TMI Blog2001 (3) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... Industry Package or the Gujarat Package with the rider that no change in choice once exercised will be permitted and the employees were directed to avail the benefit offered by the Government of India on or before 10-1-2001 under the said scheme. 3. In W.P. Nos. 157 to 159 of 2001, the very writ petitioners have assailed the order passed by the AAIFR dated 15-11-2000 confirming the order passed by the BIFR dated 12-6-2000. In all these petitions, the petitioners have approached for issue of a writ of certiorari and to quash the said orders. W.P. 1343 of 2001 is filed by the writ petitioners praying to issue a writ of certiorari or any other appropriate writ quashing the order dated 12-6-2000 passed by the BIFR and AAIFR and also to direct the Government of India to re-consider the matter and to see that the Bharat Gold Mines Ltd. is not wound up and the Mines is revived and to pass such order bearing in mind the provisions of articles 14, 21, 41, 42 and 43 of the Constitution of India and the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 ("the Act 1985"). 4. In W.P. Nos. 4503 to 4507 of 2001 and W.P. No. 5118 of 2001, the writ petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay royalty of 5 per cent on the net realisation of gold to the then Government of Mysore. The State Government of Mysore nationalised three gold mines with effect from 29-11-1956 as the then Government felt that the companies would not be making necessary long-term investments as their leases were to expire in 1970 and paid a compensation of Rs. 1.64 crores. In June 1958 the Government of India decided to strengthen the gold reserves and directed the Government of Mysore that the gold produced by the Kolar Mines be made over to it and as a Member of the International Monetary Fund, the Government could pay no more than the IMF rates. However, a subsidy representing the difference between the cost of production and the IMF price was given to the State Government under article 282 of the Constitution of India. Since payment of subsidy became embarrassment to the Government of India, the State Government agreed to transfer the mines to the Central Government for operation under the style of Kolar Gold Mining Undertakings (KGMU), in December 1962 as a subordinate office of the Ministry of Finance. The Board of Management had the Finance Minister as the Chairman, the Deputy Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceptable level of losses for time-slices in the intervening period between total closure and the present period; and c. the scope for diversification of operations and alternative utilisation of the Company s infrastructure in the intervening period so as to minimise losses. 10. In his report submitted to the Government of India, Mr. K.S.R. Chari observed that the Kolar Gold Mines history over a century has been one of a series of challenges posed by technical problems of a magnitude rarely encountered elsewhere in the world of hard-rock mining. These have seen days when the market prices for gold were as low as Rs. 1.82 per gram for almost six decades. The study team was constituted in September 1984 by the Department of Mines and the Study Team submitted a report on capacity utilisation, profitability and corporate recovery plan. The Chari s report discloses that the KGF, in their lifetime spanning over hundred years, appear to have brought to the surface 50 million tons of gold-bearing rocks, yielding 800 tons of gold valued at Rs. 17,000 crores at today s prices in the market. During the first two decades, the gold values were as high as 40 gms./ton, gradually coming do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... why the Government should have been fighting shy of giving the BGML the market price for the gold right from the start. A positive and more helpful gold pricing policy by the Govern-ment could largely have prevented BGML from getting into the present unfortunate position it is in to-day. It has resulted in BGML being portrayed as a losing concern which really it has not been so far but is rapidly becoming one. By 31-3-1985, the Government had built up a surplus of Rs. 154.88 crores accruing to it through gold made over by BGML since its inception. The Company deserves to be given market price for gold produced by it with immediate effect to enable it to function as a comer-cial venture. He recommended that the Government could treat BGML as the canalising agency and advance necessary FE from its reserves to import 50 to 60 tons of gold annually for sale in the open market at the ruling prices, at a pre-determined rate of 10/20 gms. per occasion of wedding etc., and in the process not only will the financial losses incurred by the BGML be wiped out but at the same time, smuggling of gold with all its risks and uncertainties will become a highly uneconomic venture and should get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d its seventh report on 30-3-1994 after considering the concrete proposals for development and exploration of mining at Kolar made by one S. Natrajan, former Director (Technical), the documents furnished by the Ministry of Mines, the oral evidence of the representa-tives of the Ministry, Workers Unions, management of Bharat Gold Mines. An impression was given to the Parliamentary Committee that faulty process of extraction and pilferage of the finished gold are the two important factors responsible for escalation of cost of production. The machines and other equipments used in extraction of gold ore are either defective or have become outdated in terms of their viability. The mining technology is at present is in dire need of modernisation. BGML Authorities have submitted a rehabilitation proposal worth Rs. 107.83 crores to the Industrial Credit and Investment Corporation of India Ltd., the operating agency appointed by BIFR and a copy of the report has been sent to Central Government and suggestion was made to Government of India to consider it sympathetically. Insofar as security and pilferage in the BGML premises, Chari Committee and also the Parliamentary Committee noticed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the officers of the company are perhaps enjoying rent free accommodations. The people live in the area do not know any other profession except mining because they are in this field generation after generation and when these people are not given jobs in KGF they remain unemployed and loiter around in the hope of getting job. The unemployed youth of the area may join hands with these anti-socials. The scavenging by scavengers is still in existence in KGF despite its abolition at the national level. The Sub-Committee made certain recommendations for revival of the company. The company has been referred to BIFR. Now it cannot take any action for the revival without the prior permission of BIFR and, therefore, recommended that the reference by BGML, Kolar to BIFR be revoked. The Government may either make available 41 crores of rupees as Budgetary support or soft loan to the company or stand as a guarantor to enable the company to get loans from banks and financial institutions. The Management can raise the requisite funds for its revival by selling its surplus land at the existing market rates. The security network of the company should be streamlined and every effort should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re different in these writ petitions, that their views and grounds of challenge are the same. All of them have assailed the act of the Management of BGML, the final order passed by the BIFR and AAIFR and the Government order for closure of the company. Each Workers Union has its own grouse against these orders. 14. The orders of the BIFR, AAIFR and the order passed by the Government under section 25-O are assailed on the following, among other grounds in these batch of writ petitions. That the order of the BIFR is wholly erroneous. It has failed to take steps for revival of BGML and relied on the statements made by the represen-tatives of Government of India without even verifying the correctness of the same and rejected the proposal for takeover of the company by the private companies. The BIFR has failed to explore the possibility of reviving BGML. The BIFR and AAIFR have failed to consider the various reports submitted for its consideration. The BIFR has failed to consider the reports submitted by the ICICI and that BIFR has failed to find viable alternative within a reasonable time. The order of the competent authority granting permission for closure of BGML is totally v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion the manpower. It is contended that effort has been made to reduce the manpower through Voluntary Retirement Scheme (VRS) and decided to explore the possibility of rehabilitation through joint venture route. After decision of the BIFR to wind up the company, the Government of India once again offered VRS for one month s period which was valid up to 10-1-2000. The Ministry of Labour had already passed an order permitting the closure of the Company. That the report submitted by K.S.R. Chari, formerly Secretary, Department of Mines, Government of India, New Delhi, also advised the Central Government to close the company in a phased manner. In view of the accumulated loss there is no chance of the company to revive its mining. Therefore, the only alternative for the Government was to close the mining. The orders of the BIFR and AAIFR in this background is justifiable. The order passed under section 25-O is not arbitrary as the authority has taken into consideration all the factors for passing the said order. 16. In the statement of objections filed by the Government, it is narrated the affairs of the company, the losses accrued and there is no spec of chance to revive the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Committee besides identifying the causes of sickness gave a model Bill and the Act is passed with modified provisions by taking all the major recommendations. 20. The Supreme Court in the case of Navnit R. Kamani v. R.R. Kamani AIR 1989 SC 9 explicitly explained the object of this legislation in the following words : "...the legislation has been enacted with the end in view to : 1.Afford maximum protection of employment; 2.optimise the use of the funds of the companies etc.; 3.salvaging the production assets; 4.realising the amounts due to the banks, etc.; and 5.to replace the existing time-consuming and inadequate machinery by efficient machinery for expeditious determination by a body of experts." (p. 17) Various High Courts while considering the object and purport of the Act made the following observations : "Sick Industrial Companies (Special Provisions) Act, had been enacted to safeguard the economy of the nation and to protect viable sick units. It is aimed at reviving and rehabilitating sick industries." ( Testeels Ltd. v. Radhaben Ranchhodlal Charitable Trust AIR 1988 Guj. 213. "The object of the Act like Sick Industrial Companies (Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abour trouble; 23 per cent due to market recession and 9 per cent due to other quarrels (Bharat s Sick Industries and BIFR by H.P.S. Pahwa, 5th Edition at page 8). In the same text, we find at page 11 the economic survey for the year 1996-97 and Table 3 - Profile of sick industrial undertakings. The total sick industrial units in the country were 2,40,700 out of which 2,38,176 were Small Scale Industries while 1,867 were Non-Small Scale Industries and 657 were Non-SSI weak units. Out of these sick units 16,362 were considered as viable and 2,50,454 were considered as non-viable and 2,390 whose viability, not decided. The outstanding bank guarantee at the end of March 1995 was Rs. 13,739 crores, the total sick units involved as on March 1995 was 2,71,206. These statistics only go to show the shocking and alarming industrial scenario of the country. 21. Where a reference is made by the industry under section 15, the Board, viz., the BIFR can make for determining whether industry has become a sick industry or not. The Board may require by order any operating agency to inquire into and make a report on the aspects as may be specified in the order. Section 16(3) further provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four weeks. The Bench further observed that major parties involved in the rehabilita-tion exercise are requested for time to facilitate in-depth examination of the rehabilitation scheme. The Ministry submitted that the matter was referred to the group of Ministers who in turn remitted it to the Commit- tee of Secretaries. Government of Karnataka have agreed to give relief in royalty, but have regretted their inability to grant concessions in power tariff. Similarly, Andhra Pradesh Government have not agreed to grant reliefs in royalty as well as power tariffs. The Board noticed during the course of deliberations that Company had floated global tenders for ( i ) recovery of gold from the mine tailing dumps, and ( ii ) exploration and exploitation for gold in all the lease areas through shallow surface mining. In response to the tenders five offers had so far been received, out of which four were from Australian Companies and one from a Canadian company which have been processed by the Government. The Director, Ministry of Mines stated the issue of global tenders by the company was in line with the current policy of the Government globalisation and liberalisation. This has added a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. He said that the workers had accepted wage freeze for 5 years, and there is, therefore, no question of any interim relief. Interim relief has not been paid by any sick central PSU. The GOI is providing cash support of Rs. 14 crores per annum from non-plan assistance of BGML for payment of wages and salaries. Shri V.A. Gore, DGM, ICICI submitted that the projection would need to be revised in consultation with NAAL and BGML. The OA would need three months time to submit the revised proposal." Having regard to these submissions, the Board gave certain directions to reformulate and recast the rehabilitation scheme since M/s. NAAL has been selected as a joint venture partner. New development took place when further sitting was made and the Ministry of Mines desired that the company should re-negotiate with the prospective joint venture partner to obtain their equity participation of at least 40 per cent. The meeting was held with NAAL but they did not agree to enhance BGML s equity beyond 30 per cent. This position was reported to GOI and the matter was under consideration of the Ministry. The Bench also noticed that BGML incurred an operating loss of Rs. 3,873 lakhs during 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of all the submissions made, observed that the main promoter Government of India have clearly taken a decision not to support the revival of the Company and not to provide any financial assistance to the company for its revival and have clearly recommended that winding up is the only course of action available inasmuch as their effort to privatise the Company also through a process of global tender has failed." The Board further observed that the Unions are totally dependent on the Government of India and the State Governments for not only massive reliefs and concessions but also additional financial support of a very large order which is clearly not forthcoming. Therefore, the Board finds that there is no merit in the submissions made by the employees for revival of the company and conclude that the only course of action open in this case is to wind up the company in all round public interest. Therefore, it ordered issue of show-cause notice for winding up to all the parties concerned and their objections/suggestions to this winding up proposal was called for. 23. It is submitted before the Court that the Board has passed the order to wind up and that the Government has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conditions which were not acceptable to the Government of India. Respondents 1 and 2 have not placed all the materials before the Court to assess the reasons for not agreeing for the joint venture proposal initiated earlier. If the Central Government feels that Rs. 100 crores is a sum which is too high to meet the demand of BGML for its survival, the company could have sought the financial assistance from the other financial institutions which has not been done in this case. The writ petitioner in W.P. 7987 of 2001 painted a very bright picture of exploitation of gold both in the mines and tailing dumps and they gave a rosy picture of making profits after second year. When a private company hopes to revive it with work force of 1200 from out of the present work force of BGML, it is not known what made the Government of India to refuse offering its helping hand to revive a century old gold mine. Various obstacles appear to have been placed in the matter of revival. The BIFR was so optimistic at some stage after considering various proposals for revival, but suddenly turned down and accepted the submission made by the Central Government only on the ground that it will not help BGML ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should have tightened their security which they have not done, various loopholes were noticed in the security system of BGML. This is only one of the defects pointed out by the Committees apart from the extra expenditure incurred by the management as such. No effort has been made by the management to curb unlawful expenditure and also cut down the working force, dismantle old machinery and no serious attempt has ever been made to infuse new life to this century old gold mines. 27. Under section 20, where the Board, after making inquiry under section 16 and after consideration of all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, it may record and forward its opinion to the concerned High Court. 28. The learned standing counsel for the Central Government, Shri Ashok Haranahalli, hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia to revive and to give a new life to these age-old machines coupled with other factors were sufficient for the management for closure of mine. The BIFR which has considered these factors at the first instance, took such a long time to reach the conclusion that running of mine is not viable and this was so solely on the plea of the Government of India that it is not prepared to pump in the required money. The BIFR has failed to act within the stipulated time or at least within the reasonable time. The reasons assigned for the final order which is accepted by the AAIFR, in my opinion, are not tenable and acceptable. There is no offer to the workers to run the mine. Where the Central Government found it hard to pump in hundred crores of rupees to revive the factory, it is not worthwhile to ask the workers who had sacrificed their salaries for over five years to find necessary funds unless Government of India was prepared to transfer the management to the workers themselves. 30A. In this background, the Court has to consider whether it can step in to stop the rot set in, in this century old mine and whether the Tribunals in performance of their sacred duty of finding ways and me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the public interest. In case of bona fide closure it would be generally so. Yet the interest of labour for the time being is bound to suffer because it makes a worker unemployed. Such a situation as far as reasonably possible, should be prevented. Public interest and social justice do require the protection of the labour. But it is reasonable to give them protection against all unemployment after affecting the interests of so many persons interested and connected with the management apart from the employers. Is it possible to compel the employer to manage the undertakings even when they do not find it safe and practicable to manage the affairs ? Can they be asked to go on facing tremendous difficulties of management even at the risk of their person and property ? Can they be compelled to go on incurring losses year after year ? As we have indicated earlier, in section 25-FFF retrenchment compensation was allowed in cases of closure and if closure was occasioned on account of unavoidable circumstances beyond the control of the employer a ceiling was put on the amount of compensation under the proviso. The explanation postulates the financial difficulties including financial l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... afety and on the economic front. If he violates it, apart from the civil liability which will be of a recurring nature, he incurs the penal liability not only under section 25R of the Act but many other statutes." (p. 37) These are the questions which are answered by the Apex Court while deciding Excel Wear s case. 33. The case on hand is a Central Government Undertaking. The deficiency in the management of the company, the loopholes in the administration, the age-old machineries installed by the management for excavating the gold ore, the pilferage of the gold output and other criminal activities, the failure of labour in providing its 100 per cent efficiency in the production of gold the combination of all these factors which brought the BGML to the present situation. If that were not so, the Parliamentary Committee would not have suggested certain measures for revival of the Company. NAAL one of the writ petitioners before this Court would not have come forward to take over the Company and hopes to earn profits after two years. The Secretaries have taken into consideration only the accumulated losses and the interest accrued thereon amounting to Rs. 500 crores, have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Laxmi Starch Ltd. v. Kundara Factory Workers Union [1992 Lab IC 1337] at para 12 has stated as follows : "No employer has a fundamental right to close down an industry unreasonably or for reasons which are mala fide . Closure has to be for just and inevitable reasons as it affects large number of employees, members of the general public, production of the country etc., . . . ." The Kerala High Court held that there are orders arising under the provisions of section 25-O of the I.D. Act, are assailable under article 226 of the Constitution of India, specially where the Government failed to exercise wrongly or mala fide exercised the discretion. 36. A Division Bench of the Gujarat High Court in Associated Cement Companies Ltd. v. Union of India 1989 LLJ (1) Guj. 599 held that the requirement of section 25-O(2) is in the nature of a restriction imposed upon the right of the employer to close down the business. Therefore, this phrase must be so construed as to make the restriction which is imposed on the right of the employer reasonable within the meaning of article 19(6) because the right to close down is not an absolute right and it can certainly be rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order passed by the authority. How to Judge the validity of the order of the statutory authority? Invoking the jurisdiction of the High Court under article 226 of the Constitution of India came up before a Bench of five Judges before the Supreme Court in Mohinder Singh Gill v. Chief Election Commissioner, New Delhi AIR 1978 SC 851. The Supreme Court while considering the powers of the Election Commissioner under Article 324 of the Constitution of India commented upon the said question at para 8 held as follows : "The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order Bad in the beginning may, by the time it comes to Court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose., J., In Gordhandas Bhanji AIR 1952 SC 16 (at p. 18) : Public orders publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BGML that the Government of India as far back as 1997 made submission before the BIFR to close down the BGML and at any cost it has no mind to continue and revive. The authority who passed the order, incidentally Joint Secretary of the concerned department who had not taken into consideration any of the submissions made by the Workers Union and other interested parties. Except accepting the reasons assigned by the BGML Management, no other reasons assigned by the authority in passing the order of closure. The authority has not taken into consideration the public interest involved, the loss of wealth to the country by forceful closure of the company. Therefore, under the circumstances there is no application of mind to all the factors which were placed before the authority while passing the impugned order. It is true that the writ petitioners could have applied for review of the order under section 25(5). Instead, they have chosen to challenge the impugned order in these writ petitions. The impugned order suffers from arbitrariness for want of application of mind to all the factors before the Court and where there is no statutory requirement and where the order is not in the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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