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High Court Of Calcutta
A. K. MATHUR, ASHIM KUMAR BANERJEE
BHARAT BHARI UDYOG NIGAM LTD. - Appellant
Versus
JESSOP AND CO.LTD.STAFF ASSOCIATION - Respondent
FMA 435 Of 2003
Decided On : 07/08/2003
None
Fact of the Case:
Jessop and Co. Ltd. (JCL) was established in 1788 and was taken over by the Government of India in 1958. The Government infused fresh funds of Rs. 54 crores in 1998 and agreed to provide a counter guarantee of Rs. 7 crore to the bankers for extending banking facilities to JCL. However, the company did not improve and the BIFR held that the revival scheme of JCL had failed and directed the operating agency, SBI, to advertise for a change of management within 90 days. The effort of the operating agency (SBI) to locate a joint venture partner also failed. The Government of India recommended converting JCL into a joint venture enterprise before the BIFR. The BIFR sanctioned a revival scheme in 1998 and Government of India infused fresh fund of Rs. 54 crores providing a financial restructure, and thereafter, Rs. 170 crores and agreed to provide counter guarantee of Rs. 7 crore to the bankers for extending banking facilities to JCL and the Government of India also consented to the revival scheme to the BIFR.
Finding of the Court:
The court held that the decision of the Government of India to disinvest 72% of its equity shares in JCL in favor of Ruia Cotex Limited was justified. The court found that the disinvestment process was transparent and fair, and that the interests of the employees of JCL had been adequately safeguarded. The court also held that the order passed by the BIFR approving the disinvestment scheme was valid and that the BIFR had not acted in breach of the principles of natural justice.
Issues: 1. Whether the disinvestment of 72% equity shares of Government of India in Jessop and Co. Ltd. (JCL) in favor of Ruia Cotex Limited was justified. 2. Whether the disinvestment process was transparent and fair. 3. Whether the interests of the employees of JCL had been adequately safeguarded. 4. Whether the order passed by the BIFR approving the disinvestment scheme was valid. 5. Whether the BIFR had acted in breach of the principles of natural justice.
Ratio Decidendi: 1. The court held that the Government of India was entitled to disinvest its equity shares in JCL in order to release large amount of public resources locked in non-strategic public sector undertakings and their re-deployment in public health, family welfare and social welfare, primary education and essential infrastructure. 2. The court found that the disinvestment process was transparent and fair, as it was conducted in accordance with the Rangarajan Committee recommendations and the guidelines issued by the Department of Disinvestment. The court also noted that the Government had appointed an Inter-Ministerial Group to oversee the disinvestment process and that the decision to disinvest 72% of the equity shares in JCL had been taken after considering the recommendations of the Group. 3. The court held that the interests of the employees of JCL had been adequately safeguarded, as the Government had ensured that the employees would continue to receive the same terms and conditions of employment after the disinvestment. The court also noted that the Government had provided a financial package to JCL to help it meet its obligations to its employees. 4. The court held that the order passed by the BIFR approving the disinvestment scheme was valid, as the BIFR had considered all the relevant factors before approving the scheme. The court also noted that the BIFR had given the employees of JCL an opportunity to be heard before approving the scheme. 5. The court held that the BIFR had not acted in breach of the principles of natural justice, as the employees of JCL had been given an opportunity to be heard before the BIFR approved the disinvestment scheme.
Final Decision: The court set aside the order of the learned Single Judge and allowed the appeals being FMA No. 433 of 2003 (by Bharat Bhari Udyog Nigam Ltd.); FMA No. 434 of 2003 (by Ruia Cotex Ltd.) and FMA No. 436 of 2003 (by Union of India) and dismissed the appeal being FMA No. 435 of 2003 filed by Jessop and Co. Ltd. Staff Association and another, and dismissed the writ petition with no order as to costs.
( 1 ) ALL the above appeals arise against the order passed by a learned Single Judge dated 25 March, 2003. Therefore, they are disposed of by a common order. By the said order, the learned Single Judge has set aside the disinvestment of Jessop and Co. Ltd.
( 2 ) THE appeal being FMA No. 433 of 2003 has been filed by Bharat Bhari Udyog Nigam Ltd. ; FMA No. 434 of 2003 by Ruia Cotex Ltd. ; FMA No. 435 of 2003 by Jessop and Co. Ltd. Staff Association and FMA No. 436 of 2003 Union of India.
( 3 ) THE basic question involved in all these four appeals is whether disinvestment of 72% equity shares of Government of India in Jessop and Co. Ltd. , in favour of Ruia Cotex Limited is justified or not.
( 4 ) FOR convenient disposal of all these appeals, it may be relevant to give a resume of the facts giving rise to these appeals.
( 5 ) INITIALLY, a writ petition was filed by Jessop and Co. Ltd. Staff Association represented by its Secretary, Aloke Kumar Brahmachari. By this writ petition, the petitioner prayed for a writ of mandamus directing respondent Nos. . 3 and 4 by restraining them from recommending, finalising and/or approving of any disinvestment of Government equity in Jessop and Co. Ltd. (for short JCL ). It was further prayed that the respondent No. 1 be restrained from proceeding with the consideration of any proposal or package in favour of disinvesting the Government stake in JCL.
( 6 ) THE ground of challenge in the writ petition was that the impugned action violates the Government of India policy on disinvestment, that is, the more than 49% of equity can be divested in strategic sector industries and 'railway transport' being in the strategic sector, more than 49% equity share of the Government of India in JCL cannot be divested. It was submitted that JCL is a main manufacturing company of the railway transport item such as EMU coaches and wagons. The JCL traditionally is specialised in railway coaches and wagon manufacturer. It was alleged that this action of the Government in divesting or off-loading 72% or more of its equity share in JCL, which falls in the strategic sector, is in violation of the Government of India disinvestment policy. It was also pointed out that since the Government is parting with its share and the matter is pending in the BIFR (Case No. 502 of 1995), if the disinvestment is decided in favour of the private promoter, then it will become a fait accompli before the BIFR.
( 7 ) IN short, the basic ground of challenge raised in the writ petition was that since 'railway transport' falls in the strategic sector, JCL which manufactures the EMU coaches and wagons, also falls in the strategic sector, and as such, not more than 49% of the equity can be disinvested in this strategic sector industry. This was the main ground on which the action of the Government was challenged in this writ petition with the aforesaid prayer. But unfortunately, it appears that the main issue which was sought to be challenged in this writ petition, has been lost sight of and the learned Single Judge has proceeded to go into the questions which were raised by filing supplementary affidavits. We would not have referred to the synopsis of the main writ petition; but it has become necessary at the outset because the learned Single Judge has travelled beyond the pleadings and has primarily gone on the basis of the supplementary affidavits which has been filed from time to time in these proceedings. Therefore, this is a serious question to be answered in this writ petition that all the pleadings be given to winds, and the matter be decided on the basis of supplementary affidavits. During the pendency of the writ petition, the BIFR decided the matter pending before it and approved the scheme of the Government of India on disinvestment in favour of the private party, that is, M/s. Ruia Cotex Ltd. (in short Ruia); and this order was also sought to be challenged by filing a supplementary affidavit during
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