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TaxTMI 
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2017 (2) TMI 1527
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....s i.e. appellants in L.P.A. No. 1940 of 2015 for payment of salary and other allowances was disposed of with direction to the State to allocate a sum of Rs. 10 Crores for payment to the affected employees for payment on account of various reasons such as marriage of daughters, ailment, old age disease, payment of loan etc. On deposit of the said amount, the Managing Director/Administrator was to examine the individual cases and to make recommendations depending on the merit of the case for release of fund in his/her favour. The writ applicants have filed appeal claiming entire pay and allowance from the State whereas, the State has filed appeal against the direction to deposit sum of Rs. 10 Crores. 2. Firstly some facts. A writ application No. 488 of 2002 was filed in public interest in Supreme Court by Ms. Kapila Hingorani consequent to newspaper report regarding non-payment of salary for long time resulting in starvation and death of an employee of the Corporation wholly owned by the State of Bihar. In such petition, Supreme Court passed a detailed interim order since reported as Kapila Hingorani (I) v. State of Bihar (2003) 6 SCC 1. The question raised in the said petition was ....
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..../or neglected to enforce the social-welfare legislations enacted in this behalf e.g. Payment of Wages Act, Minimum Wages Act etc. Such welfare activities as adumbrated in Part IV of the Constitution of India indisputably would cast a duty upon the State being a welfare State and its statutory authorities to do all things which they are statutorily obligated to perform. 74. 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 undertakings 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 se....
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....herefore, the High Court was requested to examine these matters in Public Interest Litigation and pass appropriate orders expeditiously. The order reads as under:- "The issues involved in these cases basically are legal issues. They will have to be gone into by the concerned High Courts. This Court has so far monitored the matter to its best possible ability. In the circumstances, we request the High Court to examine these matters in the PIL and pass appropriate orders in these PILs as expeditiously as possible. The Registry is directed to forward copy of this order to the Registrar General of the High Court. The attention of the Hon'ble Chief Justice of the High Court may be drawn to this order. We request the High Court to consider the orders passed by this Court giving appropriate directions from time to time in these cases. We also direct the High Court to consider making interim payments to the affected persons including medical treatment. The writ petitions are disposed of accordingly. In view of the order passed in the writ petition, no orders are required to be passed on the interlocutory applications." 7. A s....
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....p; "In our Order dated 9th August, 2010, we had indicated that the case needs to be monitored by the High Court and, in that connection, we directed the High Court to consider making interim payments to the affected persons, including medical treatment. We may clarify that only an affected person has to approach the High Court and if an application is made by him/her, then, in the course of monitoring, the High Court may consider the claim made by such affected person, who has to be one of the employees of the State Public Sector Undertaking." 11. It is thereafter, the present writ application was filed out of which the present appeals have arisen for consideration before this Court. 12. At the time of hearing, the writ applicants referred to another order of the Supreme Court reported as State of Jharkhand and another v. Harihar Yadav and others, (2014) 2 SCC 114. The said order came to be passed in an appeal against an order passed by the High Court of Jharkhand at Ranchi in L.P.A. No. 77 of 2009 on 16th of June, 2011. In Harihar Yadav's case (supra) the Supreme Court was seized of one Corporation wherein direction was issued for payment of salary from 1-1-1995 till 29-12-2....
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....of both the States we proceed to issue the following directions: 59.1. The employees who were paid a certain amount after this Court had directed for deposit of rupees fifty crores by the State of Bihar and have not been absorbed by JHALCO, they should be paid their salary from 1-1-1995 till 29-12-2001. 59.2. The State of Bihar shall comply with the directions within a period of three months from today as they are aware of the names of employees who had been paid proportionally out of the deposit made earlier. 59.3. The State of Jharkhand shall pay from 29-12-2001 till 13-9-2004. We have fixed the cut-off date for the State of Jharkhand as it had issued the Notification on 29-12-2001 creating an erroneous impression and confusion. The date for the State of Bihar has been determined regard being had to the date the Central Government took a decision asking the State of Bihar to go for liquidation. 59.5. The State of Bihar shall deduct the amount already paid by virtue of the order (Kapila Hingorani (1) v. State of Bihar, (2003) 6 SCC 1) passed by this Court. However, the State of Jharkhand shall pay the ....
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....ould depend on the provisions of the statute concerned. 18. The argument of the counsel for the petitioners, therefore, cannot be summarily rejected. In the facts of the present case. I am rather inclined to agree with the counsel that it is really the State Government which has been carrying on the activities through these Corporations. The Corporations are like "extension counters' of the Government Departments. Even so, in view of the decision in the HEC case and other cases mentioned above, I am unable to issue any direction to the State Government to pay salary to their (Corporations') employees. In none of the subsequent cases so far, the Supreme Court has gone to the extent of holding that the State is responsible for the liability of the incorporated companies. The horizons of the administrative law and constitutional law are expanding. By virtue of the judgments of the Supreme Court the matters and objects which earlier lay beyond the scope of judicial review are now amenable to writ jurisdiction of the High Court and subject to judicial scrutiny. Perhaps, the days are not far off when the distinction between Companies/Corporations and incorpora....
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..... It is argued that in Kapila Hingorani (I) and Kapila Hingorani (II), the Supreme Court has ordered for disbursement of a sum of Rs. 125 crores to mitigate the humane problems and has not conclusively held that the State Government is liable to pay salary and allowances and retrial benefits to the employees of the Boards, Corporations and the companies. It is also argued that in Kapila Hingorani (I) and Kapila Hingorani (II), the judgment of the Full Bench of this Court has not been set aside. It is further argued that Kapila Hingorani (I) and Kapila Hingorani(II) have been considered in the judgments reported as State of U.P. and another v. Uptron Employees' Union, CMD and others, (2006) 5 SCC 319 and State of Assam v. Barak Upatyaka D.U. Karmachari Sanstha, (2009) 5 SCC 694 wherein, it has been held that the State would not be liable to pay wages to the employees of the Boards, Corporations and the Companies incorporated with the State as a sole shareholder. 16. The Supreme Court has left the legal issues to be decided by the High Courts, and that there is no conclusive finding in paragraph 74 of Kapila Hingorani (I) and Paragraph 37 of Kapila Hingorani (II) that the State ....
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....ees of the Corporation have joined the companies knowing very well that their wages are charged over the assets of the company in terms of Section 529A of the Companies Act. Having worked under a company and playing a role leading to financial distress, they cannot assert that the State is responsible for the salary and allowances by lifting the corporate wheel. Such Boards and Corporations are State for the purpose of enforcement of fundamental rights conferred under Part-III of the Constitution but the employees of such Boards and Corporations cannot assert that they are employees of the State Government. They will continue to be employees of the Boards, Corporations and Companies. Though such Boards, Corporations and the Companies are amenable to writ jurisdiction but the parity is only in respect of invocation of writ jurisdiction and does not extend any further. If the State Government has to bear the financial burden, the liability of the State as well as applicants themselves would be 200+150+500 up to 2006. With more than a decade having been passed, the liability can very well be over one thousand crores. Can such huge liability be passed on to the State only to meet the h....
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....s, appear that this Court did not lay down any principle of law of universal application and passed appropriate orders only in the compelling circumstances noticed by it. We are, therefore, satisfied that in respect of a sick industrial company, even if it be a subsidiary of a government company, there is no legal obligation cast upon the State Government to pay the wages due to the workmen. The rights of workmen are governed by the relevant provisions of the Companies Act where their claim has been accorded priority. Moreover, in any view of the matter we find nothing in SICA which authorises BIFR to pass an interim order directing the State Government in such circumstances to pay the wages due to the employees of the sick industrial company. We, therefore, allow all these appeals and set aside the impugned orders." 22. In another two Bench judgment reported as State of Assam v. Barak Upatyaka D.U. Karmachari Sanstha, (2009) 5 SCC 694, the employees of a Government Society were not being paid salary. The trade union of the employees filed a writ petition requiring the Government to bear and pay the salary of the employees of the Co-operative Societies. The Court considering the s....
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....akings for several years, have no value as precedents. The interim directions were also clearly in exercise of extraordinary power under Article 142 of the Constitution. It is not possible to read such tentative reasons, as final conclusions, as contended by the respondent. If those observations are taken to be a final decision, it may lead to every disadvantaged group or every citizen or every unemployed person, facing extreme hardship, approaching this Court or the High Court alleging human rights violations and seeking a mandamus requiring the State, to provide him or them an allowance for meeting food, shelter, clothing, salary, medical treatment, and education, if not more. Surely that was not the intention of Kapila Hingorani (I) (2003) 6 SCC 1 and Kapila Hingorani (II) (2005) 2 SCC 262. 24. We, therefore, reject the interpretation put forth by the respondent, on the tentative observations in Kapila Hingorani (I) (2003) 6 SCC 1 and Kapila Hingorani (II) (2005) 2 SCC 262, to contend that the Government would be liable for payment of salaries and other dues of employees of the public sector undertakings. We are of the considered view that the decision of the....
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....to the one in which the respondent employees were engaged, suffered such financial losses, as would make the sustenance of the organisation itself, unviable. Can the employees of such an organisation, raise a claim in law, that the corporate body be not wound up, despite its financial unworkability? Just because the resultant effect would be that they would lose their jobs. The answer to the above query has to be in the negative. The sustenance of the organisation itself, is of paramount importance. The claim of employees who have been engaged by the organisation, to run the activities of the organisation, is of secondary importance. If an organisation does not remain financially viable, the same cannot be required to remain functional, only for the reason that its employees, are not adversely impacted. When and how a decision to wind up an organisation is to be taken, is a policy decision. The decision to wind up a corporation may be based on several factors, including the nature of activities rendered by it. In a given organisation, sometimes small losses may be sufficient to order its closure, as its activities may have no vital bearing on the residents of the State. Where, an o....
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....ified with the Union but has been placed under a special system of control and conferred certain privileges by virtue of the provisions contained in Sections 619 and 620 of the Companies Act. Merely because the entire shareholding is owned by the Central Government will not make the incorporated company as Central Government. It is also equally well settled that the employees of the government company are not civil servants and so are not entitled to the protection afforded by Article 311 of the Constitution (Pyare Lal Sharma v. Managing Director (1989) 3 SCC 448). Since employees of government companies are not government servants, they have absolutely no legal right to claim that the Government should pay their salary or that the additional expenditure incurred on account of revision of their pay scale should be met by the Government. Being employees of the companies it is the responsibility of the companies to pay them salary and if the company is sustaining losses continuously over a period and does not have the financial capacity to revise or enhance the pay scale, the petitioners cannot claim any legal right to ask for a direction to the Central Government to meet the additio....
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.... the same was not done for the employees of the regional rural banks who then filed writ petitions. It was contended on behalf of the Union of India and also the banks that financial condition of the regional rural banks was not such that they may give their employees the pay structure of the employees of the nationalised commercial banks. It was in these circumstances that this Court observed that the decision of the National Industrial Tribunal in the form of an award having been implemented by the Central Government, it would not be permissible for the employer bank or the Union of India to take such a plea in the proceedings before the Court. The other case, namely, All India Regional Rural Bank Officers Federation v. Govt. of India (2002)3 SCC 554 arose out of interlocutory applications and contempt petitions which were filed for implementation of the direction issued in the earlier case, namely, South Malabar Gramin Bank (2001) 4 SCC 101. Any observation in these two cases to the effect that the financial capacity of the employer cannot be held to be a germane consideration for determination of the wage structure of the employees must, therefore, be confined to the facts of t....
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....ve left the question of liability of the State Government to pay salary and allowances open. The intervention of the Supreme Court was to address humane problem of financial stringency suffered by such employees. Therefore, neither the Kapila Hingorani (I) nor Kapila Hingorni (II) or Harihar Yadav's case unequivocally holds the State Government responsible for payment of salary and allowances to the employees of the Boards, Corporations and the Companies, if such Boards, Corporations and the Companies are not able to pay salary and allowances due to financial stringency on any ground whatsoever. QUESTION NO. 2 27. In Barak Upatyaka's case (supra), the Supreme Court has observed that the observations and directions in Kapila Hingorani (I) and Kapila Hingorani (II) are the interim directions based on tentative reasons and have no value as precedent. Such interim directions were given in extraordinary power under Article 142 of the Constitution. The Court held to the following effect:- "22. The observations and directions in Kapila Hingorani (I) (2003)6 SCC 1 and Kapila Hingorani (II) (2005) 2 SCC 262 being interim directions based on tentative reasons, r....