# A.K. BINDAL AND ANR v. UNION OF INDIA AND ORS

- **Citation:** [2003] 3 S.C.R. 928
- **Court:** Supreme Court of India
- **Decided:** 2003-04-25
- **Bench:** S. Rajendra Babu, G.P. Mathur
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/a-k-bindal-and-anr-v-union-of-india-and-ors-19168
- **Pages:** 30

## Headnote

Service Law:
Constitution of India, I 950; Articles I 3, 14, 21 and 311:
Transfer Petitions-Sick Public Sector Undertakings-Revision of Pay
scale-Issuance of Memorandum by the Central Government not providing
any budgetary support for the wage increase-PSEs generate internal resources
to meet additional expenditure-Issuance of another Memorandum by the
D Board of Public Enterprises clarifYing that revision in pay scale and other
benefits would be subject to revival of PSEs by BIFR-Cha//enge to--
Employees' legal right to revision in pay vis-a-vis financial capacity of the
Government-Held: Generally, financial capacity of the Industry is a germane
consideration for determination of the wage structure of the employees-Since
PSEs have been s11ffering heavy losses contin11011s/y, the employees could not
E legitimately claim revision in their pay sea/es-Non-revision of pay-scales
wo11ld not amount to violation of f11ndamenta/ rights under Article 21Companies Act-Sections 619 and 620.
F
Employees of PSEs-Stat11s of-They are not Government ServantsHence not entitled to protection afforded 11nder Article 31 I.
Employees exercising their option for 'Voluntary Retirement Scheme'
and accepting payment thereof-S11bsequent claim for revision in pay scaleJustification of-Held: Since the employees accepted VRS witho11t any protest
regarding revision of pay-scale from back date, there was a complete cessation
of the Jura/ relationship between employer and employee-Hence employees
G cannot claim revision of pay scale.
Words and Phrases:
'Voluntary Retirement Scheme', 'Government Servant', 'Jura!
H relationship between employer and employee', 'Financial capacity of the
928
A.K. llll\D.·\L ». lJ.0.1.
929
!ndus1ry' and 'Golden Handshake '~Meaning of
Petitioners, employees of two sick Public Sector UndertakingsFertilizer. Corporation of India (FCI) and Hindustan Fertilizer Corporation
(HFC), filed writ petitions in the High Court which were transferred to
this Court. They have challenged the Memorandum dated 19.7.1995 issued
by the Government of India that no budgetary support for wage increase
would be provided to sick PSEs and these Undertakings were directed to
A
B
generate their own resources to meet such expenditure, and another
Memorandum dated 19.7.1995 issued by the Department of Public
Enterprises whereby the revision of pay-scales and grant of other benefits
were to be allowed only after revival of the Units of these PSEs by BIFR. C
The questions which arose for consideration were whether the
employees of sick Public Sector Enterprises have any legal right to revision
in pay scales though the PSEs did not have financial capacity and whether
the Government should continuously provide financial support to meet the
additional expenditure due to such revision in pay scales.
It was contended for the petitioners that employees have right to get
fair and reasonable wage in return for employment and denial of such right
D
on the ground of uncertainty of existence of the establishment would be
violative of Articles 13 and 14 of the Constitution of India; that it was E
inappropriate to postpone revision of pay scales subject to revival of the
PSEs by B.l.F.R.; that since losses incurred by the PSEs were not directly
attributed to its employees, it would be unreasonable to deny revision by
linking it to profitability; that sickness of PSEs without consideration of
causes of sickness by the Government could be no ground to .iustify denial
of wage revision; that there was a compromise on the issue of pay revision F
and the same was recorded by the High Court and modalities had to be
worked out but due to adjournment of the matter and later transferring it
to the Supreme Court, the compromise could not be implemented; and that
since the emplo)•ees had accepted the VRS under compulsion, there could
not be any waiver of their fundamental right to claim arrears of salary G
for the past period by revision in pay scale.
On behalf of the Union of India, it

## Text

_Characters 0–39,929 of 75,520. This is a partial read: ask again with offset=39929 for what follows._

A
B
c
A.K. BINDAL AND ANR.
v.
UNION OF INDIA AND ORS.
APRIL 25, 2003
[S. RAJENDRA BABU AND G.P. MATHUR, JJ.]
Service Law:
Constitution of India, I 950; Articles I 3, 14, 21 and 311:
Transfer Petitions-Sick Public Sector Undertakings-Revision of Pay
scale-Issuance of Memorandum by the Central Government not providing
any budgetary support for the wage increase-PSEs generate internal resources
to meet additional expenditure-Issuance of another Memorandum by the
D Board of Public Enterprises clarifYing that revision in pay scale and other
benefits would be subject to revival of PSEs by BIFR-Cha//enge to--
Employees' legal right to revision in pay vis-a-vis financial capacity of the
Government-Held: Generally, financial capacity of the Industry is a germane
consideration for determination of the wage structure of the employees-Since
PSEs have been s11ffering heavy losses contin11011s/y, the employees could not
E legitimately claim revision in their pay sea/es-Non-revision of pay-scales
wo11ld not amount to violation of f11ndamenta/ rights under Article 21Companies Act-Sections 619 and 620.
F
Employees of PSEs-Stat11s of-They are not Government ServantsHence not entitled to protection afforded 11nder Article 31 I.
Employees exercising their option for 'Voluntary Retirement Scheme'
and accepting payment thereof-S11bsequent claim for revision in pay scaleJustification of-Held: Since the employees accepted VRS witho11t any protest
regarding revision of pay-scale from back date, there was a complete cessation
of the Jura/ relationship between employer and employee-Hence employees
G cannot claim revision of pay scale.
Words and Phrases:
'Voluntary Retirement Scheme', 'Government Servant', 'Jura!
H relationship between employer and employee', 'Financial capacity of the
928
A.K. llll\D.·\L ». lJ.0.1.
929
!ndus1ry' and 'Golden Handshake '~Meaning of
Petitioners, employees of two sick Public Sector UndertakingsFertilizer. Corporation of India (FCI) and Hindustan Fertilizer Corporation
(HFC), filed writ petitions in the High Court which were transferred to
this Court. They have challenged the Memorandum dated 19.7.1995 issued
by the Government of India that no budgetary support for wage increase
would be provided to sick PSEs and these Undertakings were directed to
A
B
generate their own resources to meet such expenditure, and another
Memorandum dated 19.7.1995 issued by the Department of Public
Enterprises whereby the revision of pay-scales and grant of other benefits
were to be allowed only after revival of the Units of these PSEs by BIFR. C
The questions which arose for consideration were whether the
employees of sick Public Sector Enterprises have any legal right to revision
in pay scales though the PSEs did not have financial capacity and whether
the Government should continuously provide financial support to meet the
additional expenditure due to such revision in pay scales.
It was contended for the petitioners that employees have right to get
fair and reasonable wage in return for employment and denial of such right
D
on the ground of uncertainty of existence of the establishment would be
violative of Articles 13 and 14 of the Constitution of India; that it was E
inappropriate to postpone revision of pay scales subject to revival of the
PSEs by B.l.F.R.; that since losses incurred by the PSEs were not directly
attributed to its employees, it would be unreasonable to deny revision by
linking it to profitability; that sickness of PSEs without consideration of
causes of sickness by the Government could be no ground to .iustify denial
of wage revision; that there was a compromise on the issue of pay revision F
and the same was recorded by the High Court and modalities had to be
worked out but due to adjournment of the matter and later transferring it
to the Supreme Court, the compromise could not be implemented; and that
since the emplo)•ees had accepted the VRS under compulsion, there could
not be any waiver of their fundamental right to claim arrears of salary G
for the past period by revision in pay scale.
On behalf of the Union of India, it was submitted that since most of
the employees of the PSEs having opted for VRS and having availed the
benefits without any demur, the relationship of employer and employee had
ceased to exist and they could not agitate for revision in pa)' scale.
H
930
SUPREME COl !Jn Rl:l'ORlS
11003 I 3 S.C.R.
A
Answcrilig the questions in the negative, the Court
HELD: I.I. The identity of the Government Company remains
distinct from the Government. The Government Company is not identified
with the Union but has been placed under a special system of control and
conferred certain privileges by virtue of the provisions contained in Sections
B 619 and 620 of the Companies Act. Merely because the entire share holding
is owned by the Central Government will not make the incorporated
company as Central Government. It is also equally well settled that the
employees of the Government Company are not civil servants and so are
not entitled to the protection afforded by Article 311 of the Constitution.
C Since employees of Government Companies are not Government servants
they have absolutely no right to claim that Government should pay their
salary or that the additional expenditure incurred on account of revision
of their pay scale should be met by the Government. Being employees of
the companies it is the responsibility of the companies to pay them salary
D
and if the company is sustaining losses continuously over a period of time
and does not have the financial capacity to revise or enhance the pay scale,
the petitioners cannot claim any legal right to ask for a direction to the
Central Government to meet the additional expenditure which may be
incurred on account of revision of pay scales. Hence, no infirmity, legal or
constitutional, could be found in the two Office Memoranda.
E
1942-C-F; 943-AI
Hearn Engineering Ma:door Union v. S1a1e of Bihar and Ors., AIR
(1970) SC 82 and Pyare Lal Sharma v. Managing Director,Jammu & Kashmir
Industries Ltd. and Ors., AIR (1989) SC 1854, relied on.
F
1.2. The scope and content of Article 21 of the Constitution of India
has been expanded by judicial decisions. Right to life enshrined in this
Article means something more than survival or animal existence. It would
include the right to live with human dignity. But to hold that mere nonrevision of pay scale would also amount to a violation of the fundamental
G right guaranteed under Article 21 would be stretching it too far and cannot
be countenanced. The petitioners have not placed any material on record
to show that the salary which is currently being paid to them is so low that
they arc not able to maintain their living having regard to the 'posts' which
they are holding. 1943-B, C, E, G, HI
H
Express Newspapers Ltd. and Ors. v. Union of' India and Ors .. AIR
-
A.K. BIN DAL v. U.0.1.
931
(1958) SC 578, followed.
A
Hindustan Times ltd v. Their Workmen, AIR (1963) SC 1332, relied
on.
State of Maharashlra v. Chandrahhan, AIR (1983) SC 803; People's
Union for Civil liberties v. Union of India, AIR (1982) SC 1473 and Delhi B
Transport Co1poration v. D. T.C. Mazdoor Congress, 11990] Supp. 1 SCR 142,
distinguished.
1.3. The material on record clearly shows that both FCI and H FC
had been suffering heavy losses for the last many years and the Government C
had been giving considerable amounts for meeting the expenses of the
organisation. In such a situation, the employees cannot legitimately claim
that their pay scales should necessarily be revised and enhanced even
though the organisations in which they are working are making continuous
losses and are deeply in red. 1946-H; 947-A]
South Malabar Gra111in Bank v. Coordination Commillee of South
Malabar Gram in Bank E111ployees' Union and Soulh Malabar Gram in Bank
Officers' Federation and Ors., 1200114 SCC 101 and All India Regional Rural
Bank Officers Federation and Ors. v, Govern111enl of India and Ors., 1200213
sec 554, distinguished.
1.4. The Single Judge of the High Court, misunderstood the content
and import of the stand taken in the counter-affidavit and wrongly
proceeded on the basis as if respondent Nos. 3 and 4 had, subject to certain
conditions, agreed to provide revised salary from backdate. In fact no offer
D
E
of payment of revised salary had been made yet it was mentioned in the F
order that "the petitioner is prepared to accept the offer of the respondent".
No final order had been passed recording any compromise as the counsel
for respondents wanted to take instructions and the matter was adjourned.
It is also noteworthy that the so called agreement/compromise mentioned
in the order was only on behalf of respondent Nos. 3 and 4 (FCI and HFC) G
and there was no compromise or agreement to pay revised salary on behalf
of the Union of India against whom principal relief was claimed by the
petitioners. The order passed by this Court on 19.4.2000 clearly recorded
that a limited relief to all the employees of the two companies was being
granted purely as ad hoc measure and without prejudice to the rights and
contentions of all concerned. This was reiterated in the subsequent order H
932
SUPREME COURT REPORTS
(2003] 3 S.C.R.
A dated 18.8.2000. Factually there being no compromise or settlement on
behalf of respondent nos. 3 and 4 for payment of revised salary as they
had never agreed to do so and the orders passed by this Court on 19.4.2000
and 18.8.2000 having clearly indicated that they were not to come in any
way in the ultimate decision of the case, it can not be held that there was
B any compromise or settlement at any earlier stage which entitled the
petitioners to get revised salary. (951-G, H; 952-A-EI
1.5. Both FCI and HFC had suffered continuous losses. The units of
the companies have already suspended their operations quite some time
back and as on date no unit is functioning nor any production is being
C made. There is also no denial of the fact that the companies have suffered
huge losses and salaries of the employees who were practically doing no
work has been paid by the Government for a considerably long period.
The employees accepted YRS with their eyes open without making any kind
of protest regarding their past rights based upon revision of pay scale from
back date. This is in addition to terminal benefits. The Government was
D conscious about the fact that the pay scales of some of the PSUs had not
been revised with effect from 1.1.1992 and therefore it has provided
adequate compensation in that regard in the second YRS which was
announced for all Central Public Sector Undertakings on 6.11.2001. There
is a considerable amount to be paid to an employee ex-gratia besides the
E terminal benefits in case he opts for voluntary retirement under the Scheme
and his option is accepted. The amount is paid not for doing any work or
rendering any service. It is paid in lieu of the employee himself leaving the
services of the company or the industrial establishment and foregoing all
his claims or rights in the same. It is a package deal of give and take. That
is why in business world it is known as 'Golden Handshake'. The main
F purpose of paying this amount is to bring about a complete cessation of
the jural relationship between the employer and the employee. After the
amount is paid and the employee ceases to be under the employment of
the company or the undertaking, he leaves with all his rights and there is
no question of his again agitating for any kind of his past rights, with his
G erstwhile employer including making any claim with regard to enhancement
of pay scale for an earlier period. If the employee is still permitted to raise
a grievance regarding enhancement of pay scale from a retrospective date,
even after he has opted for Voluntary Retirement Scheme and has accepted
the amount paid to him, the whole purpose of introducing the Scheme
would be totally frustrated. (954-H; 955-D, E; 956-B-El
H
-
A.K. BINDAL '"· l;.o.I. [MATHUR . .I.]
933
1.6. The petitioners arc officers of the two companies and are mature A
enough to weigh the pros and cons of the options which were available to
them. They could have waited and pursued their claim for revision of pay
scale without opting for YRS. However they, in their wisdom thought that
in the fact situation YRS was a better option available and chose the same.
After having applied for YRS and taken the money it is not open to them B
to contend that they had exercised the option under any kind of compulsion.
1956-F, GI
CIVIL ORIGINAL JURISDICTION : Transferred Case (C) No. 8 of
2000.
WITH
T.C. (C) Nos. 2, 4. 3, 9, 10, 11, 12, 13, 15, 35/2000 and T.P.(C) No.
326 of 2002.
Mukul Rohatgi, Additional Solicitor General, R. Venkatramani, L.
c
Nageswara Rao, N.N. Goswami, A. Bhattacharya, Sanjoy Kr. Ghosh, Vivek D
Singh, Vani Singh, Ms. Vimla Sinha, Yunus Malik, L.R. Singh, R.
Krishnamorthi, Ambhoj Kumar Sinha, Ms. Mridula Ray Bhardwaj, Dr. Sumant
Bhardwaj, Ms. Mona Rajvanshi, Raj Kumar Gupta, Sheo Kumar Gupta, A:N.
Bardiyar, Prashant Chaudhary, G.S. Chatterjee, Raja Chatterjee, Punit Dutt
Tyagi, Ms. Kirti Renu Mishra, S. Wasim A. Qadri, B.V. Bairam Das, T.A.
Khan, R.N. Poddar, Mrs. Anil Katiyar, Deba Prasad Mukherjee, Annam D.N. E
Rao, Niraj Gupta, Ms. Meera Mathur, Shambhu Prasad Singh, Ms. Manjula
Gupta, Ms. Sushama Suri, Mis. Dadachanji & Co. Advs., (NP), Ghanshyam
Joshi P. Addy, S. Saxena, R.C. Verma, Mukesh Verma, Manish Srivastava,
Mrs. Rekha Pal Ii, Shreekant N. Terdol, Jagat Arora, Rajat Arora, Raj iv Nanda,
Pratap Venugopal, P.S. Sudhir, K.J. John & Co., Ajay Kumar Jain, Ms. F
Nitika Pal, Suruchi Agarwal for the appearing parties.
The Judgment of the Court was delivered by
G.P. MATHUR, J. The issue raised in these Transfer Petitions is
regarding revision of pay scale of officers of Fertilizer Corporation of India G
and Hindustan Fertilizer Corporation and, therefore, they are being disposed
of by a common order. For the sake of convenience, we will refer to the
pleadings in Transfer Case No. 8 of :woo whereby Writ Petition No. 2 I 08 of
1996 which was tiled in Delhi High Comt was transferred to this Court.
A.K. Bindal, President. Federation of Officers' Association ofFe1tilizer H
934
SUPREME COURT REPORTS
120031 3 S.C.R.
A Corporation of India (for short 'FCI") and Dr. K.P. Sinh'a, authorised
representative of Federation of Officers' Association of Hindustan Fe11ilizer
Corporation Ltd. (for short 'HFC') filed Writ Petition No. 2018 of 1996 in
Delhi High Court praying that Clauses 11, 12 and 13 of the Memorandum
dated 19.7.1995 issued by Government of India, Ministry of Industry,
Department of Public Enterprises and connected clauses, of Annexes V of the
B said Memorandum be quashed and consequently the practice of uniform
treatment of the officers in the profit and loss making companies in the FCI/
HFC be revived. The other prayer made is that the respondents be directed
to pay to the petitioners by way of interim relief at least 60% of the benefit
of the revision of pay and perks which their counterparts have been given,
C pending final decision of the Writ Petition. The respondent arrayed in the
Writ Petition are (I) The Union of India through the Secretary, Department
of Fertilizers, in the Ministry of Chemicals & Fertilizers, (2) The Secretary,
Department of Public Enterprises, Ministry of Industry, Government of India:
(3) The Fertilizer Corporation of India Ltd; and (4) Hindustan Fertilizers
Corporation of India Ltd. The pleadings of the parties are fairly long and the
D documents filed are bulky but we will refer only to basic facts which are
necessary for the decision of the controversy.
In January, 1961 two Fertilizer companies, namely Sindri Fertil·izers
and Chemicals Ltd. and Hindustan Fertilizer and Chemicals Ltd. were merged
E and a new company named as Fertilizer Corporation of India Ltd. (for short
'FCI') was created. Between 1961 and 1977, FCI came to have 17 Fctilizer
Units. 7 of which were in operation while remaining 10 were at various
stages of implementation. In 1978 the Government of India set up a Committee
to work out the modalities for reorganisation of its Fertilizer Industry. On the
basis of the recommendation of the Committee, the Government of India
F approved the bifurcation and reorganization of FCI and National Fertilize1"
Ltd. (for short 'NFL') which was an independent and separate undertaking at
that time and allocated the various units to the newly created undertakings
which were five in number. Namrup, Haldia, Barauni and Durgapur units
were allocated to the newly formed Hindustan Fertilizer Corporation Ltd.
G (for short 'HFC') and Sindri, Gorakhpur, Ramagundam, Talcher, Korba and
Jodhpur Mining Organization were retained with FCI. The other units were
allocated to newly created Rashtriya Chemicals and Fenilizers Ltd. and
National Fertilizers Ltd. while a fifth company dealing exclusively with
planning and development was created which was known as Project and
Development (India) Ltd. After reorganization, the industrial pattern of pay
H and DA was introduced and it was made effective from 1.9.1997. The
-
..
A.K. BINDALv. U.0.1. [MATHUR, J.]
935
Department of Chemicals and Fertilizers, Government of India issued a circular A
on 3.9.1979 which provided that revision of pay scales and fringe benefits of
the officers of the entire FCl/NFL would be the same and consequently all
the officers in the five companies were treated alike with reference to revision
of their pay scales and fringe benefits etc. The revision of pay scales of
officers which was due from 1.8.1986 could not be given as the Govefument B
did not take steps in that regard. However a decision was taken by the
Government to give ad hoc relief to all the officers working in the Public
Enterprises, following the Industrial DA pattern and related scales of pay and
accordingly ad hoc relief was paid to all the officers of FCI and HFC with
effect from 1.1.1986 at uniform rate. Since the Government did not take any
decision regarding the revision of pay scales and perks of the officers of the C
entire public sector in the country, the Bureau of Public Enterprises (for short
'BPE') which is a policy making division of the Government of India,
recommended for payment of second relief to the officers of Public Enterprises
following the industrial DA pattern on 13.1.1990. Consequently FCl/NFL
issued circulars on 24.1.1990 for giving ad hoc relief to the officers. During
this period the Government of India and also the Management of FCI and D
HFC made no distinction on the basis of "loss making" or "profit making"
companies in the matter of revision of pay scale and fringe benefits to the
officers of the companies and they were treated alike irrespective of the fact
that the companies in which they were working had been making losses. The
period of validity of the revised pay scales made applicable from 1.1.1987 E
was for five years and thereafter the next revision of pay scales became due
from 1.1.1992 but the same was not done for the officers employed in FCI
and HFC on the ground that the two companies were incurring losses.
However, the other companies in erstwhile FCl/NFL group of companies
were given revised pay scale and fringe benefits with effect from 1.1.1992.
According to the petitioners an unfair and unjust policy of discrimination in F
the matter of revision of pay scales based upon profits and losses of the
company commenced at this stage. Thereafter the Department of Public
Enterprises, Ministry of Industry, Government of India issued an Office ·
Memorandum on 12.4.1993 on Wage Policy for the fifth round of wage
negotiations in Public Sector Enterprises (for short 'PSEs') whereby the ban G
imposed by D.O. No.2(3)/91-DPE (WC) dated 17.10.1991 was withdrawn
and it was directed that the management of PSEs may commence their wage
negotiations with the Trade Unions/Associations. It fu1ther provided that under
the new Wage Policy the Managements were free to negotiate the wage
structure keeping in view and consistent with the generation of resources/
profits by the individual enterprises/units but the Government will not provide H
936
SUPREME COURT REPORTS
[2003) 3 S.C.R.
A any budgetary· support for the wage increase and the respective managements
will have to find the requisite resources from within their own internal
generation. Para 5 of this Office Memorandum specifically said that the wage
settlement should be negotiated by the PSEs in accordance with the above
parameters. This was followed by the impugned Office Memorandum dated
B 19.7.1995 issued by the Department of Public Enterprises on the subject of
revision of scales of pay of the Executives holding post below the Board
level and non-unionised supervisors with effect from 1.1.1992. The petitioners
are basically aggrieved by para 13 of this Office Memorandum which provides
that for sick PS Es registered with the Board for Industrial and Financial
Reconstruction (for short 'BIFR'), pay revision and grant of other benefits
C will be allowed only if it is decided to revive the unit and 1he revival package
should include the enhanced liability on this account.
The stand of the respondents in the counter-affidavit filed by them is
that FCI and HFC which were under the administrative control of Department
of Fertilizers (for short 'DOF') were referred to BIFR and were declared as
D sick companies on 6.11.1992 and 12.11.1992 respectively. Out of the four
units of FCI the unit at Gorakhpur was lying closed since 10.6.1990. The
commercial production in the Haldia unit of FCI which is located in West
Bengal did not commence at all ever since its mechanical ,completion in
1981. The equity base of both the companies had been totally eroded as a
E result of continues losses. The FCI and HFC had projected net losses of
Rs. 562.51 corers and Rs. 438.99 corers respectively for the year 1996-1997.
The BIFR had appointed Industrial Credit and lnv·estment Corporation of
India Ltd. (for short 'ICICI') as the Operating Agency in March 1994 to
examine various options and work out unit wise rehabilitation plans for these
companies. The ICICI submitted its report in January 1995 and thereafter, the
F matter was taken up by Group of Ministers which set up a Committee of
officers to evaluate all the available alternatives for revival of the companies.
The Department of Fertilizers, keeping in view ~he report of the Operating
Agency as well as suggestions received from various other bodies including
the employees unions/associations formulated revival packages. The package
G envisaged revamp of the functional units of these companies namely, Sindri,
Ramagundam and Talcher of FCI and Durgapur, Barauni and Namrup units
ofHFC at a total investment of Rs. 2201.13 crore (Rs. 1736.20 crore for FCI
and Rs. 464.93 crore for HFC) without providing for wage revision of the
employees. However, due to prior commitment of funds of Public Sector
Units/Cooperative Societies in the Fertilizer Sector for their ongoing expansion
H and reluctance of Financial Institutions to fund the revival packages of sick
-
...
A.K. BINDAL v. U.0.1. [MATHUR, J.]
937
PSUs, the funding arrangements for these packages could not be tied up. The A
ICJCJ also expressed serious reservation on the viability to these packages
necessitating a review of the same.
The details of the budgetary support given by the government since
1991-1992 till 1995-1996 have been given in para 12 of the counter-affidavit.
It is averred in para 14 of the counter-affidavit that in case the pay scales and B
other beneiits of the employees are directed to be revised with effect from
1.1.1992 it would involve additional financial implication of Rs. 120. corers
(Rs. 60 corers each for FCI and HFC) for the five year period. The revival
packages for both FCJ and HFC have not been approved for implementation
by the BIFR because the Operating Agency, the Department of Fertilizers C
and the Promoters have not been able to mobilize funds required for the
revival package. Pay revision of the employees will further add to the financial
requirements for the revival package, which is held up for want of funding.
It is also pleaded in the counter affidavit that the Government guidelines
do not prohibit BIFR referred companies from revising their pay scales and D
other benefits with effect from 1.1.1992 but has linked it with the basic issue
ofrevival packages of such companies. This revival package is to be approved
by the BIFR after it is agreed to by the Operating Agency and funding
institutions. It has thus been submitted that no decision .could be taken on
revision of pay scales of the employees of FCI and HFC as it is linked to the
revival packages being formulated for these companies for approval of BIFR.
The Office Memorandum dated 19.7.1995 has been issued with the approval
E
of the Cabinet Committee on Economic Affairs. The basic thrust of the
policy as contained in office memorandum dated 12.4.1993 is that PSUs
should generate their own resources for meeting the enhanced liability on
account of pay revision and no budgetary support shall be extended to them F
by the Government.
After transfer of writ petitions, this Court issued several directions to
BIFR to submit repmts regarding viability of the units of the companies. The
BIFR by its order dated 2.11.200 I recommended winding up of FCI. A
similar order for winding up of HFC has also been passed. The FCI preferred G
an appeal before AA!FR which has been dismissed. The Delhi High Court is
now proceeding with winding up of both the companies namely, FCI and
HFC.
Shri R.Venkataranmani, learned senior counsel for the petitioners, has
submitted that just as pension is not bounty or a matter of grace depending H
938
SUPREME COURT REPORTS
(2003] 3 S.C.R.
A u·pon the sweet will of the employer, so also, fair and reasonable return for
employment is neither a bounty nor a matter of grace. This is a right arising
out of the relationship of employment and in the determination of the same
particularly of the employer is the State, fair and reasonable criteria will have
to be adopted and to the extent a fair and reasonable return is denied on th1~
B sole ground of the need to take a decision regarding continued existence of
the establishment in question, the fundamental right of the petitionern
guaranteed under Article 14 and 2 I read with Article 39(a) and 43 of the
Constitution is violated. Learned counsel has submitted that the impugned
Office Memorandum is discriminatory in as much as PSUs which follow the
-Central Dearness Allowances pattern are getting the benefit of periodical pay
C revision regardless of the position of the undertaking, namely whether running
in losses or marking profits. The PS Us, such as the establishment in question,
which are governed by the Industrial Dearness Allowance pattern are singled
out and are denied periodical pay revision since I 992. It has been urged that
having regard to socio-economic objectives sought to be realized by the
establishment of the fertilizer industry in the public sector and the fact that
D the said industry has served the aforesaid purpose of production and
distribution of fertilizers at affordable prices and augmenting agricultural and
rural productivity, it was inappropriate on the part of the Government of
India to postpone the revision of pay from I 992 and to link it up in the year
1995 with the decision to refer the companies to BIFR. Learned counsel has
E further submitted that when it is not demonstrated that the incident of loss is
attributable to the conduct of employees or workers and when it is
acknowledged that several factors which could have been conveniently dealt
with to eliminate loss making condition (viz, old plants and obsolete
technology) and to do so was within the competence of the Government of
India, it will be gross injustice to the eniployees to deny their pay revision
F by relating it with profitability. Sickness of PSU without consideration of the
causes of sickness, it is urged, can be no ground for denial of fair pay
revision particularly when the Government of India has failed to take relevant
and efficient steps to promote the health of the industry.
G
In suppor1 of his submissions that financial capacity or otherwise can
be no ground for denying revision of wages of employees of the State or
PSUs, Shri Yenkataramani has placed strong reliance on South Malabar
Gramin Bank v. Coordination Commif/ee of South Malabar Gramin Bank
Employees' Union and South Malabar Gram in Bank Officers' Federation
and Ors., (2001] 4 SCC IOI and All India Regional Rural Bank Officers
H Federation and Ors. v. Government of India and Ors., (2002] 3 SCC 554.
A. K. BINDAL v. U.0.1. [MATHUR, J.]
939
Regarding the submission based upon violation of fundamental rights of the A
petitioners, learned counsel has laid great emphasis on the following
observations made by Sawant J. in Delhi Transport Corporation v. D. TC.
Mazdoor Congress, (1990] Supp I SCR 142 at pages 276 and 277 which read
as under:-
"The employment under the public undertakings is a public B
employment and a public property. It is not only the undertakings but
also the society which has a stake in their proper and efficient working.
Both discipline and devotion are necessary for efficacy. To ensure
both, the service conditions of those who work for them must be
encouraging, certain and secured, and not vague and whimsical. With C
capricious service condition, both discipline and devotion are
endangered and efficiency is impaired.
The right to life includes right to livelihood. The right to livelihood
therefore cannot hang on to the fancies of individuals in authority.
The employment is not a bounty from them nor can its survival be D
at their mercy. Income is the foundation of many fundamental rights
and when work is the sole source of income, the right to work becomes
as much fundamental. Fundamental rights can ill-afford to be
consigned to the limbo of undefined premises and uncertain
applications. That will be a mockery of them."
To strengthen his submission that the denial of fair wages on account
of non-revision of pay scale would violate the fundamental right of the
petitioners, learned counsel has also tried to take support from certain
observations made in All India Imams Organisation and Ors. v. Union of
India, (1993] 3 SCC 584 wherein it was held that Imams who perform religious
duties are also entitled to emoluments, as right to life, enshrined in Article
21 means right to live with human dignity and that financial difficulties of
the institutions cannot be above fundamental rights of a citizen. Another
serious contention raised by Shri Venkataramani is that the Union of India
E
F
had also agreed both in the meeting held on 20.9.1996 and also in the affidavit
filed before the Delhi High Court for a settlement regarding the revision of G
pay scales being implemented from 1.1.1992 but without payment of arrears
upto 1.1.1996. According to the learned counsel the High Court had passed
an order on 10.11.1997 recording the compromise and the matter was
adjourned only to work out the modalities of payment, but on account of
filing of Transfer Petition by the Union of India in this Court, the compromise
could not be implemented. However, taking note of the said compromise this H
940
SUPREME COURT REPORTS
[2003) 3 S.C.R.
A Court passed orders on 19.4.2000 and 18.8.2000 for payment of fixed amounts
to various categories of employees. The submission is that in view of the
compromise entered into by the respondents and the orders passed by Delhi
High Court and thereafter by this Court, it is not open to the respondents to
resile from the same and deny the benefit of revision of pay scale to the
B petitioners.
In order to appreciate the first submission, it s necessary to refer to the
two Office Memorandums which have been assailed in the writ petitions.
Para 2 of Office Memorandum No. I (3)/86-DPE (WC) dated 12.4.1993 issued
by Department of Public Enterprise, Ministry of Industry, Government of
C India which is relevant for our purposes is being reproduced below:
D
E
F
G
H
"Under the new wage policy, the Managements are free to
negotiate the wage structure keeping in view and consistent with the
generation of resources/profits by the individual enterprises/units. The
Government will not provide any budgetary support for the wage
increase and the respective managements will have to find the requisite
resources from within their own internal generation. For certain PSEs
which are monopolies or near monopolies or having an administered
price structure, it must be ensured that increase in wages after
negotiations do not result in an automatic increase in administered
prices of their goods and services."
The subject and paras 11 and 13 of Office Memorandum issued by the
same department on 19.7.1995 read as under:
"Subject: Revision of Scales of Pay of the Executives holding
posts below the Board level and non-unionised
supervisors w.e.f. 1.1.1992.
Para ll. The pay revision of the executives holding posts below the
Board level and non-unionised supervisors would be pennitted
subject to the conditions stipulated in the DPE's OM No. I (3)86DPE(WC) dated 12.4.1993 and 17 .1.1994. These conditions
prescribe that there shall be no increase in labour cost per physical
unit of output. The Government shall not provide any budgetary
support to the PSEs for meeting the enhanced liability. The PSEs
which are monoplies or near monoplies or having an administered
Price structure, it must be ensured that increase in salaries/wages
do not result in an automatic increase in administered prices of
f
A.K. BINDAL v. U.0.1. [MATHUR, J.]
941
their goods and services. Requisite resources for the pay increase A
must be found from within own internal generation.
Para I 3. For sick PS Es registered with the BIFR, pay revision and
grant of other benefit will be allowed only if it is decided to
revive the unit. The revival package should include the enhanced
liability on this account. The benefit of pay revision, etc. shall be B
extended to JJSCO and financial liability thereof shall be met by
SAIL."
The change in policy effected by these Memorandums was that the
Government would not provide any budgetary suppott for the wage increase
and the undertakings themselves will have to generate the resources to meet C
the additional expenditure, which will be incurred on account of increase in
wages. So far as sick enterprises which were registered with BIFR it was
directed that the revision in pay scale and other benefits would be allowed
only if it was actually decided to revive the industrial unit. The question
which arises for consideration is whether the employees of Public Sector D
Enterprises have any legal right to claim that though the industrial undertakings
or the companies in which they are working did not have the financial capacity
to grant revision in pay scale, yet the Government should give financial
support to meet the additional expenditure incurred in that regard.
The Fertilizer Corporation of India and Hindustan Fertilizers Corporation E
are both companies registered under the Companies Act with the only
difference that they are Government Companies within the meaning of Section
617 of the Companies Act. What will be the legal position of a Government
Company and whether its employees will be treated to be government servants
was examined in Heavy Engineering Mazdoor Union v. State of Bihar and
Ors., AIR (1970) SC 82 and it was held as under in para 4 of the reports. F
" ....... It is an undisputed fact that the company was incorporated under
the Companies Act and it is the company so incorporated which
carries on the undertaking. The undertaking, therefore, is not one
carried on directly by the Central Government or by any_ one of its
departments as in the case of posts and telegraphs or the G
railways .......... "
After referring to the well known decision in Soloman v. A. Salomon
& Co. Ltd. ( 1897) AC 22, Halsbury's Laws of England and some other
English decisions the Court ruled as under::
H
942
A
B
SUPREME COURT REPORTS
[2003] 3 S.C.R.
" ........... Therefore, the mere fact that the entire share capital of the
respondent-company was contributed by the Central Government and
I
the fact that all its shares are held by the President and certain officers
of the Central Government does not make any difference. The company
and the share holders being, as aforesaid, distinct entities the fact that
the President of India and certain officers hold all its shares does not
make the company an agent either of the President or the Central
Government. ........... "
Again in para 5 it was held that the fact that a minister appoints the
members or directors of a corporation and he is entitled to call for information,
C to give directions which are binding on the directors and to supervise over
the conduct of the business of the corporation does not render the corporation
an agent of the State.
The legal position is that identity of the Government Company remains
distinct from the government. The Government Company is not identified
D with the Union but has been placed under a special system of control and
conferred ce1tain privileges by virtue of the provisions contained in Sections
619 and 620 of the Companies Act. Merely because the entire share holding
is owned by the Central Government will not make the incorporated company
as Central Government. It is also equally well settled that the employees of
the Government Company are not civil servants and so are not entitled to the
E protection afforded by Article 311 of the Constitution Pyare Lal Sharma v.
Managing Director, AIR (1989) SC 1854. Since employees of G9vernment
Companies are not government servants they have absolutely no legal right
to claim that government should pay their salary or that they additional
expenditure incurred on account of revision of their pay scale should be met
F by the government. Being employees of the companies it is the responsibility
of the companies to pay them salary and if the company is sustaining losses
continuously over a period and does not have the financial capacity to revise
or enhance the pay scale, the petitioners cannot claim any legal right to ask
for a direction to the Central Government to meet the additional expenditure
which may be incurred on account of revision of pay scales. It appears that
G prior to issuance of the Office Memorandum dated 12.4.1993 the Government
had been providing the necessary funds for the management of Public Sector
Enterprises which had been incurring losses. After the change in economic
policy introduced in early nineties, Government took a decision that the
Public Sector Undertakings will have to generate their own resources to meet
H the aclditional expenditure incurred on account of increase in wages and that
A.K. BINDAL v. U.0.1. [MATHUR, J.]
943
the government will not provide any funds for the same. Such of the Public A
Sector Enterprises (Government Companies) which had become sick and had
been referred to BIFR, were obviously running on huge losses and did not
have their own resources to meet the financial liability which would have
been dated 19.7.1995 the Government merely reiterated its earlier stand and
issued a caution that till a decision was taken to revive the undertakings no B
revision in pay scale should be allowed. We, therefore do not find any infirmity
legal or constitutional in the two Office Memorandums which have been
challenged iri the writ petitions.
We are unable to accept the contention of Shri Venkatarmani that on
account of non-revision of pay scales of the petitioners in the year 1992, C
there has been any violation of their fundamental rights guaranteed under
Article 21 of the Constitution.