2003 Supreme(SC) 858

2003(4) Supreme 1
SUPREME COURT OF INDIA
(Under Art. 32 of the Constitution of India)
V.N. Khare, CJI., S.B. Sinha, J.
Kapila Hingorani -Petitioner
versus
State of Bihar -Respondent
Writ Petition (C) No. 488 of 2002
Decided on 9-5-2003
Counsel for the Parties :
For the Appearing Parties : Soli J. Sorabjee, Attorney General, P.S. Mishra, Shanti Bhushan, Rakesh Dwivedi, Amarendra Sharan, Sr. Advocates, Tathagat Harsh Vardhan, Vishnu Sharma, Ms. Swarupa Reddy, Aman Hingorani, Ms. Priya Hingorani, Ms. Kapila Hingorani, B.B. Singh, Saket Singh, Prateek Jalan, Ms. Sushma Suri, Amit Kumar, M.P. Jha, Ram Ekbal Roy, Anil K. Chopra, Advocates.
For the Petitioner : In person.

IMPORTANT POINT
The State of Bihar cannot escape its liability when a human rights problem of such magnitude involving the starvation deaths and/or suicide by the employees of Government Companies/public sector undertakings has taken place by reason of non-payment of their salary for a long time.

Headnote:Constitution of India-Articles 21 and 32-Non payment of salaries for a long time to employees of State owned corporations, public sector undertakings or statutory bodies in State of Bihar-Death of several employees due to starvation-Self immolations-Incident widely reported in newspapers-Acute financial crisis-Employees have not been paid their salaries for a long time, in some cases for a decade or more-Whether State of Bihar can escape its liability having regard to human rights problem involved in the matter-(No)-Whether liability of State of Bihar can be shifted to Union of India-(No)-Interim directions issued-Financial stringency may not be a ground for not issuing direction when a question of violation of FRs arises.

       Held : The court in a situation of this nature is obligated to issue necessary directions to mitigate the extreme hardship of the employees involving violation of human rights of the citizens of India at the hands of the State of Bihar and the government companies and corporations fully owned or controlled by it. A right to carry on business is subject to compliance of constitutional obligations as also limitations provided for in the Constitution. Financial stringency may not be a ground for not issuing requisite directions when a question of violation of fundamental right arises. This Court has been highlighting this aspect in the matters concerning fundamental rights and maintenance of ecology. (Paras 63 and 64)

       The State, thus, has made itself liable to mitigate the sufferings of the employees of the public sector undertakings or the government companies. While passing an interim order, however, it is our duty to take into consideration the immediate hardship which may be faced by the State of Bihar having regard to the alleged financial stringency. We, however, hasten to add that we do not intend to lay down a law, as at present advised, that the State is directly or vicariously liable to pay 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 Undertaking for such a long time. We are not issuing any direction as against the State of Jharkhand as no step had admittedly been taken by the Central Government in terms of Section 65 of the State Reorganisation Act and furthermore as only four public sector undertakings have been transferred to the State of Jharkhand in respect whereof the petitioner does not make any grievance. In the peculiar facts and circumstance of this case in our opinion, interest of justice shall be met, if the following interim directions are issued for the present:

       1. The High Court may strive to dispose of all liquidation proceedings in respect of the Government companies owned and controlled by the State of Bihar as expeditiously as possible. For the said purpose and/or purposes ancillary to or incidental therewith, it may pass an interim order and/or orders by way of sale and/or disposal of the properties belonging to such public sector undertaking and/or Government companies or to take such measure or measures as it may deem fit and proper.

       2. For the aforementioned purposes 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. The terms and conditions for appointment of the said Committee may be determined by the High Court. All expenses in this behalf shall be borne by the State of Bihar.

       3. The High Court shall be entitled to issue requisite direction/directions to the said committee from time to time as and when it deems fit and proper.

       4. 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 instalments. 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 wherefor, the parties may file their claims before it.

       5. 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.

       6. The rights of the workmen shall be considered in terms of Section 529-A of the Companies Act.

       7. The Central Government is hereby 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. (Paras 71 to 74)

       (ii) Constitution of India-Article 21-Life-Meaning and concept-Expansion of right to life and personal liberty-Judicial decisions-Right of workmen-Constitutional provisions must be so interpreted so as to advance its socio economic objectives. (Paras 54 to 59)

       (iii) Constitution of India-Article 12-State-Government companies/public sector undertakings-States within the meaning of Article 12-Liability of State towards debtors of such companies.

       Held : 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 debtors 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 of life and liberty, the State has also an additional duty to see that the rights of employees of such corporations are not infringed. 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 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. In relation to statutory authority, the State had also the requisite power to issue necessary directions which were binding upon them, as for example, Section 79(c) of Electricity (Supply) Act. 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 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. 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 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. (Paras 30 to 34)

       The power of the State in the sphere of exercise of its constitutional power including those contained in Article 298 of the Constitution of India inheres in it a duty towards public, whose money is being invested. Article 298 of the Constitution of India confers a prerogative upon the State to carry on trade or business. While doing so the State must fulfil its constitutional obligations. It must oversee protection and preservation of the rights as adumbrated in Articles 14, 19, 21 and 300-A of the Constitution of India. (Para 36)

       (iv) Companies Act, 1956-Corporate veil-Lifting of-Government companies/public sector undertakings-Principle behind lifting of corporate veil is a changing concept-It is expanding its horizon-Whenever a corporate entity is abused for an unjust and inequitable purpose-Court would not hesitate to lift the veil and look into realities so as to identify persons who are guilty and liable thereof-Corporate veil can be pierced when corporate personality is found to be opposed to justice, convenience and interest of revenue or workman or against public interest.