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BALCO Employees Union (Regd..) v. Union of India & Ors. AIR 2002 SC 350

This article is written by Tisha Agrawal. The article deals with the case of BALCO employees Union vs. Union of India, with reference to its facts, issues raised, arguments made, judgement, precedents referred, and the judgements which relied on this case as well as the concerned Articles of the Constitution of India. 

Introduction

The case of BALCO Employees Union v. Union of India (2002) is a landmark judgement in the realm of Constitutional Law and Labour Rights. The case revolves around the decision of the Government of India to disinvest in M/S Bharat Aluminium Company Limited. This disinvestment led to an unrest amongst the workers of the company, following which they challenged this decision in the following case. It was the issue of the case that the decision of the Government of India will cause harm and hamper the legal and social interests of the employees of the company. 

The judgement focused on the implementation of administrative policies and the intervention of courts in such decisions. The decision of the Supreme Court throws light upon the discretion and power of the Government, along with the broader perspective of natural rights and their applicability. The need to discourage frivolous Public Interest Litigation (PIL) was also emphasised. The decision was delivered in favour of the Government, but it paved a way for many litigious issues which arose ahead on similar factual lines. 

Details of the case

  • Case name: BALCO employees Union v. Union of India
  • Equivalent Citation: AIR 2002 SC 350 
  • Important provisions: Articles 14 and 15 of the Constitution of India
  • Bench: B.N. Kirpal, Shivaraj V. Patil, P. Venkatrama Reddi, JJ. 
  • Petitioner/Appellant: BALCO Employees Union
  • Respondents: Union of India
  • Judgement date: 10th December, 2001

Facts of the case 

The Company in question, M/S Bharat Aluminium Company Ltd. (BALCO) was incorporated in 1965 under the Companies Act, 1956, as a Government of India undertaking. The company was engaged in manufacturing aluminium and had plants at Korba (Chattisgarh) and Bidhanbag (West Bengal). During the 1990s, Central Government had planned to disinvest in some of the Public Sector Undertakings. Subsequently, in 1996, the Ministry of Industry (Department of Public Enterprises) Government of India constituted a commission to look after the disinvestments in Public Sector. This commission was formed for three years. The commission was an independent, non-statutory advisory body. 

The commission was constituted with an objective of reviewing Government’s investments and plan the future initiatives, which is viable for the economy. It was established with the view that the commission will also consider the interests of the stakeholders, workers, and consumers while advising any disinvestment. The commission was merely an advisory body, and the final decision-making power was still vested with the Government of India. 

In 1997, the commission advised that BALCO needed to be privatised and categorised as non-core group industry. The commission recommended that the Government shall immediately disinvest its holding in the company by offering a significant share of 40% of the equity to a strategic partner. It was further recommended by the chairman of the commission that offer 51% or more to the strategic partner along with the transfer of management. Consequently, the whole strategic sale was arranged, and the highest bidder was approved. 

The decision of the Government of India for the strategic sale was challenged by the employees Union of BALCO by a writ petition in the High Court of Delhi which was disposed off. Consequently, when the process of transferring of shares was initiated, a number of other writ petitions were filed in the Chhattisgarh and Delhi high Courts. All these petitions were then transferred to the Hon’ble Apex Court upon an application made by the Union of India. Hence, the present case was decided by the Supreme Court. 

Issues raised 

The following were the core issues in the present case before the Court : – 

  1. Whether the decision of the Government of India to disinvest in BALCO was valid?
  2. Whether such a decision is amenable to judicial review, and if so, then to what extent? 

Arguments of the parties

Arguments on behalf of the petitioners

It was argued by the petitioners that the workmen are seriously affected by the decision of the Government of India to disinvest 51% of the shares in BALCO and turn it into a private corporation. Before the disinvestment, BALCO was a state within the meaning of Article 12 of the Constitution of India. The workmen have lost their rights and protection as guaranteed by Article 14 and 16 of the Constitution of India. Before making such decision, the workers ought have been heard. A consultation with the workers was necessary. The Petitioners placed reliance on Ajay Hasia v. Khalid Mujin Sehravardi (1980) and Central Inland Water Transportation Ltd v. Brojo Ganguly (1986). In these cases, rights of the workers were emphasised and discussed by the Court. It was observed that the corporation has to necessarily consult with the workers if any is action is against their interests and social justice. 

It was further contended that taking away the protection under Article 14 and 16 has civil consequence, therefore the workmen had a right to be heard. The rights and benefits were both procedural and substantive. It would also take away the right to pension of the workers, including the principle that there can be no discrimination in granting or withholding pension. Reliance was placed on Bharat Petroleum Management Staff Pensioners v. Bharat Petroleum Corp. Ltd. (1988). 

It was also submitted before the court that the implementation of the disinvestments has failed to achieve a comprehensive package of socio-political reforms. The decision making process has not been fair, just, and reasonable.  The Government shall not have taken such a crucial decision without consulting with the workers and giving them a fair opportunity to put forth their contentions. The Government of India has not considered the repercussions of its decision accurately. 

Arguments on behalf of the respondents

It was submitted by the respondents that, since 1990s, Government has done disinvestments in various companies. There are majorly three reasons behind the disinvestment decisions and these are: – 

  • The rate of returns of government enterprises have been low despite multiple efforts.
  • The centre, or the states, has no resources to sustain enterprises that are not capable of standing on their own. There is an environment of intense competition.
  • Despite efforts, the government has not been able to change the working culture of government enterprises. 

Because of the above-mentioned reasons, the strongest of the enterprises are sinking, and it has become more difficult for the government to retain them. The technological change has also become faster and the government cannot keep up with it anymore. The challenge for the petitioners is untenable. 

It was further submitted that the advisability of the economic policies of the government are not subject to judicial review. The courts cannot consider the relative merits of the various economic policies. Reliance was placed on Rustom Cavasjee Cooper v. Union of India (1970) wherein the court said that it is not for the courts to consider the relative merits of the different political theories or economic policies. The court cannot take action on an appeal over the policy of the parliament in enacting a law. Similarly, it was argued that the courts cannot examine the policy of disinvestment and its desirability. Judicial interference with the administrative authority is not meticulous. The process of disinvestment is a policy decision and complex economic factors are at stake. The courts have consistently refrained from interfering with such economic decisions. The same shall be followed in the present case. 

There is no principle of Natural Justice that requires prior notice to be given to the workers who are affected by an economic policy. The government has a right to transfer its shares as a shareholder when an industry is registered under the Companies Act, 1956. The persons joining any such company also accept the right of the directors and the shareholders to conduct the affairs of the company as per law. 

Judgement of the case

The Hon’ble Apex Court held that the disinvestments by the Government were not invalid. In a democratic setup, it is the discretion of each government to follow its own policies. Such policies might affect and cause some adverse changes in the system, but until and unless any illegality is being committed or if it is contrary to law or mala fide in nature, a decision per se cannot be interfered with the court. It does not fall within the ambit of judicial review. 

It can only be reviewed if it is demonstrated that the policy is contrary to any statutory provisions or the Constitution of India. It is not up to the courts to consider the relative merits of the policies. For analysing the correctness of any policy, there is the Parliament. There is no substance in the arguments of the petitioner that the decision to disinvest was arbitrary or capricious. It is a part of the service of an employee to accept the decisions of the employer. The principles of Natural Justice have no role to play here. However, while taking such decisions, an employer is expected to keep in mind the interests of the employees of the company. But this does not entitle the employees to demand a right of hearing or consultation prior to any such decision. The policies cannot remain static; they ought to change with changing times. 

The Court also rejected the contentions about the lack of transparency by the Government. It was stated that transparency does not mean conducting government business while sitting on the crossroads in public. It simply means that the manner in which a decision is being taken shall be made known, and the persons who decide are not arbitrary. In the present case, it is evident that the decision has been taken in a fair and just manner. The offer of the highest bidder was accepted. All the allegations made by the petitioners lack any kind of foundation or reasoning. 

Another contention before the court was whether the financial or economic decisions taken by the Government could be challenged through a Public Interest Litigation. The Hon’ble Court, while rejecting this claim observed that PIL was brought into the judicial process for litigation in the interest of the public and nothing more than that. Whenever the courts have interfered while entertaining PIL, the reason has mainly been the violation of Article 21 or of human rights. A PIL is entertained only when the litigation is initiated for the benefit of the poor and in societal interests. It is not a weapon to challenge the financial or economic decisions that are taken by the Government. The decision of the government to disinvest is purely an administrative decision that relates to the economic policy of the State. Any challenge to such action cannot fall within the parameters of Public Interest Litigation. 

Judicial interference is available when there is an injury to the public because of the actions of the Government. In the present case, it is not applicable. Court will interfere only when there is a clear violation of constitutional or statutory provisions. 

State Government had also claimed that they were not consulted in the entire process of disinvestment. The court observed that it is not possible that the State Government was oblivious to this fact during the entire proceedings. The facts of the case clearly show that wide publicity was given at various stages of this disinvestment. It was after wide publicity that the Global Advisor was appointed. Therefore, all the contentions of the Workers Union and the State Government are rejected, and the disinvestment is held valid. 

Precedents referred

While analysing the arguments put forth by the Union and the State Government, the Hon’ble Supreme Court referred to many significant judgements.  

The Hon’ble Court was reluctant to decide the matter of economic policy. In the case of Bhavesh Parish and Ors. v. Union of India and Ors. (2000), it was stated that the services rendered by certain sectors of the Indian economy could not be belittled by the courts. It is an accepted principle that the courts shall not interfere in matters of the legislature. It shall be best left to the expertise and wisdom of the people dealing with the subject. 

In Narmada Bachao Andolan v. Union of India and Ors. (2000), it was held that the courts, in exercise of their jurisdiction, will not transgress into the field of policy decisions. The court has the duty to see that, in the making of such decision, no law is violated but only to the extent permissible under the Constitution.

In M.P. Oil extraction v. State of M.P. and ors. (1997), it was stated that unless the policy in question is absolutely capricious, is not supported by any reason and is arbitrary in nature, then only courts can intervene. Otherwise, the courts cannot step in or come into conflict with the statutory provisions. 

In R.K. Garg v. Union of India (1981), it was held that courts cannot express their opinion as to whether, at a certain juncture, a national policy should have been adopted or not. There may be views and opinions shared by the citizens of the country, but that has to be sorted out in Parliament only. The courts cannot review and examine whether the said policy should have been adopted. When there is a prima facie constitutional bar on such a policy, then courts can, of course, decide. 

In Premium Granites and Anr. v. State of Tamil Nadu (1994), it was observed that it is not the domain of the court to embark upon an unchartered ocean of public policy. Such power is with the executive and legislative authorities, as the case may be. The only function of the court is to see that any lawful authority is not being abused. A public body must not exceed or abuse its powers and shall remain within the limits of the authority committed to it, as held in Peerless General Finance and Investment and Co. v. Reserve Bank of India (1992). 

Further, in the case of State of Haryana v. Shri Des Raj Sanagar and Anr. (1975), it was held that there is no principle of natural justice that grants the workers a right to prior notice. The existence of rights under Articles 14 and 16 does not have the effect of vetoing the Government’s right to disinvest. Employees cannot claim any right to continuous consultation at each stage of disinvestment. 

In the case of National Textile Workers Union v. P.R. Ramakrishnan (1983), it was held by Justice Bhagwati that it is fair and sensible to consult the labours when the change of management is happening; however, in law there is no such obligation. As a result, the employees continue to be under the employment of the company; only the management has changed, but it does not amount to a change in employment. 

Analysis of the judgement in BALCO case

After two decades of judgement, the case still stands as a significant milestone in the judicial process. Besides the issue that arose between the Employees Union and the Government of India, the major controversy revolved around the Union’s decision to disinvest in the company, BALCO. The decision was also challenged by the state government on the grounds of a lack of transparency. Therefore, the case had both political and legal challenges. The case primarily revolved around the rights of the employees and their protection under Articles 14 and 16 of the Constitution of India. 

The Court declined all the contentions and very categorically clarified that policy decisions are purely administrative actions and courts cannot interfere in such decisions. If the court started interfering in every matter of the Government, then it would hinder the smooth functioning of the different institutions in a democracy. Therefore, the court actually did not indulge into deciding the merits of the disinvestment policy. The court evaded deciding the correctness of the policy by addressing it as an administrative policy. 

After the judgement of BALCO, disinvestments of HPCL and BPCL were also approved based on BALCO, whereas the merits of disinvestments were never assessed in the BALCO case. We can say that it set up the wrong precedent for the following cases. The Court also narrowed down the extent and ambit of courts while assessing matters of economic or financial policy. The Court stated that it is not within the domain of the courts or the scope of judicial review. The courts are not inclined to strike down a particular policy at the behest of the petitioners. It was also held that courts cannot grant relief by way of injunction or stay with respect to public projects and schemes. It can only happen when the Court is fully satisfied without any reasonable doubt that such a policy might hamper public interests. The court seems to have followed the case of Narmada Bachao Andolan, wherein interim reliefs caused great hindrances in the completion of the project and thus millions of rupees were lost. The court also directed that PILs should not be used for frivolous petitions. It is important that PILs are kept sacrosanct by not abusing them. 

It is important that the workers and the union understand the contours of labour rights when a policy decision is made. A labourer cannot claim a right on the basis of natural rights or justice. Even a government servant having protection under Articles 14 and 16 of the Constitution does not entitle him to an absolute right to remain in service. Therefore, the decision to change the control and management of the company from Government to a private entity is the sole prerogative of the Government. It might come as a strong judgement by the Court, but it was a remarkable step towards reducing PILs in the Court on every dispute. 

Judgements for which this case was relied on

There are a catena of judicial pronouncements that have relied upon the BALCO decision for its tremendous views. Some of them are as follows: – 

In 2005, Hon’ble Supreme Court, while deciding the case of R and M Trust v. Koramangala Residents Vigilance Group and Ors. (2005), relied upon the BALCO judgement and held that Public Interest Litigation is no doubt a very useful handle for redressing the grievances of the people, but it has also been abused by some interested persons and has brought a bad name. The courts should not exercise their jurisdiction lightly but should exercise it in very light and rare cases. PIL is not a pill or a panacea for all wrongs. 

In 2006, in the case of All India ITDC Workers Union and Ors. v. ITDC and Ors. (2006), regarding disinvestment, the Court referred to the case of BALCO and held that the apprehension of the employees of IDTC is baseless and is liable to be rejected as the safeguards regarding the service conditions of the employees have been duly provided in the transfer document. It was the contention of the workers that the decision of disinvestment hampered their interests and rights. The employees of the company registered under the Companies Act do not have any right to continue to enjoy the status of an employee of an instrumentality of the state. 

In National South Indian River Interlinking Agriculturist Association v. The Government of Tamil Nadu and Ors. (2017), Madras High Court relied on BALCO case and held that the fact that fair, just and equitable procedure has not been followed in formulating the policy is a matter falling within the purview of judicial review under the writ jurisdiction. Wisdom and advisability of economic policies are ordinarily not amenable to judicial review. 

In the case of the Kerala Bar Hotels Association and Ors. v. State of Kerala and Ors. (2015), the Hon’ble Supreme Court held that the policy in question does not suffer from any arbitrariness. In a democracy, it is the prerogative of the elected government to implement and follow its own policy, even if it somehow affects the vested interests of the people. Reliance was placed on the BALCO case. 

In the case of Parisons Agrotech Ltd. and Ors. v. Union of India (2015),  it was observed that unless any illegality is committed in the execution of a certain policy or if the same is contrary to law or mala fide, then such a decision cannot be inferred as violation of Articles 12, 14 and 18 of the Indian Constitution. 

In Shivam v. State of U.P. (2021), the Hon’ble Allahabad High Court observed that whenever the courts have interfered or given directions while entertaining a PIL, it has only been when there were violations of Article 21, or when the case is filed for the benefit of the poor sections of society. Public Interest Litigation is not meant to be used as a weapon. 

Conclusion

The case of BALCO Employees Union v. Union of India remains a pivotal juncture in Indian jurisprudence. It particularly concerns managing the delicate balance between administrative decisions, labour rights and judicial review. The judgement significantly sheds light upon the nature of judicial review and Public Interest Litigations. The case underscores the judiciary’s reluctance to intervene in matters of policy, which shall be taken by experts. The principle is yet again affirmed that the policy decisions shall primarily fall within the purview of the executive and legislative branches rather than the courts. The decision upholds the discretion of the Government in taking policy decisions and deciding what is right and what is wrong for the economic growth of the nation. Such actions would not be under the purview of the judiciary until and unless they were completely arbitrary or mala fide

Along with this, the judgement also elucidates the importance of the principles of natural justice but clarifies that they do not apply to a case like this. Prior consultation with the workers is not a mandate created by law; therefore, the workers cannot claim the right to be heard or consulted. The government has the prerogative to transfer its shares in public sector undertakings. The judgement might be criticised for the limiting nature of the judicial scope, but it has streamlined the legal process by discouraging such frivolous petitions. 

Ultimately, the case highlights the intricacies between law and policy making decisions. In a democratic set-up it is necessary that each institution be allowed to function independently without any intervention from other institutions.

Frequently Asked Questions (FAQs)

What are Public Sector Undertakings? 

Public Sector undertakings are government owned companies in India. At least 51% of the share capital is owned by the Government. There are many public sector undertakings even today after the government undertook many disinvestments. 

What are disinvestments? 

Disinvestment is the process by which the government sells or liquidates any assets or subsidiaries. It also means reducing capital expenditures. Disinvestment is carried out for a number of reasons, either political, economical or social. 

What are the principles of natural Justice? 

The two principles of natural justice are the right to be heard and the right to a fair trial. These principles aim to provide a fair, just and reasonable verdict to all. 

What is judicial review? 

Judicial review in India is a process by which the Supreme Court and the High Courts can examine executive or legislative actions that are inconsistent with the Indian Constitution. 

References

  • https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1087593 

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