No Acts & Articles mentioned in this case
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CASE NO.:
Transfer Case (civil) 8 of 2001
PETITIONER:
BALCO EMPLOYEES UNION (REGD.)
Vs.
RESPONDENT:
UNION OF INDIA & ORS.
DATE OF JUDGMENT: 10/12/2001
BENCH:
B.N. Kirpal, Shivaraj V. Patil & P. Venkatarama Reddi.
JUDGMENT:
W I T H
T.C. (C) Nos. 9 and 10 of 2001
and
W.P. (C) No. 194 of 2001.
J U D G M E N T
KIRPAL, J.
The validity of the decision of the Union of India to disinvest
and transfer 51% shares of M/s Bharat Aluminium Company Limited
(hereinafter referred to as 'BALCO') is the primary issue in these
cases.
BALCO was incorporated in 1965 as a Government of India
Undertaking under the Companies Act, 1956. Prior to its
disinvestment it had a paid-up share capital of Rs. 488.85 crores
which was owned and controlled by the Government of India. The
company is engaged in the manufacture of aluminium and had plants
at Korba in the State of Chhattisgarh and Bidhanbag in the State of
West Bengal. The Company has integrated aluminium manufacturing
plant for the manufacture and sale of aluminium metal including wire
rods and semi-fabricated products.
The Government of Madhya Pradesh vide its letter dated
18th March, 1968 wrote to BALCO stating that it proposed that land
be granted to it on a 99 years lease subject to the terms and conditions
contained therein. The letter envisaged giving on lease Government
land on payment of premium of Rs. 200/- per acre and, in addition
thereto also to provide tenure land which was to be acquired and
transferred on lease to BALCO on payment by it the actual cost of
acquisition plus annual lease rent. Vide its letter dated 13th June, 1968
BALCO gave its assent to the proposal contained in the aforesaid
letter of 18th March, 1968 for transfer of land to it. BALCO intimated
by this letter that the total requirement of land would be about 1616
acres. Thereafter, in addition to the Government land which was
transferred, the Government of Madhya Pradesh acquired land for
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BALCO under the provisions of the Land Acquisition Act, 1894 on
payment of compensation. The District Collector, Bilaspur also
granted permission under Section 165(6) of the M.P. Land Revenue
Code, 1959 for acquiring/transferring private land in favour of
BALCO. As a result of the aforesaid, BALCO set up it's
establishment on it's acquiring land from and with the help of the
State Government.
Since 1990-91 successive Central Government had been
planning to disinvest some of the Public Sector Undertakings. In
pursuance to the policy of disinvestment by a Resolution dated
23rd August, 1996 the Ministry of Industry (Department of Public
Enterprises) Government of India constituted a Public Sector
DisInvestment Commission initially for a period of three years. The
Resolution stated that this Commission was established in pursuance
of the Common Minimum Programme of the United Front
Government at the Centre. The Commission was an independent,
non-statutory advisory body and was headed by Shri G.V.
Ramakrishna who was to be its Full-time Chairman. The
Commission had four part-time Members. Paras 3, 4 and 5 of the
said Resolution are as follows:-
"3. The broad terms of reference of the Commission are as
follows:-
I. To draw a comprehensive overall long term disinvestment
programme within 5-10 years for the PSUs referred to it by
the Core Group.
II. To determine the extent of disinvestment (total/partial
indicating percentage) in each of the PSU.
III. To prioritise the PSUs referred to it by the Core Group in
terms of the overall disinvestment programme.
IV. To recommend the preferred mode(s) of disinvestment
(domestic capital markets/international capital
markets/auction/private sale to identified investors/any
other) for each of the identified PSUs. Also to suggest an
appropriate mix of the various alternatives taking into
account the market conditions.
V. To recommend a mix between primary and secondary
disinvestments taking into account Government's objective,
the relevant PSUs funding requirement and the market
conditions.
VI. To supervise the overall sale process and take decisions on
instrument, pricing, timing, etc. as appropriate.
VII. To select the financial advisers for the specified PSUs to
facilitate the disinvestment process.
VIII. To ensure that appropriate measures are taken during the
disinvestment process to protect the interests of the affected
employees including encouraging employees' participation
in the sale process.
IX. To monitor the progress of disinvestment process and take
necessary measures and report periodically to the
Government on such progress.
X. To assist the Government to create public awareness of the
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Government's disinvestment policies and programmes with
a view to developing a commitment by the people.
XI. To give wide publicity to the disinvestment proposals so as
to ensure larger public participation in the shareholding of
the enterprises; and
XII. To advise the Government on possible capital restructuring
of enterprises by marginal investments, if required, so as to
ensure enhanced realisation through disinvestment.
4. The Disinvestment Commission will be advisory body and
the Government will take a final decision on the companies to be
disinvested and mode of disinvestment on the basis of advice given
by the Disinvestment Commission. The PSUs would implement
the decision of the Government under the overall supervision of the
Disinvestment Commission.
5. The Commission while advising the Government on the
above matters will also take into consideration the interests of
stakeholders, workers, consumers and others having a stake in the
relevant public sector undertakings."
It may here be noted that by a Resolution dated 12th January,
1998 the earlier Resolution of 23rd August, 1996 was partly modified
with deletion of paras 3, 4 and 5 and by substitution of the same by
the following:
"3(i) The Disinvestment Commission shall be an advisory body
and its role and function would be to advise the Government
on Disinvestment in those public sector units that are
referred to it by the Government.
3(ii) The Commission shall also advise the Government on any
other matter relating to disinvestment as may be specifically
referred to it by the Government, and also carry out any
other activities relating to disinvestment as may be assigned
to it by the Government.
3(iii) In making its recommendations, the Commission will also
take into consideration the interests of workers, employees
and others stake holders, in the public sector unit(s).
3(iv) The final decision on the recommendations of the
Disinvestment Commission will vest with the Government."
According to the Union of India, it laid down the broad
procedures to be followed for processing the recommendations of the
Disinvestment Commission. It was, inter alia, decided that:
i. the Ministry of Finance (now Department of Dis-
investment) would process the recommendations of the Dis-
Investment Commission, by inviting comments from the
concerned administrative machinery;
ii. submit the recommendation to the Core Group of
Secretaries for Dis-investment for consideration;
iii. The recommendations of the Core Group of Secretaries
would then be taken to the Cabinet for decision;
iv. It was also decided that the Core Group of Secretaries
would be headed by the Cabinet Secretary and its permanent
members would be Finance Secretary, Revenue Secretary,
Expenditure Secretary, Secretary Department of Public
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Enterprises, Secretary Planning Commission and Chief
Economic Advisor, Ministry of Finance, and
v. to implement the decisions, an Inter-Ministerial Group
headed by the Secretary/Joint Secretary of the
Administrative Ministry and consisting of Joint Secretaries
of Department of Economic Affairs, Department of Public
Enterprises, alongwith the Chairman and Managing
Director of the Companies as Members and Director
(Finance) of the company as the Convenor. In case of
BALCO, the IMG consisted of Secretary level Officers and
was headed by Secretary (Mines).
On 10th December, 1999 the Department of Disinvestment was
set up and the responsibilities which were earlier assigned to the
Ministry of Finance have now been transferred to this Department.
The Disinvestment Commission in its 2nd Report submitted in
April, 1997 advised the Government of India that BALCO needed to
be privatised. The recommendation which it made was that the
Government may immediately disinvest its holding in the Company by
offering a significant share of 40% of the equity to a strategic partner.
The Report further advised that there should be an agreement with the
selected strategic partner specifying that the Government would within
two years make a public offer in the domestic market for further sale
of shares to institutions, small investors and employees thereby
bringing down its holding to 26%. The Commission also
recommended that there should be an on-going review of the situation
and the Government may disinvest its balance equity of 26% in full in
favour of investors in the domestic market at the appropriate time.
The Commission had recommended the appointment of a Financial
Advisor to undertake a proper valuation of the company and to
conduct the sale process. The Commission had categorised BALCO
as a non-core group industry.
The Chairman of the Disinvestment Commission wrote a letter
dated 12th June, 1998 to the Secretary, Ministry of Mines,
Government of India drawing the Government's attention to the
recommendations of the Commission for sale of 40% of equity in
BALCO and to bringing down of the Government holding to 26%
within two years. This letter then referred to the 5th Report of the
Commission wherein it had reviewed the question of strategic sale and
had suggested that the Government may keep its shareholding below
the level of investment being offered by the strategic buyer and its
divesting some portion of equity to other entities. This letter noted
that in these circumstances, it may be difficult to get in a multilateral
financial institution to act fast in taking up shares of BALCO. The
Chairman of the Commission then recommended that "in keeping with
the spirit of the recommendations of the 5th Report, you may now
kindly consider offering 51% or more to the strategic buyer along with
transfer of management. This sale will enable a smooth transaction
with the participation of more bidders and better price for the shares.
This will also be in keeping with the current policy as announced by
the FM in his recent budget speech".
The Cabinet Committee on Economic Affairs had, in the
meantime, in September 1997 granted approval for appointment of a
technical and financial advisor, selected through a competitive
process, for managing the strategic sale and restructuring of BALCO.
Global advertisement was then issued inviting from interested parties
Expression of Interest for selection as a Global Advisor. The
advertisement was published in four financial papers in India and also
in 'The Economist', a renowned financial magazine published abroad.
Eight Merchant Banks showed their interest in appointment of the
Global Advisor. The lowest bid of M/s Jardine Fleming Securities
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India Ltd. was accepted and approved by the Cabinet Committee on
Disinvestment on 9th March, 1999. The Cabinet Committee on
Disinvestment also approved the proposal of strategic sale of 51%
equity in respect of BALCO.
The decision of the Government to the aforesaid strategic sale
was challenged by the BALCO Employees' Union by filing Writ
Petition No. 2249 of 1999 in the High Court of Delhi. This petition
was disposed of by the High Court vide its order dated 3rd August,
1999.
On 3rd March, 2000, the Union Cabinet approved the Ministry
of Mines' proposal to reduce the share capital of BALCO from Rs.
488.8 crores to Rs. 244.4 crores. This resulted in cash flow of Rs.
244.4 crores to the Union Government in the Financial Year 1999-
2000.
A formal Agreement between Jardine Fleming, the Global
Advisor and the Government of India was executed on 14th June,
2000. The scope of work of the Global Advisor, inter alia, included
the development, updating and review of a list of potential buyers of
the stake; preparing necessary documents; assisting the Government of
India in sale negotiations with potential buyers and to advise on the
sale price; to coordinate and monitor the progress of the transaction
until its completion.
Thereafter, on 16th June, 2000 the Global Advisor, on behalf of
the Government of India, issued an advertisement calling for
"Expression of Interest" in leading journals and newspapers such as
the Economist, London, the Mining Journal, London, the Economic
Times, India, Business Standard, India and the Financial Express,
India. The invitation was to Companies and Joint Ventures which
may be interested in acquiring 51% shares of the Government of India
in BALCO. The last date for submitting the expression of interest
was 30th June, 2000 and the interested companies were required to
submit their expression of interest together with their Audited Annual
Reports and a profile describing their business and operations.
Eight companies submitted their Expression of Interest. These
companies were as follows:
"i. Sterlite Industries (India) Ltd.
ii. Hindlaco Industries Ltd.
iii. Tranex Holding Inc.
iv. Indian Minerals Corporation Plc.
v. VAW Aluminium AG, Germany
vi. ALCOA, USA
vii. Sibirsky, Russia
viii. MALCO"
M/s Jardine Fleming, Global Advisor made an analysis of the
various bids on the basis of the financial and technical capability,
familiarity with India and overall credibility. Thereupon two
companies, namely, Indian Minerals Corporation Plc. And Tranex
Holding Inc. were rejected. The Inter-Ministerial Group (hereinafter
referred to as IMG) set up by the Union of India, accepted the
expression of interest of six out of eight parties and it also decided that
the bids of Sterlite and MALCO be treated as one. Thus there
remained five prospective bidders but two, namely, VAW Aluminium
AG, Germany and Sibirsky, Russia dropped out and the remaining
three, namely, ALCOA, USA, Hindalco and Sterlite conducted due
diligence (inspection) on BALCO between September to December,
2000.
The IMG considered the drafts of the Shareholders' Agreement
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and the Share Purchase Agreement and had discussions with three
prospective bidders and ultimately the said drafts were finalised on
11th January, 2001.
For the purpose of carrying out the asset valuation of BALCO,
the Global Advisor short listed four parties from the list of Registered
Government Valuers approved by the Income-Tax Department. On
18th January, 2001, BALCO invited quotations from the four
Registered Valuers, so short listed, and the quotation of Shri P.V. Rao
was accepted. Shri P.V. Rao was a registered valuer of immovable
property and his team mates were Government Registered Valuers
authorised to value plant and machinery. They were assisted in the
work of valuation by officers of the Indian Bureau of Mines for
assessing the value of existing mines. Pending the receipt of the
valuation report from Shri P.V. Rao, the Global Advisor on 8th
February, 2001 requested the three bidders to submit their financial
bids along with other necessary documents by 15th February, 2001,
which was later extended by one day. On 14th February, 2001 Shri
P.V. Rao submitted his asset valuation report to M/s Jardine Fleming.
On 15th February, 2001, an Evaluation Committee headed by
the Additional Secretary (Mines) was constituted. This Committee
was required to fix the reserve price of 51% equity of BALCO which
was to be sold to the strategic party. The three contenders, namely,
Alcoa, Hindalco and Sterlite Industries Ltd. submitted their sealed
bids to the Secretary (Mines) and Secretary (Disinvestment) on 16th
February, 2001. It is thereafter, that M/s Jardine Fleming presented
its valuation report together with the asset valuation done by Shri P.V.
Rao to the Evaluation Committee to work out the reserve price.
The range of valuation of BALCO that emerged on various
methodologies was as follows:-
(i) Discounted Cash Flow - Rs. 651.2 994.7 crores
(ii) Comparables - Rs. 587 909 crores
(iii) Balance Sheet - Rs. 597.2 681.9 crores
Thus, the range of valuation by all these methods came between
Rs. 587 and Rs. 995 crores for 100% of the equity. Ipso facto, for
51% of the equity, the range of valuation came out as Rs. 300 to Rs.
507 crores. The Evaluation Committee then deliberated on the
various methodologies and concluded, as per the affidavit of the
Union of India, that the most appropriate methodology for valuing the
shares of a running business of BALCO would be the Discounted
Cash Flow method. It decided to add a control premium of 25% on
the base value of equity (although the Advisor had viewed that the
premium should range between 10-15%) and then add the value of
non-core assets to arrive at a valuation of Rs. 1008.6 crores for the
company as a whole, 51% of which amounts to Rs. 514.4 crores
which was fixed as the Reserve Price. According to the respondents,
the Evaluation Committee felt that Asset Valuation Report appeared to
have over-valued the fixed assets of the company at Rs. 1072.2
crores. The Committee further observed that the fixed asset valuation
method was only a good indicator of the value that could be realised if
the business was to be liquidated, rather than for valuing the business
as a going concern. Furthermore, the asset valuation method did not
take into account the liabilities and contingent liability that go with the
business.
When the financial bids were opened, it was found that the bid
of Sterlite Industries was the highest at Rs. 551.5 crores, the bid of
Hindalco was Rs. 275 crores while ALCOA had opted out. The
report of the Evaluation Committee for acceptance of the bid which
was higher than the reserve price was considered by the IMG which
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recommended the acceptance of the bid of Sterlite Industries to the
core group of Secretaries. This core group in turn made its
recommendation to the Cabinet Committee on Disinvestment which on
21st February, 2001 approved/accepted the bid of Sterlite Industries at
Rs. 551.5 crores. The Government's decision was communicated to
Sterlite Industries on that date. The announcement of the decision to
accept the bid of Sterlite Industries led to the initiation of legal
proceedings challenging the said decision. On 23rd February, 2001,
Dr. B.L. Wadhera filed Civil Writ Petition No. 1262 of 2001 in the
Delhi High Court. This was followed by Writ Petition No. 1280 of
2001 filed by the employees of BALCO on 24th February, 2001 also in
the High Court of Delhi. On that very date, i.e., on 24th February,
2001 another employee of BALCO, namely, Mr. Samund Singh
Kanwar filed Civil Writ Petition No. 241 of 2001 in the High Court of
Chhattisgarh.
While the aforesaid writ petitions were pending there was a
Calling Attention Motion on Disinvestment with regard to BALCO in
the Rajya Sabha. Discussions on the said motion took place in the
Rajya Sabha on 27th February, 2001 and the matter was discussed in
the Lok Sabha on 1st March, 2001. The motion "that this House
disapproves the proposed disinvestment of Bharat Aluminium
Company Ltd." was defeated in the Lok Sabha by 239 votes to 119
votes. Soon thereafter on 2nd March, 2001, Shareholders Agreement
and Share Purchase Agreement between the Government of India and
Sterlite Industries Limited were signed. Pursuant to the execution of
sale, 51% of the equity was transferred to Sterlite Industries Limited
and a cheque for Rs. 551.5 crores was received. It is not necessary to
refer to the terms of the agreement in any great detail except to notice
a few clauses which pertain to safeguarding the interest of the
employees of the company. Clauses H and J of the preamble reads as
follows:
"H. Subject to Clause 7.2, the Parties envision that all employees of the
Company on the date hereof shall continue in the employment of
the Company.
J. The SP recognises that the Government in relation to its
employment policies follows certain principles for the benefit of the
members of the Scheduled Caste/Scheduled Tribes, physically
handicapped persons and other socially disadvantaged categories of
the society. The SP shall use its best efforts to cause the Company
to provide adequate job opportunities for such persons. Further, in
the event of any reduction in the strength of the employees of the
Company, the SP shall use its best efforts to ensure that the
physically handicapped persons are retrenched at the end."
Clause 7.2 which contains the Representations, Warranties and
Covenants of M/s Sterlite Industries is as follows:
"The SP represents and warrants to and covenants with each of the
Government and the Company that:
(a) it has been duly incorporated or created and is validly subsisting
and in good standing under the laws of the jurisdiction indicated in
the preamble to this Agreement;
(b) it has the corporate power and authority to enter into and perform
its obligations under this Agreement;
(c) this Agreement has been duly authorised, executed and delivered
by it and constitutes a valid and binding obligation enforceable
against it in accordance with its terms;
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(d) it is not a party to, bound or affected by or subject to any
indenture, mortgage, lease agreement, instrument, charter or by-
law provision, statute, regulation, judgment, decree or law which
would be violated, contravened, breached by or under which
default would occur or under which any payment or repayment
would be accelerated as a result of the execution and delivery of
this Agreement or the consummation of any of the transactions
provided for in this Agreement.
(e) Notwithstanding anything to the contrary in this Agreement, it shall
not retrench any part of the labour force of the Company for a
period of one (1) year from the Closing Date other than any
dismissal or termination of employees of the Company from their
employment in accordance with the applicable staff regulations and
standing orders of the Company or applicable Law; and
(f) Notwithstanding anything to the contrary in this Agreement, but
subject to sub-clause (e) above, any restructuring of the labour
force of the Company shall be implemented in the manner
recommended by the Board and in accordance with all applicable
laws.
(g) Notwithstanding anything to the contrary in this Agreement, but
subject to sub-clause (e) above, in the event of any reduction of the
strength of the Company's employees the SP shall ensure that the
Company offers its employees, an option to voluntarily retire on
terms that are not, in any manner, less favourable than the
voluntary retirement scheme offered by the Company which is
referred to in Schedule 7.4 of the Share Purchase Agreement; and
(h) It shall vote all the voting equity shares of the Company, directly
or indirectly, held by it to ensure that all provisions of this
Agreement, to the extent required, are incorporated in the
Company's articles of association."
With the filing of the writ petitions in the High Court of Delhi
and in the High Court of Chhattisgarh, an application for transfer of
the petitions was filed by the Union of India in this Court. After the
notices were issued, the company received various notices from the
authorities in Chhattisgarh for alleged breach of various provisions of
the M.P. Land Revenue Code and the Mining Concession Rules.
Some of the notices were not only addressed to the company but also
to individuals alleging violation of the provisions of the code and the
rules as also encroachment having taken place on Government land by
BALCO. This led to the filing of the Writ Petition No. 194 by
BALCO in this Court, inter alia, challenging the validity of the said
notices. During the pendency of the writ petition, the workers of the
company went on strike on 3rd March, 2001. Some interim orders
were passed in the transfer petition and subsequently on 9th May, 2001
the strike was called off. By Order dated 9th April, 2001, the writ
petitions which were pending in the High Court of Delhi and
Chhattisgarh were transferred to this Court being Transfer Case No. 8
of 2001 which pertains to the writ petition filed by BALCO
Employees' Union; Transfer Case No. 9 of 2001 pertains to the writ
petition filed by Dr. B.L. Wadhera in the Delhi High Court and
Transfer Case No. 10 of 2001 is the writ petition filed by Mr. Samund
Singh Kanwar in the High Court of Chhattisgarh.
On behalf of the BALCO Employees' Union, Shri Dipankar
P. Gupta, learned senior counsel submitted that the workmen have
been adversely affected by the decision of the Government of India to
disinvest 51% of the shares in BALCO in favour of a private party.
He contended that before disinvestment, the entire paid-up capital of
BALCO was owned and controlled by the Government of India and
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it's administrative control co-vested in the Ministry of Mines.
BALCO was, therefore, a State within the meaning of Article 12 of
the Constitution. Reliance for this was placed on Ajay Hasia and
Others vs. Khalid Mujib Sehravardi and Others, (1981) 1 SCC 722;
Central Inland Water Transport Corporation Limited and Another
Vs. Brojo Nath Ganguly and Another, (1986) 3 SCC 156. He also
contended that by reason of disinvestment the workmen have lost their
rights and protection under Articles 14 and 16 of the Constitution.
This is an adverse civil consequence and, therefore, they had a right
to be heard before and during the process of disinvestment. The type
of consultation with the workmen which was necessary, according to
Shri Dipankar P. Gupta, was whether BALCO should go through the
process of disinvestment; who should be the strategic partner; and
how should the bid of the strategic partner be evaluated. Referring to
the averment of the Union of India to the effect that interest of the
employees has been protected, Shri Dipankar P. Gupta, submitted that
in fact there was no effective protection of the workmen's interest in
the process of disinvestment. He further submitted that the workmen
have reason to believe that apart from the sale of 51% of the shares in
favour of Sterlite Industries the Agreement postulates that balance
49% will also be sold to them with the result that when normally in
such cases 5% of the shares are disinvested in favour of the employees
the same would not happen in the present case. Reliance was placed
on the decision of National Textile Workers' Union and Others vs.
P.R. Ramakrishnan and Others, (1983) 1 SCC 228 and it was also
contended that even though there may be no loss of jobs in the present
case but the taking away of the right or protection of Articles 14 and
16 is the civil consequence and, therefore, the workmen have a right
to be heard. It was submitted that such rights and benefits are both
procedural as well as substantive. Procedural benefits and rights
includes the right to approach High Court under Article 226 of the
Constitution and this Court under Article 32 of the Constitution in the
event of violation of any of their rights. This is a major advantage
since it is a relatively swift method of redressal of grievances which
would not be available to employees of private organisations.
Instances were given of the substantive rights which flow from
Articles 14 and 16 like, right to equality, equal pay for equal work,
right to pension including the principle that there can be no
discrimination in the matter of granting or withholding of pension vide
Bharat Petroleum (Erstwhile Burmah Shell) Management Staff
Pensioners vs. Bharat Petroleum Corporation Ltd. and Others,
(1988) 3 SCC page 32), right to inquiry and reasons before dismissal
etc.
The aforesaid contentions of Shri Gupta were supported by Shri
G.L. Sanghi and Shri Ranjit Kumar, senior counsel, appearing for
some of the Unions who were intervenors in the writ petition filed by
BALCO Employees' Union. He submitted that the workers should
have been heard at different stages during the process of
disinvestment, the manner in which views may be invited and
evaluated by the Government; the method of evaluation; the factors to
be taken into consideration and the choice of the strategic partner; the
terms and conditions under which the strategic partner will take over
the employment of the workers and the terms and conditions of the
Share Holders Agreement are the stages in which the workers should
have been heard and consulted. It was submitted that the decision of
the Delhi High Court of 3rd August, 1999 does not come in the way of
these contentions being raised inasmuch as the petition at that time
was regarded as premature and the order which was passed actually
preserves the workers' rights to raise the contention in future.
Reiterating these contentions Shri Ravindra Shrivastava, learned
Advocate General, State of Chhattisgarh submitted that the State does
not challenge the policy of disinvestment per se on principle as a
measure of socio-economic reform and for industrial well being in the
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country. He, however, contended that the implementation of the
policy of disinvestment, in the present case, has failed to evolve a
comprehensive package of socio-economic and political reform and to
structure the decision making process so as to achieve in a just, fair
and reasonable manner, the ultimate goal of the policy and that the
interest of the workers in the industrial sector cannot be undermined
and, therefore, any decision which was likely to affect the interest of
the workers and employees as a class as a whole cannot and ought not
to be taken to the exclusion of such class, lest it may be counter
productive. He contended that the Disinvestment Commission had
recommended that some percentage of equity share may be offered to
the workers to solicit their participation in the enterprise and which
would go a long way in proving the disinvestment plan meaningful
and successful. In this regard, it was not shown from any material or
record that the Government of India had at any stage addressed itself
to this vital aspect of the disinvestment process or had taken into
consideration the likely repercussions on the interest, right and status
of the employees and workers. This non-consideration indicates that
there has been an arbitrariness in not taking into consideration relevant
facts in the decision making process. It is further contended that the
impugned decision defeats the provisions of the M.P. Land Revenue
Code and goes against the fundamental basis on which the land was
acquired and allotted to the company.
Implicit in the submissions on behalf of the employees is the
challenge to the decision to disinvest majority of the shares of BALCO
in favour of Sterlite Industries Limited. The first question, therefore,
which would arise for consideration, is whether such a decision is
amenable to judicial review and if so within what parameters and to
what extent.
On behalf of the Union of India, the Attorney General submitted
that since 1990-91 successive Governments have gone in for
disinvestment. Disinvestment had become imperative both in the case
of Centre and the States primarily for three reasons. Firstly, despite
every effort the rate of returns of governmental enterprises had been
woefully low, excluding the sectors in which government have a
monopoly and for which they can, therefore, charge any price. The
rate of return on central enterprises came to minus 4% while the cost
at which the government borrows money is at the rate of 10 to 11%.
In the States out of 946 State level enterprises, about 241 were not
working at all; about 551 were making losses and 100 were reported
not to be submitting their accounts at all. Secondly, neither the
Centre nor the States have resources to sustain enterprises that are not
able to stand on their own in the new environment of intense
competition. Thirdly, despite repeated efforts it was not possible to
change the work culture of governmental enterprises. As a result,
even the strongest among them have been sinking into increasing
difficulties as the environment is more and more competitive and
technological change has become faster.
In support, the Solicitor General submitted that the challenge to
the decision to disinvest on the ground that it impairs public interest,
or that it was without any need to disinvest, or that it was inconsistent
with the decision of the Disinvestment Commission was untenable.
It was submitted by the learned Attorney General that the
wisdom and advisability of economic policies of Government are not
amenable to judicial review. It is not for Courts to consider the
relative merits of different economic policies. Court is not the Forum
for resolving the conflicting clauses regarding the wisdom or
advisability of policy. It will be appropriate to consider some relevant
decisions of this Court in relation to judicial review of policy
decisions.
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While considering the validity of the Banking Companies
(Acquisition and Transfer of Undertakings) Ordinance 1969, this
Court in Rustom Cavasjee Cooper vs. Union of India, (1970) 1 SCC
248 at page 294 observed as under :-
"It is again not for this Court to consider the relative merits of
the different political theories or economic policies.
This Court has the power to strike down a law on the ground
of want of authority, but the Court will not sit in appeal over
the policy of the Parliament in enacting a law..."
Applying the analogy, just as the Court does not sit over the
policy of the Parliament in enacting the law, similarly, it is not for this
Court to examine whether the policy of this disinvestment is desirable
or not. Dealing with the powers of the Court while considering the
validity of the decision taken in the sale of certain plants and
equipment of the Sindri Fertilizer Factory, which was owned by a
Public Sector Undertaking, to the highest tenderer, this Court in
Fertilizer Corporation Kamgar Union (Regd.), Sindri and Others vs.
Union of India and Others, (1981) 1 SCC 568 at page 584, while
upholding the decision to sell, observed as follows :-
".We certainly agree that judicial interference with the
administration cannot be meticulous in our Montesquien
system of separation of powers. The Court cannot usurp or
abdicate, and the parameters of judicial review must be clearly
defined and never exceeded. If the Directorate of a
Government company has acted fairly, even if it has faltered in
its wisdom, the court cannot, as a super-auditor, take the
Board of Directors to task. This function is limited to testing
whether the administrative action has been fair and free from
the taint of unreasonableness and has substantially complied
with the norms of procedure set for it by rules of public
administration."
With regard to the question of the locus standi of the workmen,
who feared large-scale retrenchment, to challenge the validity of
action taken by the Company, it was observed at page 589 as follows
:-
"If a citizen is no more than a wayfarer or officious
intervener without any interest or concern beyond what
belongs to any one of the 660 million people of this country,
the door of the court will not be ajar for him. But, if he
belongs to an organisation which has special interest in the
subject matter, if he has some concern deeper than that of a
busybody, he cannot be told off at the gates, although whether
the issue raised by him is justiciable may still remain to be
considered. I, therefore, take the view that the present petition
would clearly have been permissible under Article 226".
In State of M.P. and Others vs. Nandlal Jaiswal and Others,
(1986) 4 SCC 566 the change of the policy decision taken by the State
of Madhya Pradesh to grant licence for construction of distilleries for
manufacture and supply of country liquor to existing contractors was
challenged. Dealing with the power of the Court in considering the
validity of policy decision relating to economic matters, it was
observed at page 605 as follows :-
"But, while considering the applicability of Article 14 in such
a case, we must bear in mind that, having regard to the nature
of the trade or business, the Court would be slow to interfere
with the policy laid down by the State Government for grant of
licences for manufacture and sale of liquor. The Court would,
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in view of the inherently pernicious nature of the commodity
allow large measure of latitude to the State Government in
determining its policy of regulating, manufacture and trade in
liquor. Moreover, the grant of licences for manufacture and
sale of liquor would essentially be a matter of economic
policy where the Court would hesitate to intervene and strike
down what the State Government has done, unless it appears to
be plainly arbitrary, irrational or mala fide. We had occasion
to consider the scope of interference by the Court under
Article 14 while dealing with laws relating to economic
activities in R.K. Garg v. Union of India. We pointed out in
that case that laws relating to economic activities should be
viewed with greater latitude than laws touching civil rights
such as freedom of speech, religion, etc. We observed that
the legislature should be allowed some play in the joints
because it has to deal with complex problems which do not
admit of solution through any doctrinaire or strait-jacket
formula and this is particularly true in case of legislation
dealing with economic matters, where, having regard to the
nature of the problems required to be dealt with, greater play
in the joints has to be allowed to the legislature. We quoted
with approval the following admonition given by Frankfurter,
J. in Morey v. Dond.
In the utilities, tax and economic regulation cases, there
are good reasons for judicial self-restraint if not judicial
deference to legislative judgement. The legislature after all has
the affirmative responsibility. The Courts have only the power
to destroy, not to reconstruct. When these are added to the
complexity of economic regulation, the uncertainty, the liability
to error, the bewildering conflict of the experts, and the
number of times the judges have been overruled by events
self-limitation can be seen to be the path to judicial wisdom
and institutional prestige and stability.
What we said in that case in regard to legislation relating to
economic matters must apply equally in regard to executive
action in the field of economic activities, though the executive
decision may not be placed on as high a pedestal as legislative
judgement insofar as judicial deference is concerned. We must
not forget that in complex economic matters every decision is
necessarily empiric and it is based on experimentation or what
one may call 'trial' and error method' and, therefore, its
validity cannot be tested on any rigid 'a priori' considerations
or on the application of any strait-jacket formula. The Court
must while adjudging the constitutional validity of an executive
decision relating to economic matters grant a certain measure
of freedom or 'play in the joints' to the executive. "The
problem of government" as pointed out by the Supreme Court
of the United States in Metropolis Theatre Co. v. State of
Chicago.
are practical ones and may justify, if they do not
require, rough accommodations, illogical, it may be, and
unscientific. But even such criticism should not be hastily
expressed. What is best is not discernible, the wisdom of
any choice may be disputed or condemned. Mere errors of
government are not subject to our judicial review. It is
only its palpably arbitrary exercises which can be declared
void.
The Government, as was said in Permian Basin Area Rate
cases, is entitled to make pragmatic adjustments which may
be called for by particular circumstances. The Court cannot
strike down a policy decision taken by the State Government
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merely because it feels that another policy decision would
have been fairer or wiser or more scientific or logical. The
Court can interfere only if the policy decision is patently
arbitrary, discriminatory or mala fide. It is against the
background of these observations and keeping them in mind
that we must now proceed to deal with the contention of the
petitioners based on Article 14 of the Constitution."
A policy decision of the Government whereby validity of
contract entered into by Municipal Council with the private developer
for construction of a commercial complex was impugned came up for
consideration in G.B. Mahajan and Others vs. Jalgaon Municipal
Council and Others, (1991) 3 SCC 91 and it was observed at page
104 as follows :-
"The criticism of the project being 'unconventional' does not
add to or advance the legal contention any further. The question
is not whether it is unconventional by the standard of the extant
practices, but whether there was something in the law rendering it
impermissible. There is, no doubt, a degree of public
accountability in all governmental enterprises. But, the present
question is one of the extent and scope of judicial review over
such matters. With the expansion of the State's presence in the
field of trade and commerce and of the range of economic and
commercial enterprises of government and its instrumentalities
there is an increasing dimension to governmental concern for
stimulating efficiency, keeping costs down, improved
management methods, prevention of time and cost overruns in
projects, balancing of costs against time scales, quality control,
cost-benefit ratios etc. In search of these values it might become
necessary to adopt appropriate techniques of management of
projects with concomitant economic expediencies. These are
essentially matters of economic policy which lack adjudicative
disposition, unless they violate constitutional or legal limits on
power or have demonstrable pejorative environmental
implications or amount to clear abuse of power. This again is the
judicial recognition of administrator's right to trial and error, as
long as both trial and error are bona fide and within the limits of
authority.."
To the same effect are the observations of this Court in Peerless
General Finance and Investment Co. Limited and Another vs.
Reserve Bank of India, (1992) 2 SCC 343 in which Kasliwal, J.
observed at page 375 as follows :-
"31. The function of the Court is to see that lawful authority is
not abused but not to appropriate to itself the task entrusted to
that authority. It is well settled that a public body invested with
statutory powers must take care not to exceed or abuse its power.
It must keep within the limits of the authority committed to it. It
must act in good faith and it must act reasonably. Courts are not
to interfere with economic policy which is the function of
experts. It is not the function of the courts to sit in judgement
over matters of economic policy and it must necessarily be left to
the expert bodies. In such matters even experts can seriously and
doubtlessly differ. Courts cannot be expected to decide them
without even the aid of experts".
In Premium Granites and Another vs. State of T.N. and
Others, (1994) 2 SCC 691 while considering the Court's powers in
interfering with the policy decision, it was observed at page 715 as
under :-
"54. It is not the domain of the Court to embark upon
unchartered ocean of public policy in an exercise to consider as to
whether the particular public policy is wise or a better, public
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policy can be evolved. Such exercise must be left to the discretion
of the executive and legislative authorities as the case may
be.."
The validity of the decision of the Government to grant licence
under the Telegraph Act 1885 to non-government companies for
establishing, maintaining and working of telecommunication system of
the country pursuant to Government policy of privatisation of
Telecommunications was challenged in Delhi Science Forum and
Others vs. Union of India and Another, (1996) 2 SCC 405. It had
been contended that Telecommunications was a sensitive service
which should always be within the exclusive domain and control of the
Central Government and under no situation should be parted with by
way of grant of licence to non-government companies and private
bodies. While rejecting this contention, it observed at page 412 that :
".. The national policies in respect of economy, finance,
communications, trade, telecommunications and others have to be
decided by Parliament and the representatives of the people on
the floor of the Parliament can challenge and question any such
policy adopted by the ruling Government."
The Court then referred to an earlier decision in the case of
R.K. Garg vs. Union of India and Others, (1981) 4 SCC 675 where
there was an unsuccessful challenge to a law enacted by Parliament
and held at page 413 as follows :-
"What has been said in respect of legislations is applicable even
in respect of policies which have been adopted by Parliament.
They cannot be tested in Court of Law. The courts cannot express
their opinion as to whether at a particular juncture or under a
particular situation prevailing in the country any such national
policy should have been adopted or not. There may be views and
views, opinions and opinions which may be shared and believed
by citizens of the country including the representatives of the
people in Parliament. But that has to be sorted out in Parliament
which has to approve such policies. Privatisation is a fundamental
concept underlying the questions about the power to make
economic decisions. What should be the role of the State in the
economic development of the nation? How the resources of the
country shall be used? How the goals fixed shall be attained?
What are to be the safeguards to prevent the abuse of the
economic power? What is the mechanism of accountability to
ensure that the decision regarding privatisation is in public
interest? All these questions have to be answered by a vigilant
Parliament. Courts have their limitations because these issues
rest with the policy-makers for the nation. No direction can be
given or is expected from the courts unless while implementing
such policies, there is violation or infringement of any of the
constitutional or statutory provision. The new Telecom policy
was placed before Parliament and it shall be deemed that
Parliament has approved the same. This Court cannot review and
examine as to whether the said policy should have been adopted.
Of course, whether there is any legal or constitutional bar in
adopting such policy can certainly be examined by the Court".
While considering the validity of the industrial policy of the
State of Madhya Pradesh relating to the agreements entered into for
supply of sal seeds for extracting oil in M.P. Oil Extraction and
Another vs. State of M.P. and Others, (1997) 7 SCC 592, the Court
at page 610 held as follows :-
"41. After giving our careful consideration to the facts and
circumstances of the case and to the submissions made by the
learned counsel for the parties, it appears to us that the Industrial
Policy of 1979 which was subsequently revised from time to time
cannot be held to be arbitrary and based on no reason whatsoever
but founded on mere ipse dixit of the State Government of M.P.
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The executive authority of the State must be held to be within its
competence to frame a policy for the administration of the State.
Unless the policy framed is absolutely capricious and, not
being informed by any reason whatsoever, can be clearly held
to be arbitrary and founded on mere ipse dixit of the
executive functionaries thereby offending Article 14 of the
Constitution or such policy offends other constitutional
provisions or comes into conflict with any statutory provision,
the Court cannot and should not outstep its limit and tinker
with the policy decision of the executive functionary of the
State. This Court, in no uncertain terms, has sounded a note of
caution by indicating that policy decision is in the domain of the
executive authority of the State and the Court should not embark
on the unchartered ocean of public policy and should not
question the efficacy or otherwise of such policy so long the same
does not offend any provision of the stature or the Constitution of
India. The supremacy of each of the three organs of the State i.e.
legislature, executive and judiciary in their respective fields of
operation needs to be emphasised. The power of judicial review
of the executive and legislative action must be kept within the
bounds of constitutional scheme so that there may not be any
occasion to entertain misgivings about the role of judiciary in
outstepping its limit by unwarranted judicial activism being very
often talked of in these days. The democratic set-up to which the
polity is so deeply committed cannot function properly unless
each of the three organs appreciate the need for mutual respect
and supremacy in their respective fields."
(emphasis added)
The validity of the change of Government policy in regard to
the reimbursement of medical expenses to its serving and retired
employees came up for consideration before this Court in State of
Punjab and Others vs. Ram Lubhaya Bagga and Others (1998) 4
SCC 117. The earlier policy upholding the reimbursement for
treatment in a private hospital had been upheld by this Court but the
State of Punjab changed this policy whereby reimbursement of
medical expenses incurred in a private hospital was only possible if
such treatment was not available in any government hospital. Dealing
with the validity of the new policy, the Court observed at page 129 as
follows :-
"25. Now we revert to the last submission, whether the new
State policy is justified in not reimbursing an employee, his full
medical expenses incurred on such treatment, if incurred in any
hospital in India not being a government hospital in Punjab.
Question is whether the new policy which is restricted by the
financial constraints of the State to the rates in AIIMS would be
in violation of Article 21 of the Constitution of India. So far as
questioning the validity of governmental policy is concerned in
our view it is not normally within the domain of any court, to
weigh the pros and cons of the policy or to scrutinize it and test
the degree of its beneficial or equitable disposition for the
purpose of varying, modifying or annulling it, based on
howsoever sound and good reasoning, except where it is arbitrary
or violative of any constitutional, statutory or any other provision
of law. When Government forms its policy, it is based on a
number of circumstances on facts, law including constraints based
on its resources. It is also based on expert opinion. It would be
dangerous if court is asked to test the utility, beneficial effect of
the policy or its appraisal based on facts set out on affidavits.
The Court would dissuade itself from entering into this realm
which belongs to the executive. It is within this matrix that it is to
be seen whether the new policy violates Article 21 when it
restricts reimbursement on account of its financial constraints."
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The reluctance of the Court to judicially examine the matters of
economic policy was again emphasised in Bhavesh D. Parish and
Others vs. Union of India and Another, (2000) 5 SCC 471 and
while examining the validity of Section 45-S of the Reserve Bank of
India Act 1934, it was held as follows :-
"26. The services rendered by certain informal sectors of the
Indian economy could not be belittled. However, in the path of
economic progress, if the informal system was sought to be
replaced by a more organised system, capable of better regulation
and discipline, then this was an economic philosophy reflected by
the legislation in question. Such a philosophy might have its
merits and demerits. But these were matters of economic policy.
They are best left to the wisdom of the legislature and in policy
matters the accepted principle is that the courts should not
interfere. Moreover in the context of the changed economic
scenario the expertise of people dealing with the subject should
not be lightly interfered with. The consequences of such
interdiction can have large-scale ramifications and can put the
clock back for a number of years. The process of rationalisation
of the infirmities in the economy can be put in serious jeopardy
and, therefore, it is necessary that while dealing with economic
legislations, this Court, while not jettisoning its jurisdiction to
curb arbitrary action or unconstitutional legislation, should
interfere only in those few cases where the view reflected in the
legislation is not possible to be taken at all".
In Narmada Bachao Andolan vs. Union of India and Others,
(2000) 10 SSC 664, there was a challenge to the validity of the
establishment of a large dam. It was held by the majority at page 762
as follows :-
"229. It is now well settled that the Courts, in the exercise of
their jurisdiction, will not transgress into the field of policy
decision. Whether to have an infrastructural project or not and
what is the type of project to be undertaken and how it has to be
executed, are part of policy-making process and the Courts are
ill-equipped to adjudicate on a policy decision so undertaken. The
Court, no doubt, has a duty to see that in the undertaking of a
decision, no law is violated and people's fundamental rights are
not transgressed upon except to the extent permissible under the
Constitution."
It is evident from the above that it is neither within the domain
of the Courts nor the scope of the judicial review to embark upon an
enquiry as to whether a particular public policy is wise or whether
better public policy can be evolved. Nor are our Courts inclined to
strike down a policy at the behest of a petitioner merely because it has
been urged that a different policy would have been fairer or wiser or
more scientific or more logical.
Process of disinvestment is a policy decision involving complex
economic factors. The Courts have consistently refrained from
interfering with economic decisions as it has been recognised that
economic expediencies lack adjudicative disposition and unless the
economic decision, based on economic expediencies, is demonstrated
to be so violative of constitutional or legal limits on power or so
abhorrent to reason, that the Courts would decline to interfere. In
matters relating to economic issues, the Government has, while taking
a decision, right to "trial and error" as long as both trial and error are
bona fide and within limits of authority. There is no case made out by
the petitioner that the decision to disinvest in BALCO is in any way
capricious, arbitrary, illegal or uninformed. Even though the workers
may have interest in the manner in which the Company is conducting
its business, inasmuch as its policy decision may have an impact on
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the workers' rights, nevertheless it is an incidence of service for an
employee to accept a decision of the employer which has been
honestly taken and which is not contrary to law. Even a government
servant, having the protection of not only Articles 14 and 16 of the
Constitution but also of Article 311, has no absolute right to remain in
service. For example, apart from cases of disciplinary action, the
services of government servants can be terminated if posts are
abolished. If such employee cannot make a grievance based on part
III of the Constitution or Article 311 then it cannot stand to reason that
like the petitioners, non-government employees working in a company
which by reason of judicial pronouncement may be regarded as a State
for the purpose of part III of the Constitution, can claim a superior or
a better right than a government servant and impugn it's change of
status. In taking of a policy decision in economic matters at length,
the principles of natural justice have no role to play. While it is
expected of a responsible employer to take all aspects into
consideration including welfare of the labour before taking any policy
decision that, by itself, will not entitle the employees to demand a
right of hearing or consultation prior to the taking of the decision.
Merely because the workmen may have protection of Articles
14 and 16 of the Constitution, by regarding BALCO as a State, it does
not mean that the erstwhile sole shareholder viz., Government had to
give the workers prior notice of hearing before deciding to disinvest.
There is no principle of natural justice which requires prior notice and
hearing to persons who are generally affected as a class by an
economic policy decision of the Government. If the abolition of a post
pursuant to a policy decision does not attract the provisions of Article
311 of the Constitution as held in State of Haryana vs. Shri Des Raj
Sangar and Another, (1976) 2 SSC 844, on the same parity of
reasoning, the policy of disinvestment cannot be faulted if as a result
thereof the employees lose their rights or protection under Articles 14
and 16 of the Constitution. In other words, the existence of rights of
protection under Articles 14 and 16 of the Constitution cannot possibly
have the effect of vetoing the Government's right to disinvest. Nor
can the employees claim a right of continuous consultation at different
stages of the disinvestment process. If the disinvestment process is
gone through without contravening any law, then the normal
consequences as a result of disinvestment must follow.
The Government could have run the industry departmentally or
in any other form. When it chooses to run an industry by forming a
company and it becomes its shareholder then under the provisions of
the Companies Act as a shareholder, it would have a right to transfer
its shares. When persons seek and get employment with such a
company registered under the Companies Act, it must be presumed
that they accept the right of the directors and the shareholders to
conduct the affairs of the company in accordance with law and at the
same time they can exercise the right to sell their shares.
A similar question came up for consideration before Madras
High Court. In Southern Structurals Limited, the State of Tamil Nadu
had acquired over 99% of shares and the company had become a
government company. It had incurred losses over the years and the
government then decided to disinvest from the company. This decision
was challenged by the Company's employees by filing a Writ Petition
in the Madras High Court. It was contended on their behalf that in
the event of disinvestment being effected, the employees of the State
Government would lose valuable rights including the protection of
Articles 14 and 16 of the Constitution and a right to approach the
Court under Articles 32 and 226. Repelling this contention in
Southern Structurals Staff Union vs. Management of Southern
Structurals Ltd. and Another, [1994] 81 Comp. Cases at page 389,
the High Court held as follows :-
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"The submission that in order to enable the employees to
invoke Article 14 or Article 16 and to approach the High Court
or the Supreme Court directly by invoking Article 226 or Article
32, the Government is bound to retain its ownership of the bulk of
the shares in this company forever is devoid of any force.
The protection of Article 14 is available to all and is not
confined to employees of the State. The limitations placed by
Article 16 on the State with regard to employment under the State
is not intended to compel the State to provide employment under it
to all who seek such employment or retain all persons presently in
its service in order to enable such persons to claim the benefit of
Article 16.
Employment under the State is not a precondition for
approaching the High Court or the Supreme Court. All industrial
workers have a right to approach the Labour Court or Industrial
Tribunals for adjudication of their rights subject to the limitations
contained in the Industrial Disputes Act. Like all citizens
industrial workers also have the right to approach civil courts for
redressal of their wrongs. The decisions rendered by the civil,
labour and industrial courts or tribunals are open to challenge
before the High Court and the Supreme Court in appropriate
proceedings. Actions of the Government or other authorities
performing any public duty are amenable to correction in
proceedings under article 226. By reason of the disinvestment,
employees do not lose their right to seek redressal through courts
for any wrongs done to them.
The employees have no vested right in the employer
company continuing to be a government company or "other
authority" for the purpose of article 12 of the Constitution of
India. Apart from the fact that the very status claimed by the
employees in this case is a fortuitous occurrence with the
employees having commenced work under a private employer and
while on the verge of losing employment, being rescued by the
State taking over the company, the employees cannot claim any
right to decide as to who should own the shares of the company.
The State which invested of its own volition, can equally well
disinvest. So long as the State holds the controlling interest or the
whole of the shareholding, employees may claim the status of
employees of a government company or "other authority" under
article 12 of the Constitution. The status so conferred on the
employees does not prevent the Government from disinvesting;
nor does it make the consent of the employees a necessary
precondition for disinvestment.
Public interest is the paramount consideration, and if in
the public interest the Government thought it fit to take over a
sick company to preserve the productive unit and the jobs of those
employed therein, the government can, in the public interest, with
a view to reducing the continuing drain on its limited resources,
or with a view to raising funds for its priority welfare or
developmental projects, or even as a measure of mobilising the
funds needed for running the government, disinvest from the
public sector companies. Article 12 of the Constitution does not
place any embargo on an instrumentality of the State or "other
authority" from changing its character".
The aforesaid observations, in our opinion, enunciates the legal
position correctly. The policies of the Government ought not to
remain static. With the change in economic climate, the wisdom and
the manner for the Government to run commercial ventures may
require reconsideration. What may have been in the public interest at
a point of time may no longer be so. The Government has taken a
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policy decision that it is in public interest to disinvest in BALCO. An
elaborate process has been undergone and majority shares sold. It
cannot be said that public funds have been frittered away. In this
process, the change in the character of the company cannot be validly
impugned. While it was a policy decision to start BALCO as a
company owned by the Government, it is as a change of policy that
disinvestment has now taken place. If the initial decision could not be
validly challenged on the same parity of reasoning, the decision to
disinvest also cannot be impugned without showing that it is against
any law or mala fide.
Even though, the employees have no right to be heard before
the decision to disinvest takes place nevertheless it is the case of the
Respondent that the workers had been fully informed about the
process of disinvestment through an ongoing dialogue. In this
connection, it is pertinent to note that the BALCO Employees Union
had filed Writ Petition No. 2249 of 1999 against the Union of India
before the Delhi High Court in relation to proposed disinvestment
wherein the following order was passed on 3rd August, 1999 :-
"It is stated by Dr. Singhvi, learned counsel, on instructions
from Mr. Madan Lal, President of the Petitioner that challenge to the
policy of disinvestment in Respondent No. 5 company is not pressed. It
is further stated that whenever the final decision is to be taken by the
Respondents affecting the interests of the workers, the same be
intimated with two weeks' advance notice to the Petitioners by the
Respondents.
As far as the protection of the interests of the workers is
concerned, the relief being premature cannot be entertained and the
petition to this extent would be liable to be rejected.
Mr. Rawal, learned Additional Solicitor General states that if
any decision relating to the interests of the employees/ workers is taken
by the Respondents, two weeks' prior notice of the same will be given
to the Petitioners.
In view of the above, the petition is disposed of with liberty to
the Petitioners to approach the Court in the event of any decision
adverse to the interest of the employees/ workers being taken.
Petition disposed off accordingly".
According to the company, after the aforesaid order of 3rd
August, 1999 was passed, the entire rationale and process of
disinvestment was explained to the workers through BALCO
Samachar News letter. A meeting was held in May, 2000 by the then
Chairman and Managing Director with the Union leaders where the
Joint Secretary of the Ministry of Mines, who was also Director of the
company, was also present. In addition thereto, the workers' unions
had been making various representations to the Government which
were considered by it before finalising of various documents. That
there was a dialogue between the Government and representatives of
the workers which is evident from the copy of minutes of the meetings
held on February 14, 2001 between the union leaders and officers of
the companies and the Government. The minutes of the meeting with
leaders of six trade unions, who had taken part in the discussion,
disclose that, in principle, the Trade Unions were not against
disinvestment but their interest should be sufficiently safeguarded.
We find that in the shareholders agreement between the Union
of India and the strategic partner, it is provided that there would be no
retrenchment of any worker in the first year after the closing date and
thereafter restructuring of the labour force, if any, would be
implemented in a manner recommended by the Board of Directors of
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the company. The shareholders Agreement further mandates that in
the event reduction in the strength of its employees is required, then it
is to be ensured that the company offers its employees an option to
voluntarily retire on terms that are not in any manner less favourable
than the Voluntary Retirement Scheme offered by the company on the
date of the arrangement. Apart from the conditions stipulated in the
shareholders agreement, Shri Sundaram, learned senior counsel on
behalf of the company has stated in the Court that it will not retrench
any worker(s) who are in the employment of BALCO on the date of
takeover of the management by the strategic partner, other than any
dismissal or termination of the worker(s) of the company from their
employment in accordance with the applicable staff regulations and
standing orders of the company or other applicable laws. We record
the said statement.
We are satisfied that the workers' interests are adequately
protected in the process of disinvestment. Apart from the aforesaid
undertaking given in the Court, the existing laws adequately protect
workers' interest and no decision affecting a huge body of workers
can be taken without the prior consent of the State Government.
Further more, the service conditions are governed by the certified
orders of the company and any change in the conditions thereto can
only be made in accordance with law. The demands made by the
employees of BALCO were considered by the IMG in its meeting held
on 25th January, 2001 and the issues emanating therefrom were placed
by the Department of Disinvestment before the Cabinet Committee on
Disinvestment which held its meeting on 1st February, 2001. A note
containing the comments of the Ministry of Mines which was endorsed
by the IMG of the Cabinet Committee on Disinvestment was
forwarded by the Minister of Mines, Government of India to Shri
Tara Chand Viyogi, President, M.P. Rashtriya Mazdoor Congress.
The said note, apart from setting out reasons for disinvestment of
BALCO, also refers how the interest of the employees of BALCO has
been protected in the process of disinvestment. This note states:-
"Regarding employees, adequate provisions have been
made in Share Holders' Agreement (SHA) as follows :-
"Recital H Subject to Clause 7.2, the Parties envision that all
employees of the Company on the date hereof shall
continue in the employment of the Company.
Clause 7.2 (e) It shall not retrench any part of the labour force
of the Company for a period of one (1) year from
the Closing Date other than any dismissal or
termination of employees of the Company from
their employment in accordance with the applicable
staff regulations and standing orders of the
Company or applicable Law; and
Clause 7.2 (f) Subject to the sub-clause (e) any restructuring of
the labour force of the company shall be
implemented in the manner recommended by the
Board and in accordance with all applicable laws.
The SP in the event of any reduction of the
strength of its employees shall, ensure that the
Company offers its employees an option to
voluntarily retire on terms that are not, in any
manner, less favourable than the voluntary
retirement scheme offered by the company on the
date of this agreement;"
It may be mentioned that as per the provisions contained
in the Industrial Disputes Act, BALCO will remain an industrial
establishment even after the disinvestment and all the provisions
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of Industrial Disputes Act will automatically apply to BALCO.
In an organised sector, the issues of job security, wage
structure, perks, welfare facilities, etc., of the workmen are
governed by bipartite/tripartite agreements. These agreements are
in the nature of "settlement" under the Industrial Disputes Act.
Even after the disinvestment, the BALCO management will be
required to enter into bipartite/tripartite agreements with the
workmen through unions, and, the terms and conditions in the
agreement would be always governed by the practices and
procedures applicable under collective bargaining. It is a fact that
any agreement between two or more parties is based on the
principles of mutual consent. Hence, the consent of the
management to better service conditions, etc., would certainly
depend on the achievement of the productivity and production
targets by the workers from time to time.
Regarding providing social security to the BALCO
employees at par with government employees, it is to be noted
that as a matter of principle, no industrial establishment has any
right to be compared with a government establishment. Hence the
issue of guaranteeing the social security of the BALCO
employees at par with the employees of the Government
establishments may not be possible any time before or after the
disinvestment.
So far as employees' stock options and a lock-in period
for the investor are concerned, there is a provision in the
documents pertaining to the proposed strategic sale, for giving
upto 5 per cent of the equity to employees, and for a lock-in
period of three years.
Regarding guaranteeing that there will be no closure of
any establishment of the company for a minimum period of 10
years, it is to be noted that the "Closure" of any undertaking of
an Industrial Establishment of the kind of BALCO is governed by
Section 25(O) of Chapter V-B of the Industrial Disputes Act, by
virtue of which BALCO management before or after
disinvestment is not free to close down any part of the BALCO
at their sweet will. The closure is governed by the law of the land
and under the existing provisions of Industrial Disputes Act,
"genuineness and adequacy of the reasons stated by the
employer" and "the interests of the general public and all other
relevant factors" has to be examined by the appropriate
government, and, for doing so the government give a reasonable
opportunity of hearing to the employer and workmen and the
persons interested in such closure. It means that unless and until
the appropriate Government grants permission, the BALCO
management will not be competent to close down any undertaking
of the company even after disinvestment. So there are protections
available under the Act against arbitrary closure of any
undertaking of the BALCO after disinvestment.
The unions desire that the prospective buyer should
disclose its plans for investment/modernisation of BALCO after
disinvestment. As a matter of fact, at the time of submitting
financial bids the prospective buyers are expected to submit the
business plan as well. But perhaps in such commercial ventures,
given the changing market conditions, the business plan submitted
by prospective buyers may not be enforceable under law.
The trade unions desire that all listed demands should be
accepted and put in the form of a written agreement between the
government and the representatives of recognised unions before
finalising any agreement with the prospective buyers. In fact, the
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Government and BALCO are two different legal entities. The
Government is disinvesting its 51% equity in the BALCO. Under
law, no enforceable agreement may be entered between the
Government and the workmen of BALCO as any such agreement
will not have force of law. In order that an agreement has the
force of law, it should be a written agreement between employer
and workmen. The Government is not the employer of the
workmen employed in BALCO. As such, any such agreement is
neither desirable nor necessary and not enforceable".
From the aforesaid recital of facts, it is clear that safeguarding
the interests of the workers was one of the concerns of the
Government. Representations had been received from the Trade Union
leaders and effort was made to try and ensure that the process of
disinvestment did not adversely affect the workers.
Even though the employees of the company may have an
interest in seeing as to how the company is managed, it will not be
possible to accept the contentions that in the process of disinvestment,
the principles of natural justice would be applicable and that the
workers, or for that matter any other party having an interest therein,
would have a right of being heard. As a matter of good governance
and administration whenever such policy decisions are taken, it is
desirable that there should be wide range of consultations including
considering any representations which may have been filed, but there
is no provision in law which would require a hearing to be granted
before taking a policy decision. In exercise of executive powers,
policy decisions have to be taken from time to time. It will be
impossible and impracticable to give a formal hearing to those who
may be affected whenever a policy decision is taken. One of the
objects of giving a hearing in application of the principles of natural
justice is to see that an illegal action or decision does not take place.
Any wrong order may adversely affect a person and it is essentially
for this reason that a reasonable opportunity may have to be granted
before passing of an administrative order. In case of the policy
decision, however, it is impracticable, and at times against the public
interest, to do so, but this does not mean that a policy decision which
is contrary to law cannot be challenged. Not giving the workmen an
opportunity of being heard cannot per se be a ground of vitiating the
decision. If the decision is otherwise illegal as being contrary to law
or any constitutional provision, the persons affected like the workmen,
can impugn the same, but not giving a pre-decisional hearing cannot
be a ground for quashing the decision.
Our attention was invited to the decision in the National Textile
Workers' Union and Others vs. P.R. Ramakrishnan (supra) where
at page 245, Bhagwati, J. (as he then was) had observed that in
deciding whether the Court should wind up a company or change its
management, the Court must take into consideration not only the
interests of the shareholders and creditors but also amongst other
things, the interests of the workers. The workers must have an
opportunity of being heard for projecting and safeguarding their
interests before winding up Order is passed by the Court. It was
contended that similarly before a policy decision is taken, and also in
the execution thereof, as the interests of the workers is going to be
affected, the petitioning workers herein have a right to be heard.
There can be no doubt that in judicial proceedings where rights are
likely to be affected, principles of natural justice would require the
Court to give a hearing to the party against whom an adverse or
unfavourable Order may be passed. It was in relation to the winding
up proceedings which were pending before a Court that this Court in
National Textiles Workers Union case held that they had a right to be
heard. The position, in the present case, is different. No judicial or
quasi-judicial functions are exercised by the Government when it
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decides, as a matter of policy, to disinvest shares in a Public Sector
Undertaking. While it may be fair and sensible to consult the workers
in a situation of change of management, there is, however, in law no
such obligation to consult in the process of sale of majority shares in a
company. The decision in National Textiles Workers Union case can,
therefore, be of no assistance to the petitioner.
In this connection, we approve the following observations of the
Karnataka High Court in Prof. Babu Mathew and Others vs. Union
of India and Others, [1997] 90 Company Cases 455 where the Court
while dealing with disinvestment upto 49% of the government's
holding in a public sector company observed at page 478 as follows:
"Any economic reform, including disinvestment in PSEs is
intended to shake the system for public good. The intention of
disinvestment is to make PSEs more efficient and competitive and
perform better. The concept of the public sector and what should
be the role of the public sector in the development of the country,
are matters of policy closely linked to economic reforms. While
it is true that any policy of the Government should be in public
interest, it is not shown how prior consultation with employees of
a PSE before disinvestment is a facet of such public interest."
As a result of disinvestment of 51% of the shares of the
company, the management and control, no doubt, has gone into
private hands. Nevertheless, it cannot, in law, be said that the
employer of the workmen has changed. The employees continue to be
under the company and change of management does not in law
amount to a change in employment.
Apart from the fact that it will not be open to a Court to
consider whether there has been a gross failure to evolve a
comprehensive package towards implementation of the policy on
disinvestment, as was contended by the Advocate-General of
Chhattisgarh, it is not possible to accept the said contention as being,
in fact, correct. In the process of disinvestment, it is evident that the
Central Government was aware of the interests of the workers and
employees as a class. It was precisely for this reason that safeguards
were inserted in the Share Holders Agreement. These terms, which
have been referred to were incorporated in the agreement after the
demands of the BALCO employees were considered by the IMG in its
meeting on 25th January, 2001 and thereafter the same were
considered by the Cabinet Committee on Disinvestment on 1st
February, 2001.
As far as the grievance of alleged non-consultation of the State
Government in the process of disinvestment of BALCO is concerned,
that is a matter between the State Government and the Union of India
and any grievance on that score cannot be raised by the State against
the Government of India in these proceedings initiated by the
workmen. However, it is not possible to believe that during the entire
process of disinvestment of BALCO, the State Government was
oblivious of what was happening. The facts enumerated herein above
clearly show that wide publicity was given at various stages in
connection with disinvestment. Firstly, it was after due publicity that
a global Adviser was appointed and thereafter advertisement was
issued in an effort to select the strategic partner. The whole process
of disinvestment of BALCO took place over a period of about two
years. The issue was even debated by members in the Lok Sabha.
There was nothing to prevent the State of Chattisgarh at any stage
prior to the selection of the strategic partner, either to forward its
views or a representation or even to make an offer of buying the 51%
of the shares which were being sold. Once Share Holders' Agreement
has been signed, the offer of the State of Chattisgarh to buy 51%
equity shares in the company for a higher value of Rs. 551.41 crores
would be of no consequence. This offer did not see the light of the day
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till the start of the present litigation.
It has been contended on behalf of the State of Chattisgarh as
well as by Shri Ranjit Kumar that the process of disinvestment was a
flagrant violation/deviation of the recommendations of the expert body
of the Disinvestment Commission. It was submitted that the
Disinvestment Commission had recommended disinvestment of only
40% of the Government's equity to the strategic partner through a
transparent and competitive global bidding process but the Counter
Affidavit of the Union of India disclosed that it had taken a decision to
off-load its equity holding of 51% instead of 40% on the basis of the
letter of the Chairman of the Commission dated 12th June, 1998. The
contention of the learned Counsel was that the said letter of the
Chairman could not be a substitute for the recommendations of the
expert body of the Commission and the Government of India should
not have acted solely on the basis of the letter. It was submitted that
there was, thus, gross departure from the recommendations made by
the Commission and the same was without any valid reason or
consideration of overwhelming public interest which has resulted in
vitiating the decision making process.
The Disinvestment Commission was established by the
Government's Resolution on 23rd August, 1996. The Commission was
to have a full-time Chairman and four part-time Members. The
Commission was to make recommendations and be responsible for the
implementation of the policies of the Government of India with respect
to disinvestment. The terms of reference and the functions of the
Commission were provided for in paras 3, 4 and 5 of the said
Resolution. However, by another Resolution dated 12th January, 1998,
paras 3 to 5 were deleted. It was now specifically stated that the
Disinvestment Commission shall be the advisory body and will carry
out such activities relating to disinvestment as may be assigned to it by
the Government. It was clearly stipulated therein that the final decision
on the recommendations of the Commission will vest with the
Government. In April, 1997, the Commission advised the Government
that BALCO needed to be privatised and a significant share of 40% of
the equity should be sold to a strategic partner. This was to be
followed by the reduction of Government's share holding to 26%. The
Disinvestment Commission had categorised BALCO as a non-core
group industry. After the issue of global advertisement, M/s Jardine
Fleming Securities (I) Limited was appointed as global Adviser on
15th January, 1998. It is on 12th June, 1998 that the Chairman,
Disinvestment Commission advised that the Government may consider
offering sale of 51% or more equity of BALCO to the strategic
partner along with transfer of management. This, according to the
Chairman, would fetch a better price of shares. In the light of these
facts, it is not possible to accept the contention that the Union of India
deviated from the advice which was given by the Disinvestment
Commission. Firstly, the advice of this Disinvestment Commission
was not binding on the Government of India. Further more, the terms
of reference and the provisions contained in the Resolution dated 23rd
August, 1996 which required the disinvestment under the supervision
of the Commission and the Commission advising the Government on
matters like consideration of the interests of the stake-holders,
workers, consumers etc., were deleted by the subsequent Resolution
of 12th January, 1998. The Commission became only an advisory or
recommendatory body. It is the full-time Chairman of the Commission
who wrote on 12th June, 1998 that the Government may consider
strategic sale of 50% or more of the equity instead of the
recommendation which was contained in the earlier Report of the
Commission for sale of only 40% of the equity. For the Government
to accept this advise and to come to the conclusion that sale of 50% or
more of the equity of BALCO along with transfer of management
would secure for it a better price than the sale of only 40% cannot,
under any circumstances, be regarded as unwarranted, illegal or
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arbitrary.
It is clear from the facts enumerated above that at each stage of
disinvestment, public notices were issued in appointing the Global
Adviser and then in selecting the strategic partner. The Global
Adviser, after inviting quotations, selected a valuer, Shri P.V. Rao.
Simultaneously, with the process of valuation, steps were taken for
selecting the strategic partner by calling for expression of interest after
advertisements in leading Journals and newspapers. Nevertheless
contention is sought to be raised that the method of valuation was
faulty, some assets were not taken into consideration and that Rs.
551.5 crores offered by M/s Sterlite did not represent the correct
value of 51% shares of the company along with its controlling
interest. It is not for this Court to consider whether the price which
was fixed by the Evaluation Committee at Rs. 551.5 crores was
correct or not. What has to be seen in exercise of judicial review of
administrative action is to examine whether proper procedure has been
followed and whether the reserve price which was fixed is arbitrarily
low and on the face of it, unacceptable.
Assets including shares can be sold in a number of ways, i.e.,
they can be sold by public auction, tenders or sealed offers or by
negotiations. The exercise which was undertaken to appoint valuers
and to get a value of this controlling interest of 51% of the shares was
presumably to arrive at the reserve price. What the assets will fetch,
is ultimately reflected in the offer which is received. Despite global
advertisement, initially only eight companies submitted their
expression of interest. The IMG, consisting of high officials rejected
the bids of two of the eight parties and ultimately only three viz.,
Alcoa/USA, HINDALCO, Sterlite conducted due diligence on
BALCO between September and October, 2000. After carrying out
the necessary inspection (due diligence), it is only two out of three
applicants who gave their bid. Alcoa having dropped out, the bid of
Sterlite industry was more and double of the bid of HINDALCO. The
bidders at the time of furnishing their bids did not know what will be
the reserve price which had to be fixed. It is only after the receipt of
the bids that the reserve price was made known. The perception in the
market, therefore, clearly was that 51% shares of BALCO along with
its management was not worth more than Rs. 550.5 crores. The only
other bidder who had expressed interest was HINDALCO whose bid
was only Rs. 275 crores. Under the circumstances, when the
Government had decided to disinvest in BALCO by accepting a bid far
in excess of the reserve price which was fixed by the Evaluation
Committee, the said decision cannot, under any circumstances, be
faulted. Whether the reserve price should have been 514.4 crores or
more appears to be immaterial when the best price which has been
offered for the sale of 51% stake in BALCO after global
advertisement was only Rs. 551.5 crores. There is no suggestion that
there was any other company or institution which had or could offer
more than the said sum. When proper procedure has been followed,
as in this case, and an offer is made of a price more than the reserve
price then there is no basis for this Court to conclude that the decision
of the Government to accept the offer of Sterlite is in any way
vitiated.
It was contended by the learned Advocate General that the
whole process lacked transparency. We are not able to appreciate this
contention. The disinvestment of BALCO commenced with the
recommendation by the Disinvestment Committee in its second Report
suggesting that the Government may disinvest BALCO. It is by global
advertisement that the global Adviser and the strategic partner was
chosen. At every stage, the matter was looked into by the IMG and
ultimately by the Cabinet Committee on Disinvestment. The system
which was evolved was completely transparent. It was made known.
Transparency does not mean the conducting of the Government
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business while sitting on the cross roads in public. Transparency
would require that the manner in which decision is taken is made
known. Persons who are to decide are not arbitrarily selected or
appointed. Here we have the selection of the global adviser and the
strategic partner through the process of issuance of global
advertisement. It is the global Adviser who selected the valuer who
was already on the list of valuers maintained by the Government.
Whatever material was received was examined by high Power
Committee known as the IMG and the ultimate decision was taken by
the Cabinet Committee on Disinvestment. To say that there has been
lack of transparency, under these circumstances, is uncharitable and
without any basis.
It was contended on behalf of the State of Chattisgarh that the
land on which industry has been set up was originally tribal land. The
said land could have been acquired and used by public sector
undertaking but the tribal land could not be transferred to a non-tribal.
Once majority shares in BALCO were transferred to a non-tribal
company, the prohibition contained against the transfer of tribal land
came into operation. Relying on the majority decision of this Court in
Samatha vs. State of A.P. and Others, (1997) 8 SCC 191, it was
contended that the transfer of land even by lease in favour of BALCO
must be regarded as being invalid.
In Samatha's case, this Court had to consider the validity of the
grant of mining lease of Government land in a scheduled area to the
'Non-Tribals'. The Court had to consider the effect and applicability
of Section 3(1) of the A.P. Scheduled Areas Land Transfer
Regulation, 1959 which reads as follows :-
"3. Transfer of immovable property by a member of a
Scheduled Tribe (1) (a) Notwithstanding anything in any
enactment, rule or law in force in the Agency tracts any transfer
of immovable property situated in the Agency tracts by a person,
whether or not such person is a member of a Scheduled Tribe,
shall be absolutely null and void, unless such transfer is made in
favour of a person, who is a member of a Scheduled Tribe or a
society registered or deemed to be registered under the Andhra
Pradesh Cooperative Societies Act, 1964 (Act 7 of 1964) which is
composed solely of members of the Scheduled Tribes".
While interpreting the said Regulation framed by the Governor
in exercise of powers under Article 244 read with para 5(2) of the
Fifth Schedule of the Constitution, this Court held that the words
"transfer of immovable property . by a person" in that
clause included the transfer by way of grant of mining lease by the
State Government. Section 3(1) was interpreted as prohibiting any
such transfer in favour of a non-scheduled tribe and it was further
declared that such transfer shall be absolutely null and void.
While we have strong reservations with regard to the
correctness of the majority decision in Samatha's case, which has not
only interpreted the provisions of aforesaid Section 3(1) of the A.P.
Scheduled Areas Land Transfer Regulation, 1959 but has also
interpreted the provisions of the Fifth Schedule of the Constitution, the
said decision is not applicable in the present case because the law
applicable in Madhya Pradesh is not similar or identical to the
aforesaid Regulation of Andhra Pradesh. Article 145 (3) of the
Constitution provides that any substantial question of law as to the
interpretation of the provisions of the Constitution can only be decided
by a Bench of five judges. In Samatha's case, it is a Bench of three
Hon'ble judges who by majority of 2:1, interpreted the Fifth
Schedule of the Constitution. However, what is important to note here
is, as already observed herein above, that the provisions of the
Madhya Pradesh Land Revenue Code, 1959 and Section 165, in
particular, are not in pari materia with the aforesaid Section 3 of the
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Andhra Pradesh Regulation.
Section 165 of the M.P. Revenue Code, 1959 deals with
transfer of rights of Bhumiswami. Prior to its amendment on 29th
November, 1976, Sub-section 6 of Section 165 reads as follows :-
"Notwithstanding anything contained in sub-section (1),
the right of a Bhumiswami belonging to a tribe which has been
declared to be an aboriginal tribe by the State Government by a
notification in that behalf for the whole or a part of the area to
which this Code applies shall not be transferred to a person not
belonging to such tribe without the permission of a Revenue
Officer not below the rank of a Collector, given for reasons to be
recorded in writing".
By Section 2 of the M.P. Act No. 61 of 1976 published in the
Gazette on 29th November, 1976, the aforesaid sub-section (6) of
Section 165 was repealed and was substituted by the following
provision:-
"Notwithstanding anything contained in sub-section (1)
the right of Bhumiswami belonging to a tribe which has been
declared to be an aboriginal tribe by the State Government by a
notification in that behalf for the whole or part of the area to
which the Code applies shall
(i) in such areas as are predominately inhabited by
aboriginal tribes and from such date as the State
Government may, by notification specify, not be
transferred nor it shall be transferable either by way of
sale or otherwise or as a consequence of transaction of
loan to a person not belonging to such tribe in the
area specified in the notification;
(ii) in areas other than those specified in the notification
under clause (i), not be transferred or be transferable
either by way of sale or otherwise or as a consequence
of transaction of loan to a person not belonging to such
tribe without the permission of a Revenue Officer not
below the rank of Collector, given for reasons to be
recorded in writing".
Explanation For the purposes of this sub-section the
expression "otherwise" shall not include lease.
Sub-section (6) of Section 165, before and after its amendment,
does not contain any provision prohibiting the giving of tribal land by
way of lease to non-tribals. Prior to its amendment, a land could be
transferred to a non-tribal after getting permission of Revenue Officer
not below the rank of Collector who is required to give his reasons for
granting the permission. After amendment on 29th November, 1976
by virtue of provision of sub-section (6), lease of land is taken out of
the purview of sub-section 6(1).
In the instant case, either the land was acquired and then given
on lease by the State Government to BALCO or permission was given
by the District Collector for transfer of private land in favour of
BALCO. This was clearly permissible under the provisions of Section
165(6) as it then stood and it is too late in the day, 25 years after the
last permission was granted, to hold that because of this
disinvestment, it must be presumed that there is a transfer of land to
the non-tribal in the year 2001 even though the land continues to
remain with BALCO to whom it was originally transferred. The
giving of land to BALCO on lease was in compliance with the
provisions of Section 165(6) of the Revenue Code. Moreover, change
of management or in the shareholding does not imply that there has
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now been any transfer of land from one company to another. If the
original grant of lease of land and permission to transfer in favour of
BALCO between the years 1968 and 1972 was valid, then, it cannot
now be contended that there has been another transfer of land with the
Government having been reduced it's stake to 49%. Even if BALCO
had been a non-public sector undertaking the transfer of land to it was
not in violation of the M.P. Land Revenue Code. The decision of this
Court in Samatha's case (Supra) is inapplicable in the present case as
the statutory provision here does not contain any absolute prohibition
of the type contained in Section 3(1) of the Andhra Pradesh
Regulation, which was the basis of the decision in Samatha's case.
Transferred Case No. 9 of 2001.
Shri B.L. Wadhera has, in recent years, become a persistent
Public Interest Litigant who has to his credit fairly large number of
Writ Petitions filed in the Delhi High Court. Not to miss an
opportunity, soon after the bid of Sterlite was accepted on 21st
February, 2001, promptly Wadhera filed Writ Petition in the Delhi
High Court within two days i.e. on 23rd February, 2001 which is
Transferred Case No. 9 of 2001 challenging the said decision.
Wadhera is not an employee of the company, nor was he a prospective
bidder. He contended that he had been closely connected with public
sector undertakings and therefore, had the locus standi to file the Writ
Petition challenging the said disinvestment by filing what he terms as a
Public Interest Litigation.
Public Interest Litigation, or PIL as it is more commonly
known, entered the Indian judicial process in 1970. It will not be
incorrect to say that it is primarily the judges who have innovated this
type of litigation as there was a dire need for it. At that stage, it was
intended to vindicate public interest where fundamental and other
rights of the people who were poor, ignorant or in socially or
economically disadvantageous position and were unable to seek legal
redress were required to be espoused. PIL was not meant to be
adversarial in nature and was to be a cooperative and collaborative
effort of the parties and the Court so as to secure justice for the poor
and the weaker sections of the community who were not in a position
to protect their own interests. Public Interest Litigation was intended
to mean nothing more than what words themselves said viz.,
'litigation in the interest of the public'.
While PIL initially was invoked mostly in cases connected with
the relief to the people and the weaker sections of the society and in
areas where there was violation of human rights under Article 21, but
with the passage of time, petitions have been entertained in other
spheres. Prof. S.B. Sathe has summarised the extent of the
jurisdiction which has now been exercised in following words :-
"PIL may, therefore, be described as satisfying one or
more of the following parameters. These are not exclusive but
merely descriptive:
? Where the concerns underlying a petition are not
individualist but are shared widely by a large number
of people (bonded labour, undertrial prisoners, prison
inmates).
? Where the affected persons belong to the
disadvantaged sections of society(women, children,
bonded labour, unorganised labour etc.).
? Where judicial law making is necessary to avoid
exploitation(inter-country adoption, the education of
the children of the prostitutes).
? Where judicial intervention is necessary for the
protection of the sanctity of democratic
institutions(independence of the judiciary, existence of
grievances redressal forums).
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? Where administrative decisions related to development
are harmful to the environment and jeopardize
people's to natural resources such as air or water".
There is, in recent years, a feeling which is not without any
foundation that Public Interest Litigation is now tending to become
publicity interest litigation or private interest litigation and has a
tendency to be counter-productive.
PIL is not a pill or a panacea for all wrongs. It was essentially
meant to protect basic human rights of the weak and the disadvantaged
and was a procedure which was innovated where a public spirited
person files a petition in effect on behalf of such persons who on
account of poverty, helplessness or economic and social disabilities
could not approach the Court for relief. There have been, in recent
times, increasingly instances of abuse of PIL. Therefore, there is a
need to re-emphasize the parameters within which PIL can be resorted
to by a Petitioner and entertained by the Court. This aspect has come
up for consideration before this Court and all we need to do is to
recapitulate and re-emphasize the same.
What Public Interest Litigation is meant to be has been
explained at length in S.P. Gupta vs. Union of India and Another,
1981 (Supp) SCC 87. Public Interest Litigation in that case was filed
relating to the appointment and transfer of judges and it is in this
connection that the question arose with regard to the locus standi of
the Petitioner to file the Writ Petition. While deciding this aspect, this
Court examined as to what is the nature of the Public Interest
Litigation and who can initiate the same. At page 215, Bhagwati J.
observed as follows :-
"..It is for this reason that in public interest litigation
litigation undertaken for the purpose of redressing public injury,
enforcing public duty, protecting social, collective, 'diffused'
rights and interests or vindicating public interest, any citizen who
is acting bona fide and who has sufficient interest has to be
accorded standing.."
The limitation within which the Court must act, and the caution
against the abuse of the same is referred to by Bhagwati J. at page 219
as follows :-
"24. But we must be careful to see that the member of the public,
who approaches the court in cases of this kind, is acting bona fide
and not for personal gain or private profit or political motivation
or other oblique consideration. The Court must not allow its
process to be abused by politicians and others to delay legitimate
administrative action or to gain a political objective. Andre Rabie
has warned that "political pressure groups who could not achieve
their aims through the administrative process" and we might add,
through the political process, "may try to use the courts to further
their aims". These are some of the dangers in public interest
litigation which the court has to be careful to avoid. It is also
necessary for the court to bear in mind that there is a vital
distinction between locus standi and justiciability and it is not
every default on the part of the State or a public authority that is
justiciable. The court must take care to see that it does not
overstep the limits of its judicial function and trespass into areas
which are reserved to the Executive and the Legislature by the
Constitution. It is a fascinating exercise for the court to deal with
public interest litigation because it is a new jurisprudence which
the court is evolving a jurisprudence which demands judicial
statesmanship and high creative ability. The frontiers of public
law are expanding far and wide and new concepts and doctrines
which will change the complexion of the law and which were so
far as embedded in the womb of the future, are beginning to be
born.
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25. Before we part with this general discussion in regard to locus
standi, there is one point we would like to emphasise and it is,
that cases may arise where there is undoubtedly public injury by
the act or omission of the State or a public authority but such act
or omission also causes a specific legal injury to an individual or
to a specific class or group of individuals. In such cases, a
member of the public having sufficient interest can certainly
maintain an action challenging the legality of such act or
omission, but if the person or specific class or group of persons
who are primarily injured as a result of such act or omission, do
not wish to claim any relief and accept such act or omission
willingly and without protest, the member of the public who
complains of a secondary public injury cannot maintain the
action, for the effect of entertaining the action at the instance of
such member of the public would be to foist a relief on the person
or specific class or group of persons primarily injured, which
they do not want."
Emphasis
added
In Sachidanand Pandey and Another vs. State of West Bengal
and Others, (1987) 2 SCC 295, V. Khalid, J. observed as follows :-
"61. It is only when courts are apprised of gross violation of
fundamental rights by a group or a class action or when basic
human rights are invaded or when there are compaints of such
acts as shock the judicial conscience that the courts, especially
this Court, should leave aside procedural shackles and hear such
petitions and extend its jurisdiction under all available provisions
for remedying the hardships and miseries of the needy, the
underdog and the neglected. I will be second to none in extending
help when such help is required. But this does not mean that the
doors of this Court are always open for anyone to walk in. It is
necessary to have some self-imposed restraint on public interest
litigants".
After referring to the decision in Subhash Kumar vs. State of
Bihar and Others, (1991) 1 SCC 598 and other cases on the point, in
Janata Dal vs. H.S. Chowdhary and Others, (1992) 4 SCC 305, it
was observed at page 348 as follows :-
"109. It is thus clear that only a person acting bona fide and
having sufficient interest in the proceeding of PIL will alone have
a locus standi and can approach the court to wipe out the tears of
the poor and needy, suffering from violation of their fundamental
rights, but not a person for personal gain or private profit or
political motive or any oblique consideration. Similarly, a
vexatious petition under the colour of PIL brought before the
court for vindicating any personal grievances, deserves rejection
at the threshold".
Referring to the litigants standing in queues waiting for the
cases to be listed in Courts at page 349, Pandian, J. had observed as
follows:-
"..the busybodies, meddlesome interlopers, wayfarers or
officious interveners having absolutely no public interest except
for personal gain or private profit either for themselves or as
proxy of others or for any other extraneous motivation or for
glare of publicity break the queue muffling their faces by wearing
the mask of public interest litigation, and get into the courts by
filing vexatious and frivolous petitions and thus criminally waste
the valuable time of the courts and as a result of which the queue
standing outside the doors of the Court never moves which
piquant situation creates a frustration in the minds of the genuine
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litigants and resultantly they lose faith in the administration of
our judicial system."
While dealing with a case where PIL had been filed in relation
to an award of contract, the factors which the Courts have to consider
have been dealt with in the following observations in Raunaq
International Ltd. vs. I.V.R. Construction Ltd. and Others (1999) 1
SCC 492 at page 502.
"17. Normally before such a project is undertaken, a detailed
consideration of the need, viability, financing and cost-
effectiveness of the proposed project and offers received takes
place at various levels in the Government. If there is a good
reason why the project should not be undertaken, then the time to
object is at the time when the same is under consideration and
before a final decision is taken to undertake the project. If breach
of law in the execution of the project is apprehended, then it is at
the stage when the viability of the project is being considered that
the objection before the appropriate authorities including the
court must be raised. We would expect that if such objection or
material is placed before the Government, the same would be
considered before a final decision is taken. It is common
experience that considerable time is spent by the authorities
concerned before a final decision is taken regarding the execution
of a public project. This is the appropriate time when all aspects
and all objections should be considered. It is only when valid
objections are not taken into account or ignored that the court
may intervene. Even so, the court should be moved at the earliest
possible opportunity. Belated petitions should not be entertained.
18. The same considerations must weigh with the court when
interim orders are passed in such petitions. The party at whose
instance interim orders are obtained has to be made accountable
for the consequences of the interim order. The interim order
could delay the project, jettison finely worked financial
arrangements and escalate costs. Hence the petitioner asking for
interim orders in appropriate cases should be asked to provide
security for any increase in cost as a result of such delay or any
damages suffered by the opposite party in consequence of an
interim order. Otherwise public detriment may outweigh public
benefit in granting such interim orders. Stay order or injunction
order, if issued, must be moulded to provide for restitution."
Lastly, we need only to refer to the following observations in
the majority decision in Narmada Bachao Andolan case (supra) at
page 763.
"232. While protecting the rights of the people from being
violated in any manner utmost care has to be taken that the court
does not transgress its jurisdiction. There is, in our constitutional
framework a fairly clear demarcation of powers. The court has
come down heavily whenever the executive has sought to impinge
upon the court's jurisdiction.
233. At the same time, in exercise of its enormous power the
court should not be called upon to or undertake governmental
duties or functions. The courts cannot run the Government nor
can the administration indulge in abuse or non-use of power and
get away with it. The essence of judicial review is a constitutional
fundamental. The role of the higher judiciary under the
Constitution casts on it a great obligation as the sentinel to defend
the values of the Constitution and the rights of Indians. The
courts must, therefore, act within their judicially permissible
limitations to uphold the rule of law and harness their power in
public interest. It is precisely for this reason that it has been
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consistently held by this Court that in matters of policy the court
will not interfere. When there is a valid law requiring the
Government to act in a particular manner the court ought not to,
without striking down the law, give any direction which is not in
accordance with law. In other words, the court itself is not above
the law.
234. In respect of public projects and policies which are initiated
by the Government the courts should not become an approval
authority. Normally such decisions are taken by the Government
after due care and consideration. In a democracy welfare of the
people at large, and not merely of a small section of the society,
has to be the concern of a responsible Government. If a
considered policy decision has been taken, which is not in conflict
with any law or is not mala fide, it will not be in public interest
to require the court to go into and investigate those areas which
are the function of the executive. For any project which is
approved after due deliberation the court should refrain from
being asked to review the decision just because a petitioner in
filing a PIL alleges that such a decision should not have been
taken because an opposite view against the undertaking of the
project, which view may have been considered by the
Government, is possible. When two or more options or views are
possible and after considering them the Government takes a
policy decision it is then not the function of the court to go into
the matter afresh and, in a way, sit in appeal over such a policy
decision".
It will be seen that whenever the Court has interfered and given
directions while entertaining PIL it has mainly been where there has
been an element of violation of Article 21 or of human rights or where
the litigation has been initiated for the benefit of the poor and the
underprivileged who are unable to come to Court due to some
disadvantage. In those cases also it is the legal rights which are
secured by the Courts. We may, however, add that Public Interest
Litigation was not meant to be a weapon to challenge the financial or
economic decisions which are taken by the Government in exercise of
their administrative power. No doubt a person personally aggrieved
by any such decision, which he regards as illegal, can impugn the
same in a Court of law, but, a Public Interest Litigation at the behest
of a stranger ought not to be entertained. Such a litigation cannot per
se be on behalf of the poor and the downtrodden, unless the Court is
satisfied that there has been violation of Article 21 and the persons
adversely affected are unable to approach the Court.
The decision to disinvest and the implementation thereof is
purely an administrative decision relating to the economic policy of
the State and challenge to the same at the instance of a busy-body
cannot fall within the parameters of Public Interest Litigation.
On this ground alone, we decline to entertain the writ petition
filed by Shri B.L. Wadhera.
Writ Petition (Civil) No. 194 of 2001
This writ petition has been filed under Article 32 of the
Constitution by BALCO challenging various show causes notices
issued to them by authorities in the State of Chhattisgarh. In our
opinion, it will not be appropriate for this Court to entertain the
challenge to the said show cause notices in this petition. The
petitioners have adequate remedy open to it under the Acts under
which the notices had been issued and, in appropriate case, can
approach the High Court under Article 226 of the Constitution. This
writ petition is thus not entertained as alternative remedy is available
to the petitioner.
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Conclusion:
In a democracy, it is the prerogative of each elected
Government to follow it's own policy. Often a change in Government
may result in the shift in focus or change in economic policies. Any
such change may result in adversely affecting some vested interests.
Unless any illegality is committed in the execution of the policy or the
same is contrary to law or mala fide, a decision bringing about change
cannot per se be interfered with by the Court.
Wisdom and advisability of economic policies are ordinarily not
amenable to judicial review unless it can be demonstrated that the
policy is contrary to any statutory provision or the Constitution. In
other words, it is not for the Courts to consider relative merits of
different economic policies and consider whether a wiser or better
one can be evolved. For testing the correctness of a policy, the
appropriate forum is the Parliament and not the Courts. Here the
policy was tested and the Motion defeated in the Lok Sabha on 1st
March, 2001.
Thus, apart from the fact that the policy of disinvestment cannot
be questioned as such, the facts herein show that fair, just and
equitable procedure has been followed in carrying out this
disinvestment. The allegations of lack of transparency or that the
decision was taken in a hurry or there has been an arbitrary exercise
of power are without any basis. It is a matter of regret that on behalf
of State of Chattisgarh such allegations against the Union of India
have been made without any basis. We strongly deprecate such
unfounded averments which have been made by an officer of the said
State.
The offer of the highest bidder has been accepted. This was
more than the reserve price which was arrived at by a method which is
well recognised and, therefore, we have not examined the details in
the matter of arriving at the valuation figure. Moreover, valuation is a
question of fact and the Court will not interfere in matters of valuation
unless the methodology adopted is arbitrary [see Duncans Industries
Ltd. vs. State of U.P. and Others, (2000) 1 SCC 633].
The ratio of the decision in Samatha's case (supra) is
inapplicable here as the legal provisions here are different. The land
was validly given to BALCO a number of years ago and today it is not
open to the State of Chattisgarh to take a summersault and challenge
the correctness of it's own action. Furthermore even with the change
in management the land remains with BALCO to whom it had been
validly given on lease.
Judicial interference by way of PIL is available if there is
injury to public because of dereliction of Constitutional or statutory
obligations on the part of the government. Here it is not so and in the
sphere of economic policy or reform the Court is not the appropriate
forum. Every matter of public interest or curiosity cannot be the
subject matter of PIL. Courts are not intended to and nor should they
conduct the administration of the country. Courts will interfere only if
there is a clear violation of Constitutional or statutory provisions or
non-compliance by the State with it's Constitutional or statutory
duties. None of these contingencies arise in this present case.
In the case of a policy decision on economic matters, the Courts
should be very circumspect in conducting any enquiry or investigation
and must be most reluctant to impugn the judgement of the experts
who may have arrived at a conclusion unless the Court is satisfied
that there is illegality in the decision itself.
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Lastly, no ex-parte relief by way of injunction or stay
especially with respect to public projects and schemes or economic
policies or schemes should be granted. It is only when the Court is
satisfied for good and valid reasons, that there will be irreparable and
irretrievable damage can an injunction be issued after hearing all the
parties. Even then the Petitioner should be put on appropriate terms
such as providing an indemnity or an adequate undertaking to make
good the loss or damage in the event the PIL filed is dismissed.
It is in public interest that there should be early disposal of
cases. Public Interest Litigation should, therefore, be disposed of at
the earliest as any delay will be contrary to public interest and thus
become counter-productive.
For the aforesaid reasons stated in this judgment, we hold that
the disinvestment by the Government in BALCO was not invalid.
Transferred Case (Civil) Nos. 8, 9 and 10 of 2001 are dismissed. The
parties will, however, bear their own costs.
.....J.
[ B.N. Kirpal ]
...J.
[ Shivaraj V. Patil ]
.J.
[ P. Venkatarama Reddi ]
December 10, 2001.
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