2003 (5) TMI 359 - SC - Indian Laws

Whether in a case of this nature, the Court would take a sheer legalistic approach in holding that the corporate veil would not be lifted although its conscience stands satisfied that there has been violations of citizens right to life and liberty as adumbrated under article 21 of the Constitution of India? Whether having regard to the admitted position that the Government Companies or Corporations referred to hereinbefore are States within the meaning of article 12 of the Constitution of India, the State of Bihar having deep and pervasive control over the affairs thereof can be held to be liable to render all assistance to the said companies so as to fulfil its own and/or the corporations obligations to comply with the citizens right under articles 21 and 23 of the Constitution of India? Whether the State of Bihar can escape its liability having regard to the human rights problem involved in the matter? Whether in a case of this nature the liability of the State of Bihar, if any, can be shifted to the Union of India? Held that - The High Court may strive to dispose of all liquidation proceedings in respect of the Government companies owned and controlled by the State of Bihar as expeditiously as possible. For the said purpose and/or purposes ancillary to or incidental therewith, it may pass an interim order and/or orders by way of sale and/or disposal of the properties belonging to such public sector undertaking and/or Government companies or to take such measure or measures as it may deem fit and proper. For the aforementioned purposes a committee not consisting of more than three members chaired by a retired High Court Judge or a sitting District Judge may be appointed who may scrutinize the assets and liabilities of the companies and submit a report to the High Court as expeditiously as possible preferably within three months from the date of constitution of the committee. The terms and conditions for appointment of the said Committee may be determined by the High Court. All expenses in this behalf shall be borne by the State of Bihar. The High Court shall be entitled to issue requisite direction/directions to the said committee from time to time as and when it deems fit and proper. The State for the present shall deposit a sum of ₹ 50 crores before the High Court for disbursement of salaries to the employees of the corporations. The High Court, however, in its discretion may direct disbursement of some funds to the needy employees, on ad hoc basis so as to enable them to sustain themselves for the time being. The rights of the workmen shall be considered in terms of section 529A of the Companies Act. The Central Government is hereby directed to take a decision as regards division of assets and liabilities of the Government companies/public sector undertakings in terms of the provisions of the State Reorganisation Act, 2000. The State of Jharkhand is hereby impleaded as a respondent.

Issues Involved
1. Vicarious liability of the Government of the State of Bihar for payment of arrears of salaries to employees of state-owned corporations, public sector undertakings, or statutory bodies.
2. Non-payment of salaries to employees of various government companies/public sector undertakings.
3. Starvation deaths and suicides due to non-payment of salaries.
4. Legal and constitutional obligations of the State of Bihar towards employees of state-owned corporations.
5. Whether the liability of the State of Bihar can be shifted to the Union of India.
6. Human rights issues related to non-payment of salaries.
7. Interim directions for payment of salaries and liquidation proceedings.

Detailed Analysis

1. Vicarious Liability of the Government of Bihar
The core question addressed in this writ petition is the extent to which the Government of the State of Bihar is vicariously liable for the payment of arrears of salaries to employees of state-owned corporations, public sector undertakings, or statutory bodies. The court examined whether the State of Bihar, having deep and pervasive control over these entities, can be held liable to render assistance to fulfill the corporations' obligations to comply with the citizens' rights under Articles 21 and 23 of the Constitution of India.

2. Non-payment of Salaries
The records indicate that various government companies/public sector undertakings have not paid salaries to their employees for a long time, resulting in significant hardship and deaths. The court noted the details of the non-payment of salaries, including the duration and the number of employees affected across different undertakings.

3. Starvation Deaths and Suicides
The court acknowledged the reported starvation deaths and suicides resulting from the non-payment of salaries. The State of Bihar's affidavit admitted the non-payment but disputed the causes of death, attributing them to other factors. However, the court found the state's affidavit inconsistent and lacking in bona fide, emphasizing that the deaths were due to starvation or malnutrition.

4. Legal and Constitutional Obligations of Bihar
The court discussed the constitutional obligations of the State of Bihar, highlighting that the state, as the sole shareholder of these corporations, cannot escape its liability. The court emphasized that the government companies/public sector undertakings being 'States' within the meaning of Article 12 of the Constitution must respect life and liberty of all persons in terms of Article 21. The court held that the State of Bihar has a constitutional obligation to protect the life and liberty of the employees of these corporations.

5. Liability of the Union of India
The court rejected the argument that the liability of the State of Bihar could be shifted to the Union of India. It was held that the Union of India cannot be held liable for the failings of the state public sector undertakings. The court emphasized that financial assistance from the Union of India could not be justified in this context.

6. Human Rights Issues
The court addressed the human rights issues arising from the non-payment of salaries, referencing international covenants and the Protection of Human Rights Act, 1993. The court held that non-payment of lawful salary constitutes 'forced labour' prohibited by Article 23 of the Constitution. The court also highlighted the right to life, which includes the right to food, shelter, and other basic amenities, as fundamental human rights.

7. Interim Directions
The court issued several interim directions to mitigate the hardship faced by the employees:
- The High Court was directed to dispose of all liquidation proceedings of the government companies owned by the State of Bihar expeditiously.
- A committee chaired by a retired High Court Judge or a sitting District Judge was to be appointed to scrutinize the assets and liabilities of the companies and submit a report.
- The State of Bihar was ordered to deposit Rs. 50 crores before the High Court for disbursement of salaries to the employees.
- The High Court was authorized to direct disbursement of funds to the needy employees on an ad hoc basis.
- The rights of the workmen were to be considered in terms of Section 529A of the Companies Act.
- The Central Government was directed to decide on the division of assets and liabilities of the government companies/public sector undertakings in terms of the State Reorganisation Act, 2000.
- The State of Jharkhand was impleaded as a respondent.

These directions were issued to ensure immediate relief to the affected employees while the broader issues were being addressed. The court emphasized the State of Bihar's responsibility to address the human rights violations resulting from the prolonged non-payment of salaries.

← Previous Next →