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2006 Supreme(SC) 1018
Supreme Court Of India
Dr. A.R. Lakshmanan & A.K. Mathur
All India ITDC Workers Union & Ors - PETITIONER
Versus
ITDC & Ors. - RESPONDENT
Transfer Case (civil) 73 of 2002
WITH
TRANSFER CASE (CIVIL) No. 76/2002
Decided On : 31/10/2006
Disinvestment is a policy decision generally immune from judicial review unless illegal or mala fide. Employees of public sector undertakings have no vested right to an employer's government status, and their transfer to subsidiaries with protected conditions does not require consent.
Headnote:(A) Constitution of India - Articles 14, 21 and 311; Companies Act, 1956 - Sections 391 and 394 - Disinvestment of public sector undertakings - Scope of judicial review - Economic policy decisions involving complex factors are generally not amenable to judicial review unless they are demonstrated to be violative of constitutional or legal limits on power or so abhorrent to reason. (Paras 47, 92, 93 and 98)
(B) Employment - Transfer of services - Consent of employee - Transfer of employees from a parent company to a subsidiary company where the shareholding pattern remains identical and service conditions are fully protected does not require the individual consent of the employees.
(C) Voluntary Retirement Scheme (VRS) - Right to parity - A VRS is an invitation to treat and not a vested right; employees cannot claim parity with other units if the scheme was never made applicable to their specific unit and no such liability was disclosed during the transfer of management.
Facts of the case:
Employees of a hotel unit challenged the government's policy of disinvestment and the subsequent sale of the hotel to a private entity. They contended that the sale price was inadequate, and that their transfer to a newly formed subsidiary company without their consent was illegal. Additionally, they sought the implementation of a voluntary retirement scheme (VRS) on the grounds of parity with employees of other units under the same parent corporation.
Findings of Court:
The court found that the disinvestment was a valid policy decision based on expert recommendations. The service conditions of the employees were adequately protected under the share purchase agreement and the demerger scheme. There was no legal obligation for the new management to float a VRS since the scheme was not applicable to that specific hotel unit and the company was willing to continue employing the staff on existing terms.
Issues: Whether a policy decision of disinvestment is subject to judicial review; whether the transfer of employees to a subsidiary company requires prior consent if service conditions are protected; and whether employees can claim a right to a VRS based on parity with other disparate units.
Ratio Decidendi: Economic policy decisions, such as disinvestment, are the prerogative of the government and are not subject to judicial review unless they are illegal or mala fide. Employees of a public sector undertaking have no vested right to the employer continuing to be a government company. When a transfer to a subsidiary maintains the same ownership structure and preserves service conditions, it does not violate the principle of freedom to choose an employer. Furthermore, a VRS is a discretionary scheme and not a matter of right.
Result: The writ petitions are accordingly dismissed.
Legal Category Hierarchy
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administrative law
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judicial review
- policy decisions
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judicial review
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constitutional law
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fundamental rights
- right to equality
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fundamental rights
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company law
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disinvestment
- share transfer
- scheme of arrangement
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disinvestment
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labour law
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employment
- transfer of employees
- service conditions
- voluntary retirement scheme
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employment
JUDGMENT
Dr. AR. Lakshmanan, J.
The employees of Hotel Agra Ashok filed a writ petition being No. 41650 of 2001 in the Allahabad High Court questioning the action of the first respondent - India Tourism Development Corporation (hereinafter called the ITDC), New Delhi to sell Hotel Agra Ashok outrightly to a private party as arbitrary and illegal. According to them, Hotel Agra Ashok is one of the biggest hotels at Agra and is a five star hotel having 58 centrally air-conditioned luxurious room and other facilities. It is also their case that non-implementation of voluntary retirement scheme in respect of the employees of the Hotel Agra Ashok is totally discriminatory, arbitrary, unjust and without any rhyme or reason. It is further submitted that because the Government of India introduced a disinvestment plan with the object to sell the hotel to a private party which is liable to affect the employees very seriously including their service conditions.
The Government of India issued a press communiqui in the month of January, 2001 proposing to sell Hotel Agra Ashok for a sum of Rs.2.36 crores which is wholly inadequate and amounts to a totally distress sale. The Government has devised a scheme of creating an artificial company i.e. Hotel Yamuna View Private Limited 4th respondent herein and the said company has been incorporated only for the purpose of selling the said hotel after the hotel is transferred to it. The employees have come to understand through press reports that the hotel is being sold out to one M/s Mohan Singh respondent No.5 and his bid was accepted by the Central Government in pursuance to the advertisement. It is further submitted that the entire Hotel Agra Ashok is being sold out
only merely for a sum of Rs.3.90 crores whereas the valuation by the Agra Cantonment Board in the year 1999 of its land and buildings alone is more than Rs.5.58 crores. According to the employees, its market price at present cannot be less than Rs.20 crores. It is the contention of the employees that because of the change of ownership of the Hotel, the service conditions of the employees should not be changed by the private person and that the existing service conditions as originally agreed between the various employees of the Hotel and the new purchaser must be maintained. The prayer in the writ petition reads thus:
"(a]a writ, order or direction in the nature of mandamus restraining the respondents from unilaterally changing the terms and conditions of all class III & IV employees of the
Hotel in view of the proposed sale of Hotel Agra Ashok, Agra, to respondent no.5;
(b)a writ, order or direction in the nature of mandamus directing the parties concerned to maintain status-quo in respect of the service conditions of the petitioners and also in respect of the proposed sale and transfer of Hotel Agra Ashok to respondent no.5;
(c)a writ, order or direction in the nature of mandamus commanding the respondents to enforce and implement and to apply Voluntary Retirement Scheme which has been made applicable only in respect of the employees of Ashok Travels and Tours and not in respect of the employees of Hotel Agra Ashok, Agra;
(d)any other writ, order or direction as this Honble court may deem fit and proper in the circumstances of the case, and
(e)award cost of the petition to be paid to the petitioners."
The above writ petition was transferred to this Court and is connected with other transferred cases. The petitioners have also filed I.A. No. 49 of 2004 in transfer case No. 73 of 2002 and made a prayer to direct the respondents to apply Voluntary Retirement Scheme (VRS) in pursuance of the directions of the Government of India vide letter No. I-JS(T)/2002 dated 12.02.2002 and as prayed for by them in the writ petition. It is stated in the said IA that the employees of Hotel Ashok Agra are similarly situated and serving under similar conditions under which employees of different ITDC Hotels are circumstanced and serve the ITDC. It i
