M J Antony: Ending disinvestment's labour pains

OUT OF COURT

The Supreme Court settles some of the most frequent objections raised by the employees of PSUs being privatised.

The legal challenge in the disinvestment of sick government companies has come mainly from the employees of such units. While opposition politicians and assorted dissenters use public forums, the employees have moved the Supreme Court at least twice against major disinvestment initiatives of the central government. They raised constitutional objections to privatisation. However, the Supreme Court has examined all of them and rejected them. Last week's judgement in All India ITDC Workers' Union vs ITDC is a significant sequel to the Balco judgement delivered in 2002.

In this case, the government advertised its intention to sell outright six hotels. One of them was Hotel Agra Ashok. Its property was demerged in the name of a new company, Hotel Yamuna View Private Ltd, with the approval of the Company Law Board. All the employees were shifted to the new company without any change in their terms of service. Then the new company was transferred to a private owner under a share purchase agreement. The employees raised several objections to the scheme of the government. Since several hotels and other industries are slated to undergo similar treatment, the points raised by the employees and the answers given by the Supreme Court should make the exercise easier in the future, from the legal point of view.

The Supreme Court examined the terms of the transfer and found that the conditions of service of the employees were not in any way less favourable than the existing ones. Moreover, it emphasised that the employees of a company registered under the Companies Act did not have any vested right to continue to enjoy the status of the employee of an instrumentality of the state.

One major argument of the employees in both the cases was that they should have been at least consulted and their consent was necessary, as the companies were under government control. The answer given by the court is that government employees have no absolute right under Articles 14 (equality), 21 (right to life) and 311 (service conditions) of the Constitution and the government can even abolish posts. In the case of ITDC workers, they are not government servants and as they are merely employees of a public sector undertaking. So their rights are of a lesser magnitude.

In the Balco judgement, the court had elaborated on this aspect and said that though the workers may have an interest in the matter as privatisation might affect their rights, it should be taken as an incidence of service. If the employer has taken an honest decision, not contrary to law, the employee cannot challenge the decision on the ground of violation of natural justice. It can be done only if the decision is capricious, arbitrary, illegal or uninformed.

The remedy available to the aggrieved employees, even when the decision to disinvest is illegal and contrary to the laws and the Constitution, is to challenge it after the event, not before the decision, according to both the judgements.

Another aspect of the matter is that the government could have run the industry departmentally or in any other form. It chose to form a company and became a shareholder. According to the Companies Act, it can transfer its shares to another company. The employees are presumed to have accepted the right of the directors and shareholders to conduct the affairs of the company in accordance with law.

The ITDC workers raised another objection regarding the selective offer of the voluntary retirement scheme. VRS has been offered to employees of several other government hotels in the red. The staff of the Agra hotel was not given the choice. This argument was also rejected by the Supreme Court. The new management is not bound to make the offer as such schemes are floated only when a company retrenches its regular employees. If the new company is willing to continue with the employees on the same terms and conditions, the employees cannot compel it to introduce the VRS scheme.

Both these judgements were on issues which agitated the public before 2002. The situation seems to have changed to a great extent. One indication is given in the present judgement itself. It notes that all the employees who moved the court then have resigned their jobs and joined other services. The verdict has thus become academic for them as there are more job opportunities now. If the disinvestment scheme is transparent and implemented fairly and equitably, there should be no further challenge to it in the courts. All possible arguments from the employees seem to have been answered by the Supreme Court.