Amar Krishna Ghose v. Life Insurance Corporation of India & Anr.

SHELAT, J, This appeal, founded on the certificate granted by the High Court of Calcutta, raises questions of interpretation of sec. 3(2) of the Life Insurance (Emergency Provisions) Ordi· nance, 1 of 1956, sec. 11 of the Life Insurance Corporation Act, 31 of 1956 and R. 12A of the Life Insurance Corporation Rules, 1956 made under s. 48 of the said Act.

These questions arise in the following circumstances :

Prior to January 1, 1956 the appellant was employed as the Pdncipal Officer of .the Bengal Insurance and Seal Proper!J Co. Ltd., respondent 2 in this appeal. It was not disputed ID the High Court that by Principal Officer the appellant meant that he was the Managing Director. His salary as such officer was Rs. 2630 per mensum which on and from January 1, 1956 was rais-ed to Rs. 3000 per mensum. On January 19, 1956, respondent 2 issued in favour of the appellant four cheques for Rs. 5436-6-0 in all representing his salary for November and December 1955 and for certain other dues. On that very day; i.e., January 19, 1956, the Life Insurance (Emergency Provisions) Ordinance, 1956 came into force, u11der which January 19, 1956 was the appointed day. The. management of the life insurance business carried on by all concerns including that of respondent 2 was taken over and became vested in custodians appointed under the Ordinance. Cl. 3 (2) of the Ordinance provided that "any con-tract, whether express or implied, providing for the management of the controlled business of an insurer made before the appointed day between the insurer and any person in ch.arge of the manage- . ment of such business immediately before the appointed day shall

be deemed to have terminated on the appointea day". The Ordi-nance was substituted by the Life Insurance (Emergen~y Provi-sions) Act, 9 of 1956 which came into force as from March 21, 1956. The said cheques, when presented for payment, were not honoured by the Bank on the ground that they were not signed by the custodian.

On June 18, 1956, Parliament passed The ·Life Ir..surance Corporation Act, 31 of 1956, which came into force as froni Ju1y I, 1956. A Notification, dated August 30, 1956, issued there-under fixed September 1, J 956 as the appointed day, that is ihc date when the Corporation was established under sec. 3 of the Act. Sec. 7 of the Act reads as follows :

"7 ( 1) On the appointed day there shall be trans-ferred to and vested in the Corporation all the assets and liabilities appertaining to the controlled business of all insurers.

( 2) The assets appertaining to the controlled busi-ness of an insurer shall be deemed to include all rights and powers, and all property, whether movable or im-movable, appertaining to his controlled business, includ-ing in particular, cash balances, reserve funds, invest-ments, deposits and ah other interests and rights in or arising out of such property as may be in the posses-sion of the insurer ...... and liabilities shaJI be deemed to include all debts, liabilities ancl. obligations of what-ever kind then existing and appertaining to the coo-trolled business of the insurer."

Sec 11 ( 1) of the Act provides that every whole-time employee of an insurer whose controlled business has been transferred to and vested in the Corporation and who was employed by the insurer wholly or mainly in connection with his controlled business im-mediately before the appointed day (i.e. September l, 1956) shall on and from the appointed day become an employee of the Corporation and shall hold his office therein on the same terms and conditions as he was having on the appointed day, unless and until his ~mployment in the Corporation is tenninated by the Corporation. Sub-sec. (3) of s. 11 provides that if any question arises as to whether (a) any person was a whole-time employee of an insurer, or (b) as to whether any employee was employed wholly or mainly in connection with the controlled business of an insurer immediately before the apPointed day (i.e. Seotember 1. 1956) that question shall be referred to the Central_Govemment, whose decision shall be final. Under s. 17, the Central Govern-ment ·has been emoowered to constitute one or more tribunals. Sec. 48 empowers the Cent~al Government !o mak~ ru,lei:, ~nd in particular among other sub1ects on the supiect of 1unsd1ct10n of

A. K. GHOSE v. L.I.C. (Shelat, /.) 1001 the tribunals constituted under s. 17. Rule 12A of the Life Insurance Corporation· Rules, 1956 made under s. 48 reads as under:

"l 2A. Jurisdiction of Tribunal.

The Tribunal may exercise jurisdiction in the whole II of India and shall have power to decide or determine

all or any of the following matters, namely,

(1 ) any question whether of title or of liability, or

of any nature whatsoever in relation to the assets and liabilities pertaining to the controlled business of the insurer transferred to and vested in the Corporation."

It seems clear from s. 11(3) of the Act and the said rule 12A ( 1) that on a question whether a person was a whole-time em-ployee of an insurer or whether any employee was employed wholly or mainly in connection with the controlled business of such insurer ~mmediately before the appointed day, i.e., Septem-ber 1, 1956, it is the Central Government which is the deciding authority and whose decision is final, and (2) that where a ques-tion, whether of title or of _liability or of any nature whatsoever in relation to the assets and 'liabilities pertaining to the controlled business of the insurer transferred to and vested in the Corpora-tion, arises, it is the tribunal which is the authority invested with the jurisdiction to determine such a question.

On January 20, 1959, the appellant filed a suit in the High Court claiming the following reliefs :

(a) a decree for Rs. 5436-6-0 as salary for November

and December 1955;

(b) declaration that the purported tennination of his

contract of service as the principal officer of res-pondent 2 and/ or as an employee of the Corporation was void;

( c) declaration that he was and continued to be the em-

ployee of the Corporation and for reinstatement; (d) a decree for Rs. 1,01,250 being his salary from

January 1956 to December 1958 at the rate of Rs. 2812-8-0 per mensem;

( e) in the alternative, for a decree for the said amount

of Rs. 1,01,250 against respondent 2; and ( f) for interest and costs.

The case of the Corporation was (I ) that by rearon of cl. 3(2) of Ordinance 1 of 1956 the employment of the appellant

1002 SUPREME COURT RBPOll.TS [1973) 2 S,C,R,

with the respondent 2 stood terminated on January 19, 1956, and ( 2) that as a consequence of such termination, .the appellant was not in the empl,oyment of respondent 2 wholly or mainly in con-nection with his controlled business immediately before the appointed day under the Act, i.e., September 1, 1956, and the~ fore, was not entitled to the benefit of s. 11 ( 1) thereof and could not, therefore, claim to have become an employee of the Corpora-tion. Therefore, there was no question of his employment having to be or having been terminated by the Corporation at all, much less wrongfully. Its case further was that so far as the first relief was concerned, siince the claim for Rs. 5436-6-0 raised the qua;- tion of liability pertaining to the controlled business of respondClllt 2, the jurisdiction was exclusively with the tribunal as under s. 41 of the Act no civil court has the jurisdiction to entertain and adjudicate upon a matter which the tribunal has been empowered to determine. That being so, it was the tribunal which had to decide whether (a) the appellant's employment stood terminated on Ja1Juary 19, 1956 by virtue of cl. 3(2) of Ordinance 1of1956, and (b) wheth"r as a result of the vesting of the management of controlled business in the Custodian or the vesting of that busiMI' in the Corporation, the Corporation was liable tel jlay the arrears of liis salary for November and December 1956 and certain other dues. So far as the claim for Rs. 1,01,250, on the footing that there was no such termination of the appellant's service and con-sequently his having become and having continu:ld to be the Corporation's employee under s. 11 ( 1) of the Act, is concerned, the Corporation's case was that that part of his case had to be determined by the Central Government as under s. 11 ( 3) it ii that Government which has to decide whether the appellant was a whole-time employee of respondent 2 wholly or mainly in con-nection with that company's controlled business immediately be-fore the appointed day, viz., September 1, 1956. That question depended upon the question whether his employment with res-pondent 2 stood terminated on January 19, 1956 under cl. 3(2) of the said Ordinance, for, if it did, no further question of his becoming or his having continued as the Corporation's employee under s. 11 ( 1) of the Act could possibly arise.

A learned single Judge of the High Court, before whom the suit came up for hearing, held that the High Court had no juris-diction to entertain or adjudicate the appellant's claim against the Corporation and dismissed the appellant's suit. In a Letters Patent appeal against that judgment and docree, a Division Be~ch of the High Court sustainild the trial Court's finding that the High Court had no jurisdiction in the matter of the atinellant's claim for Rs. 5436-6-0 and that it was the tribunal which ha~ that jurisdiction. But it did not uphold the tri~I C?urt's findmg as regards the relief for the salary and declaration m respect of the period from September 1, 1956 to December 1958. Tne Division Bench held that "this part of the case, so far as the Life Insurance Corporation is concerned, will stand adjourned until the deter-mination of the proceedings before the Trib11J1al mentioned above. This will be without prejudice to the rights of the defendants to raise the question of competency of the Court to decide an)' q__ues-tion which comes within the scope of sec. 11 ( 3) of the said Act. So far as defendant No. 2 is concerned,. it has been held that the Court has jurisdiction and we arc not disturbing that part of the decree". What the Division Bench in effect decided was thit it was the tribunal and not the High Court which had the jurisdic-tion to decide :he question as to the Corporation's liability to pay the said arrears of salary for Novcmbier and December 19SS as that liability pertained to the controlled business of respondent 2. That question would involve the issue as to whether or not the appellant's CO!jtract Of service With respondent 2 stood terminated by virtue of cl. 3 ( 2 ) of the Ordinance. As regards his claim for salary for the period from September l, 1956 to December 1958, the Division Bench left the question open until the tribunal W,. cided the first part of the claim including the question arising Wider cl. 3(2) of the Ordinance. But it left the question, viz., whether the appellant becallle and continued to be the empll>yee of the Corporation under s. 11 (1 ) of the Act, open and retairieP that part of the appellant's suit with the High Court with liberty to the respondents to raise the question of the High Court's juria· diction in that regard. That question would be whether under s. 11 (3) of the Act it is for the Central Government to determine whether the appellant was the wholi:-time employee of respondent 2 immediately before the appointed day under the Act, viz., September 1, 1956.

Mr. Setalvad doubted the correctness of such an interpretation of R. 12A of the Corporation Rules and argued that the Rule conferred jurisdiction on the tribunal on questions as to the Cor-poration's liability in relation to "the assets and liabilities pertain-ing to the controlled business of the insurer transferred to and vested in the Corporation". The business transferred to and vested in the Corporation could no longer be the controlled busi-ness of the insurer and ceased to be so once it became trans-ferred to and vested in the Corporation under the Act. Therefore, he argued, the Tribunal could have no jurisdiction in respect of a liability to which the Corporation succeeded as a result of ~e assets and liabilities of the insurer having been transferred to and vested in the Corporation. He contended that that bdng the posi-tion, it was not the tribunal but the civil court which had to decide the question whether the Corporation was liable to pay the arrears of salary for November and December 1956, a liability, which the Custodian and later on the Corporation were liable to satisfy, the former as .a result of the management having vested in him under the Ordmance, and the latter as a re,sult of its having suc-ceeded 10 the assets and liabilities of the insurer. He also con-tend.ed th~t the question as to whether the appellant's contract of seMce with respondent 2 stood terminated on January 19, 1956 under cl. 3 ( 2) of the Ordinance would also not fall under R. 12A. The Add!. Solicitor-General, on the other hand, disputed such a construction of R. l 2A and contended that the tribu.nal had under that Rule .the eXclusive jurisdiction to determine both the questions, and the High Court could not by reason of s. 41 of the Act entertain or adjudge either of the two questions.

The reliefs prayed for by the appellant in his plaint pertained to two periods; ( 1) Rs. 5436-6-0 being the arrears of salary and other dues for the months of .November and December 1955, RD.cl (2) Rs. one lac and odd being the salary from January I, 19~6 to December 1958. Under R. 12A, a question either of liability or of any nature whatsoever in relation to the assets or liabilities pertaining to the controlled business of the insurer transferred to aild vested in the Corporation falls within .the jurisdiction of the tribunal and cannot be entertained and adjudicated by a civil court under s. 41 of the Act. In respect of the claim for arrears of salary for November and December 1956, the question really would be one of liability in regard to or pertaining to the cootroll-ed business of the insurer which became transferred to and vested. in the Corporation. That question, therefore, fell fairly and squarely within the jurisdiction of the tribunal. The exl'ression "controlled business of the insurer" in R. 12A means the life in-surance business carrieji on by an insurer before its management became vested in a custodian under the Ordinance and whose assets and liabilities became transferred to and vested in the Corporation under tqe Act. R. l 2A clearly deals with questions arising out of. and pertaining to such controlled business. Under R. 12A, jurisdiction to try questions in respect of the liability pertaining to such business has been vested fo the tribunal. The question of the liability of the Corporation in regard to the arrears of salary for November and December 1955 clearly related to the controlled business then carried on by respondent 2 ... The Cor-poration was sought to'be made liable to pay those arrears on the ground that that liabililY. was transferred to and vested in the C.orporation. Clearly R. 12A applied to such a question and the jurisdiction to try such a. qu_estion was in the tribu?al ~nd not the High Court. Any qu¢stion, therefore, as to the habiltty per-taining to the business which was the controlled business as de-fined by the Act would have to be tried by the tribunal.

As regards the second c\aim of the appellant, that claim in-volved the question as to Whether his contract of service with respondent 2 stood tenninatcd on January 19, 1956 by virtue of cl. 3 (2) of the Ordinance. If it did, he would not be a person who was employed by the insurer wholly or mainly in connection with his controlled business immediately before the appointed day (which is September 1, 1956 under the Act) as require(! by s. 11 ( 1) of the Act, and therefore, he could not claim to be one who became and continued to be an employee of the Corporation <IS envi>aged by that sub-section. Under sub-sec. ( 3) of sec. 11, the question whether an employee was employed wholly or mainly ·in connection with the controlled business of an insurer inune-diati:ly before the appointed day under the Act (i.e., September J, 1956) is determinable by the Central Government and not by <I civil court. That question, however, would depend upon the 4uestion whether the appellant's con_tract of service stood termi-nated by reason of cl. 3(2) of the Ordinance on September 1,. 1956. Has the tribunaj the exclusive jurisdiction to decide that 4iwstion ? .The High Court thought so, and in our view rightly because R. 12A confers on the tribunal the jurisdiction tOI try "any question---0f any nature whatsoever in relation to-liabili-ties pertaining to the controlled business of the insurer transferred to and vested in the Corporation". These are very wide words which would include the question whether the appellant as the principal officer ·of respondent 2 continued 10 be such officer after January 19, 1956 in relation to the controlled business which on and after January 19, 1956 was to be managed in terms of the Ordinance by a custodian appointed thereunder and whose assets and liabilities on the passing of the Act were transferred to and vested in the Corporation. The question whether his contract of employment as the principal officer of the business, defined as the controlled business both under the Ordinance and the Act, conti-nued or not after January 19, 1956 would be a question in re-lation to the liability pertaining to such controlled business and w~s therefore within the scope of R. 12A. But the question as to whether he became an employee of the Corporation under s. 11 (I) on and from January l, 1956, though dependent on the answer as to whether his contract stood terminate<! under cl. 3(2) of the Ordinance, would not fall within R. 12A and was not therefore triable by the tribunal. The High Court, therefore, was right in splitting the appellant's claim into two, one triable by the tribunal and the other not, and retaining with it that part of the suit which did not fall within the scope of R. 12A with liberty to the parties to raise later on the question whether that part was triable by the Court or by the Central Government under s. 11 ( 3) of the Act.

The appeal thus fails and is dismissed with costs.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1331 of 1967.

Appeal by certificate from the judgment and order dated February 28, 1966 of the Calcutta High Court in Appeal from Order No. 88 of 1965.

M. C. Setalvad and Ram Prosanna Bagchi and Sukumar Ghose for the appellant.

F. S. Narima11, Additional Solicitor General of India, K. L . . Hathi and P. C. Kapur for the respondent No. 1.