, freedom cannot be. There is always a carving in the human for satisfaction of the needs of the spirit, by arming by certain freedom for some basic values without which life is not worth-living. It is only when the satisfaction of the physical needs and the demands of the spirit coexists, there will be true efflorescence of the human personality and the free exercise of individual faculties. Therefore, when the Constitution assures dignity of the individual and the right to livelihood the exercise of the power by the executive should be cushioned with adequate safeguards for the rights of the employees against any arbitrary and capricious use of those powers.
…
279. In paragraph 4 of Chitty on Contracts (25th Edition, Volume-I) it is stated that “freedom of contract is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed and no injury is done to the economic interest of the community at large.”
(emphasis supplied)
25. Referring to a Full Bench decision of the Kerala High Court in P.V. Mani & ors v. Union of India & ors; 1985 SCC OnLine Ker 92 and Life Insurance Corporation of India Vs. Sonia Bhaskar and Others, 2015 SCC Online Ker 23029, it has been submitted that the issue raised was different. There, it was merely observed that Development Officers constitute a separate class. However, the issue raised here was not dealt with. In P.V. Mani (supra), it was observed as below:
“”5. A committee appointed by the Government of India to examine measures to streamline the economic working of the Corporation — Morarka Committee — found that the annual increment unrelated to volume of business generated by the organisation of the Development Officer was counter productive and suggested immediate steps to reorganise the wage structure. The Central Government, therefore, issued an order on 8th April, 1976, under S. 11(2) of the Act the LIC Development Officers (Alteration of Conditions of Service) Order, 1976 (hereinafter referred to as the 1976 Order). On 22-4-1976, the Corporation amended the Staff Regulations in relation to Development Officers to fall in line with the order of the Central Government under S. 11(2). That Order and the Regulations were challenged by the Development Officers in many of the High Courts. O.P. No. 5443 of 1976 was filed in this Court. Those petitions challenging the 1976 Order and Regulations were rejected in the decision reported in Harivadan v. LIC of India, 1977 Lab IC 1072 (Guj), Ramaswamy v. Union of India, (1977) 1 Lab LJ 211 : (1978 Lab IC NOC 46) (Mad) and Himangshu Kumar v. LIC of India, 1979 Lab IC 1417 (Cal). A similar Order under S. 11(2) and Regulations under S. 49(2) of the Act relating to payment of bonus to Class III and Class IV employees of the Corporation came up for consideration before the Supreme Court in the decision in L.I.C. v. D.J. Bahadur, AIR 1980 SC 2181 : (1980 Lab IC 1218), and the Court made same observations about the scope of S. 11(2) and S. 49(2) of the Act. The Government of India issued Ext. P2 dated 19-12-1978 the Life Insurance Corporation Development Officers (Alteration of Remuneration and other Terms and Conditions) Order, 1978, Ext. P3 was issued by the Corporation on the same day amending the Staff Regulations, and withdrawing the amended Regulations issued on 22-4-1976. O.P. No. 5443 of 1976 was dismissed as withdrawn in view of Exts. P2 and P3 orders, on 20-7-1979. Petitioners filed O.P. No. 3061 of 1979 challenging Exts. P2 and P3 on 27-8-1979.
6. The 1978 Order and Regulations (Exts. P2 and P3) were challenged in some of the High Courts in the country. Lodha J., of the Rajasthan High Court upheld the challenge against them in the decision reported in Chauhan v. Life Insurance Corporation of India, 1982 Lab IC 1864. He held that Development Officers were workmen under the I.D. Act and the alterations in conditions of service were illegal. But that decision was upset in appeal by a Division Bench in the decision reported in L.I.C. of India v. Chauhan, 1983 Lab IC 1767 (Raj), A Division Bench of the High Court of Delhi in the decision reported in Man Singh v. Union of India, 1983 Lab IC 1471 and the Andhra Pradesh High Court in the decision reported in M.L. Dandavate v. Union of India, 1983 Lab IC 516, also repelled the challenge against Exts. P2 and P3. It was held in all these decisions that Development Officers were not workmen as defined in the I.D. Act. Patna High Court in the decision of a Division Bench in Writ Jurisdiction Civil Case No. 2905 of 1979: (reported in 1983 Lab IC NOC 74) also upheld the validity of Exts. P2 and P3. The High Court of Madras also followed suit, in the judgment of a Division Bench consisting of Ramaswamy and Swamikannu JJ. It was in the meantime, that the Life Insurance Corporation of India (Amendment) Act, 1 of 1981, was promulgated apparently to get over the effect of the judgment of the Supreme Court reported in L.I.C. v. D.J. Bahadur, AIR 1980 SC 2181 : (1980 Lab IC 1218). The office of that enactment was to delete clause (bb) of S. 49 of the Act, enabling the Corporation to frame regulations relating to service conditions of the transferred employees, and to confer that power as part of the rule making power of the Central Government by enacting S. 49(2)(cc) of the Act. Regulations issued under S. 49(2)(bb) and other provisions were deemed to be rules issued under S. 48(2)(cc), and such deemed rules were given effect to from 20-7-1979. The consequence of this enactment, detailed provisions of which are extracted hereunder, is one of the matters for consideration in this Original Petition:
“2. Amendment of S. 48.– In the Life Insurance Corporation Act 1956 (31 of 1956) (hereinafter referred to as the principal Act), in Section 48-–
(a) in sub-sec. (2), after clause (c), the following clause shall be inserted and, shall be deemed to have been inserted with effect from the 20th day of June, 1979, namely:–
(cc) the terms and conditions of service of the employees and agents of the Corporation including those who became employees and agents of the Corporation on the appointed day under this Act,”;
(b) after sub-sec. (2), the following sub-sections shall be inserted, namely:–
“(2A) The regulations and other provisions as in force immediately before the commencement of the Life Insurance Corporation (Amendment) Act, 1981, with respect to the terms and conditions of service of employees and agents of the Corporation including those who became employees and agents of the Corporation on the appointed day under this Act, shall be deemed to be rules made under cl. (cc) of sub-sec. (2) and shall, subject to the other provisions of this section, have effect accordingly.
(2B) The power to make rules conferred by cl. (cc) of sub-sec. (2) shall include–
(i) the power to give retrospective effect to such rules; and
(ii) the power to amend by way of addition, variation or repeal, the regulations and other provisions referred to in sub-sec. (2A) with retrospective effect, from a date not earlier than the twentieth day on June, 1979.
(2C) The provisions of cl. (cc) of sub-sec. (2) and sub-sec. (2B) and any rules made under the said cl. (cc) shall have effect and any such rule made with retrospective effect from any date shall also be deemed to have had effect from that date notwithstanding any judgment, decree or order of any court, tribunal or other authority and notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947) or any other law or any agreement, settlement, award or other instrument for the time being in force”.
3. Amendment of S. 49.– In S. 49 of the Principal Act.–
(a) in sub-section (2),–
(i) in clause (b), the words “and the terms and conditions of service of employees or agents” shall be omitted.
(ii) clause (bb) shall be omitted; and
(b) after sub-section (2), the following sub-section shall be inserted, namely:–
“(3) Every regulation made under this section shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid or both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.”
26. Then, in paragraph nos. 27 and 28 of the said decision, it was further noted as below :
“27. Counsel for the petitioners submits that the terms of Exts. P2 and P3 are arbitrary and discriminatory for two reasons. It is submitted that among four groups of employees of the Corporation, only the Development Officers in Class II are picked out for hostile treatment, whereas the remuneration and other conditions of service of Class I Officers and Class III Supervisory and Clerical employees of the Corporation are not at all affected by Exts. P2 and P3. It is also submitted that the expense limit is arbitrarily fixed in relation to operational areas determined on the basis of population irrespective of local conditions and that the Development Officers have to suffer penal consequences, if annual remuneration in excess of the expense limit is more than the specified percentage of eligible premium. These determinates are said to have been chosen unrealistically, arbitrarily and therefore vindictively.
28. As far as the first of these submissions is concerned, it cannot be disputed that the, Development Officers were being treated as a well defined and separate class ever since the formation of the Corporation. They stand out as a separate class by reason of the nature of the duties performed by them, the service conditions under which they were working and the benefits which they were enjoying unlike the other categories of employees of the Corporation, the Development Officers are working in the field with no fixed hours of work; and the only method of measuring their work is to assess the volume of business with reference to ascertainable standards. A complaint that other officers of the Corporation who are distinct and separate classes are dealt with differently cannot at all be countenanced. Reference in this connection maybe made to the observations contained in the decision of the Supreme Court reported in Ajay Kumar v. Union of India, AIR 1984 SC 1130 : (1984 Lab IC 691).”
(emphasis supplied)
27. Then, in Sonia Bhaskar (supra), a learned single judge of the Kerala High Court had repelled the challenge raised to the validity of Rule 6(8) and Rule 7(1) of the Rules. The matter was carried to a division bench of that Court, by way of intra-court appeal. That challenge also failed. Relying on the ratio contained in Vivek Anand (supra) and Bipin Bihari Sinha (supra), (a division bench decision of the Patna High Court), a division bench of Kerala High Court observed as below :
“56. It remains now to consider the contention that ‘the Order and Regulations’ impugned are ultra vires Articles 14 and 16 of the Constitution. Both the Articles safeguard the right to equality of a person. Both forbid discrimination between persons similarly situate in the matter of employment without there being a reasonable basis for the same. It was contended by Shri Chatter-jee on behalf of the petitioners that the one of the classes of the employees of the Corporation viz. the Development Officers have been singled out for hostile discriminatory treatment in the matter of remuneration and other conditions of service like security of tenure. It is clear that the remuneration and even security of tenure of the Development Officers have, by ‘the Order and the Regulations’, been linked up with their operational efficiency judged with reference to the ratio of the expenses incurred upon their remuneration etc. to the eligible premium i.e., the first year’s premium of new business or renewal premium secured through agents working in their area, if, in an appraisal year their remuneration etc. exceeds the expense limit, i.e, its ratio to the eligible premium is more than 22%, or 23%, or 24%, or in some case 25%, as the case may be, the Development Officers may not earn the increment in the scale, and if the excees is very great may even have their salaries reduced and in same circumstances, may run the risk of termination of their services. The remuneration and tenure of other staff of the Corporation is not so linked up. Shri Chatterjee contends that this amounts to discrimination prohibited by Articles 14 and 16 of the Constitution because as recognised by the settlement of 1971, the Development Officers are an integral part of the establishment of the Corporation and they should have the same security of tenure as the other classes of the employees of the Corporation.
57. It is now well established that while Article 14 forbids class legislation, it does not prohibit reasonable classification. In order, however, to pass the test of permissible classification, two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things which are grouped together from others left out of the group and (ii) that that differentia must have a rational relation to this object sought to be achieved by the statute Sri. Ram Krishna Dalmia’s case (AIR 1958 SC 538).
58. That there is an intelligible criteria differentiating the Development Officers from the other employees of the Corporation cannot be gain said. They form a well recognised class, separate and distinct from all other classes of employees of the Corporation. The only question is whether the differentia has a reasonable relation to the object sought to be achieved by ‘the Order’ and the Regulations. The object of ‘the Order’ and the Regulations is, as I have said, to link up the remuneration and security of tenure of a class of employees viz. Development Officers with the income derived from the new business procured and thereby regulate the costs of development of business with which Development Officers are concerned. The question therefore, is if there is a reasonable basis for so linking up the remuneration and tenure of service of one class of employees of the Corporation viz. the Development Officers, alone. In my opinion, there is. As has been pointed out in the counter-affidavit showing cause on behalf of the respondents, unlike the other classes of employees, the Developments Officers have no fixed hours of work, and are not subject to the daily discipline of office and as such their performance can be judged only with reference to the business brought in by the agents working in their area under their supervision. And it cannot be denied that for judging the operation efficiency of the Development Officers we have to take into consideration not only the amount of business procured by the agents working in their area but also the costs incurred in procuring the business. Their remuneration and tenure of service may, there (sic) well be linked up with the income from the new business even though the (sic) and tenure of other employees is not so linked up. There are other methods available for determining the efficiency and devotion to work of other classes of employees. The classification cannot, therefore, be said to be unreasonable. It is well settled “that it must be presumed that the Legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; that the Legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be clearest.” per Das, C.J. in Ram Krishna Dalmla’s case (supra) (at 548). In view of the circumstances stated above, it can well be said that according to the deemed need for linking up the remuneration and security of tenure with the income derived from the development of the business it was their concern, was clearest in the case of the Development Officers. It must also be remembered that the Central Government and the Corporation had before them the report of Morarka Committee that the performance of the Development Officers was not satisfactory and its recommendations their remunerations should be linked up with the cost of procuring new business. The contention based on Articles 14 and 16 must, therefore, also fail.”
28. Elaborating his submission, it has been then submitted, the test of valid classification rests on “intelligible differentia” and “rational nexus”. Here, no “intelligible differentia” exists and there is no “rational nexus” to differentiate or to treat Development Officers different from other officers of LIC for the purpose of determining their ‘tenure’ or in disciplinary matter/s. All employees of LIC are engaged and they work to generate business for the LIC. Yet, for no reason, Development Officers alone have been singled out by Rules 6 & 7 of the Rules. The differentiation made is unintelligible and unreasoned. By applying Rules 6 & 7 of the Rules only against Development Officers, their tenure of appointment has been unreasonably made conditional and they have been placed on tenterhooks. To that extent, the impugned Rules are manifestly arbitrary and discriminatory.
29. As to arbitrary action, it has been urged, not only the Development Officers have to suspend their agency if any; they cannot engage their close relatives as agents to solicit business for the LIC and they do not have the power to employ or discipline agents engaged and assigned by the LIC.
30. The work of new policy sale arises at the hands of agents appointed by the LIC. The disciplinary authority for such agents is the Manager of the LIC and not any Development Officer. In face of such stipulation giving no disciplinary control over agents to the Development Officers, the petitioners would remain protected from premature termination of their tenure arising from poor work performance of such agents.
31. As to the true test of classification, learned Senior Counsel has referred to yet another recent decision of the Supreme Court in Sukanya Shantha v. Union of India & ors; 2024 SCC OnLine 2694. Explaining the contours of Article 14 of the Constitution, the Supreme Court has made the following discussion while summarising the law laid down in its earlier decisions.
V. The Contours of Article 14
25. Article14 guarantees that the “State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.” Equality is a crucial aspect of the constitutional vision. Immediately after the adoption of the Constitution, this Court laid down the standard to test the validity of laws against Article 14. In a Constitution Bench decision in Chiranjit Lal Chowdhuri v. Union of India, Justice B.K. Mukherjea articulated that a classification under Article14 “should never be arbitrary”. It was held that such classification must always “rest upon some real and substantial distinction bearing a reasonable and just relation to the things in respect to which the classification is made”. If a classification is “made without any substantial basis”, it should be “regarded as invalid”. The principle of classification was reiterated in a subsequent Constitution Bench decision in State of Bombay v. F.N. Balsara.
26. Later, a seven-judge Bench decision in State of West Bengal v. Anwar Ali Sarkar solidified the requirement of the twin test under Article14. Speaking for the Court, Justice S.R. Das held:
“In order to pass the test, two conditions must be fulfilled, namely (1) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others, and (2) that that differentia must have a rational relation to the object sought to be achieved by the Act. The differentia, which is the basis of the classification, and the object of the act are distinct things, and what is necessary is that there must be a nexus between them. In short, while the Article forbids class legislation in the sense of making improper discrimination by conferring privileges or imposing liabilities upon persons arbitrarily selected out of a large number of other persons similarly situated in relation to the privileges sought to be conferred or the liability proposed to be imposed, it does not forbid classification for the purpose of legislation, provided such classification is not arbitrary in the sense I have just explained..”
27 Adding to the above principles, Justice S.R. Das, in Ram Krishna Dalmia v. Justice S.R. Tendolkar held that the classification “may be founded on different bases, namely, geographical, or according to objects or occupations or the like”, but it needs to have a reasonable nexus with the object of the statute. It was held that “Article 14 condemns discrimination not only by a substantive law but also by a law of procedure”. Furthermore, the Court “may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation”. The Court further reiterated that:
“A statute may direct its provisions against one individual person or thing or to several individual persons or things but no reasonable basis of classification may appear on the face of it or be deducible from the surrounding circumstances, or matters of common knowledge. In such a case the court will strike down the law as an instance of naked discrimination…”
28. Subsequently, in E.P. Royappa v. State of Tamil Nadu a Constitution Bench of this Court added a crucial principle of non-arbitrariness to the discourse of equality under Article14. The Court was adjudicating the validity of an administrative order.
The Court held that:
“Equality is a dynamic concept with many aspects and dimensions and it cannot be “cribbed, cabined and confined” within traditional and doctrinaire limits. From a positivistic point of view, equality is antithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14…”
29. The principle of non-arbitrariness and reasonableness was then emphasized in the seven-judge Bench decision in Maneka Gandhi v. Union of India. It was held:
“Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. The principle of reasonableness, which legally as well as philosophically, is an essential element of equality or non-arbitrariness, pervades Article14 like a brooding omnipresence and the procedure contemplated by Article 21 must answer the test of reasonableness in order to be in conformity with Article 14. It must be “right and just and fair” and not arbitrary, fanciful or oppressive; otherwise, it would be no procedure at all and the requirement of Article 21 would not be satisfied.”
30. To test the validity of laws, the twin test of intelligible differentia and reasonable nexus held ground. Whether the test of arbitrariness is a valid principle under Article 14 led to a conflicting set of decisions. 46 In Shayara Bano v. Union of India in testing the validity of Section 2 of the Muslim Personal Law (Shariat) Application Act, 1937 which validates the triple talaq, Justice R.F. Nariman endorsed the test of manifest arbitrariness. It was held:
“The test of manifest arbitrariness, therefore, as laid down in the aforesaid judgments would apply to invalidate legislation as well as subordinate legislation under Article14. Manifest arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary. We are, therefore, of the view that arbitrariness in the sense of manifest arbitrariness as pointed out by us above would apply to negate legislation as well under Article 14.”
31. A formalistic understanding of the classification test was then critiqued by this Court in Navtej Singh Johar v. Union of India. The Court was dealing with a challenge to the constitutionality of Section 377 of the Indian Penal Act, 1860, to the extent that it criminalized consensual sexual conduct between adults. In his concurring opinion, one of us (Justice DY Chandrachud) held:
“Equating the content of equality with the reasonableness of a classification on which a law is based advances the cause of legal formalism. The problem with the classification test is that what constitutes a reasonable classification is reduced to a mere formula: the quest for an intelligible differentia and the rational nexus to the object sought to be achieved. In doing so, the test of classification risks elevating form over substance. The danger inherent in legal formalism lies in its inability to lay threadbare the values which guide the process of judging constitutional rights. Legal formalism buries the life-giving forces of the Constitution under a mere mantra. What it ignores is that Article14 contains a powerful statement of values–of the substance of equality before the law and the equal protection of laws. To reduce it to a formal exercise of classification may miss the true value of equality as a safeguard against arbitrariness in State action. As our constitutional jurisprudence has evolved towards recognising the substantive content of liberty and equality, the core of Article14 has emerged out of the shadows of classification. Article14 has a substantive content on which, together with liberty and dignity, the edifice of the Constitution is built. Simply put, in that avatar, it reflects the quest for ensuring fair treatment of the individual in every aspect of human endeavour and in every facet of human existence.” The judges declared that Section 377 is manifestly arbitrary. The doctrine of manifest arbitrariness was also adopted in the Constitution Bench decision in Joseph Shine v. Union of India.
32. Referring to the decisions in Shayara Bano, Navtej Johar, and Joseph Shine, a Constitution Bench in Association for Democratic Reforms (ADR) v. Union of India; summarized the doctrine of manifest arbitrariness in the following words:
“Courts while testing the validity of a law on the ground of manifest arbitrariness have to determine if the statute is capricious, irrational and without adequate determining principle, or something which is excessive and disproportionate. This Court has applied the standard of “manifest arbitrariness” in the following manner:
a. A provision lacks an “adequate determining principle” if the purpose is not in consonance with constitutional values. In applying this standard, Courts must make a distinction between the “ostensible purpose”, that is, the purpose which is claimed by the State and the “real purpose”, the purpose identified by Courts based on the available material such as a reading of the provision; and
b. A provision is manifestly arbitrary even if the provision does not make a classification.”
The Constitution Bench further elucidated the standards of manifest arbitrariness to test the validity of a plenary legislation with those of subordinate legislation:
“The above discussion shows that manifest arbitrariness of a subordinate legislation has to be primarily tested vis-a-vis its conformity with the parent statute. Therefore, in situations where a subordinate legislation is challenged on the ground of manifest arbitrariness, this Court will proceed to determine whether the delegate has failed “to take into account very vital facts which either expressly or by necessary implication are required to be taken into consideration by the statute or, say, the Constitution.” In contrast, application of manifest arbitrariness to a plenary legislation passed by a competent legislation requires the Court to adopt a different standard because it carries greater immunity than a subordinate legislation. We concur with Shayara Bano (supra) that a legislative action can also be tested for being manifestly arbitrary.
However, we wish to clarify that there is, and ought to be, a distinction between plenary legislation and subordinate legislation when they are challenged for being manifestly arbitrary.”
(emphasis supplied)
32. In contrast, it has been stated that all decisions relied upon by the LIC including the decision by the Kerala High Court in PV Mani (supra) and of a co-ordinate bench of this Court, in Vivek Anand (supra), only state – Development Officers constitute a class apart. Yet, they do not offer any reasoning to reach that conclusion. Therefore, they do not constitute any binding law.
33. Then, referring to yet another decision of the Supreme Court, in Khalsa University & Anr. v. State of Punjab & anr; 2024 SCC OnLine SC 2697, it has been submitted, at present there exists no doubt that even a primary legislation may remain open to the test of manifest arbitrariness. Reference has been made to the following discussion offered by the Supreme Court:
62. It can thus be seen that in the said case, it was held that the test of manifest arbitrariness as laid down by this Court in various judgments would also apply to invalidate legislation as well as subordinate legislation under Article 14. It was held that manifest arbitrariness must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. It further goes on to hold that when something is done which is excessive and disproportionate, such a legislation would be manifestly arbitrary. It, in unequivocal terms, held that arbitrariness in the sense of manifest arbitrariness would apply to negate legislation under Article 14 of the Constitution. In para 95, it was observed that the case of Natural Resources Allocation, In re, Special Reference No. 1 of 201218, did not lay down a proposition that legislation can never be struck down as being arbitrary. This Court, after referring to all the earlier judgments including Ajay Hasia v. Khalid Mujib Sehravardi, stated that legislation can be struck down on the ground that it is arbitrary under Article 14 of the Constitution. However, arbitrariness when applied to legislation cannot be used loosely.
34. Last, it has been submitted, the test of proportionality must exist to test the action taken by the LIC under Rules 6 & 7 of the Rules. Relying on Vivek Narayan Sharma and others (Demonetisation) Case v. Union of India and others; (2023) 3 SCC 1, it has been submitted, the four-pronged test of proportionality that arises on the strength of a Constitution bench decision of the Supreme Court in Modern Dental College and Research Centre; (2016) 7 SCC 353, must be applied to test the validity of the action taken by the LIC. Reliance has been placed on the following observations made in that decision:
Four-pronged test of proportionality
269. The Constitution Bench of this Court in Modern Dental College and Research Centre 54, while considering a balance between the right under Article 19(1)(g) and the reasonable restrictions under clause (6) of Article 19 of the Constitution of India, observed thus: (SCC pp. 412-13, para 60)
“60. … Thus, while examining as to whether the impugned provisions of the statute and rules amount to reasonable restrictions and are brought out in the interest of the general public, the exercise that is required to be undertaken is the balancing of fundamental right to carry on occupation on the one hand and the restrictions imposed on the other hand. This is what is known as “doctrine of proportionality”. Jurisprudentially, “proportionality” can be defined as the set of rules determining the necessary and sufficient conditions for limitation of a constitutionally protected right by a law to be constitutionally permissible. According to Aharon Barak (former Chief Justice, Supreme Court of Israel), there are four sub-components of proportionality which need to be satisfied111, a limitation of a constitutional right will be constitutionally permissible if:
(i) it is designated for a proper purpose;
(ii) the measures undertaken to effectuate such a limitation are rationally connected to the fulfilment of that purpose;
(iii) the measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation; and finally
(iv) there needs to be a proper relation (“proportionality stricto sensu” or “balancing”) between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right.”
(emphasis supplied)
35. Thus, it has been submitted, the respondent- LIC has taken excessively harsh action of doing away with the tenure of petitioners by way of a disproportionate action. Petitioners/Development Officers being prohibited from running any agency and their close relatives being prohibited from working as agents under them and further in absence of any power to appoint or discipline agents appointed by the LIC, as may allow the Development Officers to supervise and regulate their effective functioning, disproportionately harsh consequence of termination of service has been visited to the petitioners, for practically no fault on their part. If the agents have not performed at desired levels, the LIC through the Branch Manager may offer appropriate measures to encourage their improved performance. Not only that, in the present case, it is also the grievance of the petitioners that the candidates/ applicants shortlisted by the petitioners, and recommended for appointment as agents, were not appointed agents by the LIC. In some cases, commissions were also not paid to the appointed agents, leading to their poor performances.
36. Reliance has also been placed on Central Inland Water Transport Corporation Limited & anr. v Brojo Nath Ganguly & anr.; AIR 1986 SC 1571, it has been further emphasised that a permanent employee cannot be done away in disregard to the protection provided under Part-III of the Constitution of India, specifically Articles 14, 15, 16 & 19(1g) of the Constitution of India read with the Contract Act. Inherent lack of bargaining power has been cited as a circumstance to allow the Court to examine the validity of the Rules, irrespective of the fact that petitioners may have acceded to those terms of engagement in service, Rules 6 & 7 of the Rules (as they stand), confer wholly arbitrary, uncanalised, unbridled power, to terminate confirmed employees.
37. Sri Shesh Kumar, learned counsel for some of the petitioners has adopted the submissions advanced by Sri Khare. In addition, he has submitted, satisfactory performance and the suitability of the petitioners to work as Development Officers was examined at two stages. First, they were appointed Apprentice Development Officers. Their performances in that capacity was closely scrutinised and evaluated by the LIC. Upon satisfactory performance and suitability adjudged (at a written test etc.), petitioners were appointed Probationary Development Officers. Second, after serving the probation period of more than a year, their work performance was again scrutinised and evaluated, by the LIC. Only thereafter, they were made permanent and confirmed in service. That gave rise to the tenure claimed till attaining the age of superannuation, subject to regular disciplinary Rules.
38. Once tenure had arisen upon confirmation granted on the post – Development Officer, the services of the petitioners could not be abruptly ended, on consideration of business target not reached. As to the applicable law, emphasis has been laid on the same decisions as have been relied upon by Sri Khare and referred to above. He has also relied on the Master Circular dated 11.03.2019. It provides, evaluation of performance is to be made at the stage of completion of probation. Therefore, after confirmation in service, it did not remain open to the LIC to examine that issue again. To continue or treat a confirmed employee thus, would be to treat him on probation forever. It would militate against the basic concept of confirmation in service and security of tenure arising therefrom.
39. Here, he would contend that the petitioners are entitled to equality with all other confirmed employees of the LIC and they are entitled to be treated similar to all such other employees in all respects, including security of tenure. They cannot be singled out to suffer an abrupt termination of tenure on expense limit or cost ratio or such other criteria which is directly linked to the quantum of business of the corporation.
40. Sri Manish Goyal learned Senior Counsel appearing for the LIC has first referred to the work description of Apprentice Development Officer contained in the appointment letter issued to Munna Lal. Referring to Clause- 10 thereto, it has been emphasised that the petitioner was required to achieve minimum business target of 3.5 crores involving premium 10 lakhs covering 750 new lives through dependable agents; recruiting 40 active agents and ensuring 15 agents procure minimum business and 15 should be productive agents. Upon that work target being achieved, the petitioner was appointed as Probationary Development Officer and upon successful completion of probation after extension of three months, he was confirmed. Referring to Rule 2(k) of the Rules, it has been pointed out that the “Operational Area” is the area in which a Development Officer may be posted.
41. As to tenure, he has also referred to Rule 3 of the Rules. Emphasis has been laid to the fact that a Development Officer must necessarily conform to the “expense limit” and that in addition to normal disciplinary rules that apply to all employees, his services may be terminated on the ground of “poor business production” that may result in the “cost ratio” exceeding the “expense limit” beyond “eligible premium” beyond the pre-prescribed limits. In his submission, no challenge has been laid to Rule 3 of the Rules. To the extent the service conditions of Development Officers is governed by the Rules and to the extent no challenge has been raised to Rule 3 of the Rules, the limited challenge raised in these petitions, must fail.
42. As to compliance of principles of natural justice enforced by second proviso to Rule 3 of the Rules, it has been strenuously urged, that requirement has been scrupulously followed. There is no challenge on that count.
43. Also, it has been submitted, no challenge has been raised to the fixation of the “expense limit” and/or the “cost ratio” or prescription of “eligible premium” limits. Referring to “cost ratio” as defined under the Rule 2(e) of the Rules, it has been submitted it only means, the ratio that the “annual remuneration” paid to Development Officers may bear to the eligible premium for that year i.e. (broadly), the premium earned against all policies sold by all agents working under the Development Officer concerned during an appraisal year, expressed as a percentage. With respect to “expense limit”, reference has been made to the second table appended to the Rule 2(j). In that referring to “Note 1”, it has been clarified, the “expense limit” of a Development Officer may be described exceeded, if his annual remuneration for that year exceeds the “expense limit” beyond a pre-defined limit. Thus, it has been pointed out, there are outer limits expressed as percentage, that may earn dis-incentives and impugned action. The “expense limit” is not fixed or rigid may call for termination by way of a necessary consequence, of it being breached. An operational margin exists with the Development Officers upto which they may function without any adverse inference being drawn for the purpose of Rule 6(8) and Rule (7) of the Rules.
44. In that background fact, Sri Goyal would submit, no discrimination may be alleged merely because the Development Officers have been subjected to comply with the requirements of Rule 3 read with Rule 6(8) and Rule 7 of the Rules. Before such a ground substantially arises, it must be shown to the Court that there is no intelligible differentia and/or reasonable nexus, and/or there is manifest arbitrariness in the Scheme of the Rules. Elaborating on that, he has first referred to ‘Regulations’ framed under Section 49(2) of the Act. Those were amended in 1981 and have since then been treated to be Rules framed by the Central Government. Referring to Regulation 5, it has been shown, the staff of the Corporation has been classified into four parts – Class I comprised of Officers while Class II comprises of Development Officers only. Class III comprises of Supervisory and Clerical Staff while Class IV comprises of Subordinates Staff. Thus, in Class II, there are no other employees except Development Officers. That classification is also not under challenge in these proceedings.
45. Referring to Regulation 7(3) of the Regulation, it has been submitted that promotional avenues are available to the Development Officers, sohowever by virtue of the proviso thereto, the Corporation may fix the criteria to determine suitability, having regard to the duty performed by the Development Officers. Then, under Chapter IV of the Regulations, Regulation 51(1A) has been referred that provides for basic pay and allowance payable to Class II employees i.e. Development Officer to be regulated in accordance with the provisions of Schedule III. Other entertainment facilities are also provided to Development Officers under Regulation 84 of the Regulation.
46. Thus, it has been suggested that the Development Officers have been treated as a class apart. Not only for the purpose of Rule 3 read with Rule 6(8) and Rule 7 of the Rules that provides for termination of service on special grounds not provided or prescribed for other class of employees but also for the purposes of payments of salary, bonuses and also entertainment facilities.
47. In contrast, Class I, Class III and Class IV employees of the Corporation receive salaries. Over and above that they are only entitled to incentives based on the income of the LIC. However, no incentive or bonus is made available to such other class of employees, based on their own performance viz-a-viz increase of business of the Corporation. With respect to Class II employees i.e. Development Officers, incentive schemes have remained in place from time to time. Earlier, Incentive Scheme of 2007 was introduced that remained in force till 2010. Thereafter, the Incentive Scheme 2011 was introduced that was in force when cause of action arose to the petitioners.
48. Reference has been made to Clause V of the Incentive Scheme. Referring to that clause, it has been submitted, the formula for Basic Incentive payable to Development Officer reads as below :
“Formula for determining Basic Incentive Bonus :
Basic Incentive Bonus shall be determined as per formula shown in Table -I below :
Stipulation
Basic Incentive Bonus
“Qualifying premium” in the appraisal year in excess of SIX times the annual remuneration of the Development Officer in that year.
12.5% of such excess; plus
“Qualifying premium” in the appraisal year in excess of SEVEN AND A HALF times the annual remuneration of the Development Officer in that year.
0.60% of such excess; plus
“Qualifying premium” in the appraisal year in excess of TEN times the annual remuneration of the Development Officer in the year.
0.60% of such excess; plus
“Qualifying premium” in the appraisal year in excess of ELEVEN times the annual remuneration of the Development Officer in the year.
0.30% of such excess; plus
“Qualifying premium” in the appraisal year in excess of TWELVE times the annual remuneration of the Development Officer in the year.
0.25% of such excess; plus
“Qualifying premium” in the appraisal year in excess of FIFTEEN times the annual remuneration of the Development Officer in the year.
0.25% of such excess;
49. Thus, not only negative incentive exists in the shape of Rule 3 read with Rule 6(8) and Rule 7 of the Rules, but more importantly besides the margin in the “expense limit” contained in the Rule 2(j), positive incentive exists, to encourage Development Officers to perform better to generate higher revenues to the Corporation. That direct linkage between the growth of the business of the Corporation and the remuneration (including bonus) payable to the Development Officer is described to be a unique and distinguishing feature in the master-servant relationship that may exist between the corporation and its employees, generally. No other employee is directly linked with the fresh revenue generation for the Corporation and no other employee of the Corporation is therefore privileged to earn additional bonuses for reason of good performance, in that regard.
50. As to the agents, it has been submitted that they form a distinct class. Those are not employees of the Corporation. They work solely on terms of payment of commission. No parity may be drawn with them. Suffice to note, not less than 40 agents are assigned to one Development Officer at any given point of time. Without getting into of how many new policies an agent may procure for the Corporation in one year, it has been submitted, there is no inherent arbitrariness on the part of the Corporation in subjecting the Development Officers to the rigors of Rule 3 read with Rule 6(8) and Rule 7 of the Rules. A team of 40 agents is more than enough to ensure business arises to the Corporation, on a reasonable working of those agents as may defray the expenses of salary paid to the Development Officers or atleast with the margin of survival beyond the ‘expense limit” but within the prescribed upper limit.
51. Referring to Vivek Anand (supra), it has been submitted, specific challenge was raised in that case to the validity of the Rules. Referring to paragraph-20, 22 and 29 of that order, it has been submitted, that that challenge was specifically considered by the coordinate bench. Thereafter, in paragraph-33, the challenge was specifically repelled. Therefore, it cannot be said that such challenge had not been raised. At the same time, on query made as to the binding precedential value of that decision after the order of specific remand was made by the Supreme Court in this case, he would fairly state that the said challenge has to be tested in view of the order of the Supreme Court.
52. Then, reference has been made to S.M. Alagiry Vs. Life Insurance Corporation of India 2017 SCC OnLine Mad 25861, decided by the Madras High Court where challenge was raised to similar termination offered to Development Officers. It was objected on behalf of those petitioners – being permanent employees of the Corporation, they may not be terminated by issuance of a simple notice in a course of summary proceedings. In that decision, the Madras High Court took note of the primary duties of the Development Officer and cited the same as a reason to treat them a class apart. Reference has been made to the reasoning offered by the Madras High Court in Paragraph-39, 40, 41, 42, 43, 44, 45, 46, 47 and 48 of the decision. They read as below:
“39. It is the primary duty of the Development Officer to actively participate in the business development of the Corporation. They are not mere Ministerial staff like other employees. These Officers are meant for the business development of the Corporation and keeping this in mind, the Management of the Life Insurance Corporation of India has decided to issue the Special Rules covering the business performances of the Development Officers and those Rules cannot be said to be unconstitutional and the Rules were issued for the development of the business activities of the Corporation, which is in conformity with the nature of the business to be carried out by the Corporation.
40. It is the prerogative of the employer to prescribe the conditions of service. However, the test would be the principles of reasonableness and fairness. If any Rule is arbitrary, unreasonable or unconstitutional, then the Courts have to interfere with such Rules. However, on perusal of the entire Rule and its object, this Court is of the firm opinion that the Rules were issued in order to protect the business interest of the Corporation and for the development of the same.
41. The Life Insurance Corporation of India, being a business development Organisation, any compromise on business activities will certainly harmful to the very existence of the Corporation. Thus, the Special Rules prescribed for the post of Development Officers, cannot be said to be arbitrary or unreasonable.
42. In respect of penalty, this Court is of the view that the termination in the case on hand, has not been imposed by way of penalty under the Staff Regulation. In the event of committing a misconduct, then the Corporation can initiate disciplinary action under the Staff Regulations. However, in the case on hand, it is purely relating to the business development performance of the Development Officers and it is something relates to the official performance and relating to the record of performance of the Development Officers.
43. Actions are initiated under these Rules based on the continuous performances of the respective Development Officers recorded by the Competent Authorities. Thus, the penalty of termination prescribed in these Rules, cannot be compared with the penalty prescribed under the Staff Regulation. The penalty of termination is simplicitor in nature in respect of the Development Officers in relation to the allegation of under-performance. Thus, the concept of the Special Rules and its nature, cannot be compared with the Staff Regulation which is applicable to all staff of the Life Insurance Corporation of India.
44. The very purpose of issuing the Development Officers (Revision of Certain Terms and Conditions of Service) Rules, is for regulating the terms and conditions of service relating to the business performance of Development Officers. Thus, it is necessary for the respondent-Corporation to monitor the business performance as well as the efficiency level of the Development Officers for the growth of the Organisation. When, at the time of appointment, these writ petitioners, while accepting the conditions of service, had accepted the terms and conditions. The terms and conditions of service are part and parcel of the offer of appointment and once the same is accepted by the petitioners, then they are bound by the same.
45. The Rules are specifically issued as Special Rules in order to regulate the business performance of the Development Officers in the Life Insurance Corporation of India, the Corporation is meeting out huge expenditure by way of establishment costs, salary to the staff etc. Therefore, as a public institution, it is duty mandatory on the part of the respondent to regulate the service conditions of such Officers and other staffs.
46. The development of business is the prime object sought to be achieved by Life Insurance Corporation of India. Such being the nature of the Organisation, certainly the Special Rules issued in respect of the terms and conditions of service for the business performance of the Development Officers, are in order and there is no legal infirmity, in invoking such Special Rules for a particular cadre.
47. The Special Rules relating to the Development Officers are unambiguous with regard to the termination of services of these Development Officers in certain cases. It is a termination simplicitor. Thus, the penalty of termination in this context with reference to the Special Rules, cannot be construed as a major penalty as contemplated under the General Staff Regulations. A fine distinction is to be drawn between the General Rules governing the service conditions and the Special Rules governing the service conditions. General Rule is applicable to the entire staff of the Organisation in respect of certain misconducts committed and by invoking General Staff Regulations, a charge memo is to be framed, a domestic enquiry is to be conducted and thereafter by following the procedures on the principles of natural justice, a final order in the disciplinary proceedings shall be passed.
48. However, in the case of termination simplicitor, the assessment of performance as per the Special Rules are sufficient to invoke the provisions of termination. The very object of the Rule is to assess the business performance of the Development Officers and take a decision. A show cause notice has been issued in order to provide an opportunity to the Development Officers to express their grievances/explanations/objections for invoking the provisions of termination simplicitor. In the event of getting a convincing reply from the Development Officers concerned, then the Competent Authorities may consider the explanation and grant extension of service or continuance of service as per their decision in this regard.”
(emphasis supplied)
53. Next, reference has been made to a division bench decision of the Kerala High Court in Life Insurance Corporation of India Vs. Sonia Bhaskar and Others (supra) wherein the decision of the learned single judge of the Kerala High Court was confirmed. In that decision, besides taking note of Vivek Anand (supra), the Kerala High Court applied the principle laid down in Brojo Nath Ganguly (supra) and also Delhi Transport Corporation Vs. Delhi Transport Corporation Majdoor Congress (supra). Thereafter, it has quoted with approval the reasoning offered by the Patna High Court in Bipin Bihari Sinha and Others Vs. Union of India, 1981 SCC OnLine Pat 101, wherein it has been observed as below:
“58. It is now well established that while Article 14 forbids class legislation, it does not prohibit reasonable classification. In order, however, to pass the test of permissible classification, two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things which are grouped together from others left out of the group and (ii) that that differentia must have a rational relation to this object sought to be achieved by the statute Sri. Ram Krishna Dalmia‘s case (AIR 1958 SC 538).
59. That there is an intelligible criteria differentiating the Development Officers from the other employees of the Corporation cannot be gain said. They form a well recognised class, separate and distinct from all other classes of employees of the Corporation. The only question is whether the differentia has a reasonable relation to the object sought to be achieved by ‘the Order’ and the Regulations. The object of ‘the Order’ and the Regulations is, as I have said, to link up the remuneration and security of tenure of a class of employees viz. Development Officers with the income derived from the new business procured and thereby regulate the costs of development of business with which Development Officers are concerned. The question therefore, is if there is a reasonable basis for so linking up the remuneration and tenure of service of one class of employees of the Corporation viz. the Development Officers, alone. In my opinion, there is. As has been pointed out in the counter-affidavit showing cause on behalf of the respondents, unlike the other classes of employees, the Developments Officers have no fixed hours of work, and are not subject to the daily discipline of office and as such their performance can be judged only with reference to the business brought in by the agents working in their area under their supervision. And it cannot be denied that for judging the operation efficiency of the Development Officers we have to take into consideration not only the amount of business procured by the agents working in their area but also the costs incurred in procuring the business. Their remuneration and tenure of service may, there (sic) well be linked up with the income from the new business even though the (sic) and tenure of other employees is not so linked up. There are other methods available for determining the efficiency and devotion to work of other classes of employees. The classification cannot, therefore, be said to be unreasonable. It is well settled “that it must be presumed that the Legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; that the Legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be clearest.” per Das, C.J. in Ram Krishna Dalmla‘s case (supra) (at 548). In view of the circumstances stated above, it can well be said that according to the deemed need for linking up the remuneration and security of tenure with the income derived from the development of the business it was their concern, was clearest in the case of the Development Officers. It must also be remembered that the Central Government and the Corporation had before them the report of Morarka Committee that the performance of the Development Officers was not satisfactory and its recommendations their remunerations should be linked up with the cost of procuring new business. The contention based on Articles 14 and 16 must, therefore, also fail.”
(emphasis supplied)
54. Then, with respect to grant of excessive delegation qua Rule 6(8) and Rule 7(1) of the Rules, in Sonia Bhaskar (supra), it was opined as below:
“47. From the grounds as has been noted by the Apex Court, it is clear that Rules 6(8) and 7(1) of the 2009 Rules cannot be held to be in excess of the rule making power of the Central Government nor it can be said that it violated any of the provisions of the parent Act, i.e, the 1956 Act. The Rules cannot be said to lacking guidelines for exercise of the power since cost ratio and expense limit which are the basis for exercising power for termination have been well defined in the Rules and explained. The LIC being a Corporation carrying on life insurance business it is the wisdom of the rule making authority to frame policies and effectuate the said policy by statutory provisions. The court is not the best judge to enquire whether the policy is good or bad or whether any better policy could have been framed.
…
49. These Issues being interconnected, are taken together. Sub-rule (8) of Rule 6 as extracted above indicates that the sub-rule (8) has given an overriding effect on sub-rules 1 to 7 of Rule 6. It provides that where annual remuneration of Development Officer in any preceding year exceeds 38% of the eligible premium of that year and the aggregate of the annual remuneration in the relevant year and the appraisal year immediately preceding the relevant year exceeds 38% of the aggregate of the eligible premium in those two years, “his service shall be liable to be terminated” in accordance with Rule 7. The words used in sub-rule (8) ‘shall be liable to be terminated’ are in a mandatory form providing for termination of service as mentioned in the rule. Rule 7(1) has also been made applicable by virtue of Rule 6(8). Rule 7(1) provides that the person shall be given an opportunity to show cause against such proposed termination of his service. When Rule 6(8) provides in a mandatory form that where the annual remuneration in any preceding year exceeds 38% of the eligible premium of that and the appraisal year immediately preceding the relevant year exceeds 38% of the aggregate of the eligible premium in those two years, his services shall be liable to be terminated, what is the ambit and extent of opportunity as has been contemplated to proviso to Sub-rule (1) of Rule 7 is the question to be answered. Exhibit P8 termination order in W.P. (C) No. 6094 of 2014 (W.A. No. 8 of 2015) indicates that although the General Manager has noted the grounds taken by the petitioner in her reply to the show cause notice, the order only confined to the cost ratio and the performance of the Development Officer. Zonal Manager in his order clearly held that the issues raised by the petitioner are extraneous and there is no provision in the special rule to consider this aspect. ”
(emphasis supplied)
55. Further, the issue was considered on the test of reasonableness for which purpose the opportunity of hearing inbuilt in Rule 6(5) was considered in paragraph-35 and 36 of that report. They read as below:
“51. A perusal of sub-rule (5) of Rule 6 indicates that apart from the factual inaccuracies in the computation of eligible premium or other figures, a Development Officer can also submit an explanation with regard to any cause beyond the control of Development Officer warranting relaxation on the expense limit. This statutory Scheme indicates that in so far as the expense limit is concerned, any cause such as accident or sickness can be raised and action can be avoided. Rule 6(8) does not indicate anything regarding the nature of cause which can be put forward by the Development Officer for his defence. But when the proviso to Rule 7(1) uses the words that the Development Officer shall be given an opportunity to show cause against the proposed termination, he is free to submit any valid cause and it cannot be read in a manner that consideration of any valid cause is excluded. In the event the cause shown by the Development Officer in the reply to the notice of termination under Rule 7(1) is acceptable, whether the Zonal Manager can drop the notice of termination or by Rule 6(8) which mandates in mandatory form that services of Officer shall be liable to be terminated, is he bound to terminate? In the event interpretation to Rule 6(8) is accepted to be mandatory termination, the provision contemplated under Rule 7(1) becomes an empty formality and useless. Reading of the word ‘shall’ in Rule 6(8) mandatory shall make the proviso to Rule 6(8) arbitrary and unreasonable. With regard to the expense limit, the Development Officer is entitled to submit a cause such as accident or sickness, why cannot he put such cause in reply to the notice under Rule 7(1) when he has exceeded the cost ratio? There cannot be any such classification between the exceeding expense limit and cost ratio in so far as the grounds for show cause are concerned. Any valid cause on the part of Development Officer can resist an action as contemplated by Rule 6 and various sub-rules of Rule 6 and the similar causes can also be held capable of resisting any action of termination under Rule 6(8) read with Rule 7(1). Any other interpretation will lead to the the mandatory requirement of termination as arbitrary and unreasonable.
52. The word ‘shall’ used in Rule 6(8) has to be read down to save it from becoming unconstitutional. The principle of ‘reading down’ is elaborately explained by the Apex Court in its judgment reported in Subramanian Swamy v. Raj through Member, Juvenile Justice Board ((2014) 8 SCC 390]. Explaining the doctrine of reading down the following was laid down by the Apex Court in paragraph 61:
“61. Reading down the provisions of a Statute cannot be resorted to when the meaning thereof is plain and unambiguous and the legislative intent is clear. The fundamental principle of the “reading down” doctrine can be summarized as follows. Courts must read the legislation literally in the first instance. If on such reading and understanding the vice of unconstitutionality is attracted, the Courts must explore whether there has been an unintended legislative omission. If such an intendment can be reasonably implied without undertaking what, unmistakably, would be a legislative exercise, the Act may be read down to save it from unconstitutionality. The above is a fairly well established and well accepted principle of interpretation which having been reiterated by this Court time and again would obviate the necessity of any recall of the huge number of precedents available except, perhaps, the view of Sawant, J. (majority view) in Delhi Transport Corporation v. D.T.C. Mazdoor Congress, 1991 Supp (1) SCC 600 which succinctly sums up the position is, therefore, extracted below.
“255. It is thus clear that the doctrine of reading down or of recasting the Statute can be applied in limited situations. It is essentially used, firstly, for saving a Statute from being struck down on account of its unconstitutionality. It is an extension of the principle that when two interpretations are possible — one rendering it constitutional and the other making it unconstitutional, the former should be preferred. The unconstitutionality may spring from either the incompetence of the Legislature to enact the Statute or from its violation of any of the provisions of the Constitution. The second situation which summons its aid is where the provisions of the Statute are vague and ambiguous and it is possible to gather the intentions of the Legislature from the object of the Statute, the context in which the provision occurs and the purpose for which it is made. However, when the provision is cast in a definite and unambiguous language and its intention is clear, it is not permissible either to mend or bend it even if such recasting is in accord with good reason and conscience. In such circumstances, it is not possible for the Court to remake the Statute. Its only duty is to strike it down and leave it to the Legislature if it so desires, to amend it. What is further, if the remaking of the Statute by the Courts is to lead to its distortion that course is to be scrupulously avoided. One of the situations further where the doctrine can never be called into play is where the Statute requires extensive additions and deletions. Not only it is no part of the Court’s duty to undertake such exercise, but it is beyond its jurisdiction to do so.””
(emphasis supplied)
56. In sum and substance, the submission is Rules 6(8) and 7 of the Rules may not be read in isolation. They are part of a composite whole and contain all the terms and conditions of service of Development Officers. In that it is integral to the scheme of the terms and conditions that Development Officers remain a class apart so classified for reason of their special status qua revenue generation by the Corporation. On one hand there exist measures that may be categorised as special disciplinary measures, by virtue of Rule 3 read with Rule 6 and Rule 7 of the Rules and on the other there are special incentives provided specifically to the Development Officers owing to their special role and relationship qua the Corporation. Neither the incentive nor the disincentive may be looked at in a compartmentalised way. They have to be looked holistically so as to harmonise every aspect of the Rule to read a consistent scheme containing all terms and conditions applicable to a Development Officer.
57. In rejoinder, learned counsel for the petitioners would submit that the payment of incentives to Development Officer may never be cited to create a reasonable classification. Referring to Life Insurance Corporation of India (Recruitment of Apprentice Development Officers) Regulations, 1999, it has been submitted, only agents may be categorised as class of persons who are linked to the payment of commission. The Development Officers are permanent employees of the Corporation entitled to salary payment like any other employees of the Corporation. In a way, they faced two levels of selection. First, at the time of appointment as Probationary Development Officer and later only upon successful completion of probationary period, they were confirmed Development Officers. At that stage, they were required to pass an examination. Thus confirmed, they cannot be discriminated solely for reason of payment of bonus, as claimed by the respondent.
58. Strongly relying on the protections available to them under Part III of the Constitution of India, it has been stressed that their services cannot be done away arbitrarily. To the extent, Rule 7 vests arbitrary, uncanalised and unbridled powers to the Corporation to throw out confirmed employees, the same is unconstitutional.
59. Emphasis has been laid on the fact that payment of incentives may remain an extra benefit. It does not create any intelligible differentia and it does not offer reasonable nexus to treat Development Officers differently from other employees of the Corporation. The agents remaining within the clutches of the Corporation (through Managers) and not the petitioners Development Officers. Therefore, the petitioners cannot be prejudiced for non performance of the agents.
60. Further, it has been emphasised that confirmation as Development Officers creates permanent tenure in favour of the petitioners. Relying on A.L. Kalra (supra) as also DTC (supra), it has been submitted, public service cannot be arbitrarily terminated. As to the payment of incentives bonus, it has been stated, such incentives are not unique to Development Officers alone. Provisions exist for payment of such incentives to other employees as well.
61. Having heard learned counsel for the parties and having perused the record, in the first place, the issue of validity of Rule 6 and 7 did arise in Vivek Anand (supra). It is however true that the exact nature of challenge now raised may not have been raised in that case. Yet, the co-ordinate bench had earlier dismissed thesse writ petitions, by making a brief observation in that regard. Thereupon, the matter travelled to the Supreme Court. In view of the order dated 30.01.2018 passed by that Court, the different shades of submissions as also noted by the Supreme Court, it may not survive to the respondents that the matter is concluded by the earlier decision notwithstanding fact that Vivek Anand (supra) attained finality, in its own facts.
62. On the issue of opportunity of hearing, again there may be less dispute. The rules, as have been extracted in extenso, above. They provide for two-tier opportunity to show-cause. In the first place, the proviso to Rule 6(4) of the Rules contemplates an opportunity to be given to the affected Development Officers to show-cause to explain the facts that may be relied against him under Rule 6(1) and (2). As noted above, that opportunity was granted to and availed by the petitioners – with respect to both appraisal years ending 30.04.2011 and 30.04.2012. Then, second tier opportunity is contemplated by virtue of Rule 6(8) read with proviso to Rule 7(1). Again that opportunity was granted to and availed by the petitioners.
63. Therefore, as a fact, there is no dispute that the procedural Rules, as they exist, have been complied. No violation of rules of natural justice, is alleged. The only dispute and the real issue before us is whether the provisions of Rule 6 and Rule 7 of the Rules are valid. Though, much submissions have been advanced to assail the validity of Rule 6 read with Rule 7 of the Rules, it has rightly been pointed out by Shri Manish Goyal, learned Senior Counsel for the Corporation that no challenge has been laid to Rule 3 of the Rules. Rule 3 clearly provides (by way of first proviso), that the tenure of a Development Officer hinges on his continued conformance to the “expense limit” applicable to him. The second proviso only confirms the requirement of natural justice – that for any action taken – affecting the tenure of a Development Officer (for reason of expense limit exceeded), due opportunity of hearing must first be given to him.
64. In that, further procedural safeguard of grant of opportunity has been inbuilt, to govern the discretion vested in the Corporation to not terminate the services of a Development Officer who may have exceeded the expense limit, if such fact is evidenced for reason of “poor business production”. To that extent, a safeguard has been built in favour of the Development Officers.
65. Coming to direct challenge raised to Rule 6(8) and 7(1), we may first consider whether the Development Officers have been treated as class apart. If yes, whether there exists an “intelligible differentia” or “reasonable nexus” to offer such classification and whether those Rules are “manifestly arbitrary”.
66. Plainly, the employees of the Corporation are divided into four classes. It is equally true that in Class-II, other than Development Officers, there exists no other employee, grade or type of employee. Yet, that may not be enough to allow for the test of classification to be satisfied. In that, we note, from the day one i.e. on the date of engagement as an Apprentice Development Officer, the scheme of business generation is drilled into service conditions of a Development Officers. By way of duty, work or assignment itself, it is provided by way of a target set in terms of new business to be generated that such Apprentice Development Officers may not only generate new business of 3.5 crores, but they must generate new annual premium in excess of Rs.10 lakhs involving 750 new life cover besides the target requirement to engage 40 active agents, 15 of whom must bring in minimum business and 15 of whom must be productive agents. That work description clearly defines the relationship expected to arise between Corporation and the Apprentice Development Officers.
67. As to the work and performance of Development Officers, detailed consideration was offered by the Madras High Court in S.M. Alagiry (supra). Also, detailed consideration was offered in Full Bench decision of the Kerala High Court in P.V. Mani (supra) and also in the decision of the Patna High Court in Bipin Bihari Sinha (supra) as also by the Kerala High Court in Sonia Bhaskar (supra). We have referred to these decisions to record the nature of work and method of performance assessment of Development Officers appointed by the LIC, in extenso. To the extent no contrary fact has been pleaded by the petitioners (in those petitions), to the facts as noted in the aforesaid decisions, we take notice and rely on the same, to base our reasoning as to classification. We find ourselves in respectful agreement with the opinion of the Patna, Kerala and Madras High Courts, noted above.
68. Then, as to issue of valid classification, in the first place, no act of primary legislation has been shown to exist (by either side), to establish any higher existing law governing or having a bearing on the classification of Development Officers as a separate class of employees of LIC, for the purpose of differential treatment offered to them under the impugned Rules. To the extent, the Rules are in the nature of special disciplinary Rules applicable to Development Officers, framed by the competent authority, there is no inherent defect in the same.
69. Therefore, mere absence of such higher law, may not be hurriedly lead to any conclusion of absence of “intelligible differentia” or that the power given to the rule making body is unbridled or uncanalized or without “reasonable nexus” or “manifestly arbitrary”. As to manifest arbitrariness, in the first place, the Rule as have been extracted in extenso above, not only it provides for dual opportunity of hearing before offending action of curtailment of tenure or termination from service may arise, second operational margins above the expense limit (between 19%-25% of eligible premium) exist to ensure that no adverse action is taken against any Development Officer found to have operated within that range the expense limit, crossed. Then, opportunity of time (at least one year) has been granted to improve ones’ performance. Thus, if total remuneration paid to a Development Officer is Rs. 118/- against eligible premium Rs. 100/-, no adverse action may ever be taken against such Development Officer under the impugned Rule, though the cost of retaining of such Development Officer paid by the LIC would remain higher than the business earned by such Development Officer; third, termination is not the only consequence, in the event of expense limit being breached (beyond the permissible range). First, incentive would be denied and second disincentive would be awarded on such a non-performing Development Officer. Only in the event of continued non-performance as may lead to either reduction to the basic grade pay applicable or in the event of breach of expense limit beyond a higher cut-off (38% by way of aggregate for last two years), action of termination may be taken; fourth, permissible explanations may exist, to avoid the harsh consequence of termination from service. Thus, under Rule 6(5)(b) accident or sickness suffered by individual Development Officer may be cited as just circumstance to avoid penal action contemplated under the impugned Rules; fifth, remedy of appeal etc. is also available.
70. Next, keeping in mind the nature of work performed by Development Officers as considered in P.V. Mani (supra), Sonia Bhaskar (supra) and Bipin Bihari Sinha (supra), it is seen, by very nature of their work, the Development Officers remain field officers (earlier even designated as such). They are not required to perform any regular desk job by LIC. They are the arms and legs of the LIC, entrusted the most vital task of generating new businesses/revenue for the LIC. It has not been shown to us that any other class of officers or employees of the LIC is entrusted exclusively, the task of generating new businesses/revenue. To achieve that object, at least forty agents (approximately) appointed by the LIC are placed under each Development Officer. It is through these agents that Development Officers are expected to earn enough new business to the LIC as may generate “eligible premium” that may defray the annual remuneration paid to such Development Officer. That in sum and substance is the scheme of the Rules..
71. To the extent the Development Officers have at their command not less than forty agents who they guide, supervise and monitor to procure new business for the LIC, fundamentally, there is no reason to hold that the Rule is “manifestly arbitrary”. Besides the inherent logic that arises occasioned by the fact that other than the present petitioners, no other Development Officers has approached the Court and besides the fact that it is not shown to the Court that the Rule is being applied by the LIC to hire and fire, as they say, on whims and fancies, it must be acknowledged in the facts brought before us, that reasonable basis to apply the Rule exists, both in statutory stipulations and its application.
72. Other than the bald statement that the impugned Rule has been made applicable only to Development Officers, and there exists no “intelligible differentia” or “reasonable nexus” to sustain the Rules, no fact has been pleaded or established before us as may lead us to reach that conclusion. The burden that lay on the petitioners to prove that essential fact, has remained undischarged. As noted above, the work definition of the petitioners and the method of appraisal of their performance could not have been made by the LIC in manner similar to the appraisal of work of such other employees of LIC. Prima facie, all other employees of LIC being employees who do not work to directly generate business but to account for it (generally), it is difficult to accept the contention being advanced by learned senior counsel for the petitioners and other learned counsel for the petitioners that they must be dealt similarly.
73. The agents are engaged by the LIC purely against payment of commission. They are not paid any salary. While it is true that the Development Officers may not be the disciplinary officers over such agents and that authority may rest with another employee/Manager appointed by the LIC, at the same time, agents work exclusively against assignment made to particular Development Officers. An agent of LIC once assigned to a Development Officers does not work under another during continuance of his assignment with the first. The business goals of LIC – specifically to generate new business arises at the hands of the agents who are not the employees of the LIC but who work under the supervision and the guidance of the Development Officers. That being the nature of arrangement made, clearly, the work of Development Officers is directly and inextricably linked to generation of new businesses of LIC. It is not related to service of existing businesses and it is not related to administrative or managerial control over officers and office staff, etc. The work of Development Officers predominantly and exclusively relates to new business generation. It has not been shown to us that Development Officers perform any other work for the LIC.
74. It is in that context of the Scheme of Rules, the Regulations as also the Incentive Schemes have to be seen in entirety. While other employees of the LIC are entitled to incentives, etc. on the general increase of profitability of the Corporation, on the contrary, the Development Officers, purely on account of their special position and work assignment made by the LIC qua activity of business generation, have been provided special incentives referable directly to the quantum of new business generated under their leadership. Thus, if in one district, there are ten Development Officers and the new business of the LIC grows at different rates at the hands of those ten Development Officers, the incentive that may be earned by each Development Officer under the Incentive Scheme would vary and be not related to the rate of growth or total profitability of the Corporation or growth of total business of the Corporation, in that district. The relationship of the LIC with its Development Officers is unique and direct in that regard.
75. Correspondingly, where new business does not grow such that a “cost ratio” is poor and “expense limit” is breached beyond other limit of tolerance i.e. roughly @ 22%, disincentives get attracted and are enforced on such Development Officers, to protect the primary commercial object of the LIC – to increase its business, every year.
76. In view of the above, we are unable to see the Development Officers as just another class of employees of the LIC with no “intelligible differentia”. Intelligible reason for the differentia exists as the LIC perceives and it expresses by way of policy a disciplinary module to be applied to Development Officers, to generate new businesses. Per se, the module of assigning 40 agents (who work on commission paid by the LIC), to each Development Officers with a minimum target to generate enough new business to defray the annual remuneration paid to the Development Officer with further provision for payment of bonuses commensurate to volume of new businesses generated by a Development Officer (above the threshold limit), in any appraisal year, clearly indicates the intent of the policy to keep the Development Officers motivated and encouraged to generate more businesses for the LIC, as may allow for high profitability to exist. Thus, “reasonable nexus” exists between the mode adopted and the purpose sought to be achieved.
77. To the extent, it may never be denied that every commercial corporation including the LIC exists for commercial reasons and not for philanthropic or non profit activities and further insofar as it is undisputed to the petitioners that the LIC as a corporation is lawfully entitled to earn maximum profits, the “intelligible differentia” clearly exists to distinguish the petitioners/Development Officers as a class apart from other employees of the LIC based on the difference of work and its impact on the existence and growth of LIC, as a commercial corporation, besides its overall profitability.
78. As noted above, the impugned Rule works in a measured way. It first prescribes the “cost ratio”, “expense limit” and “eligible premium” and then provides for evaluation of a Development Officer on those factors at the end of a reasonable length of time namely 12 calendar months i.e. “appraisal year”. Even at the stage of appraisal, it prescribes upper cut off of beyond the “expense limit” that may not be breached by an individual Development Officer. Even in the event of such limit being breached, the Rules first introduce a scheme of disincentives. When those fail either over a longer period of time or they fail hopelessly for two consecutive years, the consequence of termination may arise. To that extent a “reasonable nexus” clearly exists and has been applied and enforced through the Rules between the object which is to increase profitability and not allow complacency and inefficiency to settle as may hinder the growth of the LIC as a profit making commercial entity. There is no invalidity in the Rules.
79. As noted above, there is no “manifest arbitrariness” in the Rules. As discussed above, they are wholly reasonable in measure and in application. Not only they apply principles of natural justice but they also incorporate valid reasons such as accident or illness suffered as a ground to not enforce the consequence of termination. It may be noted here itself, those grounds do not exist in any of the present writ petitions. Thus, the action taken by the LIC is in accordance with the Rules.
80. As to the submission of disproportionality, we are equally not impressed. Once we have found that the Rules are valid, reasoned and measured, the issue of disproportionality of action does not arise. Thus, in the entirety of facts and circumstances of the case, the Rules provide for additional disciplinary measures for Development Officers in addition to the general disciplinary measures provided under the Staff Regulations. In view of “intelligible differentia” and “reasonable nexus” existing, there cannot arise any further objection to the validity of the Rules for reason of those being incorporated separately. To the extent, we find that the Rules are wholly valid in law, further submission based on Part-III of the Constitution of India with respect to alleged premature termination of tenure, must be rejected, in that light.
81. For reasons noted, we do not find any infirmity in the Rules. All the writ petitions lack merits and are accordingly dismissed. No order as to costs.
82. It is necessary to place on record – dictation of order was continuing day to day yet, it could not be completed on the last working day before the onset of winter vacations i.e. on 20.12.2024. Since, the bench constitution was to change w.e.f 02.01.2025, the operative portion of the order was pronounced in open Court on 20.12.2024, with reasons to follow. The Court reopened on 02.1.2025. Before the order could be completed, one of us has received a sealed packet through Speed Post describing the sender – “Sri Hitesh Kumar Goyal, A-6/296 Kamla Nagar Agra (U.P.)-282005 Mob. 9756096093”. The petitioner in Writ-A No. 30491 of 2014 is described similarly. He is represented by Sri Shesh Kumar and Sri Sunil Dubey, Advocates. That envelope clearly bears reference to this case inasmuch as following writing appears on the face of the envelope:
“URGENT: Regarding WRIA 23101/2014 Munna lal v LIC of India”
83. Sri Shesh Kumar has neither filed any application nor he has made any mention since 20.12.2024. Hence the envelope thus received has been retained in sealed condition. Let the same be sealed in another envelope and retained on record, for whatever it may be worth.
Order Date :- 20.12.2024
rkg/prachi/Faraz/Abhilash/SA
(Donadi Ramesh, J.) (S.D. Singh, J.)
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