State finance firms not liable to pay PSU staff wages: SC

The Supreme Court has ruled that a state financial corporation is not liable to pay wages to the workers of a sick company in which it has shares. The liability is entirely that of the failed company, the court said, setting aside a judgment of the Punjab and Haryana High Court.

In this case, the Punjab State Industrial Development Corporation Ltd promoted Punjab National Fertiliser and Chemicals Ltd and held 13 per cent of its shares.

The company became sick and the high court's company judge ordered its winding up. The workers were not paid wages. They approached the chief minister, who requested the corporation to raise funds to pay arrears to the workers. The workers moved the company judge of the high court seeking a direction in terms of the chief minister's note.

The judge asked the corporation to release the funds.

The corporation moved the Supreme Court and argued that it was in financial difficulties and the high court could not pass such an order based on the chief minister's request.

The Supreme Court ruled that the state corporation could not be made liable for dues of the company in liquidation. The company's liabilities could not be fastened on an independent corporation. The sick company was among a hundred firms promoted by the state corporation and they were all separate legal entities, the court said.

The Supreme Court further asserted that the chief minister's note had no legal force. It was only a suggestion and not a government order.

The court, however, asked the state government to consider "sympathetically" whether it could provide some relief to the workers according to the suggestion of the chief minister.