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TMI Blog1996 (11) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... the association. It is the contention of the petitioners that certain improvements which have been effected in the executive staff pension fund of the Indian Oxygen Ltd. in 1985 should be made available to the existing pensioners of the Indian Oxygen Ltd., and the denial of the benefits of such an improvement to the existing pensioners of the said fund is arbitrary and violative of article 14 of the Constitution. The petitioners have also challenged rule 11(1)(cc) of Part B of Schedule IV to the Income-tax Act, 1961, as conferring an unguided power to the Board to frame rules. They have also challenged rules 89 and 91 of the Income-tax Rules, 1962, as arbitrary and violative of article 14. The petitioners have also alleged that these rules suffer from the vice of excessive delegation. They have further submitted that the appropriation of the purchase price of annuities after the death of the annuitant/pensioner by the Life Insurance Corporation of India (respondent No. 4) is ultra vires rule 3 of Part B of Schedule IV to the Income-tax Act, 1961, and constitutes an arbitrary or excessive use of power. The petitioners have contended that the scheme of such non-contributory approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fund under rule 4 of the said Part B. Rule 11 deals with the rule-making power of the Board. Rule 11(1)(cc) empowers the Board to make rules for regulating the investment or deposit of the moneys of an approved superannuation fund. Part XIII of the Income-tax Rules, 1962, covering rules 82 to 97 and dealing with approved superannuation funds is framed in exercise of the powers conferred, inter alia, under rule 11(1)(cc) of Part B of Schedule IV. Under rule 85 of the Income-tax Rules, 1962, all moneys contributed to the approved superannuation fund are required to be, invested in a Post Office Savings Bank Account in India or in a current account or in a savings account with any scheduled bank or utilised in accordance with rule 89 for making payments under a scheme of insurance or for purchase of annuities referred to in that rule. Under rule 87, the ordinary annual contribution by the employer to a fund in respect of any particular employee shall not exceed twenty-five per cent. of his salary for each year as reduced by the employer's contribution, if any, to any provident fund (whether recognised or not) in respect of the same employee for that year. Rule 89 provides as follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the life-time of the annuitant. Rules 85 and 89 are meant to safeguard the moneys deposited in the superannuation fund and to secure to the annuitant the annuity amount. Undoubtedly, rule 89 requires the trustees to purchase an annuity from the Life Insurance Corporation of India to the exclusion of any one else. But this provision must be judged in the context of the fact that the contracts of life insurance which are entered into by the Life Insurance Corporation of India are backed by a Government guarantee which is provided by section 37 of the Life Insurance Corporation Act, 1956. The payment of annuity is thus properly secured. The petitioners contended that any improvements made in the existing pension scheme after the retirement of the employees should also be made available to such retired employees who are the existing pensioners of the fund. The denial of the benefit of such improvements in the pension schemes to the existing pensioners is ultra vires articles 14, 19, 21, 31 and 300A of the Constitution of India. This contention is based on a misunderstanding of the nature of the annuity, which is purchased in respect of each employee as and when he retires. The right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contribution is in the form of a fixed percentage of salary of each of the employees. There is, therefore, no provision for an employer making any additional payment in respect of its past employees who are the existing pensioners. In Nakara's case, AIR 1983 SC 130, the increase in pension could be met from the general revenue of the Central Government. No such reserve of funds is available to the trustees of an approved superannuation fund. As soon as an employee retires and an annuity is purchased for his benefit under rule 89, there remains no scope for any fresh contribution on his account, so as to entitle him to an increased pension prospectively on the basis of improvements made subsequently in the pension scheme of a fund. Since the existing pensioners form a distinct class, there is no question of any violation of article 14 in this connection or of any other article of the Constitution. The Life Insurance Corporation of India in its affidavit, has pointed out that with effect from April 1, 1985, the corporation decided to increase the pensions payable under their annuity scheme. They decided to make this increase available not only to new pensioners but also to the ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the investment or deposit of moneys of an approved superannuation fund. This cannot be called as an arbitrary conferment of power on the Board. By the very nature of the scheme as framed, the purpose of regulating investment of the trust funds is to ensure their safety. In pursuance of this rule-making power rule 89 is framed. Under rule 89, for the purpose of providing the annuities for the beneficiaries, the trustees of a superannuation fund are required either to enter into a scheme of insurance with the Life Insurance Corporation of India or they have the option to accumulate the contributions in respect of each beneficiary and purchase an annuity from the Life Insurance Corporation of India at the time of the retirement or death of each employee or on his becoming incapacitated prior to retirement. The annuity is purchased from the accumulated contributions made in respect of each beneficiary which are a part of the approved superannuation fund. The petitioners have contended that the trustees of the superannuation fund should not be compelled to purchase an annuity from the Life Insurance Corporation of India and that the investment of the contribution in respect of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the pensioners the value of outstanding instalments is determined and this is used for the purchase of an annuity. This new annuity would be payable during the life-time of the beneficiary and the value of the outstanding instalments is returned to the beneficiary's nominee on his death. The petitioners have the option to switch over to this new scheme in respect of their outstanding instalments. Therefore, in any event there can be no question of the Life Insurance Corporation appropriating the capital purchase price of an annuity on the death of the annuitant. Rule 91, therefore, in any event, cannot be considered as giving any unjust gains to the Life Insurance Corporation of India. Moreover, under sub-rule (2) of rule 11, all rules which are made under rule 11 are subject to the provisions of section 296. Section 296 provides that the Central Government shall cause every rule made under this Act to be laid, as soon as may be, after the rule is made, before each House of Parliament while it is in session for a total period of thirty days, and the rule shall, thereafter, have effect only in such modified form as Parliament may suggest, or if it so decides, may be of no effect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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