This Case Commentary is written by Harapriya sahoo, a Second-Year Law Student of SOA National Institute of Law, Odisha

Case Title: AK Bindal vs Union of India

Citation: (2003) 5 SCC 163

Name of the Court, Name of the Judges, and Name of Parties Involved Court: Supreme Court of India

Judges: Chief Justice V.N. Khare, Justice S.B. Sinha, and Justice A.R. Lakshmanan Parties Involved:

Petitioner: Dr. A.K. Bindal and other similarly situated retired employees of the Fertilizer Corporation of India (FCI)

Respondent: Union of India and others

Abstract

The rights of workers in publicly traded companies that generate losses are the subject of a notable Supreme Court decision from 2003 called AK Bindal & Anr. v. Union of India (PSUs). The petitioners, who were workers at Hindustan Fertilizers Corporation Ltd., claimed that their rights under Articles 14 and 21 of the Indian Constitution had been infringed and asked for pay adjustments and benefits comparable to those in profit-making PSUs. The Court denied the petition, ruling that there was no breach of basic rights and that wage discrepancies were justified by the financial burden of a sick PSU. The ruling is indicative of the judiciary's acknowledgment of the need for fiscal restraint following India's economic liberalization as well as the realities of the economy.

Introduction

The Supreme Court of India rendered a major ruling in the case of A.K. Bindal & Anr. Versus Union of India & Ors., which addressed problems of industrial policy, economic liberalization, and workers' rights regarding public sector undertakings (PSUs). The main issues raised in this case were the claims of employees and officials for increased pay and other benefits after a public sector company underwent financial reorganization, especially while the company was about to go out of business owing to financial insolvency.

The case presents significant issues on how the government should manage financially challenging public sector projects while maintaining the rights of workers, especially in light of India's post-1991 economic liberalization.

The fact of the case

The public sector company Hindustan Fertilizers Corporation Ltd. (HFCL)[1], which had been deemed sick by the Board for Industrial and Financial Reconstruction (BIFR) in 1992, was the subject of grievances submitted by workers and employees. The laborers and staff at HFCL asserted their right to increased pay and other perks that were provided to workers at other PSUs. However HFCL was not profitable, and the government made the decision not to give more funding for readjusting wages or offering benefits to its workers.

The petitioners contended that because HFCL employees were public servants and the denial of these benefits amounted to a violation of Article 14 (Right to Equality) and Article 21 (Right to Life) of the Indian Constitution, they should have been entitled to the same benefits as workers of other PSUs regardless of HFCL's financial situation.

Issues before the Supreme Court

The Supreme Court had several important matters to decide:

1. If HFCL, a financially troubled PSU, had workers, could they be entitled to wage adjustments and other benefits comparable to those received by staff at other, profitable PSUs?
2. Whether the petitioners' fundamental rights under Articles 14 and 21 of the Constitution were violated by the denial of wage revision and arrears to them.
3. Whether the government had a legal or constitutional duty to support financially failing PSUs so that their workers would be taken care of.

Arguments before the court

Petitioner’s Argument[2]

The petitioners, speaking for the officers and staff of HFCL, presented several important points of contention:
1. Right to Parity in Pay and Benefits: The petitioners contended that the workers at HFCL should be granted the same benefits and pay scale adjustments as those employed by profit-making PSUs, even in light of the company's ill condition. They argued that it was discriminatory and against their rights under Articles 14 and 21 of the Constitution to refuse them such privileges.

2. Legitimate Expectation: They went on to say that workers had a right to anticipate that their pay would be adjusted regularly in compliance with government regulations, given previous practices. If these expectations are not met, the employees will be treated unfairly.

3. Violation of Fundamental Rights: The petitioners said that the refusal to pay salary adjustments and arrears constituted a violation of their Article 14 right to equality and that their Article 21 right to life and dignity was violated by their inability to obtain income stability.

The employees contended that in spite of the financial difficulties faced by the corporation, the government ought to exhibit compassion towards the workers who had dedicated decades of service to the organization and were now being deprived of fundamental financial benefits.

Respondent’s Arguments

The following reasons were put forth by the respondents, the Union of India and HFCL:

1. Economic Viability and Public Interest: According to the respondents, HFCL was not commercially viable as BIFR had deemed it unhealthy. The public interest in preserving budgetary restraint and guaranteeing effective resource allocation meant that the government was ill-equipped to supply extra funding for pay adjustments and perks.

2. No Violation of Rights: They argued that Articles 14 and 21's fundamental rights for employees had not been violated. Austerity measures were necessary due to the company's financial state, and it was not reasonable to expect the government to offer employees in loss-making companies the same perks as those in profit-making PSUs.

3. Economic Realities Justify Distinction: According to the respondents, there are sound economic reasons for differentiating between workers in profit-making and loss-making PSUs. Wage increases would worsen the financial situation of loss-making companies like HFCL, but employees at profit-making enterprises may anticipate greater perks since funds are available.

4. Doctrine of Legitimate Expectation Not Applicable: The respondents further argued that the prevailing circumstances precluded the use of the doctrine of legitimate expectation since HFCL's financial state made it evident that pay modifications were not guaranteed.

Related provisions:

Several Indian Constitutional provisions were cited in AK Bindal & Anr. v. Union of India (2003) to bolster the petitioners' arguments and the Court's rationale. The following are the main sections mentioned:

Article 14 (Right to Equality): The petitioners contended that since workers at other profit-making PSUs were getting greater wages, it was against their right to equality to refuse them salary increases. Nonetheless, the Court determined that there was no breach of Article 14 and that the differences in wealth between PSUs that made profits and those that lost money deserved different treatment.

Right to Life under Article 21: The petitioners argued that their right to life and dignity under Article 21 had been violated by their stagnant earnings. Nevertheless, the Court dismissed this argument, noting that although Article 21 guarantees the right to subsistence, it does not ensure wage parity under various economic circumstances. The PSU's financial standing was a relevant consideration when deciding on employee benefits.

The Court finally struck a balance between workers' rights and economic realities, with these constitutional provisions serving as the major legal grounds in the case.

Judgment[3]

The Union of India and HFCL's arguments were upheld by the Supreme Court, which denied the petition. The following observations were made by the Court:

1. No Violation of Article 14: The Court determined that it was reasonable and justifiable to distinguish between employees of profit-making and loss-making PSUs. The Court stressed that while addressing salary revisions in public sector firms, financial viability and economic reality had to be taken into account. Due to the fundamentally different financial circumstances of the two firms, HFCL employees could not be considered on an equal footing with employees of profit-making PSUs.

2. No Violation of Article 21: The Court dismissed the contention that the Article 21 right to life and dignity was violated by refusing wage modifications. The Court ruled that although Article 21 guarantees the right to subsistence, it does not extend to ensuring wage parity between workers in disparate economic situations.

3. Financial constraints and the public interest: The Court acknowledged that the government was not required to keep funding failing PSUs, particularly in cases where doing so would negatively impact the public interest at large by directing limited resources in other directions. The Court recognized that to maintain fiscal restraint, the government had to make difficult economic decisions and that HFCL's sound financial standing supported the decision to refuse wage modifications.

4. Legitimate Expectation theory: The petitioner's reliance on the legitimate expectation theory was similarly rejected by the court. It was decided that where the company's financial status made it abundantly evident that salary adjustments were not practical, then reasonable expectations could not be raised. When the business was close to going out of business, the workers had no legally binding expectation of pay increases.

Conclusion

In the context of public sector businesses, striking a balance between workers' rights and economic realities can be challenging, as demonstrated by the landmark ruling in the A.K. Bindal case. The Supreme Court's practical approach in this case is indicative of the government's and the judiciary's shifting objectives in the post-liberalization age, where protecting loss-making PSUs has been superseded by economic efficiency and fiscal restraint.

The ruling also emphasizes the necessity of further safeguards to safeguard the rights of employees in PSUs experiencing financial difficulties, especially when the government is unable to offer financial support. In the future, governments might have to think of different ways to preserve the financial stability of public sector businesses while making sure that employees are not abandoned in the event that their firms become insolvent.

REFERENCES

[1]Indiankanoon, A.K. Bindal & Anr vs Union Of India & Ors on 25 April, 2003 (indiankanoon.org) , (last visited on 23rd September 2024)

[2] CaseMine, A.K Bindal And Another v. Union Of India And Others | Supreme Court Of India | Judgment | Law | CaseMine , (last visited on September 26, 2024)

[3]Lawfull talks, #CaseBrief: A.K. Bindal & Anr vs Union Of India & Ors (lawfultalks.com) , (last visited on 23rd September 2024)