2013 (11) TMI 1795 - SC - Indian Laws

States criticized for unpaid salaries; SC orders payment with interest, closes employee absorption claim.

The Supreme Court criticized the States of Jharkhand and Bihar for failing to address the plight of employees facing starvation and stress due to unpaid ... Social justice - protection of right to life under Article 21 - State liability for employees of government companies - equitable responsibility for unpaid salaries - absorption of employees - model employer - deep and pervasive control - State Reorganisation Act responsibility under Section 65 - interest on delayed paymentsState liability for employees of government companies - equitable responsibility for unpaid salaries - State Reorganisation Act responsibility under Section 65 - protection of right to life under Article 21 - Liability of the State of Bihar and the State of Jharkhand to pay unpaid salaries of employees of BHALCO/JHALCO for specified past periods and the timelines for payment. - HELD THAT: - The Court, applying constitutional principles of social justice and the State's duty under Article 21 to protect life and dignity, held that in the exceptional human-rights context of prolonged non-payment of salaries the two States must discharge equitable responsibility for unpaid wages. The Court fixed temporal cut-off dates to allocate liability: the State of Bihar to pay salaries from 1.1.1995 till 29.12.2001, and the State of Jharkhand to pay from 29.12.2001 till 13.9.2004. The allocation is grounded in the factual matrix of bifurcation, actions taken by the States and the Central Government direction under Section 65 of the Bihar Reorganisation Act. The Court directed the State of Bihar to comply within three months and the State of Jharkhand to pay within four months to those who had earlier received proportionate amounts from Bihar. The Court further directed that amounts already paid by Bihar be deducted from overall liability, but that Jharkhand shall pay the entire amount for its allocated period and both States shall compute salary components after granting benefits of pay revisions extended to other employees. These directions are issued as an exercise of equitable and constitutional jurisdiction to prevent further deprivation of livelihood where ordinary statutory remedies would be inadequate to redress the humanitarian crisis. [Paras 52]State of Bihar to pay salaries from 1.1.1995 to 29.12.2001 within three months; State of Jharkhand to pay salaries from 29.12.2001 to 13.9.2004 within four months, with deductions for amounts already paid by Bihar and computation after pay revision.Interest on delayed payments - equitable responsibility for unpaid salaries - Rate of interest and related financial directions for delayed payment of the ordered salaries. - HELD THAT: - To compensate for delay and to give finality to the relief, the Court ordered that the amounts directed to be paid shall carry simple interest at the rate of 7.5% per annum. This was directed as a component of the remedial scheme to ameliorate the prejudice caused by long non-payment and to effectuate the substantive relief already allocated between the States. The direction for interest is integral to the payment scheme and follows the Court's equitable approach to ensure meaningful redress to the affected employees and their legal representatives. [Paras 52]Amounts to be paid shall carry 7.5% simple interest per annum.Absorption of employees - model employer - social justice - Finality of the claim for absorption of the employees into JHALCO. - HELD THAT: - Having considered the prolonged litigation, the earlier orders and the hardship faced by employees, the Court declined to keep the absorption claim open for further adjudication in this proceeding. The Court observed that the primary objective is to secure subsistence and dignity of life for the affected employees and, accordingly, closed the claim for absorption while directing payment of past salaries and related relief. The Court thereby moulded relief to give a definitive end to the lis and to effectuate substantive monetary redress rather than reopen the absorption controversy in this forum. [Paras 52]The claim for absorption stands closed.Final Conclusion: The appeals are disposed of by directing Bihar and Jharkhand to pay the unpaid salaries for the specified periods (Bihar: 1.1.1995-29.12.2001; Jharkhand: 29.12.2001-13.9.2004) within fixed periods, with deductions for amounts already paid, computation after pay revision benefits, payment of simple interest at 7.5% p.a., and with the claim for absorption of employees closed; no order as to costs. Issues Involved:1. Constitutional Accountability and Statutory Answerability2. Social Justice and Dignity of Living3. Payment of Salaries and Absorption of Employees4. Role of the State as a Model Employer5. Liquidation Proceedings and Division of AssetsSummary:1. Constitutional Accountability and Statutory Answerability:The Supreme Court addressed the unbearable tragedy faced by employees due to starvation and stress caused by the abandonment of responsibility by the States of Jharkhand and Bihar. The Court criticized the States for their stance that JHALCO and BHALCO being companies under the Companies Act, 1956, the employees should initiate winding up proceedings to get their dues. The Court emphasized that such a stance is devoid of constitutional accountability and statutory answerability.2. Social Justice and Dignity of Living:The Court referred to various precedents to highlight the importance of social justice, dignity of living, and the judiciary's role in ensuring these principles. It stressed that the Preamble of the Constitution and directive principles of State policy cast a responsibility on the State to sustain social and economic security. The Court reiterated that the employer, within the meaning of Article 12 of the Constitution, has a sacrosanct duty to act in terms of the sacred objectives of social and economic justice.3. Payment of Salaries and Absorption of Employees:The litigation history revealed that BHALCO employees were not paid salaries for years, leading to starvation deaths and suicides. The Supreme Court had earlier directed the State of Bihar to deposit Rs. 50 crores for salary disbursement. Despite directions, the States failed to resolve the issue, leading to further litigation. The High Court directed the State of Bihar to pay salaries till 16.6.2011 and JHALCO to absorb the unabsorbed employees. The Supreme Court modified this, directing the States of Bihar and Jharkhand to pay salaries from 1.1.1995 to 13.9.2004, with interest, and closed the claim for absorption.4. Role of the State as a Model Employer:The Court emphasized that both States and Corporations have failed to act as model employers. They have shown a lack of responsibility and vision, treating employees with indifference. The Court highlighted that a model employer must ensure the legitimate aspirations of employees are not guillotined and that they are treated with dignified fairness.5. Liquidation Proceedings and Division of Assets:The Central Government directed the State of Bihar to initiate liquidation proceedings for BHALCO, which the State of Jharkhand conceded to. The Supreme Court noted the States' vacillating stands and directed that the States of Bihar and Jharkhand must pay the employees their due salaries for the specified periods, with interest, and compute the salary component after granting the benefit of pay revision extended to other employees. The claim for absorption was closed.Conclusion:The Supreme Court's judgment underscores the constitutional duty of States to ensure social and economic justice for employees, the necessity for prompt and responsible action in bifurcation scenarios, and the imperative for States to act as model employers. The Court provided specific directions for payment of salaries and interest to the affected employees, thereby addressing their prolonged suffering.