Calcutta High Court (Appellete Side)
Bengal Chemical Sramik Karmachari ... vs Union Of India & Ors on 13 February, 2018
W.P. No. 15560 (W) of 2017
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
Appellate Side
Bengal Chemical Sramik Karmachari Union & Ors.
Vs.
Union of India & Ors.
For the Petitioners : Mr. Bikash Ranjan Bhattacharyaa, Sr. Advocate
Mr. Shamim Ahamed, Advocate
Mr. Arka Maiti, Advocate
For the Respondent : Mr. Koushik Chandra, Additional Solicitor General
Nos. 4 & 5 Mr. Pradip Kr. Das, Advocate
Mr. S.R. Saha, Advocate
Mr. Suman Kr. Mukherjee, Advocate
Hearing concluded on : February 6, 2018
Judgment on : February 13, 2018
DEBANGSU BASAK, J.:-
The petitioners have challenged the decision of strategic sale of Bengal Chemical and Pharmaceutical Limited (BCPL) taken by the Central Government.
Learned Senior Advocate for the petitioners has submitted that, BCPL was established in 1901 by an eminent scientist and entrepreneur Acharya Prafulla Chandra Ray. The institution was a part of the freedom struggle. BCPL has factories at Kolkata, Panihati, Mumbai and Kanpur. The management of BCPL was taken over by the Government of India on December 15, 1997. BCPL was nationalized pursuant to the Bengal Chemical and Pharmaceutical Works Limited (Acquisition and Transfer of Undertakings) Act, 1980. BCPL is one of the largest manufacturers of generic drugs in the Country. The Central Government did not nurture BCPL adequately. Consequently, BCPL started making losses and was referred to the Board for Industrial and Financial Reconstruction (BIFR) established under the provisions of the Seek Industrial Companies (Special Provisions) Act, 1985. In the proceedings before BIFR a revival package was proposed. During the pendency of the proceedings before BIFR an attempt was made by the Central Government to sell the company. Such decision was challenged before the High Court. The High Court had intervened and passed an order of stay on the decision to sell BCPL. Subsequently, a revival scheme was placed before the BIFR in respect of BCPL, which was accepted. However, the Central Government did not act in terms of the sanctioned scheme. BCPL was referred to BIFR in the year 2005 again. The financial performance of BCPL started improving since 2014. BCPL has started posting cash profits for the year 2014-2015 onwards. Referring to 32nd Report of the Standing Committee of the 16th Lok Sabha learned Advocate appearing for the petitioners has submitted that, the Report notes the decision of the Central Government to sell surplus land of BCPL and strategic sale of BCPL. He has referred to the view expressed therein to the effect that, BCPL should be revived. It recommends revival of BCPL and seeks a report from Government in that regard. He has referred to the Katoch Committee Report on Active Pharmaceuticals Ingredients, a report of the Expert Committee set up by the Central Government to look into issues in the pharmaceutical sector. He has submitted that, one of the main recommendations of the Katoch Committee is that, the Central Government should evolve ways and means of utilizing the resources available with the public sector units for setting up of Active Pharmaceuticals Ingredients. The Katoch Committee is of the view that, an average cluster of Active Pharmaceuticals Ingredients would require about 1000 to 2,000 hectares of land and would require about 750-1000 Crore investments of common facilities/services. He has submitted that, BCPL has such an infrastructure available, therefore, BCPL should be developed in terms of Katoch Committee Report.
Referring to the affidavits used by the respondents, he has submitted that, the Central government has sought to justify the decision for strategic sale of BCPL on the ground that, BCPL is no longer in the priority sector. The Central Government has decided not to do business in an area which does not fall within the priority sector. He has submitted that, health is a priority sector for Central Government. The Central Government is free to decide on economic policies. However, such freedom is circumscribed by the constitutional mandate. Central Government cannot breach the constitutional mandate while formulating any policy even if it was an economic policy. Heath being a priority sector, Central Government is misplaced while treating pharmaceutical industry not to be a priority sector. He has referred to Article 21 of the Constitution of India and has submitted that, health is included in the right to life enshrined in Article 21 of the Constitution of India. Referring to Article 39 of the Constitution of India he has submitted that, although, the directive principles of State policy may not by themselves per se be justiciable, the Courts, however, are entitled to take the benefit of the directive principles of State policy, in understanding the contours of the fundamental rights, enshrined in the Constitution of India.
Referring to 2013 Volume 6 Supreme Court Cases page 1 (Novartis AG v. Union of India & Ors.) learned Senior Advocate for the petitioners has submitted that, where there is a conflict between two interests, then, the Court should lean in favour of the one advancing public interest. In the present case, there may be a conflict between economic interest of the Central Government with that of interest of the citizens in relation to health. He has submitted that, health should take precedence as it involves the entire country. He has submitted that, the observations made in 2002 Volume 2 Supreme Court Cases page 333 (BALCO Employees Union (Regd.) v. Union of India & Ors.) supports the view that, a policy decision of the Central Government is justiciable provided that, it is substantiated that such policy decision is contrary to the provisions of the Constitution. A policy decision is not immune from judicial scrutiny. In appropriate cases the Courts can strike down a policy of the Central Government. In the facts of the present case, he has submitted that, the decision of the Central Government to sell BCPL strategically being violative of the constitutional mandate should be quashed.
Learned Additional Solicitor General appearing for the Central Government has submitted that, the Central Government has taken a policy decision in not doing business in sectors which do not come within the priority sector. Manufacturing of pharmaceutical products, do not come within the priority sector, in the opinion of the Central Government. He has referred to the affidavit-in-opposition filed on behalf of the Central government. He has referred to the data provided in such affidavit and has submitted that, although Public Sector Undertakings in the pharmaceutical sector were doing well at a given point of time, private operators has caught up with the Public Sector Undertakings and has replaced the public sector. He has referred to the productions of the Public Sector Undertakings in the pharmaceutical sector in the aggregate. There are five Public Sector Undertakings engaged in the manufacturing of pharmaceutical products. The entirety of the production of those five Public Sector Undertakings does not constitute more than 5% of the total pharmaceutical products of the country. Therefore, there is no need for the Central Government to continue with the Public Sector Undertakings in the pharmaceutical industry. These public sector pharmaceutical companies are making loss with no prospect of revival. Allowing any of them to continue its existence in the public sector would be an avoidable economic burden on the exchequer with no corresponding benefit to offset the trouble taken. It is, therefore, in the interest of the nation that they are taken out from the public sector.
Learned Additional Solicitor General has referred to the affidavit- in-opposition and the writing dated May 24, 2017 issued by the Ministry of Commerce and Fertilizers Department of Pharmaceutical. He has submitted that, the recommendations of the Standing Parliamentary Committee were considered by the department. The department is of the view that, the total contributions of the Public Sector Undertakings in supply of generic medicine is less than 5%. None of the Public Sector Undertakings is manufacturing any medicine which is not already manufactured by the private sector. Consequently, Public Sector Undertakings in the pharmaceutical sector are no longer of strategic value. Moreover, the Public Sector Undertakings in the pharmaceutical sector excepting one of them are incurring huge losses continuously. The net worth of the Public Sector Undertakings is in the negative. Consequently, the Government has decided to close down two of the Public Sector Undertakings and strategically sale BCPL along with another Public Sector Undertaking. With regard to the revival of BCPL, the department is of the view that, although BCPL has achieved net profit for few years, its net worth continues to remain negative. Therefore, the Cabinet had decided not to close down the company but put it in strategic sale. He has submitted that, the recommendations of the Standing Parliamentary Committee were taken into consideration and that the department has taken a contrary view. The reasons for taking a contrary view have been stated. Therefore, there is no infirmity in the decision making process. The decision taken by the Central Government in this regard, therefore, should not be interfered with by a Writ Court. The decision relates to an economic field. The Court should be slow to interfere in such field. A greater latitude is available to the Government with regard to policies in the economic sphere. He has referred to 2002 Volume 2 Supreme Court Cases page 333 (BALCO Employees Union (Regd.) v. Union of India & Ors.), 2006 Volume 10 Supreme Court Cases page 66 (All India ITDC Workers' Union & Ors. v. ITDC & Ors.) and 2015 Volume 9 page 657 (Parisons Agrotech Private Limited & Anr. v. Union of India & Ors.) in support of his contentions. He has submitted that, the employees of BCPL have no choice of their employer. No right or interest of the employees of BCPL stands affected by the decision of strategic sale. BCPL will continue to exist albeit a new management. Change of management cannot be accepted as a just cause to interfere with a decision of strategic sale. The writ petition should therefore be dismissed.
The following issues have arisen for consideration in the present writ petition:-
(i) Is a decision of strategic sale of a Public Sector Undertaking justiciable?
(ii) If the answer to the first issue is in the affirmative, is the impugned decision bad?
(iii) To what relief or reliefs, if any, are the parties entitled to?
A registered trade union of the employees of BCPL has challenged the decision of the Central Government to sell BCPL on strategic basis. BCPL was established on April 12, 1901. It has four factories. Two of the factories are located in the State of West Bengal while one in Mumbai and the other in Kanpur. The factories in West Bengal are at Kolkata and Panihati. BCPL had started incurring losses from 1950. The management of BCPL was taken over by the Government of India on December 15, 1997. Thereafter, consequent to the Bengal Chemical and Pharmaceutical Works Limited (Acquisition and Transfer of Undertakings) Act, 1980, BCPL was nationalized. By reason of such nationalization, the initial company was renamed and continued as Bengal Chemicals and Pharmaceuticals Limited. BCPL is engaged in the manufacture and sale of generic drugs. Its production is not limited to generic drugs alone. It manufactures anti snake venom and cosmetics amongst other products. BCPL had faced financial troubles prior and subsequent to its nationalization. It was referred to the BIFR twice. During the pendency of consideration of the revival package in respect of BCPL at its first reference proceedings before BIFR, a decision was taken by the Central Government to sell BCPL. Upon the High Court being approached, an order of stay of such decision of the Central government was granted. In the proceeding before BIFR, a revival package in respect of BCPL was accepted by BIFR. According to the petitioners, the Central Government did not act in terms of the revival package as sanctioned by BIFR. BCPL was referred to BIFR again in 2005. BCPL, however, had started posting cash profits from 2014 onwards. The net worth of BCPL, however, remains to be negative.
It appears that, the 32nd Standing Parliamentary Committee had considered the issue of strategic sale of Public Sector Undertakings in the pharmaceutical sector. There appears to be five Public Sector Undertakings in the pharmaceutical sector, one of them being BCPL. In respect of BCPL, in a 32nd Report, the Standing Parliamentary Committee of the 16th Lok Sabha is of the following view:-
"The Committee are deeply pained to note that the Government has decided to sell surplus land of IDPL, RDPL, HAL and BCPL that after liabilities have been met, balance sheet cleansed and VRS/VSS effected IDPL and RDPL be closed and HAL and BCPL be sold strategically. The Committee, feel that the main objective of setting up Pharma PSUs were not to earn profits but to encourage indigenous production of bulk drugs and life saving drugs and formulations and to support various health programmes of the Government. The Committee observe that Pharma PSUs supply generic medicines all over the country. It is also observed that BCPL had made a stellar performance during the last two years. While in the year 2014-2015 its MOU Assessment was good and Corporate Governance was fair, it became excellent both in respect of MOU Assessment and Corporate Governance during the year 2015-2016. The Committee also observe that BCPL is planning to start Anti-Snake Venom Project (ASVS) project as the product is not available in the country at the moment in required quantity as both Government sector units namely BCPL and Central Research Institute (CRI), Kasauli have stopped production of ASVS for the last 10 years. Due to non availability of fund and also due to project cost escalation the project could not be commissioned. The Committee feel that the Department is not taking the matter seriously in spite of the fact that 2 lakh people are suffering from snake bite every year. The Committee, therefore recommend that BCPL may not be closed by strategically selling and instead be supported in its special cause especially when it is on the path of regaining its old glory. The Committee, further observe funds to be allocated to Pharma PSUs had been consistently delayed due to the lackadaisical approach of the Department to impress upon the Ministry of finance of the urgent need for funds to complete the projects resulting in ultimately closure of IDPL and RDPL plants and strategic sale of BCPL and HAL. The Committee therefore recommend that even if there is any little scope for running the PSUs in PPP mode or other mode the Department should consider this instead of closing the IDPL and RDPL and option of strategic sales of BCPL and HAL all may be fully revived. The Committee, would like to be informed of the action taken in this regard."
The recommendations of the Standing Parliamentary Committee were considered by the Department of Pharmaceutical, Ministry of Commerce and Fertilizers. The affidavit-in-opposition of the Central Government discloses a writing dated May 24, 2017 which state the views of the Department of Pharmaceutical on the recommendations made by the Standing Parliamentary Committee in respect of BCPL. The relevant portion of such writing is as follows:-
"It is submitted that during last three years, the total sale of all the five PSUs were around Rs. 500-550 Crore out of total turnover of about Rs. 2.00 lakh crore Indian Pharma Industry. Indian Private Pharma Industry is well developed.
Total contribution of the PSUs in supply of generic medicines under PMBJP is also less than 5%. No PSU is manufacturing any medicines which is not already manufactures by private sector. PSUs are no longer of strategic value.
The Pharma PSUs except KAPL, are incurring huge losses continuously for the past several years. Net worth of the PSUs is in negative. As such the Government has decided to close IDPL and RDPL and strategically sell BCPL and HAL.
As regards revival of BCPL, it is submitted that although during recent year has achieved net profit but its net worth is in negative only. The Cabinet has decided not to close the company but put on strategic sale. Thus, the company will remain operational, only its management would be changed. Anti Snake Venum Serum, can be manufactured by the company it but from its own funds. Department had sought Rs. 28.10 Crore under Budget Estimates (BE) for 2017-18. However, Ministry of Finance has not given any amount for the project."
The Central Government had taken a decision to sell BCPL strategically. The strategic sale of BCPL is explained by the Central Government in its affidavit by stating that, the liabilities of BCPL would be met out by the sale of surplus land of BCPL. Thereafter, there will be a sale of the shareholding of BCPL with a transfer of management of BCPL to a strategic buyer. In such process, the Central Government seeks to achieve the basic objective of not doing business in a non- priority sector. The affidavit of the Central Government explains that, the Central Government had constituted a high level committee of NITI Aayog to identify sick or loss making/ non-performing Public Sector Undertakings and for recommendations of suitable strategies for action with regard to those identified. Such committee had decided that, prioritization of Public Sector Undertakings should be made on the basis of nature of activity performed by them and not on the basis of profit. In deciding on the priority, such committee had taken into consideration four essential factors. Firstly, whether a Public Sector Undertaking was required for national security. Secondly, whether the Public Sector Undertaking was performing any sovereign or quasi sovereign function. Thirdly, whether it involved in any important development where the private sector has failed to perform. Fourthly, whether the presence of Public Sector Undertaking was desirable for public purpose. Any Public Sector Undertaking which met any of such criteria was categorized as high priority. Otherwise, the Public Sector Undertakings were categorized as low priority. Pharmaceutical Public Sector Undertakings were not performing any of the four identified functions for them to be considered as a priority sector. Consequently, the pharmaceutical Public Sector Undertakings including BCPL coming within the low priority sector, strategies were developed for the purpose of either closing them down or going in for strategic sale. In the case of BCPL, the Central Government is going for strategic sale. By reason of such decision, BCPL will not be closed down. Such of the employees of BCPL who are not offered early retirement or who do not accept the same, will continue to remain as employees of BCPL with the only change being that of the management.
BALCO Employees Union (Regd.) (supra) has dealt with the extent of judicial review of policy decisions taken by the Government in economic sphere. It has expressed the view that, process of disinvestment is a policy decision involving complex economic factors. The Courts have consistently refrained from interfering with economic decisions unless the economic decision, based on economic expediencies, is demonstrated to be so violative of constitutional or legal limits on power or so abhorrent to reason, that the Courts are required to interfere. It has recognized the fact that, in matters relating to economic issues, the Government has a greater latitude, to the extent of undertaking a trial and error, as long as both the trial and error are bona fide and within the limits of authority. In the facts of that case, the Court had refused to interfere in a public interest litigation at the instance of the workers of Bharat Aluminum Company relating to its disinvestment.
BALCO Employees Union (Regd.) (supra) has been considered in All India ITDC Workers' Union & Ors. (supra). It has considered the disinvestment policy with regard to Indian Tourism Development Corporation. It has expressed the view that, a Government employee has no absolute right under Articles 14, 21 and 311 of the Constitution of India. Therefore, an employee of an instrumentality of the State cannot be said to have any vested right to continue to enjoy such status.
Bajaj Hindustan Limited (supra) has considered BALCO Employees Union (Regd.) (supra) and has expressed the view that, in areas of economic and commerce, a greater latitude is available to the executive than in other matters. Courts not being experts in such fields, cannot interfere with the wisdom of policy framed by legislature or the executive. However, it has expressed the view that, Courts can interfere where there is a clear violation of statute or constitutional provision or where the decision of the policy of the State stands vitiated on the ground of arbitrariness.
Parisons Agrotech Private Limited & Anr. (supra) has expressed the view that, the Writ Court has adequate power of judicial review in respect of policy decisions of the Central Government. However, once it is found that, there is sufficient material for taking a particular policy decision, bringing it within the four corners of Article 14 of the Constitution of India, the Court will not exercise its power of judicial review to determine the correctness of such a policy decision or indulge in the exercise of finding out whether there could be more appropriate or better alternatives.
Novartis AG (supra) has considered an application for grant of patent. It has noted that, with the anxiety to safeguard the public heath objectives. Parliament had brought about the amendments to the Patent Act, 1970 in 2005.
The authorities noted above, support the view that, a policy decision of the Government is not immune from judicial scrutiny. Government has a large latitude in making policies. Such latitude is greater in respect of policies in the economic sphere. Government enjoys such latitude so long its policies are based on materials satisfying the contours of Article 14 of the Constitution of India. In such cases, Courts are not required to determine the correctness or the wisdom of such a policy or embark upon an exercise of substituting it with a policy which it perceives to be better. A court can intervene in a policy matter when such policy is unconstitutional or contrary to the statutory provisions or vitiated by arbitrariness or unreasonableness or is unconscionable. Safeguarding public health is one of the objectives of the State.
The first issue, therefore, is answered accordingly. Apparently, the necessity of the Central Government to do business through the instrumentality of a Public Sector Undertaking had engaged the attention of the Government at various levels. The Parliamentary Standing Committee of 16th Lok Sabha in its 32nd Report had taken a particular view and had made their recommendations. The same issue was considered by NITI Aayog. NITI Aayog had categorized Public Sector Undertakings into priority and non-priority sectors. It had laid down four factors, for considering whether an undertaking belong to the priority sector or not any of which, if satisfied, would lead to a Public Sector Undertaking being classified under the priority sector. The yardsticks are enumerated in the affidavit-in-opposition of the Central Government and have been noted above. On the avail of such yardsticks BCPL has been categorized as belonging to the non-priority sector. The Central Government has accepted such classification and is working thereon. The issue is whether or not pharmaceutical as a sector can be considered to be non-priority on the yardsticks formulated by NITI Aayog itself.
Article 21 of the Constitution of India enshrines the fundamental right of life. It is as follows:-
"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."
It is trite law that, heath is a part of right of life. Health comes within the four corners of the fundamental right of life recognized under Article 21 of the Constitution of India. Article 39 of the Constitution of India is as follows:-
"39. Certain principles of policy to be followed by the State. - The State shall, in particular, direct its policy towards securing-
(a) that the citizens, men and women equally, have the right to an adequate means to livelihood;
(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good;
(c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment;
(d) that there is equal pay for equal work for both men and women;
(e) that the health and strength of workers, men and women, and the tender age of children are not abused and that citizens are not forced by economic necessity to enter avocations unsuited to their age or strength;
(f) that children are given opportunities and facilities to develop in a healthy manner and in conditions of freedom and dignity and that childhood and youth are protected against exploitation and against moral and material abandonment."
Articles 39(b), (c) and (e) of the Constitution of India enjoin a duty upon the State to provide good quality and health facilities to its citizens. Making available health services facilities to its citizens at affordable rates is one of the fundamental duties of the State. A policy decision of the State, which permits it to abdicate its fundamental duty recognized under the Constitution, cannot be sustained as one being supported by adequate materials or being reasonable or satisfying the contours of Article 14 of the Constitution of India. Existence of a pharmaceutical company in the Public Sector Undertaking will add to the availability of medicines at affordable rates to the citizens rather than subtract from it. Availability of medicines at affordable rates is one of the pillars on which a robust health care facility is founded. The citizens must have access to affordable health care. Affordable health care would necessarily bring within its wake availability of affordable medicines. A Public Sector Undertaking manufacturing generic medicine would, therefore, be better placed and equipped to provide such a service.
The courter argument would be that, the present economics of BCPL warrant sale of such Public Sector Undertaking or to do away with it altogether. With respect, the State being endowed with the obligation to be a welfare State under the Constitution, it is not open to the State to contend that, the economics of maintaining a Public Sector Undertaking outweighs the continuance of the same. It is the stand of the Central Government that, although BCPL is making profits, its net worth is negative and is likely to remain so. The private sector is in a position to produce the same kind of medicines as that of BCPL. It is to be noted that, private sector is manufacturing the same kind of medicines profitably. There is no reason as to why a public sector unit cannot manufacture the same medicine with profits. The financial results placed before the Court in respect of BCPL from 2014 onwards show that BCPL is posting cash profits. Its negative net worth is yet to be wiped out. However, the same does not necessarily lead one to infer that BCPL would not be in a position to wipe out its negative net worth given a chance. The Central Government is not claiming that, the products manufactured by BCPL is obsolete or does not have market. BCPL has surplus land. Such land can be put to use in terms of Katoch Committee Report.
So far BCPL and its survivality is concerned, two views are possible as would appear from the recommendations of the Parliamentary Standing Committee and the other taken by the Central Government. Both the views, ultimately arrive at the survival of BCPL. However, the two views of different routes and methodolity of allowing BCPL to survive. View of Central Government takes BCPL out of public sector while the view of Parliamentary Standing Committee allows it to retain such status. If BCPL continues to remain in the public sector, Central Government would necessarily remain to be in the control and management of BCPL. This would facilitate the discharge of the State's obligations under the Constitution rather than curtail it. As noted above, it is the obligation of the State to provide health care facility at reasonable rate or at least make the same available to its citizens at affordable rates. Conscious of the proposition that, a Court need not substitute its wisdom on the economic policy of the State, the impugned decision is tasted on the anvil of Articles 21 and 39 of the Constitution. The impugned decision fails such test. The impugned decision does not facilitate discharge of the State to make avail a robust heath care system. Rather it impedes the same. Therefore, the decision of the Central Government based on the recommendations of NITI Aayog to consider BCPL as falling under the non-priority sector cannot be sustained. The consequent decision of undertaking a strategic sale of BCPL which is based upon the classification of BCPL under the non- priority sector is also vitiated. The initial recommendation of NITI Aayog coupled with the decision of the Central Government on the basis of such recommendation of NITI Aayog to classify BCPL in the non-priority sector not being sustainable, the subsequent decision of strategic sale cannot be sustained also. This order, however, will not prevent the authorities from deciding on the fate of BCPL, in accordance with law.
The second issue is, therefore, answered by setting aside the decision of the Central Government to undertake a strategic sale of BCPL.
The third issue is answered by allowing the W.P. No. 15560 (W) of 2017. No order as to costs.
Urgent certified website copies of this order, if applied for, be made available to the parties upon compliance of the requisite formalities.
[DEBANGSU BASAK, J.]