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CASE NO.:

Transfer Petition (civil) 8 of 2000

PETITIONER:

A.K. Bindal & Anr.

RESPONDENT:

Union of India & Ors.

DATE OF JUDGMENT: 25/04/2003

BENCH:

S. Rajendra Babu & G.P. Mathur.

JUDGMENT:

JUDGMENT

With T.C.(C) Nos.2, 4, 3, 9, 10, 11, 12, 13, 15 of 2000, T.C. (C) No.35 of

2000, and T.P. (C) No.326 of 2002

G.P. MATHUR,J.

The issue raised in these Transfer Petitions is regarding revision of

pay scale of officers of Fertilizer Corporation of India and Hindustan

Fertilizer Corporation and, therefore, they are being disposed of by a

common order. For the sake of convenience, we will refer to the pleadings

in Transfer Case No. 8 of 2000 whereby Writ Petition No. 2108 of 1996

which was filed in Delhi High Court was transferred to this Court.

A.K. Bindal, President, Federation of Officers' Association of

Fertilizer Corporation of India (for short 'FCI') and Dr. K.P. Sinha,

authorised representative of Federation of Officers' Associations of

Hindustan Fertilizer Corporation Ltd. (for short 'HFC') filed Writ Petition

No. 2018 of 1996 in Delhi High Court praying that Clauses 11,12 and 13 of

the Memorandum dated 19.7.1995 issued by Government of India, Ministry

of Industry, Department of Public Enterprises and connected clauses of

Annexure V of the said Memorandum be quashed and consequently the

practice of uniform treatment of the officers in the profit and loss making

companies in the FCI/HFC be revived. The other prayer made is that the

respondents be directed to pay to the petitioners by way of interim relief at

least 60% of the benefit of the revision of pay and perks which their

counterparts have been given, pending final decision of the Writ Petition.

The respondents arrayed in the Writ Petition are (1) The Union of India

through the Secretary, Department of Fertilizers, in the Ministry of

Chemicals & Fertilizers; (2) The Secretary, Department of Public

Enterprises, Ministry of Industry, Government of India; (3) The Fertilizer

Corporation of India Ltd.; and (4) Hindustan Fertilizers Corporation of India

Ltd. The pleadings of the parties are fairly long and the documents filed are

bulky but we will refer only to basic facts which are necessary for the

decision of the controversy.

In January, 1961 two Fertilizer companies, namely Sindri Fertilizers

and Chemicals Ltd. and Hindustan Fertilizer and Chemicals Ltd. were

merged and a new company named as Fertilizer Corporation of India Ltd.

(for short 'FCI') was created. Between 1961 and 1977, FCI, came to have 17

Fertilizer Units, 7 of which were in operation while remaining 10 were at

various stages of implementation. In 1978 the Government of India set up a

Committee to work out the modalities for reorganisation of its Fertilizer

Industry. On the basis of the recommendation of the Committee, the

Government of India approved the bifurcation and reorganization of FCI and

National Fertilizer Ltd. (for short 'NFL') which was an independent and

separate undertaking at that time and allocated the various units to the newly

created undertakings which were five in number. Namrup, Haldia, Barauni

and Durgapur units were allocated to the newly formed Hindustan Fertilizer

Corporation Ltd. (for short 'HFC') and Sindri, Gorakhpur, Ramagundam,

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Talcher, Korba and Jodhpur Mining Organization were retained with FCI.

The other units were allocated to newly created Rashtriya Chemicals and

Fertilizers Ltd. and National Fertilizers Ltd. while a fifth company dealing

exclusively with planning and development was created which was known

as Project and Development (India) Ltd. After reorganization, the industrial

pattern of pay and DA was introduced and it was made effective from

1.9.1977. The Department of Chemicals and Fertilizers, Government of

India issued a circular on 3.9.1979 which provided that revision of pay

scales and fringe benefits of the officers of the entire FCI/NFL would be the

same and consequently all the officers in the five companies were treated

alike with reference to revision of their pay scales and fringe benefits etc.

The revision of pay scales of officers which was due from 1.8.1986 could

not be given as the Government did not take steps in that regard. However a

decision was taken by the Government to give ad hoc relief to all the officers

working in the Public Enterprises, following the Industrial DA pattern and

related scales of pay and accordingly ad hoc relief was paid to all the

officers of FCI and HFC with effect from 1.1.1986 at uniform rate. Since

the Government did not take any decision regarding the revision of pay

scales and perks of the officers of the entire public sector in the country, the

Bureau of Public Enterprises (for short 'BPE') which is a policy making

division of the Government of India, recommended for payment of second

relief to the officers of Public Enterprises following the industrial DA

pattern on 13.1.1990. Consequently FCI/NFL issued circulars on 24.1.1990

for giving ad hoc relief to the officers. During this period the Government

of India and also the Management of FCI and HFC made no distinction on

the basis of "loss making" or "profit making" companies in the matter of

revision of pay scale and fringe benefits to the officers of the companies and

they were treated alike irrespective of the fact that the companies in which

they were working had been making losses. The period of validity of the

revised pay scales made applicable from 1.1.1987 was for five years and

thereafter the next revision of pay scales became due from 1.1.1992 but the

same was not done for the officers employed in FCI and HFC on the ground

that the two companies were incurring losses. However, the other

companies in erstwhile FCI/NFL group of companies were given revised

pay scale and fringe benefits with effect from 1.1.1992. According to the

petitioners an unfair and unjust policy of discrimination in the matter of

revision of pay scales based upon profits and losses of the company

commenced at this stage. Thereafter the Department of Public Enterprises,

Ministry of Industry, Government of India issued an Office Memorandum

on 12.4.1993 on Wage Policy for the fifth round of wage negotiations in

Public Sector Enterprises (for short 'PSEs') whereby the ban imposed by

D.O. No.2(3)/91-DPE (WC) dated 17.10.1991 was withdrawn and it was

directed that the management of PSEs may commence their wage

negotiations with the Trade Unions/Associations. It further provided that

under the new Wage Policy the Managements were free to negotiate the

wage structure keeping in view and consistent with the generation of

resources/profits by the individual enterprises/units but the Government will

not provide any budgetary support for the wage increase and the respective

managements will have to find the requisite resources from within their own

internal generation. Para 5 of this Office Memorandum specifically said

that the wage settlement should be negotiated by the PSEs in accordance

with the above parameters. This was followed by the impugned Office

Memorandum dated 19.7.1995 issued by the Department of Public

Enterprises on the subject of revision of scales of pay of the Executives

holding post below the Board level and non-unionised supervisors with

effect from 1.1.1992. The petitioners are basically aggrieved by para 13 of

this Office Memorandum which provides that for sick PSEs registered with

the Board for Industrial and Financial Reconstruction (for short 'BIFR'), pay

revision and grant of other benefits will be allowed only if it is decided to

revive the unit and the revival package should include the enhanced liability

on this account.

The stand of the respondents in the counter-affidavit filed by them is

that FCI and HFC which were under the administrative control of

Department of Fertilizers (for short 'DOF') were referred to BIFR and were

declared as sick companies on 6.11.1992 and 12.11.1992 respectively. Out

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of the four units of FCI the unit at Gorakhpur was lying closed since

10.6.1990. The commercial production in the Haldia unit of FCI which is

located in West Bengal did not commence at all ever since its mechanical

completion in 1981. The equity base of both the companies had been totally

eroded as a result of continuous losses. The FCI and HFC had projected net

losses of Rs.562.51 crores and Rs.438.99 crores respectively for the year

1996-1997. The BIFR had appointed Industrial Credit and Investment

Corporation of India Ltd. (for short 'ICICI') as the Operating Agency in

March 1994 to examine various options and work out unit wise

rehabilitation plans for these companies. The ICICI submitted its report in

January 1995 and thereafter, the matter was taken up by Group of Ministers

which set up a Committee of officers to evaluate all the available

alternatives for revival of the companies. The Department of Fertilizers,

keeping in view the report of the Operating Agency as well as suggestions

received from various other bodies including the employees

unions/associations formulated revival packages. The package envisaged

revamp of the functional units of these companies namely, Sindri,

Ramagundam and Talcher of FCI and Durgapur, Barauni and Namrup units

of HFC at a total investment of Rs.2201.13 crore (Rs.1736.20 crore for FCI

and Rs.464.93 crore for HFC) without providing for wage revision of the

employees. However, due to prior commitment of funds of Public Sector

Units/Cooperative Societies in the Fertilizer Sector for their ongoing

expansion and reluctance of Financial Institutions to fund the revival

packages of sick PSUs, the funding arrangements for these packages could

not be tied up. The ICICI also expressed serious reservation on the viability

of these packages necessitating a review of the same.

The details of the budgetary support given by the government since

1991-1992 till 1995-1996 have been given in para 12 of the counter-

affidavit. It is averred in para 14 of the counter-affidavit that in case the pay

scales and other benefits of the employees are directed to be revised with

effect from 1.1.1992 it would involve additional financial implication of

Rs.120 crores (Rs.60 crores each for FCI and HFC) for the five year period.

The revival packages for both FCI and HFC have not been approved for

implementation by the BIFR because the Operating Agency, the Department

of Fertilizers and the Promoters have not been able to mobilize funds

required for the revival package. Pay revision of the employees will further

add to the financial requirements for the revival package, which is held up

for want of funding.

It is also pleaded in the counter affidavit that the Government

guidelines do not prohibit BIFR referred companies from revising their pay

scales and other benefits with effect from 1.1.1992 but has linked it with the

basic issue of revival packages of such companies. This revival package is

to be approved by the BIFR after it is agreed to by the Operating Agency

and funding institutions. It has thus been submitted that no decision could

be taken on revision of pay scales of the employees of FCI and HFC as it is

linked to the revival packages being formulated for these companies for

approval of BIFR. The Office Memorandum dated 19.7.1995 has been

issued with the approval of the Cabinet Committee on Economic Affairs.

The basic thrust of the policy as contained in office memorandum dated

12.4.1993 is that PSUs should generate their own resources for meeting the

enhanced liability on account of pay revision and no budgetary support shall

be extended to them by the Government.

After transfer of writ petitions, this Court issued several directions to

BIFR to submit reports regarding viability of the units of the companies. The

BIFR by its order dated 2.11.2001 recommended winding up of FCI. A

similar order for winding up of HFC has also been passed. The FCI

preferred an appeal before AAIFR which has been dismissed. The Delhi

High Court is now proceeding with winding up of both the companies

namely, FCI and HFC.

Shri R. Venkataramani, learned senior counsel for the petitioners, has

submitted that just as pension is not bounty or a matter of grace depending

upon the sweet will of the employer, so also, a fair and reasonable return for

employment is neither a bounty nor a matter of grace. This is a right arising

out of the relationship of employment and in the determination of the same

particularly if the employer is the State, fair and reasonable criteria will have

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to be adopted and to the extent a fair and reasonable return is denied on the

sole ground of the need to take a decision regarding continued existence of

the establishments in question, the fundamental right of the petitioners

guaranteed under Articles 14 and 21 read with Article 39(a) and 43 of the

Constitution is violated. Learned counsel has submitted that the impugned

Office Memorandum is discriminatory in as much as PSUs which follow the

Central Dearness Allowance pattern are getting the benefit of periodical pay

revision regardless of the position of the undertaking, namely whether

running in losses or making profits. The PSUs, such as the establishments in

question, which are governed by the Industrial Dearness Allowance pattern

are singled out and are denied periodical pay revision since 1992. It has

been urged that having regard to socio-economic objectives sought to be

realized by the establishment of the fertilizer industry in the public sector

and the fact that the said industry has served the aforesaid purpose of

production and distribution of fertilizers at affordable prices and augmenting

agricultural and rural productivity, it was inappropriate on the part of the

Government of India to postpone the revision of pay from 1992 and to link

it up in the year 1995 with the decision to refer the companies to BIFR.

Learned counsel has further submitted that when it is not demonstrated that

the incident of loss is attributable to the conduct of employees or workers

and when it is acknowledged that several factors which could have been

conveniently dealt with to eliminate loss making condition (viz. old plants

and obsolete technology) and to do so was within the competence of the

Government of India, it will be gross injustice to the employees to deny their

pay revision by relating it with profitability. Sickness of PSU without

consideration of the causes of sickness, it is urged, can be no ground for

denial of fair pay revision particularly when the Government of India has

failed to take relevant and efficient steps to promote the health of the

industry.

In support of his submissions that financial capacity or otherwise can

be no ground for denying revision of wages of employees of the State or

PSUs, Shri Venkataramani has placed strong reliance on South Malabar

Gramin Bank v. Coordination Committee of South Malabar Gramin Bank

Employees' Union and South Malabar Gramin Bank Officers' Federation

and Ors. (2001) 4 SCC 101 and All India Regional Rural Bank Officers

Federation & Ors. v. Government of India & Ors. (2002) 3 SCC 554.

Regarding the submission based upon violation of fundamental rights of the

petitioners, learned counsel has laid great emphasis on the following

observations made by Sawant J. in Delhi Transport Corporation v. D.T.C.

Mazdoor Congress (1990) Supp 1 SCR 142 at pages 276 and 277 which read

as under:-

"The employment under the public undertakings is

a public employment and a public property. It is not

only the undertakings but also the society which has a

stake in their proper and efficient working. Both

discipline and devotion are necessary for efficacy. To

ensure both, the service conditions of those who work for

them must be encouraging, certain and secured, and not

vague and whimsical. With capricious service

condition, both discipline and devotion are endangered

and efficiency is impaired.

The right to life includes right to livelihood. The

right to livelihood therefore cannot hang on to the fancies

of individuals in authority. The employment is not a

bounty from them nor can its survival be at their mercy.

Income is the foundation of many fundamental rights and

when work is the sole source of income, the right to work

becomes as much fundamental. Fundamental rights can

ill-afford to be consigned to the limbo of undefined

premises and uncertain applications. That will be a

mockery of them."

To strengthen his submission that the denial of fair wages on account

of non-revision of pay scale would violate the fundamental right of the

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petitioners, learned counsel has also tried to take support from certain

observations made in All India Imams Organisation & Ors. v. Union of

India 1993 (3) SCC 584 wherein it was held that Imams who perform

religious duties are also entitled to emoluments, as right to life, enshrined in

Article 21 means right to live with human dignity and that financial

difficulties of the institutions cannot be above fundamental rights of a

citizen. Another serious contention raised by Shri Venkataramani is that the

Union of India had also agreed both in the meeting held on 20.9.1996 and

also in the affidavit filed before the Delhi High Court for a settlement

regarding the revision of pay scales being implemented from 1.1.1992 but

without payment of arrears upto 1.1.1996. According to the learned counsel

the High Court had passed an order on 10.11.1997 recording the

compromise and the matter was adjourned only to work out the modalities of

payment, but on account of filing of Transfer Petition by the Union of India

in this Court, the compromise could not be implemented. However, taking

note of the said compromise this Court passed orders on 19.4.2000 and

18.8.2000 for payment of fixed amounts to various categories of employees.

The submission is that in view of the compromise entered into by the

respondents and the orders passed by Delhi High Court and thereafter by this

Court, it is not open to the respondents to resile from the same and deny the

benefit of revision of pay scale to the petitioners.

In order to appreciate the first submission, it is necessary to refer to

the two Office Memorandums which have been assailed in the writ petitions.

Para 2 of Office Memorandum No.1 (3)/86-DPE (WC) dated 12.4.1993

issued by Department of Public Enterprise, Ministry of Industry,

Government of India which is relevant for our purposes is being reproduced

below:

"Under the new wage policy, the Managements are

free to negotiate the wage structure keeping in view and

consistent with the generation of resources/profits by the

individual enterprises/units. The Government will not

provide any budgetary support for the wage increase and

the respective managements will have to find the

requisite resources from within their own internal

generation. For certain PSEs which are monopolies or

near monopolies or having an administered price

structure, it must be ensured that increase in wages after

negotiations do not result in an automatic increase in

administered prices of their goods and services."

The subject and paras 11 and 13 of Office Memorandum issued by

the same department on 19.7.1995 read as under:

"Subject: Revision of Scales of Pay of the Executives

holding posts below the Board level and non-

unionised supervisors w.e.f. 1.1.1992.

Para 11. The pay revision of the executives holding posts

below the Board level and non-unionised supervisors

would be permitted subject to the conditions stipulated in

the DPE's OM No.1(3)86-DPE(WC) dated 12.4.1993

and 17.1.1994. These conditions prescribe that there

shall be no increase in labour cost per physical unit of

output. The Government shall not provide any budgetary

support to the PSEs for meeting the enhanced liability.

The PSEs which are monopolies or near monopolies or

having an administered price structure, it must be ensured

that increase in salaries/wages do not result in an

automatic increase in administered prices of their goods

and services. Requisite resources for the pay increases

must be found from within own internal generation.

Para 13. For sick PSEs registered with the BIFR, pay revision

and grant of other benefits will be allowed only if it is

decided to revive the unit. The revival package should

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include the enhanced liability on this account. The

benefit of pay revision, etc. shall be extended to IISCO

and financial liability thereof shall be met by SAIL."

The change in policy effected by these Memorandums was that the

Government would not provide any budgetary support for the wage increase

and the undertakings themselves will have to generate the resources to meet

the additional expenditure, which will be incurred on account of increase in

wages. So far as sick enterprises which were registered with BIFR it was

directed that the revision in pay scale and other benefits would be allowed

only if it was actually decided to revive the industrial unit. The question

which arises for consideration is whether the employees of Public Sector

Enterprises have any legal right to claim that though the industrial

undertakings or the companies in which they are working did not have the

financial capacity to grant revision in pay scale, yet the Government should

give financial support to meet the additional expenditure incurred in that

regard.

The Fertilizer Corporation of India and Hindustan Fertilizer

Corporation are both companies registered under the Companies Act with

the only difference that they are Government Companies within the meaning

of Section 617 of the Companies Act. What will be the legal position of a

Government Company and whether its employees will be treated to be

government servants was examined in Heavy Engineering Mazdoor Union

v. State of Bihar & Ors. AIR 1970 SC 82 and it was held as under in para 4

of the reports:

".............It is an undisputed fact that the company was

incorporated under the Companies Act and it is the

company so incorporated which carries on the

undertaking. The undertaking, therefore, is not one

carried on directly by the Central Government or by any

one of its departments as in the case of posts and

telegraphs or the railways........"

After referring to the well known decision in Saloman v. A. Saloman

& Co. Ltd. 1897 AC 22, Halsbury's Laws of England and some other

English decisions the Court ruled as under:

"............Therefore, the mere fact that the entire share

capital of the respondent-company was contributed by

the Central Government and the fact that all its shares are

held by the President and certain officers of the Central

Government does not make any difference. The

company and the share holders being, as aforesaid,

distinct entities the fact that the President of India and

certain officers hold all its shares does not make the

company an agent either of the President or the Central

Government..........."

Again in para 5 it was held that the fact that a minister appoints the

members or directors of a corporation and he is entitled to call for

information, to give directions which are binding on the directors and to

supervise over the conduct of the business of the corporation does not render

the corporation an agent of the State.

The legal position is that identity of the Government Company

remains distinct from the government. The Government Company is not

identified with the Union but has been placed under a special system of

control and conferred certain privileges by virtue of the provisions contained

in Sections 619 and 620 of the Companies Act. Merely because the entire

share holding is owned by the Central Government will not make the

incorporated company as Central Government. It is also equally well settled

that the employees of the Government Company are not civil servants and so

are not entitled to the protection afforded by Article 311 of the Constitution

(Pyare Lal Sharma v. Managing Director AIR 1989 SC 1854). Since

employees of Government Companies are not government servants they

have absolutely no legal right to claim that government should pay their

salary or that the additional expenditure incurred on account of revision of

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their pay scale should be met by the government. Being employees of the

companies it is the responsibility of the companies to pay them salary and if

the company is sustaining losses continuously over a period and does not

have the financial capacity to revise or enhance the pay scale, the

petitioners cannot claim any legal right to ask for a direction to the Central

Government to meet the additional expenditure which may be incurred on

account of revision of pay scales. It appears that prior to issuance of the

Office Memorandum dated 12.4.1993 the Government had been providing

the necessary funds for the management of Public Sector Enterprises which

had been incurring losses. After the change in economic policy introduced

in early nineties, Government took a decision that the Public Sector

Undertakings will have to generate their own resources to meet the

additional expenditure incurred on account of increase in wages and that the

government will not provide any funds for the same. Such of the Public

Sector Enterprises (Government Companies) which had become sick and

had been referred to BIFR, were obviously running on huge losses and did

not have their own resources 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.

We are unable to accept the contention of Shri Venkataramani that on

account of non-revision of pay scales of the petitioners in the year 1992,

there has been any violation of their fundamental rights guaranteed under

Article 21 of the Constitution. Article 21 provides that no person shall be

deprived of his life or personal liberty except according to procedure

established by law. The scope and content of this Article has been expanded

by judicial decisions. Right to life enshrined in this Article means

something more than survival or animal existence. It would include the right

to live with human dignity. Payment of very small subsistence allowance to

an employee under suspension which would be wholly insufficient to sustain

his living, was held to be violative of Article 21 of the Constitution in State

of Maharashtra v. Chandrabhan AIR 1983 SC 803. Similarly, unfair

conditions of labour in People's Union for Civil Liberties v. Union of India

AIR 1982 SC 1473. It has been held to embrace within its field the right to

livelihood by means which are not illegal, immoral or opposed to public

policy in Olga Tellis v. Bombay Municipal Corporation AIR 1987 SC 108.

But to hold that mere non-revision of pay scale would also amount to a

violation of the fundamental right guaranteed under Article 21 would be

stretching it too far and cannot be countenanced. Even under the Industrial

law, the view is that the workmen should get a minimum wage or a fair

wage but not that his wages must be revised and enhanced periodically. It is

true that on account of inflation there has been a general price rise but by

that fact alone it is not possible to draw an inference that the salary currently

being paid to them is wholly inadequate to lead a life with human dignity.

What should be the salary structure to lead a "life with human dignity" is a

difficult exercise and cannot be measured in absolute terms. It will depend

upon nature of duty and responsibility of the post, the requisite qualification

and experience, working condition and a host of other factors. The salary

structure of similarly placed persons working in other Public Sector

Undertakings may also be relevant. The petitioners have not placed any

material on record to show that the salary which is currently being paid to

them is so low that they are not able to maintain their living having regard to

the post which they are holding. The observations made in paragraphs 276

and 277 in Delhi Transport Corporation v. D.T.C. Mazdoor Congress

(supra), strongly relied upon by learned counsel for the petitioners, should

not be read out of its context. In the said case the Court was called upon to

consider the constitutional validity of Regulation 9 of Delhi Road Transport

Authority (Conditions of Appointment and Service) Regulations, 1952,

which gave power to terminate the services of an employee after giving one

month's notice or pay in lieu thereof. The termination of services of some

of the employees on the ground that they were inefficient in their work by

giving one month's notice was set aside by the High Court as in its opinion

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Regulation 9(b) gave absolute unbridled and arbitrary powers to the

management to terminate the service of any permanent or temporary

employee and, therefore, the same was violative of Article 14 of the

Constitution. It was in this context that the aforesaid observations were

made by one Hon'ble Judge in his separate opinion. The issue involved was

not of revision of pay scale but that of termination of service which has an

altogether different impact on an employee.

The contention that economic viability of the industrial unit or the

financial capacity of the employer cannot be taken into consideration in the

matter of revision of pay scales of the employees, does not appeal to us.

The question of revision of wages of workmen was examined by a

Constitution Bench in Express Newspapers Ltd. & Ors. v. Union of India &

Ors. AIR 1958 SC 578 having regard to the provisions of Industrial Disputes

Act and Minimum Wages Act and the following principles for fixation of

rates of wages were laid down :

(1) that in the fixation of rates of wages which include within its compass

the fixation of scales of wages also, the capacity of the industry to pay

is one of the essential circumstance to be taken into consideration

except in cases of bare subsistence or minimum wage where the

employer is bound to pay the same irrespective of such capacity ;

(2) that the capacity of the industry to pay is to be considered on an

industry-cum-region basis after taking a fair cross section of the

industry; and

(3) that the proper measure for gauging the capacity of the industry to pay

should take into account the elasticity of demand for the product, the

possibility of tightening up the organisation so that the industry could

pay higher wages without difficulty and the possibility of increase in

the efficiency of the lowest paid workers resulting in increase in

production considered in conjunction with the elasticity of demand for

the product - no doubt against the ultimate back-ground that the

burden of the increased rate should not be such as to drive the

employer out of business.

(Emphasis supplied)

The same question was again examined in Hindustan Times Ltd. v.

Their Workmen AIR 1963 SC 1332 and the Court recorded its conclusion in

following words in para 7 of the Report :

"While industrial adjudication will be happy to fix a

wage structure which would give the workmen generally a

living wage, economic considerations make that only dream for

the future. That is why the Industrial Tribunals in this country

generally confine their horizon to the target of fixing a fair

wage. But there again, the economic factors have to be

carefully considered. For these reasons, this Court has

repeatedly emphasised the need of considering the problem on

an industry-cum-region basis, and of giving careful

consideration to the ability of the industry to pay."

(Emphasis supplied)

It may be noticed that in these cases the Court was considering the

question of wage structure for workmen who belong to economically poor

section of society and providing them even living wage was held to be a

distant dream on account of economic considerations and also the capacity

of the industry to pay.

In South Malabar Gramin Bank v. Coordination Committee of South

Malabar Gramin Bank Employees' Union and South Malabar Gramin Bank

Officers' Federation and Ors. (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 were getting

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their pay scales on the basis of 5th bipartite settlement and by

implementation of the award of the National Industrial Tribunal, the

employees of the Regional Rural Banks were also given the benefits of the

same settlement. Subsequently, the pay structures of the employees of

nationalised commercial banks were further revised by 6th and 7th bipartite

settlements but the same was not done for the employees of the Regional

Rural Banks who then filed writ petitions. It was contended on behalf of

the Union of India and also the Banks that financial condition of the

Regional Rural Banks was not such that they may give their employees the

pay structure of the employees of the nationalised commercial banks. It

was in these circumstances that this Court observed that the decision of the

National Industrial Tribunal in the form of an award having been

implemented by the Central Government, it would not be permissible for

the employer bank or the Union of India to take such a plea in the

proceedings before the Court. The other case namely All India Regional

Rural Bank Officers Federation & Ors. v. Government of India & Ors.

(2002) 3 SCC 554 arose out of interlocutory applications and contempt

petitions which were filed for implementation of the direction issued in the

earlier case namely South Malabar Gramin Bank (supra). Any observation

in these two cases to the effect that the financial capacity of the employer

cannot be held to be a germane consideration for determination of the wage

structure of the employees must, therefore, be confined to the facts of the

aforesaid case and cannot be held to be of general application in all

situations. In Associate Banks Officers' Association v. State Bank of India

& Ors. 1998 (1) SCC 428 it was observed that many ingredients go into the

shaping of the wage structure of any organisation which may have been

shaped by negotiated settlements with employees' unions or through

industrial adjudication or with the help of expert committees. The

economic capability of the employer also plays a crucial part in it; as also its

capacity to expand business or earn more profits. It was also held that a

simplistic approach, granting higher remuneration to workers in one

organisation because another organisation had granted them, may lead to

undesirable results and the application of the doctrine would be fraught with

danger and may 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 considerable amount for meeting the

expenses of the organisation. 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 red.

The second argument based upon the so-called

settlement/compromise may now be examined. The petitioners A.K. Bindal

and others moved Civil Misc. Application No.7885 of 1996 before the High

Court for grant of interim relief. It was prayed that a direction regarding

implementation of the revision benefit with effect from the date of the

application by notionally calculating the pay etc., as would have been

available to the petitioners, had the pay revision been implemented from

1.1.1992 be issued and further at least 50 per cent of the arrears which

would be due to the petitioners for the period 1.1.1992 to the date of the

filing of the application be paid to them. The respondents opposed the prayer

for grant of interim relief by filing a reply stating that the application is

devoid of any merits and the same is liable to be dismissed. The relevant part

of para G, H and I which has a bearing on the controversy in hand, is being

reproduced below:-

"As already submitted in reply to A & B above,

budgetary support to the extent possible has been

provided by the Government to enable these companies

to sustain operations in their functional units with a view

to avoiding irretrievable damage to equipment and

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supplementing the indigenous urea production. This has

been done even at the cost of large cash losses incurred

by these companies pending a final decision on their

revival by the BIFR. These companies are unable to

generate any internal resources to absorb the enhanced

liability of increased salary to their employees. Under

the extant guidelines for salary revision of PSUs

employees, such liability is not to be met through

budgetary support. Pay revision will be allowed only if it

is decided by the BIFR to revive these companies and the

revival packages include the enhanced liability on this

account. As a compromise solution, the managements of

the Respondents No.3 and 4 had explored the possibility

of providing salary revision w.e.f. 1.1.96 subject to the

condition that no arrears would be paid for the period

1.1.92 to 31.12.95 which the company would consider at

a later date after its turn around, however, subject to

availability of funds. Since no mutual agreement could

be arrived at between the managements & the

associations, this proposal could not get

finalised.........."

The application was heard by a learned Single Judge of the High

Court who passed an order on 10.11.1997 which according to the petitioners

contains the terms of the settlement. After the transfer of the Writ Petitions

this Court passed a detail order on 19.4.2000 and it is necessary to

reproduce the same in extenso.

"Having heard leaned senior counsel for the petitioners,

learned senior counsel Mr. Goswami for the Union of India, the

learned counsel for the Hindustan Fertiliser Corporation Ltd.

(HFC) and Fertilizer Corporation of India (FCI), we find that

appropriate interim orders, without prejudice to the rights and

contentions of all concerned, are required to be passed at this

stage for employees of all the units of the aforesaid two

corporations.

In the writ petition which was moved before the High

Court of Delhi by the concerned employees of the aforesaid two

concerns claiming for revision of pay scales and payment of

appropriate amounts accordingly, a learned Single Judge of the

High Court has on 10th November 1997 made the following

observations :

"In reply to the petitioner's application the

respondent had taken the stand that as a compromise the

respondents 3 and 4 agreed to provide revised salary to

the petitioners w.e.f. 1st January 1996, subject to the

contention that no arrear w.e.f. 1st January 1992 till 31st

December 1995 will be paid. The petitioner is prepared

to accept the offer of the respondent. Counsel for the

respondent wants to take instruction with regard to

payment as per record. Let him do so.

Matter be listed on 21st November, 1997."

It is, of course, true that the order recites that respondent

nos.3 and 4 agreed to provide revised salary to the petitioner

w.e.f. 01st January 1996 subject to the contention that no arrears

w.e.f. 01st January 1992 till 31st December 1995 will be paid

and the petitioner was prepared to accept the said offer of the

respondent. Though respondent nos.3 and 4 agreed to provide

revised salary to the petitioner but the real responsibility to

make payment would rest on the shoulders of the respondent-

Union of India. The order further recites that counsel for the

respondent wanted to take instructions with regard to the

payment as per the record and the Court said 'let him do so',

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and, therefore, the matter was to be listed on 21st November,

1997.

It is to be noted that, therefore, the matter stood

adjourned for passing appropriate orders in the light of what

transpired on 10th November 1997 only in connection with

fixing the mode of payment of the appropriate salary in the

revised time scale with effect from 01st January, 1996. For that

purpose, the matter stood adjourned from time to time till

ultimately it got transferred to this Court pursuant to our order

in T.P. (c) No.845 of 1998.

Learned senior counsel Shri Goswami has filed a reply,

which is taken on record, to the prayer of the petitioners in the

transferred case. In fact he raised grievance that the financial

conditions of these units is not good and many of them have

been closed. Be that as it may, as the proceedings are pending

before the Board for Financial and Industrial Reconstruction

(BIFR), since 1992 it will be for the BIFR to look into the

grievance of the respondent-Union of India to do the needful in

this connection. We are sure that the Union of India will also

fully cooperate in seeing to it that the BIFR is enabled to take

appropriate decisions in this connection at the earliest.

However, in the light of what is stated in the order of the

learned Single Judge of the High Court dated 10th November

1997 which uptill now has not been sought to be got revised,

reviewed or appealed against, we deem it fit, in the interest of

justice, to give at least a limited relief to all the employees of

the aforesaid two concerns, including, Class III and IV

employees, purely as an ad-hoc measure, and without prejudice

to the rights and contentions of all concerned to the following

effect :

Revised salary shall be computed with effect

from 01st January 1992 notionally for the concerned

staff members of all the units of the aforesaid two

Government Corporatations, namely, HFC and FCI

only.

No arrears shall be paid to the concerned

staff members till 31st March, 2000. Only actual

revised salary will be available in the time scale so

computed, from 01st April 2000 on the basis of the

revised pay scale available from 01st January 1992.

However, no further upward revision of pay

scales will be available to the concerned staff

members pursuant to the present order. That

question is kept open.

The revised salaries payable from 01st April

2000 shall be paid to the concerned employees

within six weeks from today and then in future

salaries in revised pay scales as per 1.1.92 revision

will be made available to the concerned staff

members from month to month till further orders.

These proceedings will now stand over for six months.

In the meantime we hope and trust that the Union of India will

take appropriate steps before BIFR due to the emergent

situation which is projected vociferously by learned senior

counsel for the Union of India to the effect that may of these

units have been closed.

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It is for the Union of India to respond appropriately to the

BIFR enquiry which is pending since 1992. Learned counsel

for BIFR also assured this Court that the moment the BIFR

hears from the concerned authroties, BIFR will promptly take

decisions in the matter.

It is axiomatic to observe that if these two corporations,

which are the limbs of the Government, want appropriate funds

to be released for compliance of this order, it will be for the

Union of India to stand up to the occasion and to comply with

such request."

(Emphasis supplied)

The Union of India moved an application for

clarification/modification of the above order which was heard on 18.8.2000

and the following order was passed:-

"Having heard learned Solicitor General for the applicant

- Union of India and learned senior counsel Mr. Sanyal, for the

contesting respondents, purely as an adhoc measure and without

prejudice to the rights and contentions of the parties in the main

matter, we deem it fit in the interest of justice to modify our

order dated 19.04.2000 to the following effect :-

(i) The authorities shall pay as an adhoc

measure and on account Rs.1,500/- to Class-I

employees; Rs.1,000/- to Class II employees;

Rs.750/- to Class-III employees and Rs.500/- to

Class-IV employees consisting of various

categories in each of the Classes; per month with

effect from 1.4.2000. This payment will be

without prejudice to the rights and contentions of

the parties in the pending matters.

(ii) We make it clear that this order will

not affect whatever payment by way of HRA is

being released or was released by the authorities to

the employees concerned.

(iii) The direction that payments as earlier

issued by us on 19.4.2000 will stand modified by

the present order.

(iv) According to this order, all arrears

with effect from 1.4.2000 to 31.7.2000 will be

cleared within ten weeks from today and the

current payment be made with effect from

1.8.2000 along with the salary payable for the

month of August, 2000.

(v) Future payments shall accordingly be

made from month to month regularly along with

usual salaries payable to them.

This order is passed purely as an ad hoc measure and will

not come in the way of the ultimate decision of this Court.

This order will also not be treated as a precedent in any matter

in view of the special facts of the present case. We express no

opinion about the nature of the order passed by learned Single

Judge of the High Court. That question will abide by the

decision in the main matter. In view of the present order, I.A.s

are disposed of."

(Emphasis supplied)

It may be noticed that the reference to the word "compromise" has

been made in the order of the High Court dated 10.11.1997 and this order

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was passed in Civil Misc. Application No.7885 of 1996 which was filed by

the petitioners for grant of interim relief. In the counter-affidavit which

was filed on behalf of the respondents it was asserted that the application is

meritless and the prayer for interim relief was devoid of any merits and the

application was liable to be dismissed. In para G, H and I of the counter-

affidavit, reproduced above, it was stated that pay revision will be allowed

only if it is decided by the BIFR to revive the companies and the revival

packages will include the enhanced liability on this account. A reading of the

above paragraphs will further show that the management of respondent nos.

3 and 4 alone had explored the possibility of a compromise solution but even

this proposal could not be finalised. The learned Single Judge of the High

Court, in our opinion, misunderstood the content and import of the stand

taken in para G, H and I of the counter-affidavit and wrongly proceeded on

the basis as if the respondent nos. 3 and 4 had, subject to certain conditions,

agreed to provide revised salary from 1.1.1996. In fact no offer of payment

of revised salary had been made yet it was mentioned in the order that "the

petitioner is prepared to accept the offer of the respondent". No final order

had been passed recording any compromise as the counsel for respondents

wanted to take instructions and the matter was adjourned. It is also

noteworthy that the so called agreement/compromise mentioned in the order

was only on behalf of respondent nos. 3 and 4 which are FCI and HFC

respectively. There was no compromise or agreement to pay revised salary

on behalf of the Union of India which is respondent no. 1 to the writ petition.

The order passed by this Court on 19.4.2000 clearly recorded that a limited

relief to all the employees of the two companies was being granted purely as

ad hoc measure and without prejudice to the rights and contentions of all

concerned. This was reiterated in the subsequent order dated 18.8.2000

when it was said that the order was being passed purely as ad hoc measure

and will not come in the way of the ultimate decision of the Court The

principal relief claimed by the petitioners is against Union of India and

Secretary, Department of Public Enterprises (respondent nos. 3 and 4) as it is

they who have issued the impugned memorandum dated 19.7.1995 which

places embargo upon the revision of pay scale of employees of sick PSUs

registered with BIFR. Factually there being no compromise or settlement on

behalf of respondent nos.3 and 4 for payment of revised salary as they had

never agreed to do so and the orders passed by this Court on 19.4.2000 and

18.8.2000 having clearly indicated that they were being passed by way of

ad hoc measure and were not to come in any way in the ultimate decision of

the case, it is not possible to hold that there was any compromise or

settlement at any earlier stage which entitled the petitioners to get

revised salary. The contention of the petitioner based upon the alleged

settlement or compromise is, therefore, devoid of merits and has to be

rejected.

Apart from what we have discussed earlier, it is necessary to take note

of a subsequent development which has a serious impact on the relief

claimed by the petitioners. The respondents have filed an affidavit on

15.2.2003 sworn by Shri Pawan Wadhwa, Deputy Secretary, Department of

Fertilizers, Ministry of Chemicals and Fertilizers. It is averred in the said

affidavit that the accumulated losses as on 31.1.2003 of HFC have been

Rs.7421.52 crores and that of FCI have been Rs.8874.00 crores. To meet

the expenditure towards salary, wages as well as other administrative

expenses in these units including preservation cost of the plants, total plan

and non-plan budgetary assistance to the tune of Rs.2,227.00 crores has been

extended by the Government of India till 31.1.2003. The commercial

production in some of the units of both the companies never commenced and

the remaining units suspended operations one by one as viability/economics

of production of urea in these plants had become extremely unfavourable.

The revival packages of these companies could not be taken up for want of

funding tie up with the Financial Institutions on account of their reservation

about the techno-economic viability of the proposals. The revival package

based on unit-wise techno-economic viability were considered by the

competent authority in the Government from time to time culminating in

Government's decision on 18.7.2002 and 5.9.2002 for closure of majority of

the units of both FCI and HFC along with supporting establishments. The

Government had incurred an expenditure for Rs.72.96 lakhs per month in

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respect of HFC and Rs.69 lakhs per month in respect of FCI in

implementing the orders of this Court dated 19.4.2000 and 18.8.2000. The

accumulated expenditure which had been borne by the Government of India

through non-plan budgetary support till date as on this account adds up to

Rs.16.56 crores in respect of FCI and Rs. 21.56 crores in respect of HFC. It

is further averred that in October 1998 the Government announced a scheme

for Voluntary Retirement for the employees of the Central Public Sector

Undertakings. This scheme was liberalised and another scheme was

announced on 5.5.2000 in order to give benefit to the employees of the

Enterprises in which pay revision with effect from 1.1.1992 and 1.1.1997

had not been affected. The Government announced further liberalised

scheme on 6.11.2001 under which the Voluntary Retirement compensation

on the basis of their existing pay (basic + DA) was increased by 100 per cent

and 50 per cent respectively. According to the respondents almost 99 per

cent of employees of FCI and HFC had opted for the Voluntary Retirement

Scheme (for short VRS). The exact figures regarding implementation of the

Scheme as on 24.3.2003 is given below:

PSU-WISE DETAILS OF IMPLEMENTATION OF VRS

S.No

Item

HFC

FCI

1.

Total employees as on 20.9.2002

4881

5712

2.

Employees opted for VRS

4781

5675

3.

Employees released

4325

5097

4.

Funds released by DOF (Rs. Crores)

174.50

253.50

5.

Funds actually utilized by the company

154.10

237.30

6.

Balance funds with the Company

20.50

16.20

Shri Mukul Rohtagi, learned Additional Solicitor General has

submitted that while framing the Voluntary Retirement Scheme the

grievance of the petitioners regarding non-revision of their pay scale has

been taken into consideration and it was for this reason that in the second

Voluntary Retirement Scheme announced on 6.11.2001

ex-gratia payment in respect of employees on pay scales at 1.1.1987 level

has been increased by 100 per cent and for employees on pay scales at

1.1.1992 level, it has been increased by 50 per cent So far as HFC is

concerned 4781 out of 4881 employees had opted for VRS and only 100

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remained. Similarly for FCI out of 5712 employees 5675 had opted for VRS

and only 37 remained. The majority of left over number of employees in

both the companies is proposed to be retained for assisting in completion of

the formalities entailing the closure process. The Government of India had

released an amount of Rs.154 crores to HFC and Rs.237.50 crores to FCI for

disbursal of VRS benefits to these employees. Learned counsel has

submitted that the employees of both the Companies having taken

advantage of VRS and having taken the amount without any demur, the

relationship of employer and employee had ceased to exist. They cannot

therefore raise any grievance regarding the non revision of pay scale at this

stage and consequently the Writ Petitions have become infructuous. Even

Shri A.K. Bindal who filed the writ petition in his capacity as President of

Federation of Officers Association had also taken voluntary retirement and

after acceptance of the amount had left the company and had gone out.

Shri Venkataramani has submitted that the employees had no option

in the matter and had accepted the VRS under compulsion as it was

provided therein that those who did not opt for the same within three

months from the date of offer would be eligible only for retrenchment

compensation. He has also submitted that under the Scheme the total

compensation amount has to be calculated on the basis of existing pay scale

and as there was no revision of pay scales since 1992, the petitioners have

got a very small amount. Learned counsel has further submitted that there

can be no waiver of fundamental rights and even if an employee has opted

for VRS and has taken the amount and left the company it would not mean

that he has foregone his right to claim the salary which he was entitled to

get during the period when he was an employee of the company.

The material on record shows that both FCI and HFC had suffered

continuous losses. The Financial status of the companies as on 31.3.1996

was as under:

FCI HFC

Paid up equity and reserves as on 31.3.96 662.84 705.13

Accumulated Loss upto 31.3.96 2510.95 3096.16

Net worth as on 31.3.96 (-) 2248.11 (-) 2385.03

Net Profit/Loss (95-96) (-) 426.62 (-) 466.52

(Provisional)

(All figures in crores)

In the year 1996-97 FCI and HFC projected net losses of Rs. 562.51

crores and Rs. 438.99 crores respectively. The total loss suffered by these

companies as on 31.1.2003 was Rs.8874.00 crores and 7421.52 crores

respectively. The Government extended non-plan budgetary assistance of

Rs.2369.00 crores to FCI and Rs.2227.00 crores to HFC upto 31.1.2003.

The units of the companies have already suspended their operations

quite some time back and as on date no unit is functioning nor any

production is being made. There is also no denial of the fact that the

companies have suffered huge losses and salaries of the employees who

were practically doing no work has been paid by the Government for a

considerable long period. The employees accepted VRS with their eyes

open without making any kind of protest regarding their past rights based

upon revision of pay scale from 1.1.1992.

The Voluntary Retirement Scheme (VRS) which is some times called

Voluntary Separation Scheme (VSS) is introduced by companies and

industrial establishments in order to reduce the surplus staff and to bring in

financial efficiency. The Office Memorandum dated 5.5.2000 issued by

Government of India provided that for sick and unviable units, the VRS

package of Department of Heavy Industry will be adopted. Under this

Scheme an employee is entitled to an ex-gratia payment equivalent to 45

days emoluments (pay + D.A.) for each completed year of service or the

monthly emoluments at the time of retirement multiplied by the balance

months of service left before the normal date of retirement, whichever is

less. This is in addition to terminal benefits. The Government was

conscious about the fact that the pay scales of some of the PSUs had not

been revised with effect from 1.1.1992 and therefore it has provided

adequate compensation in that regard in the second VRS which was

announced for all Central Public Sector Undertakings on 6.11.2001. Clause

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(a) of the scheme reads as under:

a) Ex-gratia payment in respect of employees on pay

scales at 1.1.87 and 1.1.92 levels, computed on their

existing pay scales in accordance with the extant scheme,

shall be increased by 100% and 50% respectively.

This shows that a considerable amount is to be paid to an employee

ex-gratia besides the terminal benefits in case he opts for voluntary

retirement under the Scheme and his option is accepted. The amount is paid

not for doing any work or rendering any service. It is paid in lieu of the

employee himself leaving the services of the company or the industrial

establishment and forgoing all his claims or rights in the same. It is a

package deal of give and take. That is why in business world it is known as

'Golden Handshake'. The main purpose of paying this amount is to bring

about a complete cessation of the jural relationship between the employer

and the employee. After the amount is paid and the employee ceases to be

under the employment of the company or the undertaking, he leaves with all

his rights and there is no question of his again agitating for any kind of his

past rights, with his erstwhile employer including making any claim with

regard to enhancement of pay scale for an earlier period. If the employee is

still permitted to raise a grievance regarding enhancement of pay scale from

a retrospective date, even after he has opted for Voluntary Retirement

Scheme and has accepted the amount paid to him, the whole purpose of

introducing the Scheme would be totally frustrated.

The contention that the employees opted for VRS under any kind of

compulsion is not worthy of acceptance. The petitioners are officers of the

two companies and are mature enough to weigh the pros and cons of the

options which were available to them. They could have waited and pursued

their claim for revision of pay scale without opting for VRS. However they,

in their wisdom thought that in the fact situation VRS was a better option

available and chose the same. After having applied for VRS and taken the

money it is not open to them to contend that they exercised the option under

any kind of compulsion. In view of the fact that nearly ninety nine per cent

of employees have availed of the VRS Scheme and have left the companies

(FCI & HFC), the writ petition no longer survives and has become

infructuous.

Shri Nageshwar Rao, learned senior counsel appearing in Transferred

Case No.35 of 2000 (Writ Petition filed by employees of HFC in Calcutta

High Court) apart from challenging the validity of the Office Memorandum

on the same grounds also urged that the price of urea was fixed by the

Government under Fertilizer Control Order which was wholly

unremunerative and, therefore, the employees cannot in any way be held

responsible for the losses suffered by the Units and consequently they should

not be made to suffer on that account. We are unable to entertain this

submission as the factual foundation for such a plea has not been laid in the

pleadings. That apart, learned counsel for the respondents has made a

statement that the Government had reimbursed the Units in that regard.

For the reasons discussed above, we find no merit in the Transferred

Petitions which are accordingly dismissed. No costs.