http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8

CASE NO.:

Writ Petition (civil) 488 of 2002

PETITIONER:

Kapila Hingorani

RESPONDENT:

State of Bihar

DATE OF JUDGMENT: 13/01/2005

BENCH:

N. Santosh Hegde & S.B. Sinha

JUDGMENT:

J U D G M E N T

I.A. NOS. 7 & 9-10

IN

WRIT PETITION (CIVIL) NO.488 OF 2002

O R D E R

This Court in this case disposed of on 9th May, 2003 since reported in

(2003) 6 SCC 1 issued certain directions. Those directions need not be

reproduced herein. Pursuant to or in furtherance of those directions, the

State of Bihar has deposited a sum of Rs. 50 crores. The High Court of

Judicature at Patna has also constituted a committee headed by Hon'ble Mr.

Justice Uday Sinha, a former Judge of the Patna High Court.

A report of the said committee has been placed before us, from a

perusal whereof it appears that a sum of Rs. 25,98,65,883.00 had been

recommended for payment to the employees of most of the undertakings.

Payment to Bihar State Sugar Corporation was said to be in the pipeline

which came to be about Rs. 17 crores. It has been pointed out that BSIDC

and units of other corporations in Jharkhand had not been paid yet and the

Committee is left with Rs. 6 crores and odd.

An application for clarification has been filed by the Petitioner herein

marked as I.A. No. 7 of 2004 wherein it has been prayed that the Jharkhand

Hill Area Lift Irrigation Corporation Limited (JHALCO) be treated as

successor of Bihar Hill Area Lift Irrigation Corporation (BHALCO) from

15.11.2000 onwards. It has further been contended that employees of Bihar

Hill Area Lift Irrigation Corporation Ltd. would be absorbed by Jharkhand

Hill Area Lift Irrigation Corporation Ltd., only if they forego their claim of

salary for period prior to the respective dates of absorption.

A prayer therefore has been made to clarify the order dated 9th May,

2003 as to whether the State of Bihar or State of Jharkhand or both would be

required to pay the unpaid salary to the employees of BHALCO.

Another interlocutory application being I.A. No. 9 of 2004 has been

filed by the petitioner praying therein for a direction upon the Respondent \026

State of Bihar and/ or State of Jharkhand to deposit sufficient sum of money

with the Hon'ble Patna High Court so that at least the employees of the

corporations listed in the order dated 9th May, 2003 be paid their salaries.

Counter affidavits affirmed by Shri Ashok Kumar Choudhary,

Chairman, Bureau of Public Enterprises, Government of Bihar, Patna have

been filed on behalf of the State of Bihar both in I.A. No. 7 and I.A. No. 9 of

2004. In the counter affidavit filed in I.A. No. 7 of 2004, it has been

contended that the Government of Bihar will initiate liquidation proceedings

in respect of BHALCO and having regard to the offer made by the State of

Jharkhand no relief should be granted by this Court to the employees of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8

said corporation as they may still close to exercise their option to get

absorbed in JHALCO.

In the counter affidavit filed in I.A. No. 9 of 2004, the State of Bihar

has been contended that the direction issued by this Court in its order dated

9th May, 2003 being extraordinary in nature and by way of one time

arrangement only, no direction should be issued directing the State of Bihar

to make any further payment.

The State of Jharkhand has also been impleaded as a party herein and

it has filed a counter-affidavit affirmed by one Shri Binod Kumar Verma,

Managing Director, JHALCO, Ranchi wherein a contention is raised that

BHALCO is still under the control of the State of Bihar. It has further been

affirmed that in stead and place of BHALCO, a new corporation known as

JHALCO has been incorporated and registered to the Registrar of

Companies, Jharkhand on or about 22nd March, 2002. The said JHALCO is,

thus, said to be new corporation and nothing to do with BHALCO and in any

event, it is not the successor of BHALCO.

It is not in dispute that pursuant to or in furtherance of the directions

issued by this Court, the Central Government has exercised its jurisdiction

under Section 65 of the States Reorganization Act.

Union of India has filed an affidavit wherein it has been contended

that winding up applications have already been filed by the State of Bihar in

relation to the following eighteen companies:

"1. Bihar State Industries Development

Corporation

2. Bihar State Leather Development Corporation

3. Bihar State Electronics Development

Corporation

4. Bihar State Sugar Corporation Limited

5. Bihar State Medicine and Chemical

Development Corporation

6. Bihar State Fruit and Vegetables Development

Corporation

7. Bihar State Agro Industries Corporation

8. Bihar State Textiles Corporation Limited

9. Bihar State Small Industries Corporation

Limited

10. Bihar State Handlooms and Handicrafts

Corporation

11. Bihar State Forest Development Corporation

Limited

12. Bihar State Export Development Corporation

Limited

13. Bihar State Construction Corporation Limited

14. Bihar State Bridge Construction Corporation

Limited

15. Bihar State Police Building Construction

Corporation Limited

16. Bihar State Water and Sewage Disposal Board

17. Bihar State Panchayati Raj Finance

Development Corporation Limited

18. Bihar State Film Development and Finance

Corporation Limited"

It is, therefore, contended that in that view of the matter, no order

was required to be passed under Section 65 in relation thereto.

It was further contended that eight companies, names whereof are

noticed hereinbelow, operate within the territories of Bihar and as such no

order of bifurcation was required to be passed:

"1. North Bihar Industrial Area Development

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8

Authority

2. Darbhanga Industrial Area Development

Authority

3. Patna Area Development Authority

4. Muzaffarpur Area Development Authority

5. Darbhanga Area Development Authority

6. Gaya Area Development Authority

7. Electricity Corporation Limited

8. Bhagalpur Regional Development Authority,

Bhagalpur"

So far as other companies which are operating both within the

territories of States of Bihar and Jharkhand are concerned, a direction in

respect of the following four companies orders for division of assets and

liabilities has already been issued:

"1. Bihar State Road Transport Corporation

2. Bihar State Housing Board

3. Bihar State Electricity Board

4. Bihar State Pollution Control Board"

It is stated that no decision as regard 18 companies have been taken

by the States of Bihar and Jharkhand. The case of one company known as

Bihar State Cooperative Milk Producer's Federation (COMFED) is said to

be subjudice.

For the purpose of division of assets of the companies which have

been operating within the territories of States of Bihar and Jharkhand, it is

stated:

"8. That as per the orders issued by the Ministry of

Home Affairs, the assets, liabilities and employees

of the most of the companies have been divided

between the States of Bihar and Jharkhand.

However, in respect of the Corporations such as

Bihar State Warehousing Corporation, Bihar State

Hydro Electric Power Corporation, Bihar State

Text Book Publishing Corporation Limited, Bihar

State Finance Corporation and Bihar State Food

and Civil Supplies Corporation, it was decided that

these Corporations will continue to function as

inter-State Corporations in the States of Bihar and

Jharkhand. Accordingly, it was decided to divide

the shares of these Corporations as well as the

representation of the two States in their respective

Board of Directors."

A Committee has also been constituted for monitoring the progress of

implementation of orders passed by the Central Government comprising of

the Chief Secretary, Bihar or his/ her nominee and Chief Secretary,

Jharkhand or his/her nominee. The said committee is required to meet at

least once in a month and submit a progress report to the Ministry of Home

Affairs.

Mr. B.B. Singh, learned counsel appearing on behalf of the State of

Bihar would submit that the State has no liability to pay the salaries of the

employees of the statutory corporations/ companies incorporated under the

Indian Companies Act. Reliance in this behalf has been placed on Steel

Authority of India Ltd. and Others vs. National Union Waterfront Workers

and Others [(2001) 7 SCC 1] and Electronics Corporation of India Ltd. and

Others vs. Secretary, Revenue Department, Govt. of Andhra Pradesh and

Others [(1999) 4 SCC 458].

The learned counsel would contend that the statutory corporations/

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8

other public undertakings being not completely under the control of the

State, the remedy of the employee, if any, is to file appropriate applications

before the Company Judge before whom winding-up applications in relation

to 18 companies have been filed or to approach the appropriate Industrial

Court in that behalf.

In its order dated 9th May, 2003, this Court considered the matter from

the human rights aspects as also the fundamental rights of the employees of

the public sector undertakings operating in the State of Bihar holding :

"We, however, hasten to add that we do not intend

to lay down a law, as at present advised, that the

State is directly or vicariously liable to pay

salaries/remunerations of the employees of the

public sector undertakings or the Government

companies in all situations . We, as explained

hereinbefore, only say that the State cannot escape

its liability when a human rights problem of such

magnitude involving the starvation deaths and/or

suicide by the employees has taken place by reason

of non-payment of salary to the employees of

Public Sector Undertaking for such a long time.

We are not issuing any direction as against the

State of Jharkhand as no step had admittedly been

taken by the Central Government in terms of

Section 65 of the State Reorganisation Act and

furthermore as only four public sector

undertakings have been transferred to the State of

Jharkhand in respect whereof the petitioner does

not make any grievance."

It has been contended before us that after passing of the

aforementioned order, five of employees have died due to non-payment of

their salaries.

The Constitution Bench decision of this Court in Steel Authority of

India Ltd. (supra) and Electronics Corporation of India Ltd. (supra), which

has been relied upon by Mr. Singh had been considered by this Court in its

order dated 9th May, 2003 holding :

"Thus, the law as stated therein is not of universal

application. The ratio of the said decisions must

be applied having regard to the fact situation

obtaining therein [See Bhavnagar University vs.

Palitana Sugar Mill (P) Ltd. and Others [(2003) 2

SCC 111 \026 (Para 59)]. It has its limitations in its

applications, as exceptions exist in several areas"

This Court further relying upon the doctrine of 'lifting the corporate

veil' observed:

"The Government companies/public sector

undertakings being 'States' would be

constitutionally liable to respect life and liberty of

all persons in terms of Article 21 of the

Constitution of India. They, therefore, must do so

in cases of their own employees. The Government

of the State of Bihar for all intent and purport is

the sole shareholder. Although in law, its liability

towards the debtors of the Company may be

confined to the shares held by it but having regard

to the deep and pervasive control it exercises over

the Government companies; in the matter of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8

enforcement of human rights and/or rights of the

citizen of life and liberty, the State has also an

additional duty to see that the rights of employees

of such corporations are not infringed.

The right to exercise deep and pervasive control

would in its turn make the Government of Bihar

liable to see that the life and liberty clause in

respect of the employees is fully safeguarded. The

Government of the State of Bihar, thus, had a

constitutional obligation to protect life and liberty

of the employees of the Government owned

companies/corporations who are the citizens of

India. It had an additional liability having regard

to its right of extensive supervision over the affairs

of the company."

As regards the statutory corporation, it was further noticed:

"In relation to statutory authority, the State had

also the requisite power to issue necessary

directions which were binding upon them, as for

example, Section 79(c) of Electricity (Supply)

Act."

This Court further observed that the State has a constitutional

obligation and acts in a fiduciary capacity vis-`-vis performance of its

constitutional duties and functions by the public sector undertakings as it has

constitutional obligations in relation thereto.

The State of Bihar in response to the applications filed by the

petitioner herein cannot, in our opinion, be permitted to raise questions

which have expressly been rejected. It cannot seek a review of the said

judgment indirectly which could not do directly. Even for such matters, an

application for clarification would not be maintainable. [See Ram Chandra

Singh Vs. Savitri Devi, JT 2004 (6) SC 93].

We, therefore, do not appreciate the stand taken by the State of Bihar

now that it does not have any constitutional obligation towards a section of

citizens, viz., the employees of the public sector undertakings who have not

been paid salaries for years.

We also do not appreciate the submissions made on behalf of the State

of Bihar that the directions issued were only one-time direction. In clause 4

of the direction, it was clearly stated that the State for the present shall

deposit a sum of Rs. 50 crores before the High Court for disbursement of

salaries to the employees of the Corporations. Furthermore, the matter had

been directed to be placed again after six months.

[emphasis supplied]

It is really a matter of regret that despite statutory power as also the

power of control vested in the State of Bihar either under the statutes or in

terms of Articles and Memorandum of Association of the respective

Government Companies, it did not exercise the same and now raised a

contention that the State had no effective control over the functions of the

said public sector undertakings. The States of Bihar and Jharkhand,

indisputably, can exercise their statutory power and in discharge thereof can

issue requisite directions as is permissible in law.

We have heretobefore noticed the operative part of the report of the

Committee.

It would appear therefrom that the directions of this Court could not

be complied with having regard to the fact that only six crores were left with

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8

the Committee. Before us a chart has been submitted showing the

approximate amount involved for payment of arrears of salaries in relation to

the following corporations:

"Name of undertaking

Approximate amount admittedly

involved for payment of arrears

Bihar State Sugar Corporation

Rs. 130 crores

Bihar State Leather Industries

Development Corporation / Bihar

Finished Leathers

Rs. 62.45 crores

Bihar State Industrial Development

Corporation

Rs. 61.72 crores

Bihar State Agro Industries

Development Corporation

Rs. 60.73 crores

Bihar State Construction Corporation

Rs. 37.50 crores

Bihar State Handloom & Handicraft

Corporation

Rs. 18 crores

Bihar State Small Scale Industrial

Development Corporation

Rs. 18 crores

Bihar State Medicine & Chemical

Development Corporation

Rs. 9.46 crores

Bihar State Panchyati Raj Financial

Corporation

Rs. 3.75 crores

Bihar State Electronic Dev.

Corporation

Rs. 2.51 crores

Bihar State Fruit & Vegetable

Development Corporation

Rs. 1.8056 crores

Bihar State Vastraya (Textile)

Corporation

Rs. 0.70 crores

Bihar State Film Development &

Financial Corporation

Rs. 55,000/- per month

since August 2002"

It has further been placed before us that as regards Bihar State Road

Transport Corporation, Bihar State Khadi Gramdhoyog Board, Bihar State &

Food Civil Supplies Corporation and Bihar State Seed Corporation,

approximate amount involved for payment of arrears of salaries and assets

and liabilities divided have been shown in the following terms:

"Name of Undertaking

Approximate amount

involved for payment of

arrears of salaries

Status

Bihar State Road

Transport Corporation

Rs. 160.35 crores

Assets and Liabilities

divided at the ratio of

65:35 vide order dated

14.1.2004

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8

Bihar State Khadi

Gramdhoyog Board

Rs. 37.50 crores

Assets and liabilities

divided vide Order

dated 13.9.2004

Bihar State & Food

Civil Supplies

Corporation

Rs. 16.56 crores

Assets and liabilities

divided at the ratio of

3:1 vide order dated

13.9.2004

Bihar State Seed

Corporation

Rs. 4.53 crores

Assets and liabilities

divided at the ratio of

78:22 vide order dated

13.9.2004"

As regards BHALCO, it was contended that the approximate amount

involved for payment of arrears and salaries is not available as the said

corporation continues to be under the control of the State of Bihar.

It is true, as has been contended on behalf of the State of Jharkhand,

that a new corporation named as JHALCO has come into being, but keeping

in view of the fact that the State of Jharkhand itself has given option to the

employees of BHALCO, the order of absorption of those employees who opt

for employment may be passed at an early date and not later than six weeks

from date. The concerned employees need not file any undertaking at this

stage as the question as to whether the State of Jharkhand is liable to pay any

salary and other emoluments to the employees of BHALCO is a question

which would fall for decision in an appropriate proceedings.

Keeping in view of the fact that despite this Court's our order dated

9th May, 2003, five persons have lost their lives owing to non-payment of

salaries and keeping in view of the order of the Central Government dividing

the assets and liabilities between the States of Bihar and Jharkhand in

relation to Bihar State Road Transport Corporation, Bihar State Khadi

Gramdhoyog Board, Bihar State & Food Civil Supplies Corporation and

Bihar State Seed Corporation, etc., we direct the State of Bihar to deposit a

sum of Rs. 50 crores and the State of Jharkhand a sum of Rs. 25 crores

within eight weeks from date.

The Committee headed by Justice Uday Sinha would continue to

function. The High Court of Judicature at Patna and the Jharkhand High

Court are hereby requested to pass appropriate orders in the liquidation

proceedings filed by the States of Bihar or Jharkhand, as the case may be, as

expeditiously as possible and preferably within a period of six months from

the date of communication of this order.

Any amount paid to the employees concerned shall be subject to the

order(s) passed by the appropriate court of law in this behalf and it goes

without saying that the amount so paid to them shall be duly credited.

We make it clear that we have not issued aforementioned directions to

the States of Bihar and Jhakhand on the premise that they are bound to pay

the salaries of the employees of the public sector undertakings but on the

ground that the employees have a human right as also a fundamental right

under Article 21 which the States are bound to protect. The directions,

which have been issued by this Court on 9th May, 2003 as also which are

being issued herein, are in furtherance of the human and fundamental rights

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8

of the employees concerned and not by way of an enforcement of their legal

right to arrears of salaries. The amount of salary payable to the concerned

employees or workmen would undoubtedly be adjudicated upon in the

proper proceedings. However, these directions are issued which are

necessary for their survival. Undoubtedly, any amount paid by Justice Uday

Sinha Committee pursuant to these directions shall be duly credited for.

These applications are disposed of with the aforementioned directions.

Put up the matter after six months.