1994 (6) TMI 139 - HC - Companies Law

Summary

Issues Involved:
1. Can the State be compelled not to disinvest from a Government company at the instance of the employees?
2. Whether the decision to disinvest violates the rights conferred by Articles 14, 16, and 19(1)(g) of the Constitution.
3. Whether the decision to disinvest is subject to judicial review.

Issue-Wise Detailed Analysis:

1. Compulsion on the State to Not Disinvest:
The primary question is whether the State can be compelled to refrain from disinvesting from a Government company based on the employees' concerns. The court examined the viability of the company and the substantial financial losses it has incurred. Southern Structurals Limited, initially a private entity, became a Government company in 1978 after the State acquired over 99% of its shares. Despite continuous financial support, the company has remained unprofitable, with accumulated losses exceeding its net worth. The court noted that the rehabilitation of the company would require further significant financial investment from the State, which has already provided substantial concessions. Given this background, the court found that the decision to disinvest, aimed at reducing the financial burden on the State Exchequer, is reasonable and not arbitrary.

2. Violation of Rights Under Articles 14 and 16:
The petitioners argued that disinvestment would deprive them of their rights under Articles 14 and 16 of the Constitution, which protect equality before the law and equality of opportunity in public employment, respectively. The court clarified that employees of a Government company are not Government servants. They do not hold civil posts, and their employer is the company, not the Government. The Government's role as a shareholder does not confer upon the employees the status of Government employees. The court cited the Supreme Court's decision in Dr. S.L. Agarwal v. Hindustan Steel Ltd., which established that employees of Government companies do not hold civil posts and cannot invoke Article 311. Therefore, the employees' rights under Articles 14 and 16 are not violated by the disinvestment.

3. Judicial Review of the Decision to Disinvest:
The court addressed whether the decision to disinvest is subject to judicial review. It observed that economic policy decisions, such as disinvestment, are generally not amenable to judicial review unless they violate constitutional or statutory provisions or are mala fide or arbitrary. The court referenced the Supreme Court's observation in Premium Granites v. State of Tamil Nadu, which stated that the validity of public policy is only considered when it infringes fundamental rights. The court found no evidence of mala fide or arbitrary action in the State's decision to disinvest, which was taken after careful consideration and approval by successive popular governments. The decision was based on the need to reduce the financial burden on the State and redirect resources to essential services like primary education and healthcare.

4. Article 19(1)(g) and Right to Employment:
The petitioners contended that disinvestment would violate their right to practice any profession or carry on any occupation, trade, or business under Article 19(1)(g) of the Constitution. The court referred to the Supreme Court's decision in Fertilizer Corpn. Kamgar Union v. Union of India, which distinguished between the right to pursue a calling and the right to work in a specific post. The court concluded that disinvestment does not automatically lead to the closure of the company or loss of employment. Even if retrenchment occurs, employees have recourse under industrial laws. The right to work as industrial workers is not infringed by disinvestment, as it does not prevent them from seeking employment elsewhere.

Conclusion:
The court dismissed the writ petition, holding that the State's decision to disinvest from Southern Structurals Limited is reasonable, does not violate constitutional rights, and is not subject to judicial review in the absence of mala fide or arbitrary action. The State's concern for the welfare of the employees was acknowledged, and the court expressed confidence that the State would take measures within its resources to assist the employees. No costs were awarded.