2005 (1) TMI 754 - SC - Indian Laws

States of Bihar and Jharkhand ordered to deposit funds for employee salaries, High Courts to expedite liquidation.

The court directed the States of Bihar and Jharkhand to deposit additional funds to ensure payment of salaries to employees, emphasizing the protection of ... Fundamental right under Article 21 - human rights obligation to prevent starvation deaths due to non-payment of salaries - lifting the corporate veil - state's fiduciary duty towards employees of state-owned corporations - successor liability and absorption of employees - orders under Section 65 of the States Reorganisation ActFundamental right under Article 21 - lifting the corporate veil - state's fiduciary duty towards employees of state-owned corporations - Constitutional obligation of the State to protect life and liberty of employees of state-owned corporations where non-payment of salaries endangers survival. - HELD THAT: - The Court held that while it would not lay down a universal rule making the State directly or vicariously liable to pay all salaries of public sector undertakings in every situation, the State cannot escape liability where a human rights crisis affecting life and liberty (including starvation deaths or suicides) arises from prolonged non-payment of salaries. Given the deep and pervasive control exercised by the State as sole shareholder and by statutory power and directions over government companies and statutory authorities, the State bears an additional constitutional and fiduciary duty to safeguard employees' fundamental rights. This reasoning relies on the doctrine of lifting the corporate veil in the context of enforcement of Article 21 and recognises statutory power to issue binding directions to statutory authorities where appropriate. [Paras 23, 24, 25, 26, 27]State of Bihar (and in appropriate circumstances the State) has a constitutional/fiduciary obligation to protect life and liberty of employees of government-owned undertakings when non-payment of salaries gives rise to a human rights crisis.Human rights obligation to prevent starvation deaths due to non-payment of salaries - orders under Section 65 of the States Reorganisation Act - Interim relief by way of deposits to meet immediate survival needs of employees and payment subject to later adjudication. - HELD THAT: - In view of the continuing human-rights exigency (including reported deaths), and pursuant to earlier directions and the Central Government's exercise under Section 65 of the States Reorganisation Act, the Court directed immediate interim disbursement arrangements. The Court emphasised that these directions are given to protect the human and fundamental rights of employees and are not an adjudication of their legal claims to arrear salaries; any amounts paid pursuant to these directions shall be subject to and credited in accordance with orders of the appropriate court in pending or future proceedings. [Paras 27, 29, 34, 36, 37]State of Bihar to deposit Rs. 50 crores and State of Jharkhand to deposit Rs. 25 crores within eight weeks for disbursement to employees; any payments to be subject to later adjudication and credited accordingly.Successor liability and absorption of employees - Absorption of BHALCO employees by JHALCO and determination of liability for prior unpaid salaries. - HELD THAT: - The Court noted that a new corporation named JHALCO has been incorporated and that the State of Jharkhand has offered absorption to employees of BHALCO. The Court directed that orders for absorption of those employees who opt for employment be passed expeditiously and not later than six weeks from the date of the order; concerned employees need not at this stage file any undertaking. However, whether the State of Jharkhand is liable to pay any salary and other emoluments for the period prior to absorption is a question that must be decided in appropriate proceedings and was not adjudicated by this order. [Paras 3, 8, 32, 33]JHALCO to decide absorption of BHALCO employees who opt for employment within six weeks; liability for pre-absorption unpaid salaries left open for determination in appropriate proceedings (remanded).Orders under Section 65 of the States Reorganisation Act - Continuation of the monitoring committee and expedition of liquidation proceedings and implementation of bifurcation orders. - HELD THAT: - The Committee headed by Justice Uday Sinha was directed to continue functioning. The High Court of Patna and the Jharkhand High Court were requested to pass appropriate orders in the liquidation proceedings filed by the States as expeditiously as possible, preferably within six months. The Central monitoring mechanism established to oversee division of assets, liabilities and employees was affirmed and continuation insisted upon for implementation of earlier directions. [Paras 1, 16, 29, 35]Committee to continue; High Courts requested to conclude liquidation/related proceedings expeditiously (preferably within six months) and monitor implementation of division orders.Final Conclusion: The applications were disposed of by affirming the State's constitutional duty to protect employees' life and liberty in the face of non-payment of salaries, directing interim deposits by Bihar and Jharkhand (Rs. 50 crores and Rs. 25 crores respectively) for disbursement subject to later adjudication, ordering expeditious absorption decisions by JHALCO for opting BHALCO employees (with prior-salary liability to be determined in appropriate proceedings), and directing continuation of the monitoring committee with High Courts asked to expedite liquidation and related orders; matter posted after six months. Issues Involved:1. Payment of unpaid salaries to employees of Bihar Hill Area Lift Irrigation Corporation (BHALCO).2. Determination of liability between the State of Bihar and the State of Jharkhand.3. Implementation of previous court directions regarding payment of salaries.4. Division of assets and liabilities between the States of Bihar and Jharkhand.5. Human rights and fundamental rights of employees under Article 21 of the Constitution.Issue-wise Detailed Analysis:1. Payment of Unpaid Salaries to Employees of BHALCO:The petitioner filed an application seeking clarification on whether the State of Bihar or the State of Jharkhand, or both, are responsible for paying the unpaid salaries of BHALCO employees. The petitioner argued that Jharkhand Hill Area Lift Irrigation Corporation Limited (JHALCO) should be treated as the successor of BHALCO from 15.11.2000 onwards, and that employees of BHALCO should be absorbed by JHALCO if they forgo their claim for salary for the period prior to their absorption dates.2. Determination of Liability Between the State of Bihar and the State of Jharkhand:The State of Bihar contended that it should not be liable for further payments as it had already deposited Rs. 50 crores as per the court's previous directions. It also argued that the liquidation proceedings for BHALCO had been initiated and that the employees could choose to be absorbed by JHALCO. The State of Jharkhand, on the other hand, claimed that BHALCO remained under the control of Bihar and that JHALCO was a new corporation with no connection to BHALCO.3. Implementation of Previous Court Directions Regarding Payment of Salaries:The court noted that the directions issued on 9th May 2003, which included the deposit of Rs. 50 crores by the State of Bihar, were intended to address the human rights issue of non-payment of salaries, which had led to starvation deaths and suicides among employees. The court emphasized that the State of Bihar could not escape its liability to protect the life and liberty of the employees under Article 21 of the Constitution.4. Division of Assets and Liabilities Between the States of Bihar and Jharkhand:The Central Government, exercising its jurisdiction under Section 65 of the States Reorganization Act, had issued orders for the division of assets and liabilities of various corporations between Bihar and Jharkhand. The court noted that the assets, liabilities, and employees of most companies had been divided, with some corporations continuing to function as inter-State corporations. The court directed the States of Bihar and Jharkhand to deposit additional sums (Rs. 50 crores and Rs. 25 crores respectively) to ensure payment of salaries to employees.5. Human Rights and Fundamental Rights of Employees Under Article 21 of the Constitution:The court reiterated that the directions issued were based on the human rights and fundamental rights of employees under Article 21, rather than enforcing their legal right to arrears of salaries. The court emphasized the State's constitutional obligation to protect the life and liberty of employees, highlighting the deep and pervasive control exercised by the State over public sector undertakings.Conclusion:The court directed the States of Bihar and Jharkhand to deposit additional funds to ensure payment of salaries to employees, emphasizing the protection of their human and fundamental rights under Article 21. The court also requested the High Courts of Patna and Jharkhand to expedite the liquidation proceedings for the concerned corporations. The applications were disposed of with these directions, and the matter was scheduled to be reviewed after six months.