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TMI Blog2017 (2) TMI 1527X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of such prima facie findings are temporary arrangements to preserve the status quo till the matter is finally decided, to ensure that the matter does not become either infructuous or a fait accompli before the final hearing. The resume of the precedents on the issue of the liability of the State Government to pay salary and allowances of the employees of the Boards, Corporations and the Companies of which State is a shareholder and are State within the meaning of Article 12, that there is unanimity that the State Government is not liable to pay salary and allowances as they are separate juristic entity. Therefore, neither in law, as the companies are separate and distinct juristic entity than the State Government, the State cannot be directed to pay salary and wages of the employees of such juristic entity. The judgments in Kapila Hingorani [ 2003 (5) TMI 359 - SUPREME COURT] and Kapila Hingorani [ 2005 (1) TMI 754 - SUPREME COURT] have left the question of liability of the State Government to pay salary and allowances open. The intervention of the Supreme Court was to address humane problem of financial stringency suffered by such employees. Therefore, neithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Bihar to pay salary of the employees of all Boards, Corporations and Companies having huge financial burden and whether such financial burden can be passed on to the State of Bihar when the financial allocation towards the salary and allowances of the Boards, Corporations and Companies is a policy decision in economic matters? - HELD THAT:- There are no merit in the Letters Patent Appeal filed by the writ-applicants bearing L.P.A. No. 1940 of 2015. The learned Single Bench has ordered the State to deposit Rs. 10 crores to meet any financial emergency required by any of the employees is without any mechanism as to how any claim of any of the employees can be examined and paid. It is not found that such direction warrants any interference in the present Letters Patent Appeals as it is to address the humane problem but we direct that Hon'ble Mr. Justice Udai Sinha shall constitute one member Committee to disburse the said amount in accordance with law and the procedure to be devised by him. Both the Letters Patent Appeals are dismissed. - LETTERS PATENT APPEAL No.1940 of 2015 Arising out of Civil Writ Jurisdiction Case No. 21893 of 2011, LETTERS PATENT APPEAL No. 88 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the Company incorporated under the Companies Act is a juristic person which has a distinct and separate entity vis- -vis its shareholders. 4. With this background, the Court in the aforesaid case reported as Kapila Hingorani (I)'s case (Supra) observed as under:- 30. The government companies/public sector undertakings being States would be constitutionally liable to respect life and liberty of all persons in terms of Article 21 of the Constitution of India. They, therefore, must do so in cases of their own employees. The Government of the State of Bihar for all intent and purport is the sole shareholder. Although in law, its liability towards the debtors of the company may be confined to the shares held by it but having regard to the deep and pervasive control it exercises over the government companies; in the matter of enforcement of human rights and/or rights of the citizen to life and liberty, the State has also an additional duty to see that the rights of employees of such corporations are not infringed. 33. The State having regard to its right of supervision and/or deep and pervasive control, cannot be permitted to say that it did not know the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005) 2 SCC 262 the Supreme Court directed the State of Bihar to deposit another sum of Rs. 50 crores. The Court observed as under:- 25. The State of Bihar in response to the applications filed by the petitioner herein cannot, in our opinion, be permitted to raise questions which have expressly been rejected. It cannot seek a review of the said judgment indirectly which it could not do directly. Even for such matters, an application for clarification would not be maintainable. (See Ram Chandra Singh v. Savitri Devi, (2004) 12 SCC 713.) 26. We, therefore, do not appreciate the stand taken by the State of Bihar now that it does not have any constitutional obligation towards a section of citizens viz. the employees of the public sector undertakings who have not been paid salaries for years. 37. We make it clear that we have not issued the aforementioned directions to the States of Bihar and Jharkhand on the premise that they are bound to pay the salaries of the employees of the public sector undertakings but on the ground that the employees have a human right as also a fundamental right under Article 21 which the States are bound to protect. The directions, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment was 9 percent of the salary for the period February, 1997 to November, 2003 as an interim measure. The Committee mentioned that if the full salary till November, 2003 has to be paid, the amount required will be Rs. 200 crores and for salary due and payable up to 2006, a further sum of Rs. 150 crores would be required. Keeping in view retrial benefits payable to the employees, a sum of Rs. 500 crores would be required. 8. After the orders of the Supreme Court, the Committee was ordered to be wound up on 17th of September, 2007 by this Court and later, on 31st of August, 2010 the suo motu Public Interest Litigation Petition was disposed of as it was observed that the cause of action does not survive. Liberty was given to any individual to approach the appropriate forum. In terms of the direction of the Supreme Court, C.W.J.C. No. 20645 of 2010 (Awadh Kishore Sharma v. The State of Bihar Ors.) was preferred consequent to an order passed by the Hon'ble Supreme Court on 9th of August, 2010. The Writ Petition was dismissed on 17th of May, 2011 with liberty to any individual to approach the appropriate forum. 9. It is thereafter, the present petition has been filed, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingency and other aspects and expressed thus: [Kapila Hingorani (I) v. State of Bihar,: (2003) 6 SCC 1, SCC p. 34, paras 72 74] xxxx 57. If the present factual matrix is tested on the anvil of the aforesaid principles, there can be no trace of doubt that both the States and the Corporations have conveniently ostracised the concept of model employer . It would not be wrong to say that they have done so with Pacific calmness, sans vision, shorn of responsibility and oblivious of their role in such a situation. Their action reflects the attitude of emotionlessness, proclivity of impassivity and deviancy with cruel impassibility. Neither of the States nor the Corporations have even thought for a moment about the livelihood of the employees. They have remained totally alien to the situation to which the employees have been driven to. In a State of good governance the Government cannot act like an alien. It has an active role to play. It has to have a constructive and progressive vision. What would have ordinarily happened had there not been a bifurcation of the State and what fate the employees of BHALCO would have faced is a different matter altogether. The tragedy h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet the emergent financial requirements of the deserving families. 14. To controvert the argument of learned counsel for the appellants, Mr. Lalit Kishore refers to a Full Bench judgment of this Court reported as Manikant Pathak Ors. v. The State of Bihar Ors., 1997 (1) PLJR 664 to contend that there is clear distinction between Government and the Government companies created by statute, called statutory Corporations, and the Corporations/Companies incorporated under the Companies Act. It was argued that the liability of an entity under a statute would be governed by the provisions of the Statute. The relevant extract from the judgment reads as under:- 15. The distinction between Government companies created by statute, called statutory Corporations, and the Corporations/Companies incorporated under the statute such as Companies Act, however, should be kept in mind. Such distinction was pointed out in Praga Tools Corporation (supra) as well as in Heavy Engineering Majdoor Union (supra). By reason of the subsequent decisions the distinction, so far as the question of its legal character for the purpose of exercise of writ jurisdiction of the High Court is concerned, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be paid to the employees. In such a situation, in my opinion, apart from issuing a direction to them to pay the salary to the employees, the proper direction to be issued would also be for the winding up of the Corporations. Section 433 of the Companies Act provides for the situation where a company may be wound up by the Court. A company may be wound up under Section 433, inter alia, where it is unable to pay its debt under clause (e) or where the Court is of the opinion that it is just and equitable that the company should be wound up. In my opinion, the case comes under both the clauses. I would, therefore, direct the State Government to file winding up petition in this Court if the two Corporations are not able to pay salary to their employees within a period of four months and revive themselves as viable enterprises, so that the assets of the companies may be sold and the salary etc. are paid to the employees, in accordance with the provisions of the Companies Act. 15. Relying upon the said judgment and the observations of the Hon'ble Supreme Court in Paragraph 74 of Kapila Hingorani (I) and Paragraph 37 of Kapila Hingorani (II), it is argued that there is no concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y final direction on the basis of interim orders passed in Kapila Hingorani (I) and Kapila Hingorani (II), when the matter was remitted back to this Court to examine the legal issues. (3). Whether the observations made in Kapila Hingorani (I) and (II) are to address the humane problems faced by certain employees of the Boards and Corporations alone. (4). Whether the judgment in Harihar Yadav's case mandates the State of Bihar to pay salary of the employees of all Boards, Corporations and Companies having huge financial burden and whether such financial burden can be passed on to the State of Bihar when the financial allocation towards the salary and allowances of the Boards, Corporations and Companies is a policy decision in economic matters. QUESTION NO. 1 18. The Boards, Corporations and the Companies incorporated with the State as a sole shareholder or a majority shareholder are but a separate juristic entity. They are governed by a Statute. If the employees of the Company are not being paid wages, they have the priority over their wages which are secured debts in terms of Section 529A of the Companies Act, 1956. The salary of the workmen as secured cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same cannot be required to remain functional only for the reason that its employees are not adversely impacted. It has been further held that when and how much is to be paid to employees of an organization is a policy decision. All these issues fall in the realm of executive determination. 20. The Constitution Bench in the case reported as Steel Authority of India Ltd. v. National Union Waterfront Workers, (2001) 7 SCC 1 held that the Government Companies, Corporations, Societies, even though they are subject to same limitation in the field of Public Law, Constitutional or Administrative Law, it does not lead to the inference that they become agents of the Centre/State Government for all purposes so as to bind such Government for all their acts, liabilities and obligations under various Central and/or State Acts or under private law. The Court observed as under:- 37. We wish to clear the air that the principle, while discharging public functions and duties the government companies/corporations/societies which are instrumentalities or agencies of the Government must be subjected to the same limitations in the field of public law--constitutional or administrative law--as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that such assistance has been extended by the Government, for several years. 20. It is thus clear that directions were not based on legal right of the employees, but were made to meet a human right problem involving starvation deaths and suicides. But in the case on hand, relief is claimed and granted by proceeding on the basis that the employees of corporations/bodies answering the definition of State have a legal right to get their salaries from the State Government. In fact Kapila Hingorani (I) (2003) 6 SCC 1 and Kapila Hingorani (II) (2005) 2 SCC 262 specifically negative such a right. 21. A precedent is a judicial decision containing a principle, which forms an authoritative element termed as ratio decidendi. An interim order which does not finally and conclusively decide an issue cannot be a precedent. Any reasons assigned in support of such non-final interim order containing prima facie findings, are only tentative. Any interim directions issued on the basis of such prima facie findings are temporary arrangements to preserve the status quo till the matter is finally decided, to ensure that the matter does not become either infructuous or a fait accompl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be self-financing. The State Government never intended to allocate financial resources out of State funds, to run the pension scheme. The State Government, in the instant view of the matter, could not have been burdened with the liability, which it never contemplated, in the first place. Moreover, it is the case of the respondent employees themselves, that a similar pension scheme, floated for civil servants in the State of Himachal Pradesh, has also been withdrawn. The State Government has demonstrated its incapacity, to provide the required financial resources. We are, therefore, of the view that the High Court should not (as it could not) have transferred the financial liability to run the 1999 Scheme, to the State Government. Similar suggestions made by the corporate bodies concerned, cannot constitute a basis for fastening the residuary liability on the Government. 92. We shall now consider whether the State Government which had introduced the 1999 Scheme, had the right to repeal the same. In answering the above issue, it needs to be consciously kept in mind, that the employees of corporate bodies, who were extended the benefits of the 1999 Scheme, as already notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive determination. No court has any role therein. For the reasons recorded hereinabove, in our considered view, the conditions of service including wages, allowances and post-retiral benefits of employees of corporate bodies, will necessarily have to be determined administratively, on the basis of relevant factors. Financial viability, is an important factor, in such consideration. In the facts and circumstances of the present case, it is not possible for us to accept the contention advanced on behalf of the respondent employees, that the State Government should provide financial support for sustaining the 1999 Scheme, at least for such of the employees, who were engaged on or before the date of issuance of the repeal Notification (2-12-2004). We would like to conclude the instant submission by recording that the respondent employees have not been able to make out a case that the Notification dated 2-12-2004, repealing the 1999 Scheme, was in any manner, capricious, arbitrary, illegal or uninformed, and as such, we would further conclude that the respondent employees cannot be considered as being entitled, to any relief, through judicial process. 24. In another two Bench judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to meet the financial liability which would have been incurred by revision of pay scales. By the office memorandum dated 19-7-1995 the Government merely reiterated its earlier stand and issued a caution that till a decision was taken to revive the undertakings, no revision in pay scale should be allowed. We, therefore, do not find any infirmity, legal or constitutional in the two office memorandums which have been challenged in the writ petitions. 22. In South Malabar Gramin Bank v. Coordination Committee of S.M.G.B. Employees' Union and S.M.G.B. Officers' Federation (2001) 4 SCC 101 relied upon by the learned counsel for the petitioners, the Central Government had referred the dispute regarding the pay structure of the employees of the Bank to the Chairman of the National Industrial Tribunal headed by a former Chief Justice of a High Court. The Tribunal after consideration of the material placed before it held that the officers and employees of the regional rural banks will be entitled to claim parity with the officers and other employees of the sponsor banks in the matter of pay scale, allowances and other benefits. The employees of nationalised commercial banks w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay seriously affect the efficiency and at times, even the functioning of the organisation. Therefore, it appears to be the consistent view of this Court that the economic viability or the financial capacity of the employer is an important factor which cannot be ignored while fixing the wage structure, otherwise the unit itself may not be able to function and may have to close down which will inevitably have disastrous consequences for the employees themselves. The material on record clearly shows that both FCI and HFC had been suffering heavy losses for the last many years and the Government had been giving a considerable amount for meeting the expenses of the organisations. In such a situation, the employees cannot legitimately claim that their pay scales should necessarily be revised and enhanced even though the organisations in which they are working are making continuous losses and are deeply in the red. 25. The resume of the precedents on the issue of the liability of the State Government to pay salary and allowances of the employees of the Boards, Corporations and the Companies of which State is a shareholder and are State within the meaning of Article 12, that there is u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide him or them an allowance for meeting food, shelter, clothing, salary, medical treatment, and education, if not more. Surely that was not the intention of Kapila Hingorani (I) (2003)6 SCC 1 and Kapila Hingorani (II) (2005) 2 SCC 262. 28. The final order of the Supreme Court is a direction to the High Court to examine the legal issues and that the legal issue requires to be examined by this Court is as to whether the State can be called upon to pay salary and allowances to the workers of the Boards, Corporations and Companies incorporated at one stage by the State Government. Therefore, the issue as to whether the State Government is liable for payment of salary and allowance has been left open by the Supreme Court for appropriate decision by this Court. QUESTION NO. 3 29. The observations in Kapila Hingorani (I) and Kapila Hingorani (II) are in fact to address the humane problem as it left the question of liability of the State open. Reference may be made to Paragraph 74 in Kapila Hingorani (I) and Paragraph 37 of Kapila Hingorani (II). 30. Even in Harihar Yadav's case, the dispute was on account of bifurcation of the State and consequently, the liability of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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