The State Government is not liable to pay the salary and allowances of employees of State-owned Corporations as they are separate juristic entities, and the financial viability and capacity of the employer are important factors in determining the wage structure.

Hemant Gupta, J.

1. The challenge in the present Letters Patent Appeals is to an order passed by the learned Single Bench of this Court on 4th of March, 2015 in C.W.J.C. No. 21893 of 2011 whereby, the claim of the writ-applicants i.e. appellants in L.P.A. No. 1940 of 2015 for payment of salary and other allowances was disposed of with direction to the State to allocate a sum of Rs. 10 Crores for payment to the affected employees for payment on account of various reasons such as marriage of daughters, ailment, old age disease, payment of loan etc. On deposit of the said amount, the Managing Director/Administrator was to examine the individual cases and to make recommendations depending on the merit of the case for release of fund in his/her favour. The writ applicants have filed appeal claiming entire pay and allowance from the State whereas, the State has filed appeal against the direction to deposit sum of Rs.10 Crores.

2. Firstly some facts. A writ application No. 488 of 2002 was filed in public interest in Supreme Court by Ms. Kapila Hingorani consequent to newspaper report regarding non-payment of salary for long time resulting in starvation and death of an employee of the Corporation wholly owned by the State of Bihar. In such petition, Supreme Court passed a detailed interim order since reported as Kapila Hingorani (I) v. State of Bihar, (2003) 6 SCC 1. The question raised in the said petition was as to what extent the State of Bihar is vicariously liable for payment of arrears of salary to the employees of State-owned Corporations, Public Sector Undertakings or Statutory Bodies. It was brought to the notice of the Court that certain Boards and Corporations are not able to pay the salary to the employees.

3. The Supreme Court noticed the fact that the Company incorporated under the Companies Act is a juristic person which has a distinct and separate entity vis-a-vis its shareholders.

4. With this background, the Court in the aforesaid case reported as Kapila Hingorani (I) v. State of Bihar (supra) observed as under:-

"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 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 to life and liberty, the State has also an additional duty to see that the rights of employees of such corporations are not infringed.

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 du