M J Antony: Wage bill of sick PSUs

OUT OF COURT

The Supreme Court has absolved the government of the liability to pay salaries to PSU employees.

There are many government undertakings that are now unable to pay the wages of their workers. Suicides and starvation among them go unreported unlike in the case of indebted farmers. Several employees of such sick companies have recently knocked at the doors of high courts and the Supreme Court. The response of the judiciary has been rather equivocal. High-sounding constitutional sentiments have not matched the relief actually granted to the employees.

Two decisions of the recent months illustrate the dilemma faced by the judiciary and the conflicting views within. In Devendra Kumar Singh vs Administrator, the employee had not been paid his salary for more than 10 years. There was no dispute over his entitlement to the salary from the Bihar Co-operative Marketing Undertaking Ltd. The establishment just did not have the funds for its day-to-day expenses, let alone the huge wage bill of its employees.

The response of the Patna High Court to his writ petition was that "such institution/organisation must not exist. They must be immediately closed down by resorting to winding up proceedings in the light of the full bench decision of this court in Mani Kant Pathak vs State of Bihar." The high court then ordered that the part-time administrator of the undertaking shall pay the salary and the cost of the litigation to the employee, failing which he shall not draw his salary and other allowances.

The government undertaking appealed to the division bench of the high court, where the tide turned against the earlier order by the single judge bench. It criticised the earlier bench, observing that it was for the government to decide whether the undertaking should be wound up or not. Also, "no futile writ can be issued and thus the direction for payment of salary by the administrator is set aside. When the fund will be available, the salary of the employees shall be paid."

The employee then moved the Supreme Court, which took yet another view of the matter. According to the apex court, the single judge was right and the division bench was wrong. It said that if the state was not in a position to comply with its constitutional obligations, it must try to find out a way to take appropriate steps, but the employees could not be deprived of their legal right to obtain salary. However, the Supreme Court emphasised that it could not pass an order to the state to pay the salary as it had no "requisite materials to pass a general direction." Thus, the judicial row yielded nothing to the employees.

The Supreme Court judgement in State of UP vs Uptron Employees Union was another case of judicial nit-picking, with little relief to the suffering workers. The Board of Industrial & Financial Reconstruction (BIFR) directed the state government to make on account payment of wages to the workers since 1998 on humanitarian grounds. The government moved the Allahabad and Delhi high courts against the BIFR order, but both the high courts dismissed the state's petitions. Therefore, it moved the Supreme Court.

The fortunes of the employees turned worse again, when the Supreme Court held that the BIFR had no authority to direct the sick company to pay wages to the employees. It cited the 2003 judgement in A K Bindal vs Union of India to emphasise that the workers of a sick government company could not claim any legal right to ask for a direction to the government to pay revised pay scales. In the IDPL case of the same year, the Supreme Court reiterated that it was for the sick company to foot the wage bill, and the government could not be asked to meet the additional expenditure on account of the wage bill. Employees of a government company have "absolutely no legal right to claim that the government should pay their salary," the court asserted.

Three years ago, a class action on behalf of the starving employees of public sector undertakings in Bihar and Jharkhand was moved in the Supreme Court and it asked the states to distribute Rs 50 crore to the workers. However, the lengthy judgement did not lay down any firm principles which could guide scores of such cases all over the country. After giving relief to the workers, it said: "However, we hasten to add that we do not intend to lay down a law that the state is directly or vicariously liable to pay the remuneration of the employees...We only say that the state cannot escape its liability when a human rights problem of such magnitude involving starvation deaths and/or suicide has taken place."

In the more labour-affirmative days of the court, it had even tried to revive a closed unit in 1995 by asking the state and central governments to contribute Rs 30 crore each to re-establish Rohtas Industries. The unprecedented experiment of the court to assume direct control over the undertaking failed and the court permitted the revival of the winding up proceedings. Orders passed in all the above cases have now been described as ones "in the peculiar facts and circumstances" of those cases and have no binding value. Thus, almost all doors have been shut on the face of employees of sick government companies.