State of
Assam Vs. Barak Upatyaka D.U. Karmachari Sanstha [2009] INSC 544 (17 March 2009)
Judgment
Reportable
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.
6492 of 2002 State of Assam ........ Appellants Barak Upatyaka D.U.Karmachari
Sanstha ....... Respondent
R. V.
Raveendran J., This appeal by special leave is filed by the State of Assam
aggrieved by the order dated 14.6.2001 passed by the Division Bench of the
Gauhati High Court. By that order the Division Bench upheld the order dated
23.12.1999 of the learned Single Judge in Civil Rule No.2996/1995 allowing
respondent's writ petition and directing the state government to sanction
financial assistance by way of grant-in-aid to Cachar and Karimganj District
Milk Producers' Cooperative Union Limited (`CAMUL' for short) so as to enable
CAMUL to make regular payment of monthly salaries, allowances as also the arrears
to its employees.
2. CAMUL
is a society registered under the Assam Co-operative Societies Act, 1949 (`Act'
for short). Respondent, a Trade Union representing the workers of CAMUL, filed
the said writ petition (Civil Rule No.2996/1995) contending that the state
government formed and registered CAMUL as a co-operative society to run its
cattle development project; that its Board of Directors including the Managing
Director (always a government servant, on deputation) were appointed by the
state government; that the post of the Managing Director of CAMUL was declared
to be a post equivalent to a Head of Department under the state government;
that initially the entire staff of CAMUL were drawn on deputation from the
Veterinary, Agriculture & Co-operative Departments of the state government;
that in a phased manner, those employees were reverted back to their Parent
Departments and replaced by the staff appointed by CAMUL, through a Selection
Board set up by the state government with representatives from the Central
Government and National Dairy Development Board; that state government
sanctioned the staffing pattern of CAMUL; that from the year 1982-83 onwards
the Government was extending financial assistance by way of grants to CAMUL to
meet the expenditure (including the expenditure relating to its employees); and
that for the years 1994-95 though the state government had sanctioned financial
3 assistance in a sum of Rs. 7 lakhs as grant-in-aid, it was not disbursed and
consequently CAMUL did not pay the monthly salaries to its employees from
December 1994 onwards. It is contended that state government had all pervasive
control over the affairs and management of CAMUL and therefore it should be
treated as a department of government of Assam, though registered as a
co-operative society by lifting the corporate veil. It was further contended
that state government was responsible and liable to pay the salaries and
emoluments of the employees of CAMUL and it was not justified in withholding
the grant amount. The respondent union therefore sought a direction to the
state government to release the arrears of pay and allowances of employees of
CAMUL with effect from December 1994 and for a direction to continue to pay the
salary and allowances to the employees of CAMUL, every month in future. In
addition to the state government (respondent No.1) and its officers
(respondents 2 to 4), the Union of India (respondent No.5) and CAMUL and its
Managing Director (respondents 6 and 7) were impleaded as parties to the writ
petition.
3. The
state government opposed the petition. It inter alia contended that the
grant-in-aid was extended for helping CAMUL in its different development
activities; that under a centrally sponsored scheme, between 4 1981 to 1986,
the earmarked amount was released on 50:50 basis by central and state
government with 70% loan component and 30% as grant component; that though the
loan component was not repaid by CAMUL, the state government continued the
grant-in-aid for purposes of development activities; that the state government
had also provided Rs.43.60 lakhs for developing the milk-processing
infrastructure of CAMUL; that despite such assistance, CAMUL became defunct and
stopped all its activities and thereafter the Silchar Town Milk Supply Project
was being run by the state's dairy development department itself; that at no
time, the state government made any commitment or agreed to bear the salaries
of employees of CAMUL or any other similar societies; that CAMUL had to
generate its own funds and resources to pay the salaries of its staff; and that
as there was no relationship of employer and employee between the state
government and the employees of CAMUL, it was not responsible to bear or pay
any amount towards the salaries of the employees of CAMUL.
4. The
learned Single Judge allowed the writ petition. He held that the State
Government through its Veterinary Department undertook the Integrated Cattle
Development Projects (ICDP) in various districts of Assam; and as a part of the
said project, an ICDP block was created at Ghungoor, Silchar in Cachar
district; that 32 cooperative societies of Milk 5 Producers were established
and CAMUL was formed as an Apex Body of those co-operative societies; that the
Dairy Development Department of the state government had been providing
grant-in-aid earmarked in the state budget every year to CAMUL; that the state
government failed to offer any explanation or reason for stopping the
grant-in-aid from 1994; that the Dairy Development Project at Silchar was
purely a state government scheme and as that Project has not been discontinued
and as there was no decision to barring CAMUL from receiving grant-in-aid which
was being granted from 1982-83 till 1994, the state government could not deny
the grant-in-aid amount. Consequently, the learned Single Judge directed
release of the grand-in-aid for paying monthly salaries and allowances along
with arrears to the employees. The said order has been affirmed by the Division
Bench which is under challenge in this appeal by special leave. The only
question that arises for consideration is whether the High Court was justified
in directing the state government to release grants to CAMUL, so as to enable
CAMUL to pay the salary and other emoluments of its employees.
5. The
various averments of the respondent in the writ petition, about the all
pervasive financial, administrative and functional control of CAMUL by the
state government, even if assumed to be true, may at best result in CAMUL being
treated as `state' within the meaning of that expression 6 under Article 12 of
the Constitution of India. If it is a `state', in case of violation of any of
the fundamental rights of its employees, by CAMUL as employer, the employees
were entitled to claim relief against CAMUL, by taking recourse to a writ
petition under Article 226 of the Constitution of India. But the fact that a
corporate body or co-operative society answers the definition of `state' does
not make it the `state government', nor will the employees of such a body,
become holders of civil posts or employees of the state government. Therefore
the fact that the CAMUL may answer the definition of "state" does not
mean that the state government is liable to bear and pay the salaries of its employees.
CAMUL indisputably is a co- operative society registered under the provisions
of the Assam Cooperative Societies Act, 1949. Section 85 of the said Act
provides that every registered society shall be deemed to be a body corporate
by the name under which it is registered, with perpetual succession and a
common seal, and with power to hold property, to enter into contracts,
institute and defend suits and other legal proceedings and to do all things
necessary for the purposes for which it was constituted. Therefore, CAMUL, even
if it was `state' for purposes of Article 12, was an independent juristic
entity and could not have been identified with or treated as the state
government. In the view we have taken, it is not necessary in this case to
examine whether CAMUL was `state' for purposes of Article 12.
6.
Section 43 of the Act provides that notwithstanding anything contained in any
law for the time being in force, the State Government may grant loans or give
financial assistance in any form to any registered society.
Therefore,
the fact that the state government had given financial assistance in the form
of grant-in-aid to CAMUL continuously for some years, either to meet its
development activities or for even meeting the salaries, does not mean that
state government is responsible to bear and pay the salaries and emoluments of
the employees of CAMUL or other liabilities of CAMUL.
Nor can
the state government be made liable for extension of financial assistance for
all times to come, to cover the payment of salaries of employees of CAMUL. If
the salaries are not paid, the remedy of the employees of CAMUL is to proceed
against CAMUL, in accordance with law, by approaching the forum under the
appropriate labour legislation or the Co-operative Societies Act. But a trade
union representing the employees of a co-operative society cannot, by filing a
writ petition, require the Government to bear and pay the salaries of the
employees of the co- operative society, howsoever pervasive, the control of the
state government, over such society. Nor is any right created to demand the
continuance of financial assistance to a co-operative society, on the ground
that such assistance has been extended by the government, for several years.
The 8 respondent has not been able to show any right in the employees of CAMUL
against the state government, or any obligation on the part of the state
government with reference to the salaries/emoluments of employees of CAMUL
either under any statute or contract or otherwise.
7. The
learned counsel for the respondent contended that the same issue arose for
consideration in Kapila Hingorani v. State of Bihar reported in 2003 (6) SCC 1
(for short `Kapila Hingorani I') and the issue has been answered in their
favour. Reference is invited to the following question, which was set down as
one of the questions arising for consideration in that case:
Whether
having regard to the admitted position that the government companies or
corporations referred to hereinbefore are `State' within the meaning of Article
12 of the Constitution of India, the State of Bihar having deep and pervasive
control over the affairs thereof, can be held to be liable to render all
assistance to the said companies so as to fulfil its own and/or the
corporations' obligations to comply with the citizens' rights under Article 21
and 23 of the Constitution of India? Reference is also invited to the following
observations of this Court in considering the said question :
"30.
The government companies/public sector undertakings being "States"
would be
constitutionally liable to respect life and liberty of all persons in terms of
Article 21 of the Constitution of India. They, therefore, must do so in cases
of their own employees. The Government of the State of Bihar for all intent and
purport is the sole shareholder. Although in law, its liability towards the
creditors of the company may be confined to the shares held by it but having
regard to the deep and pervasive control it exercises over the government
companies, in the matter of enforcement of human rights and/or rights of the
citizen to life and liberty, the State has 9 also an additional duty to see
that the rights of employees of such corporations are not infringed.
31. The
right to exercise deep and pervasive control would in its turn make the
Government of Bihar liable to see that the life and liberty clause in respect
of the employees is fully safeguarded. The Government of the State of Bihar,
thus, had a constitutional obligation to protect the life and liberty of the
employees of the government-owned companies/corporations who are the citizens
of India. It had an additional liability having regard to its right of
extensive supervision over the affairs of the company.
33. The
State having regard to its right of supervision and/or deep and pervasive
control, cannot be permitted to say that it did not know the actual state of
affairs of the State Government undertakings and/or it was kept in the dark
that the salaries of their employees had not been paid for years leading to
starvation death and/or commission of suicide by a large number of employees.
Concept of accountability arises out of the power conferred on an authority.
34. The
state may not be liable in relation to the day-to-day functioning of the
companies, but its liability would arise on its failure to perform the
constitutional duties and functions by the public sector undertakings, as in
relation thereto lie the State's constitutional obligations. The State acts in
a fiduciary capacity. The failure on the part of the state in a case of this
nature must also be viewed from the angle that the statutory authorities have
failed and/or neglected to enforce the social-welfare legislations enacted in
this behalf e.g. Payment of Wages Act, Minimum Wages Act etc. Such welfare
activities as adumbrated in part IV of the Constitution of India indisputably
would cast a duty upon the state being a welfare state and its statutory
authorities to do all things which they are statutorily obligated to
perform."
Reference
is invited to the fact that this Court directed the Bihar government to release
Rs.50 crores and deposit it with the High Court for disbursing salaries of
employees of government corporations/companies.
The
contention of respondent is that the direction of the High Court, is in
consonance with the said view.
8. The
learned counsel for the respondent also relied upon the following observations
in Kapila Hingorani vs. State of Bihar - 2005 (2) SCC 262 (for short `Kapila
Hingorani II') :
"26.
We, therefore, do not appreciate the stand taken by the State of Bihar now that
it does not have any constitutional obligation towards a section of citizens
viz. the employees of the public sector undertakings who have not been paid
salaries for years.
27. We
also do not appreciate the submissions made on behalf of the State of Bihar
that the directions issued were only one-time direction. In clause 4 of the
directions, it was clearly stated that the State for the present shall deposit
a sum of Rs. 50 crores before the High Court for disbursement of salaries to
the employees of the corporations.
Furthermore,
the matter had been directed to be placed again after six months."
This
Court also issued further interim directions to State of Bihar to deposit a
further sum of Rs.50 crores and State of Jharkhand to deposit a sum of Rs.25
crores to meet the arrears of salaries of Public Sector undertakings.
9. We
have carefully examined the said two decisions. The two decisions are interim
orders made in a writ petition under Article 32 of the Constitution. The said
orders have not finally decided the issues/questions raised, nor laid down by
any principle of law. The observations extracted above as also other
observations and directions are purely tentative as will be evident from the
following observations in Kapila Hingorani (I) :
"We,
however hasten to add that we do not intend to lay down a law, as at present
advised, that the State id directly or vicariously liable to pay 11
salaries/remunerations of the employees of the public sector undertakings or
the government companies in all situations.
We, as
explained hereinbefore, only say that the state cannot escape its liability
when a human rights problem of such magnitude involving the starvation deaths
and/or suicide by the employees has taken place by reason of non-payment of
salary to the employees of public sector undertakings for such a long time.
This
order shall be subject to any order that may be passed subsequently or
finally."
The
position is further made clear in Kapila Hingorani (II) as under :
"We
make it clear that we have not issued the aforementioned directions to the
States of Bihar and Jharkahand on the premise that they are bound to pay the
salaries of the employees of the public sector undertakings but on the ground
that the employees have a human right as also a fundamental right under Article
21 which the states are bound to protect. The directions, which have been
issued by this Court on 9.5.2003 as also which are being issued herein, are in
furtherance of the human and fundamental rights of the employees concerned and
not by way of an enforcement of their legal right to arrears of salaries. The
amount of salary payable to the employees or workmen concerned would
undoubtedly be adjudicated upon in the proper proceedings. However, these
directions are issued which are necessary for their survival."
It is
thus clear that directions were not based on legal right of the employees, but
were made to meet a human right problem involving starvation deaths and
suicides. But in the case on hand, relief is claimed and granted by proceeding
on the basis that the employees of corporations/bodies answering the definition
of `state' have a legal right to get their salaries from the state government.
In fact Kapila Hingorani (I) and (II) specifically negative such a right.
10. A
precedent is a judicial decision containing a principle, which forms an
authoritative element termed as ratio decidendi. An interim order which does
not finally and conclusively decide an issue cannot be a precedent.
Any
reasons assigned in support of such non-final interim order containing prima
facie findings, are only tentative. Any interim directions issued on the basis
of such prima facie findings are temporary arrangements to preserve the status
quo till the matter is finally decided, to ensure that the matter does not
become either infructuous or a fait accompli before the final hearing. The
observations and directions in Kapil Hingorani (I) and (II) being interim directions
based on tentative reasons, restricted to the peculiar facts of that case
involving an extraordinary situation of human rights violation resulting in
starvation deaths and suicides by reason of non- payment of salaries to the
employees of a large number of public sector undertakings for several years,
have no value as precedents. The interim directions were also clearly in
exercise of extra-ordinary power under Article 142 of the Constitution. It is
not possible to read such tentative reasons, as final conclusions, as contended
by the respondent. If those observations are taken to be a final decision, it
may lead to every disadvantaged group or every citizen or every unemployed
person, facing extreme hardship, approaching this Court or the High Court alleging
human 13 right violations and seeking a mandamus requiring the state, to
provide him or them an allowance for meeting food, shelter, clothing, salary,
medical treatment, and education, if not more. Surely that was not the
intention of Kapila Hingorani (I) and (II).
11. What
clearly holds the field at present is the principle laid down and reiterated by
the Constitution bench of this Court in Steel Authority of India v. National
Union Waterfront Workers 2001 (7) SCC 1 wherein this Court categorically held :
" We
wish to clear the air that the principle, while discharging public functions
and duties the government companies/corporations/societies which are
instrumentalities or agencies of the government must be subjected to the same
limitations in the field of public law - constitutional or administrative law -
as the government itself, does not lead to the inference that they become
agents of the Centre/state government for all purposes so as to bind such
government for all their acts, liabilities and obligations under various
Central and/or State Acts or under private law."
[emphasis
supplied]
12. We,
therefore, reject the interpretation put forth by the respondent, on the
tentative observations in Kapila Hingorani(I) and (II), to contend that the government
would be liable for payment of salaries and other dues of employees of the
public sector undertakings. We are of the considered view that the decision of
the High Court cannot therefore be sustained.
13. We,
accordingly allow this appeal, set aside the orders of the Division Bench and
the learned Single Judge of the High Court and dismiss the writ petition
without prejudice to the right of the employees of CAMUL to take such action as
is available in law for redressal of their grievances. We may also add that
this decision will not come in the way of state government formulating any
scheme or extending any relief or benefit to the employees of CAMUL or other
similarly situated persons.
..................................J [R. V. Raveendran]
...................................J [Markandey Katju]
New Delhi.
March 17, 2009.
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