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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

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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

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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/

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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

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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

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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

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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

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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.