Bombay High Court
Rashtriya Mill Mazdoor Sangh vs State Of Maharashtra And Ors. on 5 August, 1987
Equivalent citations: 1988(1)BOMCR188
JUDGMENT V.A. Mohta, J.
1. The Empress Mills, Nagpur---A textile undertaking has been nationalised by the Central India Spinning, Weaving and Manufacturing Company Limited, the Empress Mills, Nagpur (Acquisition and Transfer of Undertaking) Act, 1986, ('the Act'). Constitutional validity of sections 9(2), 10(2), 12(1) and 26 of the Act is questioned in this petition by a representative union of the workers on the ground that they violates Articles 14, 19(1)(c) and 21 of the Constitution.
2. This century old undertaking was the first venture of the famous industrialist Shri Jamsethji Tata. It consists of 5 units and a paper division. The backdrop against which the undertaking is nationalised is best laid out in the Statement of Objects and Reasons accompanying the Bill. We reproduce the same :
"The Central India Spinning, Weaving and Manufacturing Company Limited was established at Nagpur as far back as 1874 and was engaged in the production and manufacture of yarn, cloth and paper through its industrial undertaking. "The Empress Mills", Nagpur. It has installed capacity of 1,10,500 spindles and 2,140 looms and a paper manufacturing unit capable of manufacturing 2,000 tonnes of paper per annum. The performance of the company till 1984 showed that it was earning profits and gainfully employed more that 6,000 workers. Its working results showed losses during 1984 and it was also anticipated that the operation of the undertaking would result in huge loss in 1985. In 1985, the Industrial Development Bank of India (IDBI) initiated the efforts, at the request of the Company to rehabilitate the undertaking. The Industrial Development Bank of India studied viability thereof and concluded that its operations could be made viable. A rehabilitation package, consisting of reliefs from institutions, Banks and State Government was also prepared. The Industrial Development Bank of India, in fact sanctioned the loan of Rs. 3 crores in March 1986, but the management did not avail of this facility because it felt that on account of further deterioration in condition of working of the mills, additional assistance was required. While the Industrial Development Bank of India and some other Banks were prepared to consider revised package, the response of the management was not positive. Attempts were made to persuade the management to resume normal operations, by availing of concessions. It however, did not resile from its attitude and declared lock-out on 3rd May, 1986. As its earlier application for closure of the Unit was rejected by the Government under section 25O of the Industrial Disputes Act, 1947 on the ground that it operations are viable the company and its creditors took recourse to voluntary and compulsory winding up of the company. Though the creditors withdrew the petition for winding up, the company persisted in its course for voluntary winding up.
2. The Company had filed the Petition No. 183 of 1986 for voluntary winding up under the Companies Act, 1956 in the Bombay High Court, on the ground that on account of continuous losses, the company was unable to run and manage the industrial undertaking further. The Bombay High Court passed an order on 14th May, 1986 in the said petition, appointing provisional liquidator. The Liquidator has been in possession of the properties of the Industrial undertaking.
3. The undertaking had sizeable facilities to manufacture substantial production of yarn, cloth and paper. Its closure would have resulted in keeping idle these facilities and would have meant waste of national wealth, which could have been utilised viably for production of above-mentioned articles. Further, the industrial undertaking is the largest of its size in Nagpur and in the entire Vidarbha region which is industrially backward area in the State and therefore, economy of this region is linked up with the continuance of this undertaking. In order to avoid adverse consequences of closure of this undertaking on the economy of the region and on more than 6,000 workers, it was expedient to acquire the undertaking of the said company to ensure that the interest of the general public and of the employees of the undertaking are served by the continuance, by the undertaking of the said company, of the manufacture, production and distribution of textile and paper products which are essential to the needs of the country. Such acquisition was for giving effect to the policy of the State towards securing the principle specified in Clause (b) of Article 39 of the Constitution of India.
4. As both Houses of the State Legislature were not in session and it was necessary to take immediate action to enact a law to achieve the objects stated above, the Governor of Maharashtra promulgated the Central India Spinning, Weaving and Manufacturing Company Limited, the Empress Mills Nagpur (Acquisition and Transfer of Undertaking) Ordinance 1986 on the 3rd October, 1986. This Bill is intended to replace the Ordinance by an Act of the State Legislature."
As the Preamble of the Act indicates, acquisition and transfer of undertaking is, ''with a view to securing the proper management of such undertaking so as to subserve the interest of the general public by ensuring the continued manufacture, production and distribution of textile and paper products which are essential to the needs of the economy of the country and for matters connected therewith or incidental thereto'' and therefore, ''for giving effect to the policy of the State towards securing the principle specified in Clause (b) of Article 39 of the Constitution. The Act has received the President's assent on 23rd December, 1986 and was first published on 26th December, 1986. It has come into force on 3rd October, 1986 when the Governor of the State promulgated the Central India Spinning, Weaving and Manufacturing Company Limited, the Empress Mills, Nagpur (Acquisition and Transfer of Undertaking) Ordinance, 1986 ('the Ordinance').
3. The scheme of the Act :
Section 2 lists the definitions. The term 'appointed day' means the date of commencement of the Act ; 'Corporation' means the Maharashtra State Textile Corporation, a Government Company registered under the Companies Act, 1956 ; 'new Government company' means a Government company (including a subsidiary Government company) formed and registered under the Companies Act, 1956, in which the undertaking is directed to vest under sub-section (1) of section 6 ; 'proprietors' means the Central India Spinning, Weaving and Manufacturing Company Limited; 'specified date' in relation to a provision of the Act means such date as the State Government may, by notification in the Official Gazette, specify for the purpose of that provision, and different dates may be specified for different provisions of the Act; 'undertaking' means the industrial undertaking known as the Empress Mills, Nagpur. Section 3 provides that on the appointed day, the undertaking and the right, title and interest of the proprietors in relation to the undertakings, shall stand transferred to and vest absolutely in, the State Government. Immediately thereafter the undertaking stands transferred to and vests in the Corporation. Section 4 gives the general effect of vesting. Section 5 makes the proprietors liable for the liabilities prior to the appointed day. Section 6 permits formation of a new Government company in which the undertaking may be vested by the State Government. Section 7 provides for payment of Rs. 6.10 crores to the proprietors for transfer and vesting. Reduction from the said amount to the extent of discharge of liability of the proprietors specified in the Schedule according to the order of priorities mentioned therein is permitted. Chapter IV deals with the subject of management, etc. of the undertaking. Section 9 provides for vesting of general superintendence, direction, control and management of the affairs and business of the undertaking in the State Government, the Corporation or a new Government company as the case may be. The Corporation or the new Government company shall be entitled to exercise all powers of the proprietors to the exclusion of all other persons. Section 9(2) specifically permits the Corporation or the new Government company to reorganise or restructure different units and offices with such strength of employees as it may deem fit. Section 9(2) reads thus :
''Notwithstanding anything contained in sub-section (1) or any other law for the time being in force, it shall be lawful for the Corporation or the new Government company to reorganise the functioning of the different units and offices of the undertaking and the employees employed therein and thereby restructure such units and offices with such strength of employees as the Corporation or such new Government company deem fit.'' Section 10(1) casts obligation upon the person in charge of the old management, including the liquidator appointed by the Court to deliver possession of the assets, account-books, etc. in their possession and control. Section 10(2) deals with the power of the State Government to issue directions from time to time about the manner and conduct of the management of the undertaking. It reads thus :
''The State Government may issue such directions as it may deem desirable in the circumstances of the case to the Corporation or new Government company, and such Corporation or new Government company may also, if it is considered necessary so to do, apply to the State Government at any time for instructions as to the manner in which the management of the undertaking shall be conducted or in relation to any other matter arising in the course of such management.'' Chapter V deals with the provisions relating to the employees of the proprietors. Section 12 reads thus :
''12. (1) Where service of a person who is a workman within the meaning or the Industrial Disputes Act, 1947, and who has been, immediately before the appointed day, employed in the undertaking, are, in the opinion of the Corporation necessary having regard to the requirements of the units restructured as a result of re-organisation of the undertaking, he shall become, from the date of his appointment by the Corporation, an employee of the Corporation and shall hold office or service in the Corporation with the same rights and privileges as to pension, gratuity and other matters as would have been admissible to him if the rights in relation to the undertaking had not been transferred to, and vested in the Corporation and continue to do so unless and until his employment in such Corporation is duly terminated or until his remuneration and terms and conditions of employment are duly altered by the Corporation.
(2) Where services of a person who is not a workman within the meaning of the Industrial Disputes Act, 1947, and who has been, immediately before the appointed day, employed in the undertaking, are, in the opinion of the Corporation necessary having regard to the requirements of the units or offices of the Corporation restructured as a result of re-organisation of the undertaking, he shall become, from the date of his appointment by the Corporation, an employee of the Corporation and shall hold office or service in the Corporation on such terms and conditions of employment as may be determined by the Corporation.
(3) (a) The services of every person employed by the proprietor before the appointed day shall stand terminated---
(i) on the designated date if such person is not employed before that date by the Corporation under sub-section (1) or (2) and
(ii) on the date of his appointment if such person is employed before the designated date by the Corporation under sub-section (1) or (2).
(b) A person whose services stand terminated under sub-clause (i) of Clause (a) shall not be entitled to claim employment in the Corporation as of right.
(4) (a) Every person whose services stand terminated under sub-clause (i) of Clause (a) of sub-section (3) shall be entitled to---
(i) payment of gratuity and of compensation for retrenchment or closure in accordance with the provisions of the Payment of Gratuity Act, 1972 and the Industrial Disputes Act, 1947 if he is a workman within the meaning of the latter Act, and
(ii) payment of gratuity if he is not such a workman :
Provided that, no person whose services are terminated on his superannuation on or before the designated date, shall be entitled to payment of compensation for retrenchment.
(b) Notwithstanding anything contained in Chapter VI and notwithstanding that the liability for payment of gratuity and compensation for retrenchment or closure under Clause (a) is that of the proprietors such liability shall be discharged by the State Government or the Corporation, according to the order of priorities mentioned in the Schedule and on discharge of such liability by the State Government or the Corporation the proprietors shall stand discharged to the extent of the liability so discharged.
(5) Where---
(a) the services of any person employed before the appointed day in the undertaking are terminated---
(i) under the terms of any contract or service or otherwise, or
(ii) under sub-section (3), and
(b) such person is entitled to any arrears of salary or wages or any payment for any leave not availed of or other payment not being payment by way of gratuity or compensation for retrenchment.
Such person may, except to the extent such liability of payment has been discharged by the State Government or the Corporation under the proviso to section 7, enforce his claim against the proprietors of the undertaking but not against the State Government or the Corporation :
Provided that, notwithstanding anything contained in the Industrial Disputes Act, 1947, the Payment of Wages Act, 1936, and the Payment of Gratuity Act, 1972, ---
(a) the State Government or the Corporation shall not be liable---
(i) to any person who has become an employee of the Corporation under sub-section (1) for payment of gratuity or any arrears of wages, or
(ii) to any person whose services stand terminated under sub-Clause (i) of Clause (a) of sub-section (3) for payment of gratuity or any arrears of wages or compensation for retrenchment or closure, for the period commencing from the day on which the undertaking was closed and ending on the day on which such person becomes an employee of the Corporation or, as the case may be, on which his services stand terminated irrespective of whether such closure was in accordance with the provisions of the Industrial Disputes Act, 1947 or not;
(b) the termination of services of a person under sub-section (ii) of Clause (a) of sub-section (3) on his becoming an employee of the Corporation under sub-section (1) shall not entitle such person to payment of any gratuity.
Explanation.---In this Chapter---
(a) the expression ''Corporation'' includes ''new Government company'' and
(b) the expression ''designated date'' means such date as the State Government may, by notification in the Official Gazette designate.'' Chapter VI deals with the subject of 'Commissioner of Payments'. Section 14 provides for appointment of Commissioner of Payments and section 15 for the payment by State Government to the Commissioner. Section 18 deals with priority of claims as per the schedule. Section 22 provides for disbursement to the proprietors of the balance amount left after meeting the liabilities as specified in the schedule. Chapter VII deals with Miscellaneous provisions. Section 25 provides for assumption of liabilities for making payment for discharging the liabilities of the proprietors arising out of any item specified in category 1 of the Schedule not discharged fully out of the amount of Rs. 6.10 crores. All dues including gratuity of employees in the undertaking, arrears relating to contributions towards Provident Fund and contributions under the Employees' State Insurance Act, 1948 payable by the proprietors are included in category 1 of Schedule. Section 26 gives overriding effect to the provisions of the Act. It is worded as under :
''The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act or in any decree or order of any Court, tribunal or other authority.''
4. Basic factual background and chronology of events which necessitated and preceded the nationalisation of the undertaking is :
The undertaking has 5 units and a paper division. Its machinery (1,10,500 spindles and 2,140 looms) has become out-dated. It had labour force of nearly 6000 persons. Its financial condition was grave. Expert opinion of the Industrial Development Bank of India (IDBI) was taken by the erstwhile management. IDBI identified after spot and record study workable machinery (67,732 spindles and 1582 looms) and suggested a scheme for rehabilitation and modernisation by raising of loan from various sources including sale of surplus land approximately 1.50 lakh sq. metres, out of which 60,000 sq. metres of unit No. 5 which is situated at a long distance from other units and which as per report of the IDBI was eventually to be relocated at Unit Nos. 1 to 3. The management applied despite this viability report of the IDBI for permission to close the entire undertaking to the State Government under section 25-O of the Industrial Disputes Act, 1947 (the ID Act), on 7th February, 1986. The petitioner union gave a reply on 2nd February, 1986 opposing the prayer. It also filed in the Labour Court at Nagpur applications under sections 78 and 79 of the Bombay Industrial Relations Act (the BIR Act) seeking declaration of illegal change, lock-out and or closure and also for interim relief. The creditors of the company filed winding up petition under the Indian Companies Act in the original side of the Bombay High Court on 1st March, 1986 and applied for appointment of a provisional liquidator which prayer was granted by the Hon'ble Single Judge on 19th March, 1986. By the time the petitioner union's appeal against the said order came up for hearing before the Division Bench, the State Government had rejected the company's application under section 25-O of the ID Act after hearing the parties for 3 days. The Division Bench on 31st March, 1986 directed the provisional liquidator not to take charge. The company thereafter applied for voluntary liquidation on 15-4-1986 and issued a notice of lock-out on 18-4-1986. The State Government called a meeting of the management, the union, representatives of the concerned ministries and financial institutions including IDBI. These meetings were held between 21st and 26th April, 1986. On 29th April the petitioner-union filed another application under sections 78 and 79 of the BIR Act. Both the applications were consolidated and interim relief of payment of two months' wages was granted. Upon the petitioner-unions statement before the High Court that the State Government was considering take-over of the undertaking, winding-up petition was kept in abeyance by the High Court. As no categorical statement came from the State Government, a provisional liquidator was appointed and he was directed on 14-5-1986 to take over all assets of the company. The petitioner-union through its President gave a letter dated 6th June, 1986 (supposed to be in response to some draft proposal given by the Hon'ble Minister), about work complement. Formation of a committee comprising of experts each to be nominated by both sides was suggested. Alternate suggestion was to accept the work norms fixed by the Bombay Textile Research Association (BTRA). It was mentioned that there was no basis for arriving at a figure of 4000 operative as manpower. Urgent need for taking over the undertaking was emphasised by the petitioner-union to the State Government considering the fact that thousands of workers were facing unemployment problem for long. The State Government referred the matter to BTRA which gave its first report on 16th June, 1986, determining the works norms after taking into consideration various factors including IDBI report.
5. Thus specter of unemployment and loss of dues earned out of hard labour was faced by thousands of workers. Liabilities of the company exceeded its assets, (which is quite obvious not only from the voluntary liquidation but also the unusual feature of the company not challenging the nationalisation). Section 530 of the Indian Companies Act merely gives second priority to the workers' claim and that too to the extent of Rs. 1000/- per worker. There was no prospect of restart of the undertaking in near future and rights accrued to the employees arising out of the orders passed on the application under sections 25-O of the ID Act by the State Government and under sections 78 and 79 of the BIR Act by the Labour Court had only paper value. Huge material resources of the community were being filtered away and difficult problem of finding a suitable way-out for achieving the goal of common good arose. It is very plain that the said goal cannot be achieved without modernisation and rationalisation. Making the undertaking economically viable is the only permanent and real solution to such matters. Solution dehors viability aspect would be merely temporary face saving and hypocritical devices. About the causes which brought the evil day of liquidation and closure to this big industry, IDBI had pointed out a finger at out-dated machinery, surplus labour, shortage of working capital, absence of long deterioration. We must at this stage take note of the fact that as far as petitioner union is concerned it has been throughout co-operative with the management in the moment of crisis and had made sacrifices in not pressing even certain legitimate demands. This is clear from various settlements arrived at from time to time to which our attention was rightly drawn by Shri S.D. Thakur, learned Counsel for the petitioner. It is unfortunate that even this did not salvage the position of the undertaking.
6. The stated object of the Act is to give effect to the policy of the State towards securing the directive principles of State policy specified in Article 39(b) of the Constitution which runs thus:
"39. The State shall, in particular direct its policy towards securing---
xxx xxx xxx
(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good;
xxx xxx xxx"
But the mere statement is not conclusive of the matter. The courts can examine whether that is a real object or not. This inevitably must lead to the examination of the whole background behind making of the Act, its preamble and the general scheme. We have already adverted to the background and noticed the preamble and the salient provisions of the Act. The Act first provides for the initial reorganising and restructure of the undertaking with a view to make it a viable unit in accordance with section 9(2) and thereafter for its new management as per section 12. Provision for giving fresh employment at least to some of the old employees, payment of old dues to those who opt for voluntary retirement on the basis of priority without restriction of limit are made. Though no one whose services stand terminated has a right to get employment under the new management, recruitment has to be made generally out of the old employees. Those who are recruited are endowed with some rights and privileges which would have been admissible to them but for the nationalisation until the new employment is duly terminated or until remuneration and terms and conditions of employment are duly altered by the new management which may be Corporation or a Government company . This is provided for in section 12(1). Thus unilateral right is reserved in the new management to duly terminate the employment or to duly alter the remuneration and service conditions. In this connection reference may be made to section 10(2) which permits the State Government to issue directions at any stage to the new management suo motu or at the instance of the new management and the directions so issued have a force of a mandate which the new management is obliged to comply with. It is thus clear and this position is fairly agreed before us-that the new management or the State can unilaterally affect the rights and privileges of the employees acquired under any other law, any instrument (such as settlement, award, etc.), decree or order of any Court Tribunal or other authority. What is most important is that section 26 gives overriding effect to the provisions of the Act over 'any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act or in any decree or order of any Court, Tribunal or other authority'.
7. The substance of the attack on the validity of the provisions is that not only at the initial stage of reorganisation of the undertaking but also at stages subsequent to it, valuable rights accrued to the employees or their union under various industrial and other beneficial legislations, valid settlements, awards, orders decrees, etc. can be taken away under the unguided powers and that too unilaterally without concurrence/consultation of the employees of their representative unions. These features, according to the petitioner union, are arbitrary, unreasonable, discriminatory, adversely affect the livelihood of the workers and ignore the directive principles relating to securing participation of the workers in the management of the undertaking contained in the Article 43-A newly added by the Forty-second Amendment to the Constitution and are, therefore, violative of Articles 14, 19(1)(c) and 21 of the Constitution. The reply of the State in the first place is that the pith and substance of the attack is relatable only to Article 14 and having to the object of the Act stated as well as real it has received immunity from such attack under Article 31-C of the Constitution. Secondly it is contended that the provisions are not only reasonable but are absolutely essential to carry out the object sought to be achieved, namely ultimately to make the undertaking economically viable so that it subserves the common good. It is further contended that the situation demanded some urgent decisions to be taken, exercise of nationalisation and running this industry was being made on experimental basis, all situations and events cannot, therefore, be predicted with certainty and hence grant of wide latitude was inevitable, the power is not unbridlled, the Act itself having provided the guidelines within the parameters of which alone the power can be exercised.
8. We will first take up for consideration the submission of Shri K.H. Deshpande, learned Advocate for the respondent State and the Corporation, about the Act being immune from attack based on either Article 14 or 19 by virtue of Article 31-C of the Constitution. Now, Article 31-C was introduced in our Constitution by the Constitution (Twenty-fifth Amendment) Act, 1971, with effect from 20th April, 1972. In its original form it read thus :
''31C. Notwithstanding anything contained in Article 13, no law giving effect to the policy of the State towards securing the principles specified in Clause (b) or Clause (c) of Article 39 shall be deemed to be void on the ground that it is inconsistent with, or takes away or abridges any of the rights conferred by Article 14, Article 19 or Article 31; [and no law containing a declaration that it is for giving effect to such policy shall be called in question in any Court on the ground that it does not give effect to such policy :] Provided that where such law is made by the Legislature of a State, the provisions of this Article shall not apply thereto unless such law, having been reserved for the consideration of the President, has received his assent.''
9. Validity of the aforesaid Article was questioned in a famous case of Kesavanand Bharati v. State of Kerala, . Only the bracketed portion was held to be invalid and hence it is non est. By the Constitution (Forty-second Amendment) Act, 1976, profection was extended to all laws giving effect to the policy of the State towards securing ''all or any of the principles laid down in Part IV.'' By the Constitution (Forty-fourth Amendment) Act, 1978, the words ''Article 31'' were deleted upon repeal of Article 31. In Minerva Mills Ltd. v. Union of India, amendment to Article 31-C has been struck down by majority on the ground that it destroys the balance between Part III and Part IV and thereby destroys the basic structure of the Constitution. This decision has created great controversy and generated heat. In Sanjeev Coke Manufacturing Company v. M/s. Bharat Coking Coal Ltd., certain misgiving about Minerva Mills case is expressed but that controversy need not detain us, for in this case we are concerned with only Directive Principles enunciated under Article 39(b) which find place in original Article 31-C. Undisputed legal position as it stands today is, if law has real and substantial connection with Directive Principles enshrined in Article 39(b) or (c), it is immune from attack of violation of Article 14 and 19. We have already observed that real object of the Act is what is stated in the preamble. No doubt resources nationalised were private, but that makes no difference. The term ''material resources of the community'' referred to in Article 39(b) admits of no exception on the basis of their ownership. Naturally public and private, all resources are included in the term. It is thus clear that Article 31-C is attracted in the Act, and as stated in Sanjeev Coke, where Article 31-C comes in, Article 14 goes out.' It will thus have to be held that it is not open to attack on the validity of the provisions of the Act on the basis of violation of Article 14 or 19.
10. Now about the range of inquiry relating to the alleged violation of several constitutional guarantees on the assumption that it is permissible. Reasonableness is the standard test. There is no fixed formula de hors the background, the scheme as a package and above all the object sought to be achieved which can be applied uniformly in every matter. Here we are concerned with the subject of nationalisation of an industrial undertaking whose machinery has become completely out dated, whose financial condition was grave which needs rehabilitation to make it economically viable by injecting public funds therein not merely at initial stage restructuring but also at subsequent stages of the management. Every scheme of nationalisation must involve expert opinion. For ultimate success of a scheme various factors-present and future, anticipated and unanticipated play their part. Providing for sufficient degree of flexibility thus becomes inevitable part of the scheme. This means exercise of some discretion keeping in view the object of the act depending upon the situation as and when it develops. Law on the point of limitation of the Courts to examine the merits of nationalisation policy and/or scheme seems to be well-settled. We may make useful reference to the following observations in Sanjeev Coke (supra) in this connection.
''The distribution between public, private and joint sectors and the extent and range of any scheme of nationalisation are essentially matters of State policy which are inherently inappropriate subject for judicial review. Scales of justice are just not designed to weigh competing social and economic factors. In such matters legislative wisdom must prevail and judicial review must abstain.'' In the case of Man Singh v. State of Punjab and others, while considering the constitutional validity of the Punjab Cycle Rickshaws (Regulation of Licence) Act, 1976, the Supreme Court has made the following significant observations which provide as a guide whenever attack based on excessive delegation and unbridled delegated powers is raised :---
''It seems to us that in a situation which calls for adjustment from time to time in view of varying economic and social factors, a sufficient degree of flexibility is needed, and consequently it was appropriate for the Legislature to leave the measures of the control to the rule making power of the State Government. That in truth is one of the primary reasons for delegated legislation. So long as the rules so made serve the object of the Act and fall within the limitations implied thereby no fault can be found with them.'' In the case of D.K. Trivedi v. State of Gujarat, A.I.R. 1986 Supreme Court 1323 in the context of validity of section 139(1) of the Mines and Minerals (Regulation and Development) Act, 1957, this is what the Supreme Court has observed :
''Where a statute confers discretionary power upon the executive or an administrative authority, the validity or constitutionality of such power cannot be judged on the assumption that the executive or such authority will act in an arbitrary manner in the exercise of the discretion conferred upon it. If the executive or the administrative authority acts in an arbitrary manner its action would be bad in law and liable to be struck down by the courts but the possibility of abuse of power or arbitrary exercise of power which cannot invalidate the statue conferring the power or the power which has been conferred by it.'' In the case of Harishankar Bagla v. State of Madhya Pradesh, it is said :
''As already pointed out, the preamble and the body of the sections sufficiently formulate the legislative policy and the ambit and character of the Act is such that the details of that policy can only be worked out by delegating them to a subordinate authority within the framework of that policy.'' In another famous case in (Re The Special Courts Bill 1978), it emphasised.
''Whether a law conferring discretionary powers on an administrative authority is constitutionally valid or not should not be determined on the assumption that such authority will act in an arbitrary manner in exercising the discretion committed to it. Abuse of power given by law does occur; but the validity of the law cannot be contested because of such an apprehension. Discriminatory power is not necessarily a discriminatory power ... ... ...
If the legislative policy is clear and definite and has an effective method of carrying out discretion vested upon administrative officers to make selective application of law to certain classes or groups of persons, statute itself cannot be condemned as a piece of discriminatory legislation.''
11. It is in the context of the aforesaid law laid down by the Supreme Court from time to time that we will have to consider the validity of attack based on Article 14. Is the discretion granted under sections 9(2) and 10(2) very wide ? Can such power be not misused ? are the two questions posed before us on behalf of the petitioner union. Answer to both these questions will have to be recorded in the affirmative, but those aspects are not decisive of the matter. Wide powers are not always synonymous with unguided powers. All depends upon situations obtained in each matter. Where situations are fluid, all things cannot be anticipated and experiment is to be carried out as in the present matter. Wide discretion has to be given for effectively achieving the object of the Act. Power has to be exercised within the framework of the Act and for achieving the objects thereof and not otherwise. Guidelines are thus contained in the Act itself. Possibility of misuse of power always exists for there is no power under the earth which is not capable of being misused. The high level of the authorities delegated is also a significant and relevant factor. In the instant case it is either the State Government or a Corporation or a new Government company. As rightly submitted and conceded by the learned Counsel for the respondents validity of the actual exercise of power can always be questioned if it is (a) not for the purpose of the Act, (b) actuated with malice or (c) based on no material and (d) otherwise illegal. The list of the grounds cannot be exhaustive. Thus in our view challenge based on Article 14 is firstly not available and even if it is, it has no substance. True it is that unique feature of the challenge is that it is by the workers and not by the erstwhile owner of the undertaking but that aspect will have no bearing on the point of law involved.
12. Is Article 19(1)(c) attracted at all, is the next question. Having regard to the nature and contents of the right viz. ''right to form association or unions'' we do not think so. Fundamental right to face associations or unions does not necessarily include a right to negotiate as representative unions. That aspect is governed by various legislations. In this connection we may notice the case All India Bank Employees Association v. The National Tribunal (Bank Disputes), . The following observations must make us think:
''On the construction of the Article, therefore, apart from the authorities to which we shall refer presently, we have reached the conclusion that even a very liberal interpretation of sub-clause (c) of Clause (1) of Article 19 cannot lead to the conclusion that the trade unions have a guaranteed right to an effective collective bargaining or to strike, either as part of collective bargaining or otherwise.
... ...
In our opinion, the right guaranteed under sub-clause (c) of Clause (1) of Article 19 extends to the formation of an association and in so far as the activities of the associations are concerned or as regards the steps which the union might take to achieve the purpose of its creation, they are subject to such laws as might be framed and that the validity of such laws is not to be tested by reference to the criteria to be found in Clause (4) of Article 19 of the Constitution.''
13. Now a highly arguable point about availability of attack based on violation of Article 21. Article 21 reads thus :
''21. Protection of life and personal liberty---No person shall be deprived of his life or personal liberty except according to procedure established by law.'' The pivotal question is does the word ''life'' used in Article 21 include livelihood. It appears that there has been some difference of opinion on the question in the Supreme Court. We will first notice certain decided cases to which our attention was drawn.
In (Re : Sant Ram), in the context of Supreme Court Rules framed under Article 145 of the Constitution prohibiting acceptance of engagements by a lawyer through a tort it is held that ''life'' does not include livelihood and, therefore, Article 21 is not available in a challenge to the said Rule by a tort.
In the context of policy of nationalisation of the life insurance business under the Life Insurance Corporation Act, 1956, this point arose in the case A.V. Nachane v. Union of India, . Majority judgment says :---
''The challenge based on Article 19(1)(g) and Article 21 does not appear to have any substance. Apart from anything else, a claim based on the 1974 settlements is certainly not a fundamental right that could be enforced through this Court. As regards Article 21, the first premise of the argument that the word 'life' in that Article includes livelihood was considered and rejected in the In re : Sant Ram .'' In the case of Begulla Bapi Raju v. State of Andhra Pradesh, question arose in the context of the Andhra Pradesh Land Reforms (Ceiling on Agricultural Holdings) Act, 1973. Section 3(f) of the said Act defines 'family unit' which includes even a separated minor son. The said definition was challenged inter alia on the ground of violation of Article 21. Following the case of Sant Ram (supra) as affirmed by the case of Nachane (supra) it was held that the word 'life' in Article 21 does not include livelihood.
14. There is a long line of decisions which has taken a different and broader view of the word ''life'' in Article 21. In the case of Maneka Gandhi v. Union of India, in the context of the Passports Act, 1967 it is held that 'life' is not restricted to mere physical existence but includes right to livelihood with all its relevant facets. This view is reiterated in the case of Francis Corabie Mullin v. Administrator, UTA Delhi, in the context of detenu's right to confer with legal adviser under COFEPOSA, 1974. In the case of Peoples Union for Democratic Rights v. Union of India, in the context of complaint of non-observance of the Contract Labour (Regulations & Abolition) Act, 1970 and the Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service Act, 1979 it was held that the complaint related to violation of Article 21. The case of Board of Trustees of the Bombay Port v. Dilipkumar Raghavendranath Nadkarni, deals with the question of fairness of a departmental inquiry where permission sought by a delinquent to be represented through a lawyer was rejected even though the employer was represented by a legally trained representative. In that context it is held that ''life'' in Article 21 includes livelihood.
In the State of Maharashtra v. Chandrabhan Tale, second proviso to Rule 151(1)(ii)(b) of the Bombay Service Rules, 1959 providing for nominal subsistence allowance of Re. 1/- per month to a suspended Government servant upon his conviction during pendency of appeal and prohibition against any other engagement was struck down being ultra vires of Article 21. The case of Bandhu Mukti Morcha v. Union of India, deals with the rights of bounded labourers, under Article 21 in the context of Directive Principles. The following observations in that decision are significant :
''It is the fundamental right of everyone in this country, assured under the interpretation given to Article 21 by this Court is Francis Mullin's case, to live with human dignity, free from exploitation. This right to live with human dignity enshrined in Article 21 derives its life breath from the Directive Principles of State Policy and particularly Clauses (e) and (f) of Article 39 and Articles 41 and 42 and at the least, therefore, it must include protection of the health and strength of workers, men and women, and of the tender age of children against abuse, opportunities and facilities for children to develop in a healthy manner and in conditions of freedom and dignity, educational facilities, just and humane conditions of work and maternity relief.''
15. In the context of rights of certain pavement and slum dwellers, Article 21 was pressed in to service in the case of Olga Tellis and others v. Bombay Municipal Corporation, . The Supreme Court was considering validity of (i) section 314 of the Bombay Municipal Corporation Act, which permitted removal of encroachment without notice, and (ii) action of the Corporation to remove certain encroachments without notice. Validity of section 314 of the Bombay Municipal Corporation Act was upheld even on the touch-stone of Article 21, but not of the action of eviction without notice of certain pavement and slum dwellers who were occupying the areas under compulsion and for long time. It is observed :
''As we have state while summing up the petitioners' case, the main plank of their argument is that the right to life which is guaranteed by Article 21 includes the right to livelihood and since, they will be deprived of their livelihood if they are evicted from their slum and pavement dwellings, their eviction is tantamount to deprivation of their life and is hence unconstitutional. For purposes of argument, we will assume the factual correctness of the premise that if the petitioners are evicted from their dwellings, they will be deprived of their livelihood. Upon that assumption, the question which we have to consider is whether the right to life includes the right to livelihood. We see only one answer to that question, namely, that it does. The sweep of the right to life conferred by Article 21 is wide and far reaching. It does not mean merely that life cannot be extinguished or taken away as, for example, by the imposition and execution of the death sentence, except according to procedure established by law. That is but one aspect of the right to life. An equally important fact of that right is the right to livelihood because, no person can live without the means of living, that is, the means of livelihood. If the right to livelihood is not treated as a part of the constitutional right to life, the easiest way of depriving a person of his right to life would be to deprive him of his means of livelihood to the point of abrogation. Such deprivation would not only denude the life of its effective content and meaningfulness but it would make life impossible to live. And yet, such deprivation would not have to be in accordance with the procedure established by law, if the right to livelihood is not regarded as a part of the right to life. That, while alone makes it possible to live, leave aside what makes life livable, must be deemed to be an integral component of the right to life. Deprive a person of his right to livelihood and you shall have deprived him of his life. Indeed, that explains the massive migration of the rural population to big cities. They migrate because they have no means of livelihood in the villages. The motive force which propels their desertion of their hearths and homes in the villages is the struggle for survival, that is, the struggle for life. So unimpeachable is the evidence of the nexus between life and the means of livelihood. They have to eat to live : Only a handful can afford the luxury of living to eat. They can do, namely, eat, only if they have the means of livelihood. That is the context in which it was said by Douglas, J., in Baksey that the right to work is the most precious liberty that man possesses. It is the most precious liberty because, it sustains and enables a man to live and the right to life is a precious freedom, ''Life'', as observed by Field, J., in Munn v. Illinois, means something more than mere animal existence and the inhibition against the deprivation of life extends to all those limits and faculties by which life is enjoyed. This observation was quoted with approval by this Court in Kharak Singh v. State of U.P.'' The case of Sant Ram (supra) was noticed but not followed distinguishing it on facts on the ground that it was a claim of tout to carry on nefarious activities. The cases of Nachane, Begulla Bapi Raju (supra) which followed Sant Ram, however, were not brought to the notice of the Court.
Last on the list is the case of State of Maharashtra v. Basantibai Mohanlal Khetan, where in the context of the validity of Maharashtra Housing and Development Act, 1977, it is said :---
''Then in the end we have to consider the argument based on Article 21 of the Constitution which is urged on behalf of the respondents. Article 21 essentially deals with personal liberty. It has little to do with the right to own property as such. Here we are not concerned with a case where the deprivation of property would lead to deprivation of life of liberty or livelihood.''
16. There is thus a clear trend in favour of extending the width of Article 21 to human rights including livelihood and decisions taking a restrictive view of the word ''life'' stand impliedly overruled. Sant Ram and Olga Tellis both are decisions rendered by Benches of five learned Judges. Olga Tellis is closer to the present matter and is also a later decision. Settled legal position is that if there is conflict between decisions rendered by Benches of equal strength the later prevail over the former. A conclusion is, therefore inescapable that 'life' in Article 21 includes livelihood. Is question of livelihood involved in the instant case is the next question. The Act deals with the vital rights of the workers whose livelihood depends upon service and conditions of service. In our judgement, therefore, Article 21 can be attracted in the instant case and, therefore, Article 31-C cannot be used as a protective umbrella to the Act while testing its validity on the basis of Article 21.
17. We, however, see no merit in the attack. If procedure prescribed by law for deprivation of livelihood is fair, just and reasonable there is no violation of Article 21 and for the reasons recorded in the earlier paras we have already noticed how under the circumstances the provisions are reasonable, despite existence of power to nullify valuable rights accrued to workers arising out of other beneficial legislations like ID Act and valid settlements and awards. There is nothing very special or original about overriding provisions contained in section 26 of the Act. Several legislation dealing with nationalisation such as Life Insurance Corporation Act General Insurance Business (Nationalisation) Act, the Bombay Relief Undertaking Act contain similar provisions. The Act does have some peculiar features e.g. every old employee has no right of employment but that feature by itself cannot render the legislation bad. There is also no right in the workers or the union to consultation or participation in the decision making process even where their rights are affected but that cannot be helped. When problems are to be tackled on experimental basis and future developments cannot be predicted, free hand has to be given. This is what has been done in the Act. We cannot hold that circumstances did not warrant such a legislative policy. In this connection the following observation made in Ajay Kumar Banerjee v. Union of India, A.I.R. 1984 Supreme Court 1130 are relevant :
"it is impossible to tell how successful a particular approach might be, what dislocation might occur, and what situation might develop and what new evil might be generated in the attempt. Administrative expedients must be forged and tested. Legislators recognizing these factors might wish to proceed cautiously, and courts must allow them to do so."
The above case dealt with the validity of section 16 of the General Insurance Business (Nationalisation) Act, 1972 and the schemes framed thereunder in 1980. Section 16(1) provides for merger of several employees from various sources, gives employment under one roof and section 16(2) provides for framing a scheme. In 1974 a merger scheme was prepared and in 1980 scheme service conditions were further altered. Despite overriding effect given in the said Act, provisions were sustained as valid but not the 1980 scheme on the ground that it had no nexus to the merger and the provisions called only for one time exercise. Several other questions such as, which law prevails over the other and in what circumstances are also considered and it is held :
"From the text and the decisions four tests are deducible and these: (i) The legislature has the undoubted right to alter a law already promulgated through subsequent legislation, (ii) A special law be altered, abrogated or repeated by a latter general law by an express provisions, (iii) A later general law will override a prior special law if the two are so repugnant to each other that they cannot co-exist even though no express provision in that behalf is found in the general law, and (iv) it is only in the absence of a provision to the contrary and of a clear inconsistency that a special law will remain wholly unaffected by a latter general law. See in this connection Maxwell on "The Interpretation of statutes", Twelfth Edition, pages 196-198.
... ...
It was contended that the rights of the petitioner under Article 19(1)(g) have been affected by the impugned legislation and the scheme framed thereunder. Empowering the Government to frame schemes for carrying out the purpose of the Act, does not, in our opinion in the facts and circumstances of the case, in any way, affect or abridge the fundamental rights of the petitioners and would not attract Article 19(1)(g)."
About right to change service conditions unilaterally by the management of the public sector undertaking it is held :
"Employment in the public sector undertaking enjoys a status. It was submitted that both historically as well as a matter of law the public sector undertaking being the economic instrumentalities of the State and discharging the obligations which the State have, the employees of such undertakings in principles cannot be distinguished from the employees in the government services."
18. Following observations in the case of D.K. Trivedi (supra) may also be noticed in this context.
"There is no such principle of law that before such a statutory power is exercised, persons who may be affected thereby should be heard. Whether any opportunity is to be given to persons affected to make representations to the Government would depend upon the form in which the rule making power is conferred. It is for the legislative body which confers the rule-making power to decide in what form such power should be conferred".
The case of National Textiles Workers Union v. P.R. Ramakrishnan, was relied upon by the petitioners in this connection. It relates to right of union of the workers to be heard in liquidations proceedings in the context of sections 433, 439, 443, 445(3) and 450 of the Indian Companies Act. It has been held that in such matters a worker is as much likely to be affected as a creditor if not more, every company is a social institution and under the circumstances, right of hearing granted under the Indian Companies Act has to be conceded even in favour of the union keeping in view Article 43-A. This is what the Supreme Court says :
"Then follows Article 43-A which is intended to herald industrial democracy and in the words of Krishna Iyer, J., mark "the end of industrial bounded labour". That Article says that the State shall take steps by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry. The constitutional mandates is therefore clear and undoubted that the management of the enterprise should not be left entirely in the hands of the supplies of capital but the workers should also be entitled to participate in it, because in a socialist pattern of society the enterprise which is a centre of economic power should be controlled not only by capital but also by labour. It is therefore idle to contend 32 years after coming into force of the Constitution and particularly after the introduction of Article 43-A in the Constitution that the workers should have no voice in the determination of the questions whether the enterprise should continue to run or be shut down under an order of the Court. It would be indeed be strange that the workers who have contributed to the building of the enterprise as a centre of economic power should have no right to be heard when it is sought to demolish that centre of economic power".
We are unable to see how, the ratio of the above decision rendered in the context of the provisions of the Indian Companies Act can be of any help to the petitioner.
19. Our attention was drawn to some cases under the Life Insurance Corporation Act. The first is the case of Madan Mohan Pathak v. Union of Indian, . Two settlements under the ID Act about bonus were arrived at. Before the expiry of the period of settlements payment of bonus was stopped in the midway under instructions from the Central Government. Calcutta High Court set aside those instructions being contrary to law and directed payment of bonus as per the settlement. Thereafter the Life Insurance Corporation (Modification of Settlement) Act, 1976 was passed. In the above decision validity of the said Act was successfully challenged. Reliance is placed on the following observations:
"It is quite reasonable, in my opinion, to submit that the measure which seeks to deprive workers of the benefits of a settlement arrived at and assented to by the Central Government, under the provisions of the Industrial Disputes Act, should not be set at naught by an Act designed to defeat a particular settlement. If this be the purpose of the Act as it evidently is, it could very well be said to be contrary to public interest and, therefore, not protected by Article 19(6) of the Constitution....
... It is true that, in the instant case, it is a provision of the Act of Parliament and not merely a governmental order whose validity is challenged before us. Nevertheless, we cannot forget that the Act is the result of a proposal made by the Government of the day which instead of proceeding under section 11(2) of the Life Insurance Corporation Act, choose to make an Act of Parliament protected by emergency provisions. I think that the prospects held out, the representations made, the conduct of the Government, and equities arising therefrom, may all be taken into consideration for judging whether a particular piece of legislation, initiated by the Government and enacted by Parliament is reasonable."
20. The case of Life Insurance Corporation of India v. D.J. Bahadur, deals with a notice of intention to terminate the settlements given under section 9(2) of the ID Act. Whereas old settlements and awards under the ID Act were terminated, they were not replaced by fresh settlements and awards under the said Act. The Supreme Court held, considering the scheme of the LIC Act in general and sections 11, 23 and 49 in particular read with the provisions of the ID Act that unless and until the settlements and awards under the ID Act are replaced by fresh settlements and awards, they operate and the liability thereunder does not cease to exist by mere termination. Consequently a direction was issued to give effect to the settlement of 1974 until they were replaced by fresh settlements and awards. No observations can be torn out of context. We do not see any support in the ratio of the above two decisions for the petitioner.
21. We have already referred to Nachane's case. It deals with validity of the Life Insurance Corporation (Amendment) Ordinance 1981 which was soon replaced by the Act. It is unnecessary to notice the whole back ground. Suffice it to say that the provisions of the Act and Rules framed thereunder were held to be valid. However, retrospectivity given to the Rule 3 was held to be invalid in view of the decision in Madan Mohan Pathak (supra). Now the object of the 1981 Act was to control the cost of administration in the interest of policy holders and for that purpose to revise the service conditions expeditiously. It is held that it is permissible for the legislation to make a law abrogating or repealing the existing law. It is further held that it is for the legislature to decided whether the situation was remediable by adjudication or required legislation.
Having regard to the principles laid down by several authorities it seems to us that no provisions of the Act can be struck down either under Articles 14, 19(1)(c) or 21 of the Constitution. Consequently it will have to be held that the State Government or the new management is not obliged to consult and/or secure concurrence of the petitioner union either in reconstruction or in management of the undertaking howsoever desirable the consultation may be.
22. This takes to the other reliefs claimed by the petitioner. The first is about the payment of gratuity and retrenchment compensation to the workers. During the pendency of the petition full payment is made and thus the grievance does not survive. Second relief relates to startling the paper division. On 20th February, 1987 a statement was made that a policy decision to start paper division is already taken. We enquired from the learned Counsel for the respondents as to what was detaining the starting of the paper division. The answer was, amendment to the memorandum of association of the Corporation as required under section 17 of the Companies Act. We do not think that the problem is that major and serious. If at all such amendment to the memorandum is necessary despite the provisions of the Act, the respondents are powerful and influential enough to get the matter expediated. We are further informed that raw material for paper division is rice husk for which the season commences in October and the division would be started soon after procuring raw material. Six months' time is already over. Some definite time limit must be fixed in the interest of certainty. Under all these circumstances we direct that the paper division should be started on or before 1st December, 1987.
23. The third prayer orally made relates to the declaration of "the designated date" as contemplated under section 12 of the Act. We see various difficulties in the way. It is apparent that several problems are awaiting proper solution. Such direction cannot be issued at this stage.
24. We now turn our attention to the most controvertial issue about starting of Unit No. 5. There was a major difference between parties in the approach towards this controversy. The respondents have chosen to consult the union in the matter of shifting workable machinery from Unit No. 5. Union is seriously opposed to this move. We have already held that consultation/concurrence of the union in the matter is not mandatory. In this policy decision of shifting workable machinery in any way bad, is the question? Proposed action is based on BTRA recommendations and IDBI report. Shifting of workable machinery is bound to increase at least to some extent the employment potential for the old employees of Union No. 5. Policy decision is thus in consonance with the object of the Act and is not illegal. Real apprehension of the union seems to be that once workable machinery is shifted, the land as well as the structure in Unit No. 5 would be disposed of and if that is done, restoration of the unit will be impossible even if the undertaking sees good days. We asked the learned Counsel for respondents about their present thinking over the matter. He took time and after ascertaining informed us that shifting is a long drawn process and at least for a period of 2 years from today neither land or structure would be disposed of nor encumbered (except to the extent required for raising loan on the basis of security). We are informed that even demolition of the structure shall not take place during that period unless warranted by the condition of the structure. We are also informed by both the parties that Unit No. 5 is ready for operation by scanning and repairing the workable machinery, installation of electric fittings and cleaning etc. and can be started at short notice till the process of shifting commences. We tried to have a reasonable estimate of the time within which working can actually commence. Considering all the factors and the views expressed on the time limit we direct that Unit No. 5 should be started on or before 1st September, 1987. Needless to mention that considering the impending shifting, employment in the unit will be on appropriate terms and conditions to be fixed by the respondents. We do hope and trust that process of shifting of machinery as and when undertaken would have smooth sailing and union will not come in the way.
25. Several controversial points were raised before us about the exact assurance made by the Hon'ble Minister on the floor of the House and about the exact commitment made by the President of the Union in the matter of nationalisation and other matters. As nothing much turns on those controversies we have refrained from adjudicating upon those issues.
26. To conclude :
The provisions of section 9(2), 10(2), 12(1) and 26 of the Act are valid.
There is no right of consultation in the union in the process of reconstruction or the management of undertaking.
Paper division should be started on or before 1st December, 1987.
Unit No. 5 should be started on or before 1st September, 1987.
Rule accordingly. No order as to costs.