TMI Blog2003 (5) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... Bihar, if any, can be shifted to the Union of India? Held that:- The High Court may strive to dispose of all liquidation proceedings in respect of the Government companies owned and controlled by the State of Bihar as expeditiously as possible. For the said purpose and/or purposes ancillary to or incidental therewith, it may pass an interim order and/or orders by way of sale and/or disposal of the properties belonging to such public sector undertaking and/or Government companies or to take such measure or measures as it may deem fit and proper. For the aforementioned purposes a committee not consisting of more than three members chaired by a retired High Court Judge or a sitting District Judge may be appointed who may scrutinize the assets and liabilities of the companies and submit a report to the High Court as expeditiously as possible preferably within three months from the date of constitution of the committee. The terms and conditions for appointment of the said Committee may be determined by the High Court. All expenses in this behalf shall be borne by the State of Bihar. The High Court shall be entitled to issue requisite direction/directions to the said committee fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Small Scale Industrial Development Corporation 141 In Headquarter from April 1995. In Unit from April 1993 36 5. Bihar State Sugar Corporation 9240 From January 2000 in Headquarter. In Unit from April 1992 476 6. Bihar State Leather Development Corpn. 471 From March 1993 13 6 a. Bihar Finished Leathers 35 Sl. No. Name of Public Undertaking No. of Employees Date from which salary is due Nos. of Death of Employees 7. Bihar State Industrial Development Corporation 1551 In Headquarters from July 2001 in Unit from Feb. 1993 125 8. Bihar State Electronic Corporation 157 In Headquarter up to date. In Unit from April 1998 5 9. Bihar State Vastraya Corporation 50 Nov.-96 Nil 10. Bihar State Film Development Financial Corporation 8 Aug.-02 Nil 11. Bihar State Fruit Vegetable Development Corporation 16 From Aug.-94 1 12. Bihar Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deny about the factual statement made in the said writ petition. Its stand, however, is that salaries are being paid by the statutory authorities, the details whereof are in the following terms : "In the following 26 undertakings, salary payments are up to date (as on 30-9-2002) and are continuing on a regular basis as per reports from the Corporation : 5. Bihar State Financial Corporation Ltd. 6. Bihar State Credit Investment Corporation 7. Bihar State Agriculture Marketing Board 8. Bihar State Forest Development Corporation 9. Bihar State Pollution Control Board 10. Bihar State Warehousing Corporation 11. Bihar State Tourism Development Corporation 12. Bihar State Text Book Corporation 13. Bihar State Minerals Development Corporation 14. Bihar State Housing Board 15. Bihar State Police Building Construction Corporation 16. Bihar State Bridge Construction Corporation 17. Bihar State Electricity Board 18. Bihar State Hydro-Electric Power Corporation 19. Patna Industrial Area Development Authority 20. North Bihar Industrial Area Development Authority 21. Darbhanga Industrial Area Development Authority 22. Patna Regional Development Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As in para III above 41. Bihar State Textile Corporation 50 Nov., 96 Rs. 0.70 crores Nil -do- 42. Bihar State Film Dev. Fin. Corpn. 08 Aug., 02 Rs. 55,000 Per month Nil -do- 43. Bihar State Fruits Vegetable Dev. Corpn. 16 Aug., 94 Rs. 1.8056 crores Nil -do- 44. Bihar State Seeds Dev. Corpn. 137 May, 99 Rs. 4.53 crores 5 Inadequate Medical Treatment 45. Bihar State Fisheries Development Corpn. 42 32-40 months to March, 00 Update from March, 00. Rs. 1 crore Nil NA 46. Bihar State Food And Civil Supplies Corporation 1716 Up to 40 Months Rs. 16.56 crores Nil -do- 47. Bihar State Panchayati Raj Finance Corporation 130 Mar 96 Rs. 3.75 crores Nil -do- 48. Bihar State Construction Corpn. 657 HQ Jan, 1995 Unit Jan. 1992 Rs. 37.50 crores Nil -do- 49. Bihar Hill Area Lift Irrigation Corpn. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... causes of these deaths and to submit a detailed report in the matter." 7. The records of this case bear out that deaths had occurred owing to starvation or malnutrition. The fact that the employees have not been paid their salaries for a long time; in some cases for a decade or more; stands admitted. 8. The Affidavit of the State of Bihar, purported to have been based on reports of the Managing Director of same Undertaking does not inspire confidence. The statements made therein are self-contradictory and inconsistent. It smacks of lack of bona fide and is full of afterthoughts. 9. The stand of the State of Bihar on law is that having regard to the fact that most of the undertakings or companies are registered or incorporated under the Indian Companies Act, 1956, the rights and liabilities of the shareholders would be governed by the provisions of the said Act and the liability of the said companies cannot be passed on to the State by taking recourse to the doctrine of lifting the veil or otherwise. 10. Keeping in view the complexity of the matter, this Court appointed Shri P.S. Mishra, a senior counsel of this Court, as amicus curiae . Shri Amarendra Sharan al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 598A of the Companies Act the dues of employees will have primacy. Mr. Sorabjee would urge that the learned Company Judge may also be directed to look into the Human Right aspect of the matter. 14. Mr. Mishra, learned amicus curiae, would submit that there is no reason as to why the burden of the State should be shifted to the Union of India and having regard to the provisions of articles 21 and 23 of the Constitution of India, this Court is entitled to pierce the corporate veil of the Government companies which are States within the meaning of article 12 of the Constitution of India. According to Mr. Mishra, it is beyond any cavil of doubt that the State for all intent and purport was the sole shareholder of those companies and as such it cannot escape its liability having regard to the fact that it had deep and pervasive control including financial control over the affairs of the said companies. Mr. Mishra would urge that as indisputably the corporations owned and controlled by the State of Bihar are State within the meaning of article 12 of the Constitu- tion of India, neither they nor the State of Bihar can escape their liability from enforcing the rights of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or Corporations referred to hereinbefore are States within the meaning of article 12 of the Constitution of India, the State of Bihar having deep and pervasive control over the affairs thereof can be held to be liable to render all assistance to the said companies so as to fulfil its own and/or the corporations obligations to comply with the citizens right under articles 21 and 23 of the Constitution of India? 3.Whether the State of Bihar can escape its liability having regard to the human rights problem involved in the matter? 4.Whether in a case of this nature the liability of the State of Bihar, if any, can be shifted to the Union of India? A company incorporated under the Companies Act is a juristic person. A company indisputably has a distinct and separate entity vis-a-vis its shareholders. 18. This Court in Electronics Corporation of India Ltd. s case ( supra ) opined : "15. A clear distinction must be drawn between a company and its shareholder, even though that shareholder may be only one and that the Central or a State Government. In the eye of the law, a company registered under the Companies Act is a distinct legal entity other than the legal entity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate and the Central Government and it was, therefore, an instrumentality or agency of the State and the Central Government and as such an authority-State within the meaning of article 12. The principle laid down in the aforementioned cases that if the Government acting through its officers was subject to certain constitutional limitations, a fortiori the Government acting through the instrumentality or agency of a corporation should equally be subject to the same limitations, was approved by the Constitution Bench and it was pointed out that otherwise it would lead to considerable erosion of the efficiency of the fundamental rights, for in that event the Government would be enabled to override the fundamental rights by adopting the stratagem of carrying out its function through the instrumentality or agency of a corporation while retaining control over it. That principle has been consistently followed and reiterated in all subsequent cases - See Delhi Transport Corpn. v. D.T.C. Mazdoor Congress (1991 Supp. (1) SCC 600 : 1991 SCC (L S) 1213), Som Prakash Rekhi v. Union of India ([1981] 1 SCC 449 : 1981 SCC (L S) 200), Manmohan Singh Jaitla v. Commr., Union Territory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons who are guilty and liable therefor. 21. The proposition that a company although may have only one shareholder will be distinct juristic person as adumbrated in Salomon v. Salomon Co. [1897] AC 22, has time and again been visited the application of doctrine of lifting the corporate veil in revenue and taxation matters. [ See Dal Chand v. CIT [1944] 12 ITR 458 and Juggilal Kamlapat v. CIT [1969] 73 ITR 702]. 22. The corporate veil indisputably can be pierced when the corporate personality is found to be opposed to justice, convenience and interest of the revenue or workman or against public interest. [ See CIT v. Meenakshi Mills Ltd. [1967] 1 SCR 934; Workmen Employed in Assn. Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1985] 4 SCC 11; New Horizons Ltd. v. Union of India [1995] 1 SCC 478; Renusagar Power Co. s case ( supra ), Hussainbhai v. Alath Factory Thezhilali Union, Kozhikode [1978] 4 SCC 257 and Secretary H.S.E.B. v. Suresh [1999] 3 SCC 601]. 23. The test that a public sector undertaking or Government company can be a State within the meaning of article 12 of the Constitution, only when it discharges some sovere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to statutory authority, the State had also the requisite power to issue necessary directions which were binding upon them, as for example, section 79( c ) of Electricity (Supply) Act. 28. 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 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 accountability arises out of the power conferred on an authority. 29. 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 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 behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0A of the Constitution of India. 31. Even before India became independent, our leaders started thinking in terms of eradication of poverty and discrimination as well as uplift of down-trodden. At the time of framing of the Constitution, the Constitution makers had before them the harrowing tales of starvation deaths and particularly the infamous Bengal famine. If it is considered to be the duty of the citizen to remind himself of the aspirations of the Constitution makers, the State, in our opinion, cannot be permitted to say that it has no such duty towards its own citizens. 32. Clauses ( a ), ( b ) and ( h ) of article 51A of the Constitution of India read as under : "Art. 51A. It shall be the duty of every citizen of India ( a )to abide by the Constitution and respect its ideals and institutions, the National Flag and the National Anthem; ( b )to cherish and follow the noble ideals which inspire our national struggle for freedom; ( h )to promote harmony and the spirit of common brotherhood amongst all the people of India transcending religious; linguisitc and regional or sectional diversities; to renounce practices derogatory to the dignity of women;" In it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Chameli Singh v. State of U.P. [1996] 2 SCC 549 referring to article 11 of the International Covenant on Economic, Social and Cultural Rights, 1966 held that the State parties recognize "the right to everyone to an adequate standard of living for himself and for his family including food, clothing, housing and to the continuous improvement of living conditions". Indisputably, the State parties were to take appropriate steps to ensure realization of this thought. 36. Justice Holmes expressed the following view in Missouri v. Holland 252 US 416 (433) : "When we are dealing with words that also are a constituent act, like the Constitution of the United States, we must realise that they have called into life a being the development of which could not have been foreseen completely by the most gifted of its begetters. It was enough for them to realise or to hope that they had created an organism, it has taken a century and has cost their successors must sweat and blood to prove that they created a nation. The case before us must be considered in the light of our whole experience and not merely in that of what was said a hundred years ago." Justice Frankfurter elucida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or superior. Similarly, the Atharbvanaveda stressed that all have equal right over natural resources and all were equally important like spokes in a wheel. Both the Rigveda and Atharvanaveda declared that co-operation between individuals is necessary for happiness and progress. It is also of utmost importance to note that right to equality was made a part of "Dharma" long before the State came to be established. It is equally interesting to refer to the contents of articles 1 and 7 of the Universal Declaration of Human Rights [1948], which read : "All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood." "All are equal before law and are entitled without any discrimination to equal protection of the law. All are entitled to equal protection against any discrimination in violation of this Declaration and against any incitement to such discrimination". This declaration is similar to the declaration of equality made in the Rigveda. After the establishment of the State, the obligation to protect the right to equality was cast on the Rulers. It was made a part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es an instrument of policy for the promotion and protection of corporate governance practices of greenwashing ; uThe UNDP inspired mainstreaming of human rights mission envisaging the raising of a billion dollars for the Global Sustainable Development Facility has already been subscribed to by way of seed money by some of the most egregious multinational enterprise corporate human rights offenders." 41. In the 12 Misconceptions About the Right to Food (FIAN) it is inter alia stated: "What does the Rights to Food mean? Can the existence of this Right cause laziness among people? The Right to Food is about respecting, protecting and fulfilling access to food producing resources and work. Therefore, the Right to Food doesn t make people lazy but busy, enabling them to feed themselves. Would the Right to Food be asking for too much from the government, and advocating for big government? The Right to Food in the context of Human Rights doesn t mean that the state is a super-entrepreneur determining and carrying out economic activities according to its own wisdom. It means the Right to Feed Oneself, which emphasizes dignity and self-reliance, very different from command ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verty, starvation deaths etc. of the people of Kalahandi and Koraput. It opined that if such measures are taken, there can be no doubt that it will alleviate to a great extent the miseries of the people of Kalahandi. It was directed: "...The Natural Calamities Committee shall also keep a watch over the working of the social welfare measures which are being taken and may be taken in future. Shri Pattnayak also does not dispute that if such measures are continued to be taken, it will be a great relief to the people of Kalahandi and Koraput. We hope and trust that in view of the prompt action that has been taken by the Government, soon the miseries of the people of these two districts will be over." 43. Yet again in Shantistar Builders v. Naryan Khimalal Totame [1990] 1 SCC 520, this Court observed: "Basic needs of man have traditionally been accepted to be three - food, clothing and shelter. The right to life is guaranteed in any civilized society. That would take within its sweep the right to food, the right to clothing, the right to decent environment and a reasonable accommodation to live in...": 44. This Court upheld the right to shelter in P.G. Gupta v. State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 1836. ( ii )Right to privacy - Kharak Singh v. State of U.P. AIR 1963 SC 1295; Sharda v. Dharampal JT 2003 (3) SC 399. ( iii )Right to speedy trial - Common Cause, a Registered Society v. Union of India AIR 1997 SC 1539. ( iv )Right to prisoners to interview - Smt. Prabha Dutt v. Union of India AIR 1982 SC 6. ( v )Right to a fair trial - Police Commissioner, Delhi v. Registrar, Delhi High Court AIR 1997 SC 95. ( vi )Right against torture and custodial violence - D.K. Basu v. State of West Bengal AIR 1997 SC 10. ( vii )Right to free legal aid - State of Maharashtra v. Manubhai Pragaji Vashi AIR 1996 SC 1. ( viii )Right to primary education - Unnikrishnan v. State of A.P. [1993] 1 SCC 645; T.M.A. Pai Foundation v. State of Karnataka [2002] 8 SCC 481. ( ix )Right to health and medical care - Consumer Education Research Centre v. Union of India AIR 1995 SC 922; State of Punjab v. M.S. Chawla AIR 1997 SC 125. ( x )Right to pollution-free environment - M.C. Mehta v. Union of India AIR 1987 SC 965. ( xi )Right to Safe drinking water - AP Pollution Control Board v. M.V. Nayudu AIR 1999 SC 822. ( xii )Sexual haras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such interpretative changes has recently found favour with a Division Bench of this Court in State of Maharashtra v. Dr. Praful B. Desai JT 2003 (3) SC 382: "13. One needs to set out the approach which a court must adopt in deciding such questions. It must be remembered that the first duty of the court is to do justice. As has been held by this Court in the case of Shri Krishna Gobe v. State of Maharashtra [1973] 4 SCC 23 courts must endeavour to find the truth. It has been held that there would be failure of justice not only by an unjust conviction but also by acquittal of the guilty for unjustified failure to produce available evidence. Of course the rights of the accused have to be kept in mind and safeguarded, but they should not be over emphasized to the extent of forgetting that the victims also have rights. 14. It must also be remembered that the Criminal Procedure Code is an ongoing statute. The principles of interpreting an ongoing statute have been very succinctly set out by the leading jurist Francis Bennion in his commentaries titled "Statutory Interpretation", 2nd Edition page 617: "It is presumed the Parliament intends the court to apply to an ongoing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore constantly be on the move adapting itself to the fast changing society and not lag behind." 51. The liability of the shareholders or even a third party in a given case would depend upon the nature of the situation and the extent of the statute covering the same. Participation in the functioning of a company has led to an independent liability by the secured creditors under the Comprehensive Environment Response Compensation and Liability Act, if its involvement with the management of the facility is sufficiently broad to support the inference that it could affect hazardous waste disposal decisions; although it was not currently an owner or operation of the facility within the meaning thereof in United States v. Fleet Factors Corpn. 20 ELR 20832. Thus a liability can be fastened both upon the owner as also the operator of the company under certain situations. 52. The right development in the developing countries is itself a human right. The same has been made a part of WTO and GATT. In The World Trade Organisation, Law, Practice, and Policy (Oxford) by Matusushita Schoenbaum and Mauroidis at page 389, it is stated: "The United Nations has proclaimed the existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld entail heavy expenditure which the Boards of different States would not be able to bear. We do not find any correlation between the two. Financial difficulties of the institution cannot be above fundamental right of a citizen . If the Boards have been entrusted with the responsibility of supervising and administering the Wakf then it is their duty to harness resources to pay those persons who perform the most important duty namely of leading community prayer in a mosque the very purpose for which it is created." [Emphasis supplied] 55. In State of H.P. v. H.P. State Recognised Aided Schools Managing Committees [1995] 4 SCC 507, it was opined: "16. The constitutional mandate to the State, as upheld by this Court in J.P. Unni Krishnan v. State of A.P. 1993 (1) SCC 645 to provide free education to the children up to the age of fourteen - cannot be permitted to be circumvented on the ground of lack of economic capacity or financial incapacity." (p. 514) 56. However before we issue any direction, we may state that by no stretch of imagination, the liability of the State of Bihar can be shifted to the Union of India. Only because the Union of India allegedly is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vicariously liable to pay salaries/remunerations of the employees of the public sector undertakings or the Government companies in all situations. We, as explained hereinbefore, only say that the State cannot escape its liability when a human rights problem of such magnitude involving the starvation deaths and/or suicide by the employees has taken place by reason of non-payment of salary to the employees of Public Sector Undertaking for such a long time. We are not issuing any direction as against the State of Jharkhand as no step had admittedly been taken by the Central Government in terms of section 65 of the State Reorganisation Act an furthermore as only four public sector undertakings have been transferred to the State of Jharkhand in respect of whereof the petitioner does not make any grievance. 62. In the peculiar facts and circumstance of this case in our opinion, interest of justice shall be met, if the following interim directions are issued for the present: 1.The High Court may strive to dispose of all liquidation proceedings in respect of the Government companies owned and controlled by the State of Bihar as expeditiously as possible. For the said purpose and/or p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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