Balco Employee’s Union V. Union of India

BALCO Employee’s Union v. Union of India – Significance in Administrative Law. BALCO Employee’s Union v. Union of India – Significance in Administrative Law I. INTRODUCTION………………………………………………………………………………. 02 II. A BRIEF DESCRIPTION OF THE FACTS …………………………………………….. 03 III. A CRITICAL ANALYSIS OF THE DECISION……………………………………….. 05 IV. IMPLICATIONS THAT FOLLOWED THE JUDGMENT …………………………. 08 V.

CONCLUSION……………………………………………………………………………………. 09 I. INTRODUCTION Administrative decision making has been a subject of great discussion since long. The application of a mind, which is in not a strict sense judicial, the presence of arbitral preferences coupled with the fact of discretion allowed to the executive in decision making, more often than not, carries the impression of whims and caprices being involved while such decision has been taken.

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When the Government is satisfied, based upon the material considered and issues involved, that a given decision is appropriate for a circumstances, it may equivocally be true that it may not satisfy each and every individual concerned with the similar set of issues and therefore there may arise a conflict. History is full of examples and is enriching day by day of the instances in which executive decisions have been challenged on grounds of they being arbitrary, suffering from mala fide, based on non-satisfactory grounds, irrational, to name a few of them.

The study of one such instance forms the essence of this paper. The decision of the Government of India to disinvest M/s Bharat Aluminum Company Limited, popularly known as BALCO was challenged by the employees of BALCO , State of Chattisgarh and by some public spirited individuals before various High Court and finally before the Supreme Court . It was challenged that the decision to disinvest BALCO was contrary to the legal and social interests of the employees as well as certain other legal issues were raised by different parties .

The present study is to analyse the judgment of the Supreme Court in the instant case with a critical angle and also trace its legal impact with a special focus on the impact it has made upon Administrative law. To introduce the case, it would be advisable to dwell in the broad frame the case dealt with rather than to deal with the precise facts and issues. To categorize, the case dealt with a challenge to the administrative power of the Government on the matter of disinvestment of its stake in a government company as regards the procedure followed while so deciding and also the provisions that needs to be examined while deciding the issue.

On a broader level, an administrative policy was under a challenge before the Court. The precise impact that this decision, therefore, had was on the level of administrative discretion that the executive enjoyed in the selection of and following of a policy which had a vital impact on the economic position of the country . Nevertheless, the answer of the Supreme Court has been affirmative and it was categorical in mentioning that unless the policy adopted by the government suffered from the vires of illegality or malafide .

Not stopping at this, the Court also gave a substantive reflection on the aspect of natural rights and their applicability as regards the choice of administrative policy . For a detailed analysis and to have a diverse perspective, the study has been divided into different chapters which deal with a host of issues involved in the case and for having a varied dimension. II. A BRIEF DESCRIPTION OF THE FACTS OF THE CASE The case arose to challenge the validity of the decision of the Union of India to disinvest and transfer 51% shares of M/s Bharat Aluminum Company Limited (hereinafter referred to as ‘BALCO’).

The case was filed by way of a writ petition by the BALCO Employees’ Union by filing Writ Petition No. 2249 of 1999 in the High Court of Delhi when upon the recommendation of the Disinvestment Commission, the Cabinet Committee on Disinvestment approved the sale of 51% of the shares of BALCO to private ownership and thus reducing the status of the company from a Government Company to a private enterprise . Further, upon the same issue, a Public Interest Litigation (PIL) was filed by one Dr. B. L. Wadhera in the Delhi High Court and similarly writ petition filed by Mr.

Samund Singh Kanwar in the High Court of Chattisgarh wherein different steps of the disinvestment procedure were challenged. With the filing of the writ petitions in the High Court of Delhi and in the High Court of Chattisgarh, an application for transfer of the petitions was filed by the Union of India in the Supreme Court and by Order dated 9thApril, 2001, the writ petitions which were pending in the High Court of Delhi and Chattisgarh were transferred to the Supreme Court . CONTENTION OF THE PARTIES (A) On behalf of the BALCO Employees’ Union.

Before disinvestment, the entire paid-up capital of BALCO was owned and controlled by the Government of India and its administrative control co-vested in the Ministry of Mines. BALCO was, therefore, a State within the meaning of Article 12 of the Constitution . Therefore, by the reason of disinvestment the workmen had lost their right and protection under Articles 14 and 16 of the Constitution. This was an adverse civil consequence and, therefore, they had a right to be heard before and during the process of disinvestment .

The type of consultation with the workmen which was necessary was, whether BALCO should go through the process of disinvestment; who should be the strategic partner; and how should the bid of the strategic partner be evaluated. It was further submitted that the workmen had reason to believe that apart from the sale of 51% of the shares in favour of Sterlite Industries the Agreement postulated that balance 49% will also be sold to them with the result that when normally in such cases 5% of the shares are disinvested in favour of the employees the same would not happen in the present case . B) On behalf of the Union of India It was submitted that disinvestment had become imperative both in the case of Centre and the States primarily for three reasons: a. Firstly, despite every effort the rate of returns of governmental enterprises had been woefully low, excluding the sectors in which government have a monopoly and for which they can, therefore, charge any price. The rate of return on central enterprises came to minus 4% while the cost at which the government borrows money is at the rate of 10 to 11%.

In the States out of 946 State level enterprises, above 241 were not working at all; about 551 were making losses and 100 were reported not to be submitting their accounts at all . b. Secondly, neither the Centre nor the States have resources to sustain enterprises that are not able to stand on their own in the new environment of intense competition . c. Thirdly, despite repeated efforts it was not possible to change the work culture of governmental enterprises .

As a result, even the strongest among them have been sinking into increasing difficulties as the environment is more and more competitive and technological change has become faster. Further it was submitted that the wisdom and advisability of economic policies of Government are not amenable to judicial review . It was not for Courts to consider the relative merits of different economic policies. Court was not the forum for resolving the conflicting clauses regarding the wisdom or advisability of policy.

III. A CRITICAL ANALYSIS OF THE DECISION Besides the dispute that arose between the employees and the Government of India, the major controversy that arose as regards the Union’s decision to disinvest was on political lines. It was an accusation by the state Chief Minister that there were irregularities committed by the Union in coming up to disinvestment decision as well as the decisions suffered from arbitrary exercise of power and malafide .

Another important factor which can be observed from a careful reading of the decision is that though the case was primarily to challenge the policy of disinvestment as being adopted and followed by the Union of India, the matter, as decided by the Supreme Court, revolved primarily around the rights of the employees and their consequent protection after BALCO had actually been disinvested . The Court declined to review the policy decision of the Union Government on the adoption of a policy of disinvestment though in fact it was tried to be justified on behalf of the Union as reflected from the submissions of the Attorney General .

Thus it can be said that the Court actually did not, at any stage, examine the correctness of the disinvestment policy for India. The Court tried to evade deciding upon this issue and thus giving it a name of administrative policy, it was approved. It is also important to note while laying down the decision the significance of the judgment far transcended the specifics of the BALCO transaction as it enunciates far-reaching principles that will influence the tenor of jurisprudence on economic affairs for long.

The most pertinent example is of the case of Centre for Public Interest Litigation v. Union of India wherein the disinvestment of Hindustan Petroleum Company Limited (HPCL) and Bharat Petroleum Company Limited (BPCL) was approved on the grounds that since the disinvestment of BALCO was already allowed therefore there is no case made out whereby it could be proved unsuited to the Indian context though, in reality the process of disinvestment was never in fact approved in the BALCO case based upon the merits of the case .

It is important to note that in the specific case of the alleged malfeasance in the case of BALCO, the Court categorically stated that “the facts herein show that fair, just and equitable procedure has been followed in carrying out this disinvestment. The allegations of lack of transparency or that the decision was taken in a hurry, or that there has been an arbitrary exercise of power are without any basis. It is a matter of regret that on behalf of the State of Chattisgarh such allegations against the Union of India have been made without any basis.

We strongly deprecate such unfounded averments which have been made by an officer of the said State. ” Thus the judgment was not simply a strong rebuke to the credibility of the Chief Minister Mr. Ajit Jogi, it also served to forestall further challenges by state governments on the federal government’s prerogatives on privatization . Also, the Court circumscribed the extent to which matters of economic policy and disinvestment in particular, and consequently matters of policy, shall be scrutinized by courts .

The Court was categorical in stating that ‘‘it is neither within the domain of the Courts nor the scope of judicial review to embark upon an enquiry as to whether a particular policy is wise or whether a better public policy can be evolved. Nor are our Courts inclined to strike down a particular policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical. Parliament is the proper forum for questioning such policy. Thus the Court held that such disputes were beyond the realm of judicial determination and were left to the legislature to have circumspection over such executive policies. Also, aware of the economic costs of the plant closure as a result of the judicial intervention, the Court for the first time declared that, ‘‘No ex parte relief by way of injunction or stay especially with respect to public projects and schemes or economic policies or schemes should be granted.

It is only when the Court is satisfied for good and valid reasons that there will be irreparable and irretrievable damage can an injunction be issued after hearing all the parties. ’’ As a sort of warning, the Court sought to deprecate the excessive use of PILs as a medium to thrash government policies which were prima facie genuine and correct. It thus added, “the Petitioner should be put on appropriate terms such as providing an indemnity or an adequate undertaking to make good the loss or damage in the event the PIL is dismissed. ’ It categorically held that ‘‘every matter of public interest or curiosity cannot be the subject matter of PIL. Courts are not intended to and nor should they conduct the administration of the country. Courts will interfere only if there is a clear violation of Constitutional or statutory provisions or noncompliance by the State with its Constitutional or statutory duties. ’ In regard to disinvestment specifically, it held, ‘‘The decision to disinvest and the implementation thereof is purely an administrative decision relating to the economic policy of the State and challenge to the same at the instance of a busybody cannot fall within the parameters of Public Interest Litigation. ’’ The Court also specified the contours of the rights of labour when policy changes were affected, for instance when the Government disinvests its equity in an enterprise.

While holding that in the BALCO disinvestment case, the Government had exerted itself to protect the interests of employees of the company, more generally it was open for the Government, like any other employer, to take workers along, to keep them informed about prospective changes and to allay their apprehensions but, labour could not claim a right, either on the basis of natural justice or any other foundation, to be consulted, or the right to receive prior notice, or to be consulted at every stage of the process .

The Court also specially held that ‘‘even a government servant, having the protection of not only Articles 14 and 16 of the Constitution but also of Article 311, had no absolute right to remain in service’’ and therefore the decision to change the control of the company from government to private hands was the sole prerogative of the government and could not be challenged by the employees. IV. IMPLICATIONS THAT FOLLOWED THE JUDGMENT It is true that the decision given by the Court in the BALCO case was based upon a sound appreciation of arguments, yet there are many implications which may follow pursuant to the decision.

The major emphasis is on the policy of disinvestment. Though the Court did not go into the merits of the disinvestment policy per se yet, it did silently approve the policy to be followed by the Union . Thus the court supported the revival of the national economic with the support of private lines. The earlier policy of socialist economy, as upon which the Constitution was based and is as well enshrined in the Preamble, read with the State’s duty to avoid concentration of wealth in private hands as envisaged under the Directive Principles was not considered an appropriate solution for meeting the present day need i. . boosting the national economic growth . The observations of the Court on the aspect of natural justice may have been insignificant in terms of words spoken on it or portion of the judgment dealing with it yet; the impact which it has created is enormous. The Court held that the principles of natural justice did not apply even in case the rights of the employees were affected as regards the change of their employer . They were not even given an opportunity to be heard and this was the sole bone of contention.

For the very reason that Sterlite industries (the buyer) had given an undertaking that no employee of BALCO would be removed and the government had taken sufficient steps towards the protection of the employees, they had no reason to be heard. Employees, being connected with the manufacturing and other process in a much closer manner than any other body had, at least, the minimum right to put their views before the Court. Thus the participation of employees in the betterment of their organisation at the Board level was also discouraged.

An important fact that may have evaded the critics was the method of computation of BALCO’s capital. Of the three different methods, the accounting method adopted for arriving at the reserve price for the sale of BALCO was the one with the lowest result . It was never questioned by the Court. Thus it can be used in later cases before the Court that the method adopted by the Government is beyond judicial review too as it falls within the ambit of administrative discretion too . It may seem to be a remote issue nevertheless may be raised in the Courts.

Further, the Court never did accept or uphold that disinvestment as a policy per se was a good policy to be implemented in the pursuance of national economic growth. Yet it was so stated in the later case wherein the disinvestment of HPCL and BPCL was challenged and it was contended by the Union of India that the policy of disinvestment was upheld by the Supreme Court in the BALCO case . These are some of the implications that may arise pursuant to the decision of the Supreme Court in the matter of the BALCO disinvestment process, as being conceived by the researcher.

V. CONCLUSION The Supreme Court, in the celebrated case of Ram Jawaya Kapoor v. State of Punjab, observed thus, “the executive function comprises both the determination of policy as well as carrying into execution. The evidently includes the initiation of legislation, the maintenance of order, the promotion of social and economic welfare, the direction of foreign policy, in fact the carrying on or supervision of the general administration of the State” . Thus we find that the determination of policy has always been within the domain of the Executive.

Therefore there remains no doubt that the government had the power to decide as to the adoption of a policy of disinvestment. It is this very precise reason that the same could not have been challenged successfully before the Court. Thus, it was challenged indirectly by taking the stand that such a policy would under the legal and constitutional rights of the employees of BALCO . Thus we find that the litigation, the reason for challenge and the motive behind such a challenge were flawed from its very beginning. The success of the petition was, therefore, never guaranteed.

The main reason seems more of so political rather than legal, which initiated the present litigation. Nevertheless the Court was categorical in dealing with the issues. It laid to rest its critics while also issuing a stern warning that Public Interest Litigation should not be used as a means to invalidate policy decisions of government which in ordinary course were beyond judicial review. The Court also severely deprecated the action of the State officials who accused the Union Government of malafide and abuse without stating firm grounds for the same.

On the aspect of the impact that the decision has created on administrative law, it can be said that it was not much except for the fact that it reiterated certain fundamental principles which had already been incorporated in the Indian legal stream. The fact of the administrative discretion and power to adopt and implement policy decisions being beyond the scope of judicial review unless it suffered from illegalities or malafide was upheld .

Further the Court upheld that there was no violation of principles of natural justice by non-hearing of the employees in the entire disinvestment process as it was purely a matter of administrative choice wherein the employees had no stake. It may be hard to adjust but seems to be a sound legal principle indeed. After all the rights of the employees were protected under different labour and industrial legislations no matter who the employer was. Thus accepting the fact that they had an interest in the management of the company yet, it was not incumbent or essential to take their views before deciding the entire process.

The silent approval of the disinvestment process by the Apex Court also symbolizes the fact that the Court also feels it in the interest of national interests and the economy on the whole. This the Court expounded in a later case when it approved the sale of HPCL and BPCL on similar lines as BALCO. Thus, on a whole, though the case may failed to give any novel concept, yet it is landmark of its own kind. It was an attempt on the part of the Court to define its own limits on judicial review. It also stretched the scope for the exercise of administrative powers in making policy decision. REFERENCES

ARTICLES: 1. Devesh Kapur and Ravi Ramamurti, Privatization in India: The Imperatives and Consequences of Gradualism, (Center For Research On Economic Development And Policy Reform, 2003, Last visited on September 7th, 2011). 2. Presentation on Disinvestment, as presented by the Union of India at the OECD CONFERENCE on Privatisation, Employment and Employees, 10-11 OCTOBER 2002, Turkey, Last visited on September 7th, 2011). 3. Shankar Acharya, India’s Macroeconomic Management In The Nineties, (As Prepared For Indian Council For Research On International Economic Relations, 2001, ; http://www. crier. org/; Last visited on September 7th, 2011). 4. T. N. Srinivasan, Economic Reforms and Global Integration, (Policy Paper, as presented to Center for Research on Economic Development and Policy Reform, Stanford University, 2001). 5. V. Sridhar, Battle over Balco, (The Frontline, Volume 18 – Issue 06, Mar. 17 – 30, 2001, Last visited on September 7th, 2011). BOOKS: 1. Jain & Jain, Principles of Administrative Law, (Wadhwa & Co. , Nagpur, 4th edition, 2003). 2. I. P. Messy, Principles of Adminstrative Law, (Eastern Book Company, Lucknow, 2003).

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