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Report No. 145

5.4. Impact on management.-

Another 'contention that has been advanced with some emphasis, is the impact on management of the present wide interpretation of Article 12 of the Constitution. We would like to quote in this context from an article published some time ago.1 After pointing out that the present position has been mainly invoked by employees of the undertakings or persons having commercial dealings with them as contractors or in some other capacity, the article makes the following point:-

"As mentioned earlier, the characterisation of public enterprises as "State" is essentially in relation of fundamental rights and the provisions for writs. Who invokes these vis-a-vis public enterprises? Not the general public, but mainly the employees of public enterprises and others who are in a contractual or potentially contractual relationship with public enterprise.

An aggrieved employee of a private sector company can go to court on the basis of his contract of appointment; similarly, an aggrieved contractor of a private sector firm can go to court on the basis of the terms of his contract, and a bidder for pre-qualification for tendering for a major contract can go to court if the conditions laid down in the notice inviting bids for pre-qualification have not been adhered to.

None of them can invoke fundamental rights or the provisions for writs; but an aggrieved employee or tenderer or supplier in the case of public enterprise can file a writ petition. This is the precise implication regarding public enterprises as 'State' and leads to a crucial differentiation between public enterprises and private sector.

In the practice of management the selection of good personnel and their advancement or non-advancement on the basis of merit are among the most crucial elements. Similarly, the selection of good agents or suppliers or consultants or contractors is crucial to the success of a business. In Government, all these become acts of State patronage, and consequently, issues of fairness, non-discrimination, natural justice, and so on, become far more important than suitability and efficiency. Strangely enough, an essentially managerial act such as the framing of job specifications becomes in Government virtually a legislative act; all 'recruitment rules' are considered to be acts of subordinate legislation.

Government employees can go to court on matters such as being called for interviews for appointments, the actual selection for appointment or promotion, seniority, the determination of pay, disciplinary matters, and so on. The excessive protection given to Government servants and the extensive legal recourse to them are among the major factors affecting the efficiency of Governmental functioning. Whatever the merits of such protection in the case of Government employees, the consequences of the ruling that public enterprises are 'State' is that this entire approach and attitude gets extended to them.

In their case, as in Government, the framing of job specifications and 'recruitment rules' become virtually acts of subordinate legislation; and questions of fairness and discrimination tend to over-shadow considerations of merit and efficiency. Questions of uniformity and non-discrimination also loom large in the context of contracts and purchases.

The managements of public enterprises are thus obliged to worry more about procedural correctness and defensibility in a court of law than about making the most expeditious, efficient and economic choice. This weakens the managements of public enterprises and renders commercial and enterprises like behaviour extraordinarily difficult. In effect, this alters their nature as business ventures and handicaps them in the practice of management."

1. Ramswamy R. Iyer Enterprises as State and Article 12, (25th august, 1990), Economic and Political Weekly, (pp. to M134, p. M132)

Article 12 of the Constitution and Public Sector Undertakings Back

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