Life Insurance Corporation (Modification of Settlement) Act, 1976-S. 3-.... Validity of-Corporation entered into Settlement with Class Ill and Class IV employees regarding bonus-Settlement was subject to the approval of Central Government-During emergency Central Government issued instructions not to pay bonus under the settlement-Employees filed Writ Petition in the High Court-A Single Judge allowed the Writ Petition-The impugned Act was passed when Letters Patent Appeal was pending before the High Court--Corporation withdrew the appeal-Impugned Act, if absolved the Corporation from obligation to carry out the Writ of Mandamus issued by the Single Judge.

Constitution of India : Art. 31-Bonus payable under the. Settlement, if property within the meaning of Art. 31 (2)-Stopping payment of bonus, if amounts to compulsory acquisition of property without payment of compensation.

 From time to time the Life Insurance Corporation and its employees arrived at settlement relating to the terms and conditions of service of Class III and Class IV employees including bonus payable to them. Clause (8) of the Settlement dated January 24, 1974, which related to payment of bonus provided-(i) that no profit-sharing bonus shall be paid but the Corporation may, subject to such directions as the Central Government may issue from time to time, grant any other kind of bonus to its Class III and Class IV employees; (ii) that an annual cash bonus will be paid to all Class ID and Class IV employees at the rate of 15% of the annual salary actually drawn by an employee in respect of the financial year to which the bonus relates and (iii) that save as provided therein all other terms and conditions attached to the admissibility and payment of bonus shall be as laid down in the Settlement on bonus dated June 26, 1972. Clause ( 12) of the Settlement which refers to the period of settlement provided (!) that the Settlement shall be effective from April 1, 1973 for a period of four years and (2) that the terms of the Settlement shall be subject to the approval of the Board of the Corporation and the Central Government.

One of the administrative instructions issued by the Corporation in regard to the payment of cash bonus under cl. 8(ii) of the Settlement was that in case of retirement or death, salary up to the date of cessation of service shall be taken into account for the purpose. of determining the amount of bonus payable to the employee or his heirs and the other was that the bonus shall be paid along with the salary for the month of April but in case of retirement or death, payment will be made soon after the contingency The Payment of Bonus (Amendment) Act. 1976 considerably curtailed the rights of the employees to bonus in industrial establishments. But in so far as the employees of the Corporation were concerned this Act had no application because by reason of s. 32 of the Payment of Bonus Act, the Corporation was outside the purview of its operation. The Central Government however decided that the employees of establishments which were not covered by the Bonus Act would not be eligible for payment of bonus but ex gratia payment in lieu of bonus would be made to them. Pursuant to this decision the L.I.C. was advised by the Ministry of Finance, Government of India, that no further payment of bonus should be made to its employees without getting the same cleared by the Government. The Corporation accordingly issued administrative instructions not to pay bonus to its employees under the exciting provisions until further instructions. To the employees' assertion that the Corporation was bound to pay bonus in accordance with the terms of the Settlement the Corporation con- tended that payment of bonus by the Corporation was subject to such directions as the Central Government might issue from time to time, and since the Central Government had advised it not to make any payment of bonus without its specific approval, bonus could not be paid to the employees. Thereupon, the All India Insurance Employees' Association moved the High Court for issue of a writ directing the Corporation to act in accordance with the terms of the Settlement dated January 24, 1974 read with administrative instructions dated March 29, 1974 and not to refuse to pay cash bonus to Class III and Class IV employees. A single Judge of the High Court allowed the: writ petition. While the Letters Patent Appeal was pending, Parliament passed the Life Insurance Corporation (Modification of Settlement) Act, 1976 (which is the Act impugned in this case.). In the Letters Patent Appeal the Corporation stated that in view of the impugned Act, there was no necessity for proceeding with the appeal and hence the Division Bench made no order in the appeal.

Since the effect of the impugned Act was to deprive Class III and Class IV employees of bonus payable to them in accordance with the terms of the Settlement, two of the associations filed writ petitions in this Court challenging the constitutional validity of the impugned Act. It was contended on their behalf that even if the impugned Act rendered cl. (8) (ii) ineffective with effect from April 1, 1975 it did not have the effect of absolving the Life Insurance Corporation from its obligation to carry out the writ of Mandamus issued by the High Court and (2) that the right of Class III and Class IV employees to annual cash bonus for the years 1975·76 and 1976·77 under CL 8(ii) of the Settlement was property and since the impugned Act provided for compulsory acquisition of this property without payment of compensation, it was violative of Art. 31(2) of the Constitution.