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Introduction:
Our constitution, which is arguably the largest written constitution in the
world, expressly provides for the proliferating chapter of fundamental Rights
and lays down the Directive Principles of State Policy. It covers almost every
sphere of state activity and demarcates the legislative, judicial and executive
domain. The constitution declares India as a SOVEREIGN SOCIALIST SECULAR
DEMOCRATIC REPUBLIC. The ever growing chapter of fundamental Rights constitutes
a separate part i.e. Part III of the constitution which is the most cherished
part and is responsible for all the constitutional jurisprudence that has
developed around the right to life provision. The bare wordings of Article21 No
one shall be deprived of his life or personal liberty except according to the
procedure established by law are made to work for the common man and hold a
celestial significance in the Indian legal scheme of things.
All this assures that a
citizen gets the basic minimum necessities for the bare subsistence of a
dignified survival. The state is responsible for any violation of the
Fundamental Rights of citizens. But where the state itself turns into an
assassin, the plight of the citizens can not be ignored. Extravagance
The Affliction:
It was around January 1992 from when the employees of the state owned
corporations of Bihar were deprived of their salaries. It took more than ten
years for the judiciary to take notice only when a public spirited citizen and a
Supreme Court lawyer Kapila Hingorani filed a writ petition under Art.32 of the
constitution of India. According to the petitioner, a newspaper report showed
that hundreds of employees of various State- owned corporations, public
undertakings or other statutory bodies in Bihar had died due to starvation or
committed suicide owing to acute financial crisis resulting in acute financial
crisis resulting from non- payment of salaries for a long time. There were
nineteen such state- owned sick corporations. The court was moved by a series of
Express reports called Bihar & Bloodless Murder provided a graphic account of
how nearly 40,000 employees of the Bihar government & from school and college
teachers to typists, clerks, sweepers, accountants & had been reduced to penury,
not paid salaries for at least 10 years. In its counter affidavit, the State of
Bihar did not deny
about the factual statement made in the said writ petition. It, however, alleged
that salaries had been paid by some of the statutory bodies while the remaining
ones faced financial difficulties. The Supreme Court found the counter affidavit
to be self-contradictory. The Supreme Court appointed Mr. P.S. Mishra as the
amicus curiae. The petitioner contended
that the State could not escape its liability in the matter of payment of
salaries to its own employees. The petitioner contended that in view of the
deaths and the commission of suicide by employees of the State owned
corporations, the SC should issue interim directions for payment of salaries to
the employees. It was also contended that the govt. companies should discharge
their obligation under Art. 21.
The State contended that
since most of the companies are constituted under the Companies Act, 1956, the
rights and liabilities of the shareholders would be governed by that act and the
liabilities of those companies can not be passed on to the State by taking
recourse to the doctrine of lifting the veil. The State further contended that
in view of the magnitude of the problem, the liability should be apportioned to
the extent of eighty percent and ten percent between the Union of India
and the State govt. respectively and the remaining part may be met by sale of
properties of the respective companies. The Union of India contended that it
could not be charged any kind of liabilities of the State.
In the report submitted by
Mr. P.S. Mishra, the amicus curiae, it was submitted that the SC could break the
corporate veil of the govt. companies because the State was the sole shareholder
of the companies and had deep and pervasive control over the affairs.Since such
companies were State under Art.12, neither the Union nor the State of Bihar
could escape the liability to enforce the liability to enforce the rights of the
citizens under Arts.21 and 23.
The Supreme Court formulated
the following questions:
1. Whether in a case like this, the Court would take a sheer legal approach and
hold that the corporate veil would not be lifted although the citizens right to
life and liberty under Art.21 had been violated?
2. Whether the State of
Bihar could be asked to render all assistance to the said companies so as to
fulfil its own obligations to comply with the citizens rights under Art. 21 and
23 of the Constitution?
3. Whether the State of
Bihar could escape its liability having regard to the human rights problem?
4. Whether the liability of
the State of Bihar, could be shifted to the Union of India?
Verdict:
The court adopting a very humane approach and held that the corporate veil can
be pierced when the corporate personality is found to be opposed to justice,
convenience and interest of the revenue or workmen or against public interest.
The court while passing the order held that the employees have a human right as
also a fundamental right under
Article 21 which the states are bound the protect and not by way of an
enforcement of their legal right to arrears of salaries. The court directed the
HC to dispose of all liquidation proceedings in respect of government
corporations owned and controlled by the state government as expeditiously as
possible and pass interim orders for the sale and disposal of the properties
thereof for utilization of the same towards payment of salaries of the
employees. A three-member committee of
retired and sitting judges was to be constituted to scrutinize the liability of
the government companies and submit a report to the HC in three months. The
Bihar government would bear expenses of the committee and the HC would issue
necessary directions to the committee from time to time.
The interim order was given
by a bench comprising Chief Justice V N Khare and Justice S B Sinha. The Court
directed the State to deposit Rs. 50 crore within two months of the judgment
before the Patna High Court for its disbursal to the employees. The High Court
shall be entitled to issue requisite directions to the said committee from time
to time as
and when it deems fit and proper; the Chief Justice said pronouncing the interim
order. The High Court, however, in its discretion, may direct disbursement of
some funds to the needy employees on ad hoc basis so as to enable them to
sustain themselves for the time being, the Chief Justice said.
The supreme court provided
that the State for the present shall deposit a sum of Rs. 50 crores before the
High Court for disbursement of salaries to the employees of the corporations.
The amount of Rs. 50 crores should be deposited in two installments. Half of the
amount shall be payable within one month and the balance amount within a month
thereafter. The High Court shall see to it that the sum so deposited and
otherwise received from any source including by way of sale of assets of the
Government Companies/Public Sector Undertakings be paid proportionately to the
concerned employee wherefore, the parties may file their claims before it.
Interestingly the Supreme Court also impleaded the State of Jharkhand as a
respondent in terms of the liabilities of the State in a State owned corporation
JHALCO. So, the court in its final decree directed:
1. The High Court to dispose
of all liquidation proceedings in respect of the Government companies owned and
controlled by the State of Bihar as expeditiously as possible.
2. A committee not
consisting of more than three members chaired by a retired High Court Judge or a
sitting District Judge may be appointed who may scrutinize the assets and
liabilities of the companies and submit a report to the High Court as
expeditiously as possible preferably within three months from the date of
constitution of the committee.
3. The State for the present
shall deposit a sum of Rs. 50 crores before
the High Court for disbursement of salaries to the employees of the
corporations. The amount of Rs. 50 crores be deposited in two
installments. Half of the amount shall be payable within one month and
the balance amount within a month thereafter. The High Court shall see
to it that the sum so deposited and/or otherwise received from any source
including by way of sale of assets of the Government Companies/Public Sector
Undertakings be paid proportionately to the
concerned employee wherefore, the parties may file their claims before it.
4. The Central Government was directed to take a decision as regards
division of assets and liabilities of the Government companies/public
sector undertakings in terms of the provisions of the State
Reorganisation Act, 2000.
5. That the matter be placed again after six months.
In view of the 5th direction, the matter was placed before the court on
Jan 13, 2005 where the court directed the State of Jharkhand was asked
to submit Rs. 25 crores before the High Court. The Committee then
constituted found that a sum of Rs. 25, 98, 65,883.00 had been due for
payment to the employees of the govt. undertakings. The court again
ordered the State of Bihar to submit an amount of Rs. 50 crores before
the High Court.
Conclusion
All these directions issued by the Supreme Court were not on the
premise that the State is bound to pay the salaries of the employees of
the Public Sector Undertakings but on the ground that the employees have
a human right as also a fundamental right under Art.21 which the States
are bound to protect in any condition.
The case of Kapila Hingorani v. State of Bihar has been another case
where the court has added another gem to the crown of human rights
jurisprudence and reaffirmed that the states responsibility of
protecting fundamental rights can not be dispensed with, neither in the
name of lack of resources nor divided responsibility under the so-called
federal structure. The judiciary has been increasingly viewed as an
institution to the saviour of people and such moves only reaffirm public
faith that is reposed on it as a last resort.
In view of the failure on the part of the statutory authorities to
enforce the social welfare legislations e.g. Payment of Wages Act,
Minimum Wages Act etc which has resulted in such an abysmal situation,
the increasing domain of judicial scrutiny may either be viewed as a
balancing mechanism only to be found in a democracy where there is an
inherent unison in the functioning of the three wings of the State even
provided with a standard separation of powers or can be viewed as an
intruding tendency scooping heed under the inefficacy of one wing of
the State. At the end it is a win-win situation both for the common man
and for the legal academician who considers it as an added feather in
circlet of the growing constitutional and legal framework.
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The author can be reached at :abhinav@legalserviceindia.com
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Kapila
Hingorani v. State of Bihar
