2009 (3) TMI 992 - SC - Indian Laws

Whether the High Court was justified in directing the state government to release grants to CAMUL so as to enable CAMUL to pay the salary and other emoluments of its employees?

Summary

Issues Involved:
1. Whether the State Government is liable to pay the salaries and emoluments of the employees of CAMUL.
2. Whether CAMUL can be treated as a department of the State Government by lifting the corporate veil.
3. The applicability of the principles laid down in Kapila Hingorani cases to the present case.

Detailed Analysis:

1. Liability of the State Government to Pay Salaries and Emoluments of CAMUL Employees:
The respondent, a Trade Union representing CAMUL employees, argued that the State Government had pervasive control over CAMUL and should be responsible for paying the salaries and emoluments of CAMUL employees. The State Government, however, contended that the grant-in-aid provided to CAMUL was for development activities and not for bearing the salaries of its employees. The Supreme Court held that even if CAMUL is considered a "state" under Article 12 of the Constitution, it does not make the State Government liable to pay the salaries of CAMUL employees. CAMUL, being a registered cooperative society under the Assam Cooperative Societies Act, 1949, is an independent juristic entity and cannot be identified with the State Government.

2. Treatment of CAMUL as a Department of the State Government:
The respondent sought to treat CAMUL as a department of the State Government by lifting the corporate veil, citing the State Government's control over CAMUL's management and finances. The Supreme Court rejected this argument, stating that CAMUL, despite being under the control of the State Government, remains a separate legal entity. The Court emphasized that the fact that CAMUL may answer the definition of "state" under Article 12 does not mean that its employees become employees of the State Government.

3. Applicability of Kapila Hingorani Cases:
The respondent relied on the interim orders in Kapila Hingorani v. State of Bihar (2003 and 2005) to argue that the State Government should be liable for the salaries of CAMUL employees. The Supreme Court clarified that the observations in Kapila Hingorani cases were interim and tentative, addressing extraordinary situations involving human rights violations, such as starvation deaths and suicides due to non-payment of salaries. These observations were not intended to establish a general principle that the State Government is liable for the salaries of employees of public sector undertakings or cooperative societies. The Court reiterated that interim orders do not constitute binding precedents and emphasized the principle laid down in Steel Authority of India v. National Union Waterfront Workers (2001), which states that government companies or societies do not become agents of the government for all purposes.

Conclusion:
The Supreme Court allowed the appeal, setting aside the orders of the Division Bench and the learned Single Judge of the Gauhati High Court. The writ petition filed by the respondent was dismissed, without prejudice to the rights of CAMUL employees to seek redressal through appropriate legal channels. The Court also noted that this decision does not prevent the State Government from formulating any scheme or extending any relief to CAMUL employees or similarly situated persons.