Holding

Employees of Government companies are not civil servants and have no legal right to compel the Union to fund pay‑scale revisions; acceptance of VRS terminates any claim for retrospective wage enhancement, and non‑revision does not violate Article 21.

Summary

The petitioners, officers of the sick public sector undertakings Fertilizer Corporation of India (FCI) and Hindustan Fertilizer Corporation (HFC), challenged two Government memoranda that denied pay‑scale revision for employees of units referred to BIFR and that provided no budgetary support for such revisions. They argued that the denial violated Articles 13, 14, 21 and 311 of the Constitution and that financial incapacity of the companies could not justify withholding fair wages. The Court held that a Government company is a distinct legal entity from the Union, its employees are not civil servants, and therefore have no entitlement to compel the Government to fund pay revisions. The Court further found that non‑revision of pay does not amount to a violation of Article 21 and that the employees who accepted the Voluntary Retirement Scheme (VRS) have terminated their employer‑employee relationship, precluding any further claim. Consequently, the petitions were dismissed as infructuous. The Court also clarified that the earlier interim orders were ad‑hoc measures and did not create any substantive right to revised salaries.

Issues considered

The legal status of employees of Government companies under the Constitution and whether they are entitled to protection under Article 311.
Whether employees of sick public sector undertakings can claim a right to pay‑scale revision despite the companies' lack of financial capacity.
Whether the denial of pay revision violates fundamental rights under Articles 13, 14 and 21 of the Constitution.
Whether acceptance of a Voluntary Retirement Scheme extinguishes the right to claim retrospective pay revision.
Whether the Government is obligated to provide budgetary support for wage revisions in sick PSUs.

Legislation cited

Companies Act, 1956s. 617, s. 619, s. 620
Industrial Disputes Act
Minimum Wages Act

Subjects

Public sector undertakingsPay revisionVoluntary Retirement SchemeGovernment companiesFinancial capacityArticle 21Article 311Constitutional lawEmployment lawBIFR

Judgment

A A.K. BINDAL AND ANR.
v.
UNION OF INDIA AND ORS.

APRIL 25, 2003

B [S. RAJENDRA BABU AND G.P. MATHUR, JJ.]

Service Law:

Constitution of India, I 950; Articles I 3, 14, 21 and 311:
c
Transfer Petitions-Sick Public Sector Undertakings-Revision of Pay
scale-Issuance of Memorandum by the Central Government not providing
any budgetary support for the wage increase-PSEs generate internal resources
to meet additional expenditure-Issuance of another Memorandum by the
D Board of Public Enterprises clarifYing that revision in pay scale and other
benefits would be subject to revival of PSEs by BIFR-Cha//enge to--
Employees' legal right to revision in pay vis-a-vis financial capacity of the
Government-Held: Generally, financial capacity of the Industry is a germane
consideration for determination of the wage structure ofthe employees-Since
PSEs have been s11ffering heavy losses contin11011s/y, the employees could not
E legitimately claim revision in their pay sea/es-Non-revision of pay-scales
wo11ld not amount to violation of f11ndamenta/ rights under Article 21-
Companies Act-Sections 619 and 620.

Employees of PSEs-Stat11s of-They are not Government Servants-
Hence not entitled to protection afforded 11nder Article 31 I.
F
Employees exercising their option for 'Voluntary Retirement Scheme'
and accepting payment thereof-S11bsequent claim for revision in pay scale-
Justification of-Held: Since the employees accepted VRS witho11t any protest
regarding revision ofpay-scale from back date, there was a complete cessation
of the Jura/ relationship between employer and employee-Hence employees
G cannot claim revision of pay scale.

Words and Phrases:

'Voluntary Retirement Scheme', 'Government Servant', 'Jura!
H relationship between employer and employee', 'Financial capacity of the
928
A.K. llll\D.·\L ». lJ.0.1. 929
!ndus1ry' and 'Golden Handshake '~Meaning of A
Petitioners, employees of two sick Public Sector Undertakings-
Fertilizer. Corporation of India (FCI) and Hindustan Fertilizer Corporation
(HFC), filed writ petitions in the High Court which were transferred to
this Court. They have challenged the Memorandum dated 19.7.1995 issued
by the Government of India that no budgetary support for wage increase B
would be provided to sick PSEs and these Undertakings were directed to
generate their own resources to meet such expenditure, and another
Memorandum dated 19.7.1995 issued by the Department of Public
Enterprises whereby the revision of pay-scales and grant of other benefits
were to be allowed only after revival of the Units of these PSEs by BIFR. C
The questions which arose for consideration were whether the
employees of sick Public Sector Enterprises have any legal right to revision
in pay scales though the PSEs did not have financial capacity and whether
the Government should continuously provide financial support to meet the
additional expenditure due to such revision in pay scales. D

It was contended for the petitioners that employees have right to get
fair and reasonable wage in return for employment and denial of such right
on the ground of uncertainty of existence of the establishment would be
violative of Articles 13 and 14 of the Constitution of India; that it was E
inappropriate to postpone revision of pay scales subject to revival of the
PSEs by B.l.F.R.; that since losses incurred by the PSEs were not directly
attributed to its employees, it would be unreasonable to deny revision by
linking it to profitability; that sickness of PSEs without consideration of
causes of sickness by the Government could be no ground to .iustify denial
of wage revision; that there was a compromise on the issue of pay revision F
and the same was recorded by the High Court and modalities had to be
worked out but due to adjournment of the matter and later transferring it
to the Supreme Court, the compromise could not be implemented; and that
since the emplo)•ees had accepted the VRS under compulsion, there could
not be any waiver of their fundamental right to claim arrears of salary G
for the past period by revision in pay scale.

On behalf of the Union of India, it was submitted that since most of
the employees of the PSEs having opted for VRS and having availed the
benefits without any demur, the relationship of employer and employee had
ceased to exist and they could not agitate for revision in pa)' scale. H
930 SUPREME COl !Jn Rl:l'ORlS 11003 I 3 S.C.R.

A Answcrilig the questions in the negative, the Court

HELD: I.I. The identity of the Government Company remains
distinct from the Government. The Government Company is not identified
with the Union but has been placed under a special system of control and
conferred certain privileges by virtue of the provisions contained in Sections
B 619 and 620 of the Companies Act. Merely because the entire share holding
is owned by the Central Government will not make the incorporated
company as Central Government. It is also equally well settled that the
employees of the Government Company are not civil servants and so are
not entitled to the protection afforded by Article 311 of the Constitution.
C Since employees of Government Companies are not Government servants
they have absolutely no right to claim that Government should pay their
salary or that the additional expenditure incurred on account of revision
of their pay scale should be met by the Government. Being employees of
the companies it is the responsibility of the companies to pay them salary
and if the company is sustaining losses continuously over a period of time
D and does not have the financial capacity to revise or enhance the pay scale,
the petitioners cannot claim any legal right to ask for a direction to the
Central Government to meet the additional expenditure which may be
incurred on account of revision of pay scales. Hence, no infirmity, legal or
constitutional, could be found in the two Office Memoranda.
E 1942-C-F; 943-AI

Hearn Engineering Ma:door Union v. S1a1e of Bihar and Ors., AIR
(1970) SC 82 and Pyare Lal Sharma v. Managing Director,Jammu & Kashmir
Industries Ltd. and Ors., AIR (1989) SC 1854, relied on.

F 1.2. The scope and content of Article 21 of the Constitution of India
has been expanded by judicial decisions. Right to life enshrined in this
Article means something more than survival or animal existence. It would
include the right to live with human dignity. But to hold that mere non-
revision of pay scale would also amount to a violation of the fundamental
G right guaranteed under Article 21 would be stretching it too far and cannot

-
be countenanced. The petitioners have not placed any material on record
to show that the salary which is currently being paid to them is so low that
they arc not able to maintain their living having regard to the 'posts' which
they are holding. 1943-B, C, E, G, HI

H Express Newspapers Ltd. and Ors. v. Union of' India and Ors .. AIR
A.K. BIN DAL v. U.0.1. 931
(1958) SC 578, followed. A
Hindustan Times ltd v. Their Workmen, AIR (1963) SC 1332, relied
on.

State of Maharashlra v. Chandrahhan, AIR (1983) SC 803; People's
Union for Civil liberties v. Union of India, AIR (1982) SC 1473 and Delhi B
Transport Co1poration v. D. T.C. Mazdoor Congress, 11990] Supp. 1 SCR 142,
distinguished.

1.3. The material on record clearly shows that both FCI and H FC
had been suffering heavy losses for the last many years and the Government C
had been giving considerable amounts for meeting the expenses of the
organisation. In such a situation, the employees cannot legitimately claim
that their pay scales should necessarily be revised and enhanced even
though the organisations in which they are working are making continuous
losses and are deeply in red. 1946-H; 947-A]
D
South Malabar Gra111in Bank v. Coordination Commillee of South
Malabar Gram in Bank E111ployees' Union and Soulh Malabar Gram in Bank
Officers' Federation and Ors., 1200114 SCC 101 and All India Regional Rural
Bank Officers Federation and Ors. v, Govern111enl of India and Ors., 1200213
sec 554, distinguished. E
1.4. The Single Judge of the High Court, misunderstood the content
and import of the stand taken in the counter-affidavit and wrongly
proceeded on the basis as if respondent Nos. 3 and 4 had, subject to certain
conditions, agreed to provide revised salary from backdate. In fact no offer
of payment of revised salary had been made yet it was mentioned in the F
order that "the petitioner is prepared to accept the offer of the respondent".
No final order had been passed recording any compromise as the counsel
for respondents wanted to take instructions and the matter was adjourned.
It is also noteworthy that the so called agreement/compromise mentioned
in the order was only on behalf of respondent Nos. 3 and 4 (FCI and HFC)
and there was no compromise or agreement to pay revised salary on behalf G
of the Union of India against whom principal relief was claimed by the
petitioners. The order passed by this Court on 19.4.2000 clearly recorded
that a limited relief to all the employees of the two companies was being
granted purely as ad hoc measure and without prejudice to the rights and
contentions of all concerned. This was reiterated in the subsequent order H
932 SUPREME COURT REPORTS (2003] 3 S.C.R.

A dated 18.8.2000. Factually there being no compromise or settlement on
behalf of respondent nos. 3 and 4 for payment of revised salary as they
had never agreed to do so and the orders passed by this Court on 19.4.2000
and 18.8.2000 having clearly indicated that they were not to come in any
way in the ultimate decision of the case, it can not be held that there was
B any compromise or settlement at any earlier stage which entitled the
petitioners to get revised salary. (951-G, H; 952-A-EI

1.5. Both FCI and HFC had suffered continuous losses. The units of
the companies have already suspended their operations quite some time
back and as on date no unit is functioning nor any production is being
C made. There is also no denial of the fact that the companies have suffered
huge losses and salaries of the employees who were practically doing no
work has been paid by the Government for a considerably long period.
The employees accepted YRS with their eyes open without making any kind
of protest regarding their past rights based upon revision of pay scale from
back date. This is in addition to terminal benefits. The Government was
D conscious about the fact that the pay scales of some of the PSUs had not
been revised with effect from 1.1.1992 and therefore it has provided
adequate compensation in that regard in the second YRS which was
announced for all Central Public Sector Undertakings on 6.11.2001. There
is a considerable amount to be paid to an employee ex-gratia besides the
E terminal benefits in case he opts for voluntary retirement under the Scheme
and his option is accepted. The amount is paid not for doing any work or
rendering any service. It is paid in lieu of the employee himself leaving the
services of the company or the industrial establishment and foregoing all
his claims or rights in the same. It is a package deal of give and take. That
is why in business world it is known as 'Golden Handshake'. The main
F purpose of paying this amount is to bring about a complete cessation of
the jural relationship between the employer and the employee. After the
amount is paid and the employee ceases to be under the employment of
the company or the undertaking, he leaves with all his rights and there is
no question of his again agitating for any kind of his past rights, with his
G erstwhile employer including making any claim with regard to enhancement
of pay scale for an earlier period. If the employee is still permitted to raise
a grievance regarding enhancement of pay scale from a retrospective date,
even after he has opted for Voluntary Retirement Scheme and has accepted
the amount paid to him, the whole purpose of introducing the Scheme
would be totally frustrated. (954-H; 955-D, E; 956-B-El
H
A.K. BINDAL '"· l;.o.I. [MATHUR . .I.] 933
1.6. The petitioners arc officers of the two companies and are mature A
enough to weigh the pros and cons of the options which were available to
them. They could have waited and pursued their claim for revision of pay
scale without opting for YRS. However they, in their wisdom thought that
in the fact situation YRS was a better option available and chose the same.
After having applied for YRS and taken the money it is not open to them B
to contend that they had exercised the option under any kind of compulsion.
1956-F, GI

CIVIL ORIGINAL JURISDICTION : Transferred Case (C) No. 8 of

-
2000.
WITH c
T.C. (C) Nos. 2, 4. 3, 9, 10, 11, 12, 13, 15, 35/2000 and T.P.(C) No.
326 of 2002.

Mukul Rohatgi, Additional Solicitor General, R. Venkatramani, L.
Nageswara Rao, N.N. Goswami, A. Bhattacharya, Sanjoy Kr. Ghosh, Vivek D
Singh, Vani Singh, Ms. Vimla Sinha, Yunus Malik, L.R. Singh, R.
Krishnamorthi, Ambhoj Kumar Sinha, Ms. Mridula Ray Bhardwaj, Dr. Sumant
Bhardwaj, Ms. Mona Rajvanshi, Raj Kumar Gupta, Sheo Kumar Gupta, A:N.
Bardiyar, Prashant Chaudhary, G.S. Chatterjee, Raja Chatterjee, Punit Dutt
Tyagi, Ms. Kirti Renu Mishra, S. Wasim A. Qadri, B.V. Bairam Das, T.A.
Khan, R.N. Poddar, Mrs. Anil Katiyar, Deba Prasad Mukherjee, Annam D.N. E
Rao, Niraj Gupta, Ms. Meera Mathur, Shambhu Prasad Singh, Ms. Manjula
Gupta, Ms. Sushama Suri, Mis. Dadachanji & Co. Advs., (NP), Ghanshyam
Joshi P. Addy, S. Saxena, R.C. Verma, Mukesh Verma, Manish Srivastava,
Mrs. Rekha Pal Ii, Shreekant N. Terdol, Jagat Arora, Rajat Arora, Raj iv Nanda,
Pratap Venugopal, P.S. Sudhir, K.J. John & Co., Ajay Kumar Jain, Ms. F
Nitika Pal, Suruchi Agarwal for the appearing parties.

The Judgment of the Court was delivered by

G.P. MATHUR, J. The issue raised in these Transfer Petitions is
regarding revision of pay scale of officers of Fertilizer Corporation of India G
and Hindustan Fertilizer Corporation and, therefore, they are being disposed
of by a common order. For the sake of convenience, we will refer to the
pleadings in Transfer Case No. 8 of :woo whereby Writ Petition No. 2 I08 of
1996 which was tiled in Delhi High Comt was transferred to this Court.

A.K. Bindal, President. Federation of Officers' Association ofFe1tilizer H
934 SUPREME COURT REPORTS 120031 3 S.C.R.

A Corporation of India (for short 'FCI") and Dr. K.P. Sinh'a, authorised
representative of Federation of Officers' Association of Hindustan Fe11ilizer
Corporation Ltd. (for short 'HFC') filed Writ Petition No. 2018 of 1996 in
Delhi High Court praying that Clauses 11, 12 and 13 of the Memorandum
dated 19.7.1995 issued by Government of India, Ministry of Industry,
Department of Public Enterprises and connected clauses, of Annexes V of the
B said Memorandum be quashed and consequently the practice of uniform
treatment of the officers in the profit and loss making companies in the FCI/
HFC be revived. The other prayer made is that the respondents be directed
to pay to the petitioners by way of interim relief at least 60% of the benefit
of the revision of pay and perks which their counterparts have been given,
C pending final decision of the Writ Petition. The respondent arrayed in the
Writ Petition are (I) The Union of India through the Secretary, Department
of Fertilizers, in the Ministry of Chemicals & Fertilizers, (2) The Secretary,
-
Department of Public Enterprises, Ministry of Industry, Government of India:
(3) The Fertilizer Corporation of India Ltd; and (4) Hindustan Fertilizers ..
Corporation of India Ltd. The pleadings of the parties are fairly long and the
D documents filed are bulky but we will refer only to basic facts which are
necessary for the decision of the controversy.

In January, 1961 two Fertilizer companies, namely Sindri Fertil·izers
and Chemicals Ltd. and Hindustan Fertilizer and Chemicals Ltd. were merged
E and a new company named as Fertilizer Corporation of India Ltd. (for short
'FCI') was created. Between 1961 and 1977, FCI came to have 17 Fctilizer
Units. 7 of which were in operation while remaining 10 were at various
stages of implementation. In 1978 the Government of India set up a Committee
to work out the modalities for reorganisation of its Fertilizer Industry. On the
basis of the recommendation of the Committee, the Government of India
F approved the bifurcation and reorganization of FCI and National Fertilize1"
Ltd. (for short 'NFL') which was an independent and separate undertaking at
that time and allocated the various units to the newly created undertakings
which were five in number. Namrup, Haldia, Barauni and Durgapur units
were allocated to the newly formed Hindustan Fertilizer Corporation Ltd.
G (for short 'HFC') and Sindri, Gorakhpur, Ramagundam, Talcher, Korba and
Jodhpur Mining Organization were retained with FCI. The other units were
allocated to newly created Rashtriya Chemicals and Fenilizers Ltd. and
National Fertilizers Ltd. while a fifth company dealing exclusively with
planning and development was created which was known as Project and
Development (India) Ltd. After reorganization, the industrial pattern of pay
H and DA was introduced and it was made effective from 1.9.1997. The
A.K. BINDALv. U.0.1. [MATHUR, J.] 935
Department of Chemicals and Fertilizers, Government of India issued a circular A
on 3.9.1979 which provided that revision of pay scales and fringe benefits of
the officers of the entire FCl/NFL would be the same and consequently all
the officers in the five companies were treated alike with reference to revision
of their pay scales and fringe benefits etc. The revision of pay scales of
officers which was due from 1.8.1986 could not be given as the Govefument
did not take steps in that regard. However a decision was taken by the B
Government to give ad hoc relief to all the officers working in the Public
Enterprises, following the Industrial DA pattern and related scales of pay and
accordingly ad hoc relief was paid to all the officers of FCI and HFC with
effect from 1.1.1986 at uniform rate. Since the Government did not take any
decision regarding the revision of pay scales and perks of the officers of the C
entire public sector in the country, the Bureau of Public Enterprises (for short
'BPE') which is a policy making division of the Government of India,
recommended for payment of second relief to the officers of Public Enterprises
following the industrial DA pattern on 13.1.1990. Consequently FCl/NFL
issued circulars on 24.1.1990 for giving ad hoc relief to the officers. During
this period the Government of India and also the Management of FCI and D
HFC made no distinction on the basis of "loss making" or "profit making"
companies in the matter of revision of pay scale and fringe benefits to the
officers of the companies and they were treated alike irrespective of the fact
that the companies in which they were working had been making losses. The
period of validity of the revised pay scales made applicable from 1.1.1987 E
was for five years and thereafter the next revision of pay scales became due
from 1.1.1992 but the same was not done for the officers employed in FCI
and HFC on the ground that the two companies were incurring losses.
However, the other companies in erstwhile FCl/NFL group of companies
were given revised pay scale and fringe benefits with effect from 1.1.1992.
According to the petitioners an unfair and unjust policy of discrimination in F
the matter of revision of pay scales based upon profits and losses of the
company commenced at this stage. Thereafter the Department of Public
Enterprises, Ministry of Industry, Government of India issued an Office ·
Memorandum on 12.4.1993 on Wage Policy for the fifth round of wage
negotiations in Public Sector Enterprises (for short 'PSEs') whereby the ban G
imposed by D.O. No.2(3)/91-DPE (WC) dated 17.10.1991 was withdrawn
and it was directed that the management of PSEs may commence their wage
negotiations with the Trade Unions/Associations. It fu1ther provided that under
the new Wage Policy the Managements were free to negotiate the wage
structure keeping in view and consistent with the generation of resources/
profits by the individual enterprises/units but the Government will not provide H
936 SUPREME COURT REPORTS [2003) 3 S.C.R.

A any budgetary· support for the wage increase and the respective managements
will have to find the requisite resources from within their own internal
generation. Para 5 of this Office Memorandum specifically said that the wage

B
settlement should be negotiated by the PSEs in accordance with the above
parameters. This was followed by the impugned Office Memorandum dated
19.7.1995 issued by the Department of Public Enterprises on the subject of
-
revision of scales of pay of the Executives holding post below the Board
level and non-unionised supervisors with effect from 1.1.1992. The petitioners
are basically aggrieved by para 13 of this Office Memorandum which provides
that for sick PS Es registered with the Board for Industrial and Financial
Reconstruction (for short 'BIFR'), pay revision and grant of other benefits
C will be allowed only if it is decided to revive the unit and 1he revival package
should include the enhanced liability on this account.

The stand of the respondents in the counter-affidavit filed by them is
that FCI and HFC which were under the administrative control of Department
of Fertilizers (for short 'DOF') were referred to BIFR and were declared as
D sick companies on 6.11.1992 and 12.11.1992 respectively. Out of the four
units of FCI the unit at Gorakhpur was lying closed since 10.6.1990. The
commercial production in the Haldia unit of FCI which is located in West
Bengal did not commence at all ever since its mechanical ,completion in
1981. The equity base of both the companies had been totally eroded as a
E result of continues losses. The FCI and HFC had projected net losses of
Rs. 562.51 corers and Rs. 438.99 corers respectively for the year 1996-1997.
The BIFR had appointed Industrial Credit and lnv·estment Corporation of
India Ltd. (for short 'ICICI') as the Operating Agency in March 1994 to
examine various options and work out unit wise rehabilitation plans for these
companies. The ICICI submitted its report in January 1995 and thereafter, the
F matter was taken up by Group of Ministers which set up a Committee of
officers to evaluate all the available alternatives for revival of the companies.
The Department of Fertilizers, keeping in view ~he report of the Operating
Agency as well as suggestions received from various other bodies including
the employees unions/associations formulated revival packages. The package
G envisaged revamp of the functional units of these companies namely, Sindri,
Ramagundam and Talcher of FCI and Durgapur, Barauni and Namrup units
ofHFC at a total investment of Rs. 2201.13 crore (Rs. 1736.20 crore for FCI
and Rs. 464.93 crore for HFC) without providing for wage revision of the
employees. However, due to prior commitment of funds of Public Sector
Units/Cooperative Societies in the Fertilizer Sector for their ongoing expansion
H and reluctance of Financial Institutions to fund the revival packages of sick ....
A.K. BINDAL v. U.0.1. [MATHUR, J.] 937
PSUs, the funding arrangements for these packages could not be tied up. The A
ICJCJ also expressed serious reservation on the viability to these packages
necessitating a review of the same.

The details of the budgetary support given by the government since
1991-1992 till 1995-1996 have been given in para 12 of the counter-affidavit.
It is averred in para 14 of the counter-affidavit that in case the pay scales and B
other beneiits of the employees are directed to be revised with effect from
1.1.1992 it would involve additional financial implication of Rs. 120. corers
(Rs. 60 corers each for FCI and HFC) for the five year period. The revival
packages for both FCJ and HFC have not been approved for implementation
by the BIFR because the Operating Agency, the Department of Fertilizers C
and the Promoters have not been able to mobilize funds required for the
revival package. Pay revision of the employees will further add to the financial
requirements for the revival package, which is held up for want of funding.

It is also pleaded in the counter affidavit that the Government guidelines
do not prohibit BIFR referred companies from revising their pay scales and D
other benefits with effect from 1.1.1992 but has linked it with the basic issue
ofrevival packages of such companies. This revival package is to be approved
by the BIFR after it is agreed to by the Operating Agency and funding
institutions. It has thus been submitted that no decision .could be taken on
revision of pay scales of the employees of FCI and HFC as it is linked to the
revival packages being formulated for these companies for approval of BIFR. E
The Office Memorandum dated 19.7.1995 has been issued with the approval
of the Cabinet Committee on Economic Affairs. The basic thrust of the
policy as contained in office memorandum dated 12.4.1993 is that PSUs
should generate their own resources for meeting the enhanced liability on
account of pay revision and no budgetary support shall be extended to them F
by the Government.

After transfer of writ petitions, this Court issued several directions to
BIFR to submit repmts regarding viability of the units of the companies. The
BIFR by its order dated 2.11.200 I recommended winding up of FCI. A
similar order for winding up of HFC has also been passed. The FCI preferred G
an appeal before AA!FR which has been dismissed. The Delhi High Court is
now proceeding with winding up of both the companies namely, FCI and
HFC.

Shri R.Venkataranmani, learned senior counsel for the petitioners, has
submitted that just as pension is not bounty or a matter of grace depending H
938 SUPREME COURT REPORTS (2003] 3 S.C.R.

A u·pon the sweet will of the employer, so also, fair and reasonable return for
employment is neither a bounty nor a matter of grace. This is a right arising
out of the relationship of employment and in the determination of the same
particularly of the employer is the State, fair and reasonable criteria will have
to be adopted and to the extent a fair and reasonable return is denied on th1~
B sole ground of the need to take a decision regarding continued existence of
the establishment in question, the fundamental right of the petitionern
guaranteed under Article 14 and 2 I read with Article 39(a) and 43 of the
Constitution is violated. Learned counsel has submitted that the impugned
Office Memorandum is discriminatory in as much as PSUs which follow the
-Central Dearness Allowances pattern are getting the benefit of periodical pay
C revision regardless of the position of the undertaking, namely whether running
in losses or marking profits. The PS Us, such as the establishment in question,
which are governed by the Industrial Dearness Allowance pattern are singled
out and are denied periodical pay revision since I 992. It has been urged that
having regard to socio-economic objectives sought to be realized by the
establishment of the fertilizer industry in the public sector and the fact that
D the said industry has served the aforesaid purpose of production and
distribution of fertilizers at affordable prices and augmenting agricultural and
rural productivity, it was inappropriate on the part of the Government of
India to postpone the revision of pay from I 992 and to link it up in the year
1995 with the decision to refer the companies to BIFR. Learned counsel has
E further submitted that when it is not demonstrated that the incident of loss is
attributable to the conduct of employees or workers and when it is
acknowledged that several factors which could have been conveniently dealt
with to eliminate loss making condition (viz, old plants and obsolete
technology) and to do so was within the competence of the Government of
India, it will be gross injustice to the eniployees to deny their pay revision
F by relating it with profitability. Sickness of PSU without consideration of the
causes of sickness, it is urged, can be no ground for denial of fair pay
revision particularly when the Government of India has failed to take relevant
and efficient steps to promote the health of the industry.

In suppor1 of his submissions that financial capacity or otherwise can
G be no ground for denying revision of wages of employees of the State or
PSUs, Shri Yenkataramani has placed strong reliance on South Malabar
Gramin Bank v. Coordination Commif/ee of South Malabar Gramin Bank
Employees' Union and South Malabar Gram in Bank Officers' Federation
and Ors., (2001] 4 SCC IOI and All India Regional Rural Bank Officers
H Federation and Ors. v. Government of India and Ors., (2002] 3 SCC 554.
A. K. BINDAL v. U.0.1. [MATHUR, J.] 939

Regarding the submission based upon violation of fundamental rights of the A
petitioners, learned counsel has laid great emphasis on the following
observations made by Sawant J. in Delhi Transport Corporation v. D. TC.
Mazdoor Congress, (1990] Supp I SCR 142 at pages 276 and 277 which read
as under:-

"The employment under the public undertakings is a public B
employment and a public property. It is not only the undertakings but
also the society which has a stake in their proper and efficient working.
Both discipline and devotion are necessary for efficacy. To ensure
both, the service conditions of those who work for them must be
encouraging, certain and secured, and not vague and whimsical. With C
capricious service condition, both discipline and devotion are
endangered and efficiency is impaired.

The right to life includes right to livelihood. The right to livelihood
therefore cannot hang on to the fancies of individuals in authority.
The employment is not a bounty from them nor can its survival be D
at their mercy. Income is the foundation of many fundamental rights
and when work is the sole source of income, the right to work becomes
as much fundamental. Fundamental rights can ill-afford to be
consigned to the limbo of undefined premises and uncertain
applications. That will be a mockery of them."
E
To strengthen his submission that the denial of fair wages on account
of non-revision of pay scale would violate the fundamental right of the
petitioners, learned counsel has also tried to take support from certain
observations made in All India Imams Organisation and Ors. v. Union of
India, (1993] 3 SCC 584 wherein it was held that Imams who perform religious
duties are also entitled to emoluments, as right to life, enshrined in Article F
21 means right to live with human dignity and that financial difficulties of
the institutions cannot be above fundamental rights of a citizen. Another
serious contention raised by Shri Venkataramani is that the Union of India
had also agreed both in the meeting held on 20.9.1996 and also in the affidavit
filed before the Delhi High Court for a settlement regarding the revision of G
pay scales being implemented from 1.1.1992 but without payment of arrears
upto 1.1.1996. According to the learned counsel the High Court had passed
an order on 10.11.1997 recording the compromise and the matter was
adjourned only to work out the modalities of payment, but on account of
filing of Transfer Petition by the Union of India in this Court, the compromise
could not be implemented. However, taking note of the said compromise this H
940 SUPREME COURT REPORTS [2003) 3 S.C.R.

A Court passed orders on 19.4.2000 and 18.8.2000 for payment of fixed amounts
to various categories of employees. The submission is that in view of the
compromise entered into by the respondents and the orders passed by Delhi
High Court and thereafter by this Court, it is not open to the respondents to
resile from the same and deny the benefit of revision of pay scale to the
B petitioners.

In order to appreciate the first submission, it s necessary to refer to the
two Office Memorandums which have been assailed in the writ petitions.
Para 2 of Office Memorandum No. I (3)/86-DPE (WC) dated 12.4.1993 issued
by Department of Public Enterprise, Ministry of Industry, Government of
C India which is relevant for our purposes is being reproduced below:

"Under the new wage policy, the Managements are free to
negotiate the wage structure keeping in view and consistent with the
generation of resources/profits by the individual enterprises/units. The
Government will not provide any budgetary support for the wage
D increase and the respective managements will have to find the requisite
resources from within their own internal generation. For certain PSEs
which are monopolies or near monopolies or having an administered
price structure, it must be ensured that increase in wages after
negotiations do not result in an automatic increase in administered
prices of their goods and services."
E
The subject and paras 11 and 13 of Office Memorandum issued by the
same department on 19.7.1995 read as under:

"Subject: Revision of Scales of Pay of the Executives holding
posts below the Board level and non-unionised
F supervisors w.e.f. 1.1.1992.

Para ll. The pay revision of the executives holding posts below the
Board level and non-unionised supervisors would be pennitted
subject to the conditions stipulated in the DPE's OM No. I (3)86-
DPE(WC) dated 12.4.1993 and 17 .1.1994. These conditions
G prescribe that there shall be no increase in labour cost per physical
unit of output. The Government shall not provide any budgetary
support to the PSEs for meeting the enhanced liability. The PSEs
which are monoplies or near monoplies or having an administered
Price structure, it must be ensured that increase in salaries/wages
H do not result in an automatic increase in administered prices of
A.K. BINDAL v. U.0.1. [MATHUR, J.] 941
their goods and services. Requisite resources for the pay increase A
must be found from within own internal generation.
Para I 3. For sick PS Es registered with the BIFR, pay revision and
grant of other benefit will be allowed only if it is decided to
f revive the unit. The revival package should include the enhanced
liability on this account. The benefit of pay revision, etc. shall be B
extended to JJSCO and financial liability thereof shall be met by
SAIL."

The change in policy effected by these Memorandums was that the
Government would not provide any budgetary suppott for the wage increase
and the undertakings themselves will have to generate the resources to meet C
the additional expenditure, which will be incurred on account of increase in
wages. So far as sick enterprises which were registered with BIFR it was
directed that the revision in pay scale and other benefits would be allowed
only if it was actually decided to revive the industrial unit. The question
which arises for consideration is whether the employees of Public Sector D
Enterprises have any legal right to claim that though the industrial undertakings
or the companies in which they are working did not have the financial capacity
to grant revision in pay scale, yet the Government should give financial
support to meet the additional expenditure incurred in that regard.

The Fertilizer Corporation of India and Hindustan Fertilizers Corporation E
are both companies registered under the Companies Act with the only
difference that they are Government Companies within the meaning of Section
617 of the Companies Act. What will be the legal position of a Government
Company and whether its employees will be treated to be government servants
was examined in Heavy Engineering Mazdoor Union v. State of Bihar and
Ors., AIR (1970) SC 82 and it was held as under in para 4 of the reports. F
" ....... It is an undisputed fact that the company was incorporated under
the Companies Act and it is the company so incorporated which
carries on the undertaking. The undertaking, therefore, is not one
carried on directly by the Central Government or by any_ one of its
departments as in the case of posts and telegraphs or the G
railways .......... "

After referring to the well known decision in Soloman v. A. Salomon
& Co. Ltd. ( 1897) AC 22, Halsbury's Laws of England and some other
English decisions the Court ruled as under::
H
942 SUPREME COURT REPORTS [2003] 3 S.C.R.

A " ........... Therefore, the mere fact that the entire share capital of the
respondent-company was contributed by the Central Government and
I
the fact that all its shares are held by the President and certain officers
of the Central Government does not make any difference. The company
and the share holders being, as aforesaid, distinct entities the fact that
the President of India and certain officers hold all its shares does not
B make the company an agent either of the President or the Central
Government. ........... "

Again in para 5 it was held that the fact that a minister appoints the
members or directors of a corporation and he is entitled to call for information,
C to give directions which are binding on the directors and to supervise over
the conduct of the business of the corporation does not render the corporation
an agent of the State.

The legal position is that identity of the Government Company remains
distinct from the government. The Government Company is not identified
D with the Union but has been placed under a special system of control and
conferred ce1tain privileges by virtue of the provisions contained in Sections
619 and 620 of the Companies Act. Merely because the entire share holding
is owned by the Central Government will not make the incorporated company
as Central Government. It is also equally well settled that the employees of
the Government Company are not civil servants and so are not entitled to the
E protection afforded by Article 311 of the Constitution Pyare Lal Sharma v.
Managing Director, AIR (1989) SC 1854. Since employees of G9vernment
Companies are not government servants they have absolutely no legal right
to claim that government should pay their salary or that they additional
expenditure incurred on account of revision of their pay scale should be met
F by the government. Being employees of the companies it is the responsibility
of the companies to pay them salary and if the company is sustaining losses
continuously over a period and does not have the financial capacity to revise
or enhance the pay scale, the petitioners cannot claim any legal right to ask
for a direction to the Central Government to meet the additional expenditure
which may be incurred on account of revision of pay scales. It appears that
G prior to issuance of the Office Memorandum dated 12.4.1993 the Government
had been providing the necessary funds for the management of Public Sector
Enterprises which had been incurring losses. After the change in economic
policy introduced in early nineties, Government took a decision that the
Public Sector Undertakings will have to generate their own resources to meet
H the aclditional expenditure incurred on account of increase in wages and that
A.K. BINDAL v. U.0.1. [MATHUR, J.] 943
the government will not provide any funds for the same. Such of the Public A
Sector Enterprises (Government Companies) which had become sick and had
been referred to BIFR, were obviously running on huge losses and did not
have their own resources to meet the financial liability which would have
been dated 19.7.1995 the Government merely reiterated its earlier stand and
issued a caution that till a decision was taken to revive the undertakings no B
revision in pay scale should be allowed. We, therefore do not find any infirmity
legal or constitutional in the two Office Memorandums which have been
challenged iri the writ petitions.

We are unable to accept the contention of Shri Venkatarmani that on
account of non-revision of pay scales of the petitioners in the year 1992, C
there has been any violation of their fundamental rights guaranteed under
Article 21 of the Constitution. Article 21 provides that no person shall be
deprived of his life or personal liberty except according to procedure
established by law. The scope and content of this Article has been expanded
by judicial decisions. Right to life enshrined in this Article means something
more than survival or animal existence. It would include the right to live with D
human dignity. Payment of very small subsistence allowance to an employee
under suspension which would be wholly insufficient to sustain his living,
was held to be violative of Article 21 of the Constitution in State of
Maharashtra v. Chandrabhan, AIR (1983) SC 803. Similarly, unfair conditions
of labour in People's Union for Civil Liberties v. Union of India AIR (1982) E
SC 1473. It has been held to embrace within its field the right to livelihood
by means which are not illegal, immoral or opposed to public policy in Olga
Tellies v. Bombay Municipal Co1poration AIR (1987) SC 108. But to hold
that mere non-revision of pay scale would also amount to a violation of the
fundamental right guaranteed under Article 21 would be stretching it too far
and cannot be countenanced. Even under the Industrial law, the view is that F
the workmen should get a minimum wage or a fair wage but not that his
wages must be revised and enhanced periodically. It is true that on account
of inflation there has been a general price rise but by that fact alone it is not
possible to draw an inference that the salary currently being paid to them is
wholly inadequate to lead a life with human dignity. What should be the G
salary structure to lead a "life with human dignity" is a difficult exercise and
cannot be measured in absolute terms. It will depend upon nature of duty and
responsibility of the post the requisite qua! ification and experience, working
condition and a host of other factors. The salary structure of similarly placed
persons working in other Public Sector Undertakings may also be relevant.
The petitioners have not placed any material on record to show that the salary H
944 SUPREME COURT REPORTS [2003) 3 S.C.R.

A which is currently being paid to them is so low that they are not able to
maintain their living having regard to the post which they are holding. The
observations made in paragraphs 276 and 277 in Delhi Transport Corporation
v. D. T.C. Mazdoor Congress (supra), strongly relied upon by learned counsel
for the petitioners, should not be read out of its context. In the said case the
Court was called upon to consider the constitutional validity of Regulation 9
B of Delhi Road Transport Authority (Condfiioils of Appointment and Service)
Regulations, 1952, which gave power to terminate the services of an employee
after giving one month's notice or pay in lieu thereof. The termination of
services of some of the employees on the ground that they were inefficient
in their work by giving one month's notice was set aside by the High Court
C as in its opinion Regulation 9(b) gave absolute unbridled and arbitrary powers
to the management to terminate the service of any permanent or temporary
employee and, therefore, the same was violative of Article 14 of the
Constitution. It was in this context that the aforesaid observations were made
by one Hon'ble Judge in his separate opinion. The issue involved was not of
revision of pay scale but that of termination of service which has an altogether
D different impact on an employee.

The contention that economic viability of the industrial unit or the
financial capacity of the employer cannot be taken into consideration in the
matter of revision of pay scales of the employees, does not appeal to us. The
E question of revision of wages of workmen was examined by a Constitution
bench in Express Newspapers Ltd and Ors. v. Union of India and Ors., AIR
(1958) SC 578 having regard to the provisions of Industrial Disputes Act and
Minimum Wages Act and the following principles for fixation of rates of
wages were laid down:

F (I) that in the fixation of rates of wages which include within its
compass the fixation of scales of wages also, the capacity of the
indus/ly to pay is one of the essential circumstances to be taken
into consideration except in cases of bare subsistence or minimum
wage where the employer is bound to pay the same irrespective
of such capacity;
G
(2) that the capacity of the industry to pay is to be considered on an
industry-cum-region basis after taking a fair cross section of the
industry; and
(3) that the proper measure for gauging the capacity of the industry
to pay should take into account the elasticity of demand for the
H
A.K. BINDAL v. U.0.1. (MATHUR. J.) 945
product, the possibility of tightening up the organisation so that A
the industry could pay higher wages without difficulty and the
possibility of increase in the efficiency of the lowest paid workers
resulting in increase in production considered in conjunction with
the elasticity of demand for the product-no doubt against the
ultimate back-ground that the burden of the increased rate should B
not be such as 'to drive the employer of business.
(Emphasis supplied.)

The same question was again examined in Hindustan Times Ltd. v.
Their Workmen, AIR (1963) SC 1332 and the Court recorded its conclusion
in following words in para 7 of the Report. C
"While industrial adjudication will be happy to fix a wage structure
which would give the workmen generally a living wage, economic
consideration make that only dream for the future. That is why the
Industrial Tribunals in this country generally confine their horizon to
the target of fixing a fair wage. But there again, the economic factors D
have to be carefully considered. For these reason, this Court has
repeatedly emphasised the need of considering the problem on an
industry-cum-region basis, and of giving careful consideration to the
ability of the indust1y to pay. "
(Emphasis supplied.) E

It may be noticed that in these cases the Court was considering the
question of wage structure for workmen who belong to economically poor
section of society and providing them even living dream was held to be a
distant wage on account of economic consideration and also the capacity of
the industry to pay. F
In South Malabar Gramin Bank v. Coordination Cammi/lee of South
Malabar Gramin Bank Employees' Union and South Malabar Gram in Bank
Officers' Federation and Ors., [2001) 4 SCC IOI, relied upon by the learned
counsel for the petitioners, the Central Government had referred the dispute
regarding the pay structure of the employees of the Bank to the Chairman of G
the National Industrial Tribunal headed by a former Chief Justice of a High
Court. The Tribunal after consideration of the material placed before it held
that the officers and employees of the Regional Rural Banks will be entitled
to claim parity with the officers and other employees of the sponsor banks
in the matter of pay scale, allowances and other benefits. The employees of H
946 SUPREME COURT REPORTS [2003) 3 S.C.R.

A nationalised commercial banks were getting their pay scales on the basis of
5th bipartite settlement and by implementation of the award of the National
Industrial Tribunal, the employees of the Regional Rural Banks were also
given the benefits of the same settlement. Subsequently, the pay structures of
the employees of nationalised commercial banks were further revised by 6th
and 7th bipartite settlements but the same was not done for the employees of
B the Regional Rural Banks who then filed writ petitions. It was contended on
behalf of the Union of India and also the Banks that financial condition of
the Regional Rural Banks was not such that they may give their employees
the pay structure of the employees of the nationalised commercial banks. It
was in these circumstances that this Court observed that the decision of the
C National Industrial Tribunal in the form of an award having been implemented
by the Central Government, it would not be permissible for the employer
bank or the Union of India to take such a plea in the proceedings before the
Court. The other case namely All India Regional Rural Bank Officers
Federation and Ors. v. Government of India and Ors., [2002) 3 SCC 554
arose out of interlocutory applications and contempt petitions which were
D filed for implementation of the direction issued in the earlier case namely
South Malabar Gramin Bank (supra). Any observation in these two cases to
the effect that the financial capacity of the employer cannot be held to be a
germane consideration for determination of the wage structure of the employees
must, therefore, be confined to the facts of the aforesaid case and cannot be
E held to be of general application in all situations. In Associate Bank Officer's
Association v. State Bank ofIndia and Ors., [ 1998) I SCC 428 it was observed
that many ingredients go into the shaping of the wage structure of any
organisation which may have been shaped by negotiated settlements with
employees' unions or through industrial adjudication or with the help of
expert committees. The economic capability of the employer also plays a
F crucial part in it; as also its capacity to expand business or earn more profits.
It was also held that a simplistic approach, granting higher remuneration to
workers in one organisation because another organisation had granted them,
may lead to undesirable results and the applications of the doctrine would be
fraught with danger and may seriously affect the efficiency and at times,
G even the functioning of the organisation. Therefore, it appears to be the
consistent view of this Court that the economic viability or the financial
capacity of the employer is an important factor which cannot be ignored
while fixing the wage structure, otherwise the unit itself may not be able to
function and may have to close down which will inevitably have disastrous
consequences for the employees themselves. The material on record clearly
H shows that both FCI and HFC had been suffering heavy losses for the last
A.K. BIN DAL v. U.0.1. [MATHUR, J.] 947
many years and the Government had been giving considerable amount for A
meeting the expenses of the organisation. In such a situation, the employees
cannot legitimately claim that their pay scales should necessarily be revised
and enhanced even though the organisations in which they are making are
making continuous losses and are deeply in red.

The second argument based upon the so-called settlement/compromise B
may now be examined. The petitioners A.K. Bindal and others moved Civil
Misc. Application No. 7885 of 1996 before the High Court for grant of
interim relief. It was prayed that a direction regarding implementation of the
revision benefit with effect from the date of the application by notionally
calculating the pay etc., as would have been available to the petitioners, had C
the pay revision been implemented from 1.1.1992 be issued and further at
least 50 per cent of the arrears which would be due to the petitioners for the
period 1.1.1992 to the date of the filing of the application be paid to them.
The respondents opposed the prayer for grant of interim relief by filing a
reply stating that the application is devoid of any merits and the same is
liable to be dismissed. The relevant part of para G,H and I which has a D
bearing on the controversy in hand, is being reproduced below:-

"As already submitted in reply to A & B above, budgetary support
to the extent possible has been provided by the Government to enable
these companies to sustain operations in their functional units with a
'view to avoiding irretrievable damage to equipment and supplementing E
the indigenous urea production. This has ben done even at the cost
of large cash losses incurred by these companies pending a final
de~ision on their revival by the BIFR. These companies are unable to
generate any internal resources to absord the enhanced liability of
increased salary to their employees. Under the extant guidelines for F
salary revision of PSUs employees such liability is not to be met
through budgetary support. Pay revision will be allowed only if it is
decided by the BlFR to revive these companies and the revival
packages include the enhanced liability on this account. As a
compromise solution, the managements of the Respondents No.3 and
4 had explored the possibility of providing salary revision w.e.f. 1.1.96 G
subject to the condition that no arrears would be paid for the period
1.1.92 to 31.12.95 which the company would consider at a later date
after its turn around, however, subject to availability of funds. Since
no mutual agreement could be arrived at between the managements
& the associatrons, this proposal could not get finalised ........" H
._,,.,

948 SUPREME COURT REPORTS [2003] 3 S.C.R.

A. The application was heard by a learned Single Judge of the High Court
who passed an order on I 0.11.1997 which according to the petitioners contains
the terms of the settlements. After the transfer of the Writ Petitions this Court
passed a detail order on 19.4.2000 and it is necessary to reproduce the same
in extenso.

B "Having heard learned senior counsel for the petitioners, learned
senior counsel Mr. Goswami for the Union of India, the learned
counsel for the Hindustan Fertiliser Corporation Ltd. HFC and
Fertilizer Corporation of India FCI, we find that appropriate interim
orders, without prejudice to the rights and contentions of all concerned,
are required to be passed at this stage for employees of all the units
c of the aforesaid two corporations.

In the writ petition which was moved before the High Court of
Delhi by the concerned employees of the aforesaid two concerns
claiming for revision of pay scales and payment of appropriate amounts
accordingly, a learned Single Judge of the High Court has on 10th
D
November 1997 made the following observations:

"In reply to the petitioner's, application the respondent had taken
the stand that as a compromise the respondents 3 and 4 agreed to
provide revised salary to the petitioners w.e.f. \st January 1996, subject
E to the contention that no arrear w.e.f. I st January 1992 till 31st
December 1995 will be paid. The petitioner is prepared to accept the
offer of the respondent. Counsel for the respondent wants to take
instruction with regard to payment as per record. Let him do so.

Matter be listed on 21st November, 1997."
F It is, of course, true that the order recites that respondent nos. 3
and 4 agreed to provide revised salary to the petitioner w.e.f. 0 I st
January 1996 subject to the contention that no arrears w.e.f. Olst
January 1992 till 31st December 1995 will be paid and the petitioner
was prepared to accept the said offer of the respondent. Though
G respondenl nos. 3 and 4 agreed lo provide revised salary lo /he
petitioner but the real responsibilily to make paymen/ would rest on
the shoulders of the respondent-Union of India. The order further
recites that counsel for the respondent wanted to take instructions
with regard to the payment as per the record and the Court said 'let
him do so', and, therefore, the matter was to be listed on 21st
H November, 1997.
A.K. BINDAL v. U.O.l. [MATHUR, J.] 949
It is to be noted that, therefore, the matter stood adjourned for A
passing appropriate orders in the light of what transpired on 10th
November 1997 only in connection with fixing the mode of payment
of the appropriate salary in the revised time scale with effect from
Olst January, 1996. For that purpose, the matter stood adjourned
from time to time till ultimately it got transferred to this Court pursuant B
to our order in T.P. (C) No. 845 of 1998.

Learned senior counsel Shri Goswami has filed a reply, which is
taken on record, to the prayer of the petitioners in the transferred
case. In fact he raised grievance that the financial conditions of these
units is not good and many of them have been closed. Be that as it C
may, as the proceedings are pending before the Board for Financial
and Industrial Reconstruction (BIFR), since 1992 it will be for the
BIFR to look into the grievance of the respondent-Union of India to
do the needful in this connection. We are sure that the Union of India
will also fully cooperate in seeing to it that the BIFR is enabled to
take appropriate decisions in this connection at the earliest. D
However, in the light of what is stated in the order of the learned
Single Judge of the High Court dated 10th November 1997 which
uptill now has not. been sought to be got revised reviewed or appealed
against, we deem it fit, in the interest of justice, to give at least a
limited relief to all the employees of the aforesaid two concerns, E
including, Class ·Ill and IV employees, purely as an ad-hoc measure,
and without prejudice to the rights and contentions of all concerned
to the following effect:

Revised salary shall be computed with effect from 0 !st January
1992 notionally for the concerned staff members of all the units of F
the aforesaid two Government Corporations, namely, HFC and FCI
only.

- No arrears shall be paid to the concerned staff members till 31st
March, 2000. Only actual revised salary will be available in the time
scale so computed, from 0 I st April 2000 on the basis of the revised G
pay scale available from O\st January 1992.

However, no further upward revision of pay scales will be available
to the concerned staff members pursuant to the present order. That
question is kept open.
H
950 SUPREME COURT REPORTS [2003] 3 S.C.R.

A The revised salaries payable from Olst April 2000 shall be paid
to the concerned employees w'ith'in six weeks from today and then in
future salaries in revised pay ~cales as per 1.1.92 revision will be
made available to the concerned staff members from month to month
till further orders.

B These proceedings will now stand over for six months. In the
meantime we hope and trust that the Union of India will take
appropriate steps before BIFR due to the emergent situation which is
projected vociferously by learned senior counsel for the Union of:·
India to the effect that may of these units have been closed.

C It is for the Union of India to respond appropriately to the BIFR ·
enquiry which is pending since I 992. Learned counsel for BIFR also 1
assured this Court that the moment the BIFR hears from the concerned·
authorities, BIFR will promptly take decisions in the matter.

It is axiomatic to observe that if these two corporations, which
D are the limbs of the Government, want appropriate funds to be released
for compliance ofth1s order, it will be for the Union of India to stand
up to the occasion and to comply with such request."

(Emphasis supplied.)

E The Union of India moved an application for clarification/modification
of the above order which was heard on 18.8.2000 and the following order
was passed:-

"Having heard learned Solicitor General for the applicant-Union -
of India and learned senior counsel Mr. Sanyal, for the contesting
F respondents, purely as an adhoc measure and without prejudice to the
rights and contentions of the parties in the main matter, we deem it
fit in the interest of justice to modify our order dated 19.04.2000 to
the following effect:-
(i) The authorities shall pay as an adhoc measure and on account
G Rs. 1,500 to Class-I employees; Rs, I,000 to Class II employees;
Rs. 750 to Class-III employees and Rs. 500 to Class-IV employees
consisting of various categories in each of the Classes; per month
with effect from 1.4.2000. This payment will be without prejudice
to the rights and contentions of the parties in the pending matters.
H (ii) We make it clear that this order will not affect whatever
A.K.131NDAL v. U.0.1. [MA THUR. J.] 951
payment by way of HRA is being released or was released by the A
authorities to the employees concerned.

(iii) The direction that payments are earlier issued by us on
19.4.2000 will stand modified by the present order.

(iv) According to this order, all arrears with effect from 1.4.2000 B
to 31. 7 .2000 will be cleared within ten weeks from today and the
current payment be made with effect from 1.8.2000 along with the
salary payable for the month of August, 2000.

(v) Future payments shall accordingly be made from month to
month regularly along with usual salaries payable to them.
c
This order is passed purely as an ad hoc measure and will not come
in the way of the ultimate decision of this Court. This orders will also
not be treated as a precedent in any matter in view of special facts of
the present case. We express no opinion about the nature of the order
passed by learned Single Judge of the High Court. That question will D
babide by the decision in the main matter. In view of the present
order. l.A.S. are disposed of."
(Emphasis supplied.)

It may be noticed that the reference to the word "compromise" has
been made in the order of the High Court dated I 0.11.1997 and this order E
was passed in Civil Misc. Application No. 7885 of 1996 which was filed by
the petitioners for grant of interim relief. In the counter-affidavit which was
filed on behalf of the respondents it was asserted that the application is
meritless and the prayer for interim relief was devoid of any merits and the
application was liable to be dismissed. In para G,H and I of the counter-
affidavit, reproduced above, it was stated that pay revision will be allowed F
only if it is decided by the BIFR to revive the companies and the revival
packages will include the enhanced liability on this account. A reading of the
above paragraphs will further snow that the management of respondent nos.
3 and 4 alone had explored the possibility of a compromise solution but even
this proposal could not be finalised. The learned Single Judge of the High G
Couii, in our opinion, misunderstood the content and import of the stand
taken in para G, H and I of the counter-affidavit and wrongly proceeded on
the basis as if the respondent nos. 3 and 4 had, subject to certain conditions,
agreed to provide revised salary from 1.1.1996. In fact no offer of payment
of revised salary had been made yet it was mentioned in the order that "the
petitioner is prepared to accept the offer of the respondent". No final order H
952 SUPREME COURT REPORTS 12003 I 3 S.C.R.

A had been passed recording any compromise as the counsel for respondents
wanted to take instructions and the matter was adjourned. It is also noteworthy
that the so called agreement/compromise mentioned in the order was only on
behalf of respondent nos. 3 and 4 which are FCI and HFC respectively. There
was no compromise or agreement to pay revised salary on behalf of the '
B Union of India which is respondent no. I to the writ petition. The order
passed by this Court on 19.4.2000 clearly recorded that a limited relief to all
the employees of the two companies was being granted purely as ad hoc
measure and without prejudice to the rights and contentions of all concerned.
This was reiterated in the subsequent order dated 18.8.2000 when it was said
that the order was being passed purely as ad hoc measure and will not come
C in the way of the ultimate decision of the Court. The principle relief claimed
by the petitioners is against Union of India and Secretary, Depatiment of
Public Enterprises (respondent nos. 3 and 4) as it,is they who have issued the
impugned memorandum dated 19.7.1995 which places embargo upon the
revision of pay scale of employees of sick PSUs registered with BIFR.
Factually there being no coi11promise or settlement on behalf of respondent
D nos. 3 and 4 for payment of revised. salary as they had never agreed to do
so and the orders passed by this Court on 19.4.2000 and 18.8.2000 having
clearly indicated that they were being passed by way of ad hoc measure and
were not to come in any way in the ultimate decision of the case, it is not
possible to hold that there was any compromise or settlement at any earlier
E stage which entitled the petiiioners to get revised salary. The contention of
the petitioner based upon the alleged settlement or compromise is, therefore,
devoid of merits and has to be rejected.

Apart from what we have discussed earlier, it is necessary to take note
of a subsequent development which has a serious impact on the relief claimed
F by the petitioners. The respondents have filed an affidavit on 15.2.2003 sworn
by Shri Pawan Wadhwa, Deputy Secretary, Department of Fertilizers, ..
Ministry of Chemicals and Fertilizers. It is averred in the said affidavit
that the accumulated losses as on 31.1.2003 of HFC have been Rs. 7421.52
crores and that of FCI have been Rs. 8874.00 crores. To meet the expenditure
G towards salary, wages as well as other administrative expenses in these
units including reservation cost of the plants, total plan and non-plan budgetary
assistance to the tune of Rs. 2,227.00 crores has been extended by the
Government of India till 31.1.2003. The commercial production in some
of the units of both the companies never commenced and the remaining
units suspended operations one by one as viability/economics of
H production of urea in these plants had become extremely unfavourable.
A.K. BINDAL v. U.0.1. [MATHUR, J.] 953

The revival packages of these companies could not be taken up for want of_. A
funding tie up with the Financial Institutions on account of their reservation
about the techno-economic viability of the proposals. The revival package
based on unit-wise techno-economic viability were considered by the
competent authority in the Government from time to time culminating in
Government's decision on 18.7.2002 and 5.9.2002 for enclosure of.majority B
of the units of both FCI .and HFC along with supporting establishments. The
Government had incurred an expenditure fof Rs. 72.96 lakhs per month in
respect of HFC and Rs. 69 lakhs per month in respect of FCI in implementing
the orders of this Court dated 19.4.2000 and 18.8.2000. The accumulated
expenditure which had been borne by the Government of India through non-
plan budgetary support till date as on this account adds up to Rs. 16.56 crores C
in respect of FCI and Rs. 21.56 crores in respect HFC. It is further averred
that in October 1998 the Government announced a scheme for Voluntary
Retirement for the employees of the Central Public Sector Undertakings. This
scheme was liberalised and another scheme was announced on 5.5.2000 in
order to give benefit to the employees of the Enterprises in which pay revision D
with effect from 1.1.1992 and 1.1.1997 had not been affected. The Government
announced further liberalised scheme on 6.11.2001 under which the Voluntary
Retirement compensation on the basis of their existing pay (basic+ DA) was
increased by I00 per cent and 50 per cent respectively. According to the
respondents almost 99 percent of employees of FCI an<\ HFC had opted for
the Voluntary Retirement Scheme (for short YRS). The exact figures regarding E
implementation of the Scheme as on 24.3.2003 is given below:

PSU-WISE DETAILS OF IMPLEMENTATION OF YRS

S.No. Item HFC FCI
F
I. Total employees as on 20.9.2002 4881 5712

2. Employees opted for YRS 4781 5675

3. Employees released 4325 5097 G
4. Funds released by DOF (Rs. Crores) 174.50 253.50

5. Funds actually utilized by the company 154.10 237.30

6. Balance funds with the Company 20.50 16.20 H
.
954 .
SUPREME COURT REPORTS (2003] 3 S.C.R .

A Shri Mukul Rohtagi, learned Additional Solicitor General has submitted
that while framing the Voluntary Retirement Scheme the grievance of the
petitioners regarding non-revision of their pay scale has been taken into
consideration and it was for this reason that in the second Voluntary Retirement
Scheme announced on 6.11.200 I ex-gratia payment in respect of employees
on pay scales at 1.1.1987 level has been increased by I 00 per cent and for
B employees on pay scales at 1.1.1992 level, it has _been increased by 50 per
cent. So far as HFC is concerned 4781 out of 4881 employees had opted for
YRS and.only JOO remained. Similarly for FCI out of5712 employees 5675
had opted for VRS and only 37 remained. The majority of left over number
of employees in both the companies is proposed to be retained for assisting
C in completion of the formalities entailing the closure process. The Government
of India had released an amount of Rs. 154 crores to HFC and Rs. 237.50
crores to FCI for disbursal of VRS benefits to these employees. Learned
counsel has submitted that the employees of both the Companies having
. taken advantage of VRS and having taken the amount without any demur, the
relationship of employer and employee had ceased to exist. They cannot
D therefore raise any grievance regarding the non revision of pay scale at this
stage and consequently the Writ Petitions have become infructuous. Even
Shri A.K. Bindal who filed the writ petition in his capacity as President of
Federation of Officers Association had also taken voluntary retirement and
after acceptance of the amount had left the company and had gone out.
E
Shri Venkataramani has submitted that the employees had no option in
the matter and had accepted the VRS under compulsion as it was provided
therein that those who did not opt for the same within three months from the
date of offer would be eligible only for retrenchment compensation. He has
also submitted that under the Scheme the total "compensation amount has to
F be calculated on the basis of existing pay scale and as there was no revision
of pay scales since 1992, the petitioners have got a very small amount.
Learned counsel has further submitted that there can be no wariver of
fundamental rights and even if an employee has opted for VRS and has taken
the amount and left the company it would not mean that he has foregone his
G right to claim the salary which he was entitled to get during the period when
he was an employee of the company.

The material on record shows that both FCI and HFC had suffered
continuous losses. The Financial status of the companies as on 31.3.1996 was
as under:
H
A.K. BINDAL v. U.0.1. [MATHUR. J.] 955
FCI HFC A
Paid up equity and reserves as on 31.3.96 662.84 705.13

Accumulated Loss upto 31.3.96 2510.95 3096.16

Net worth as on 31.3.96 (-)2248.11 (-) 2385.03 B
Net Profit/Loss (95-96) (-) 426.62 (-) 466.52
(Provisional)

All figures in crores.

In the year 1996-97 FCI and HFC projected net losses of Rs. 562.5 I
c
crores and Rs. 438.99 crores respectively. The total loss suffered by these
companies as on 31.1.2003 was Rs. 8874.00 crores and 7421.52 crores
respectively. The Government extended non-plan budgetary assistance of Rs.
2369.00 crores to FCI and Rs. 2227.00 crores to HFC upto 31.1.2003.
D
The units of the companies have already suspended their operations
quite some time back and as on date no unit is functioning nor any production
is being made. There is also no denial of the fact that the companies have
suffered huge losses and salaries of the employees who were practically
doing no work has been paid by the Government for a considerably long
period. The employees accepted YRS with their eyes open without making E
any kind of protest regarding their past rights based upon revision of pay
scale from 1.1.1992.

The Voluntary Retirement Scheme (YRS) which is some times called
Voluntary Separation Scheme (VSS) is introduced by oompanies and industrial F
establishments in order to reduce the surplus staff and to bring in financial
efficiency. The Office Memorandum dated 5.5.2000 issued by Governn~ent
of India provided that for sick and unviable units, the YRS packa_!\e of
Department of Heavy Industry will be adopted. Under this Scheme an
employee is entitled to an ex-gratia payment equivalent to 45 days emoluments
(pay+D.A.) for each completed year of service or the monthly emoluments G
at the time of retirement multiplied by the balance months of service left
before the normal date of retirement, whichever is less. This is in addition to
terminal benefits. The Government was conscious about the fact that the pay
scales of some of the PS Us had not been revised with effect from 1.1.1992
and therefore it has provided adequate compensation in that regard in the
second YRS which was announced for all Central Public Sector Undertakings H
956 SUPREME COURT REPORTS [2003) 3 S.C.R.

A on 6.11.200 I. Clauses (a) of the scheme reads as under:
(a) Ex-gratia payment in respect of employees on pay scales at 1.1.87
and 1.1.92 levels, computed on their existing pay scales in accordance
with the extent scheme, shall be increased by I 00% and 50%
respectively.
B
This shows that a considerable amount is to be paid to an employee ex-
gratia besides the terminal benefits in case he opts for voluntary retirement
under the Scheme and his option is accepted. The· amount is paid not for
doing any work or rendering any service. It is paid in lieu of the employee
himself having the services of the company or the industrial establishment
C and foregoing all his claims or rights in the same. It is a package deal of give
and take. That is why in business world it is known as 'Golden Handshake'.
The main purpose of paying this amount is to bring about a complete cessation
of the jural relationship between the employer and the employee. After the
amount is paid and the employee ceases to be under the employment of the
D company or the unde11aking, he leaves with all his rights and there is no
question of his again agitating for any kind of his past rights, with his erstwhile
employer including making any claim with regard to enhancement of pay
scale for an earlier period. If the employee is still permitted to raise a grievance
regarding enhancement of pay scale from a retrospective date, even after he
has opted for Voluntary Retirement Scheme and has accepted the amount
E paid to him, the whole purpose of introducing the Scheme would be totally
frustrated.

The contention that the employees opted for YRS under any kind of
compulsion is not worthy of acceptance. The petitioners are officers of the
two companies and are mature en~mgh to weigh the pros and cons of the
F options which were available to them. They could have waited and pursued
their claim for revision of pay scale without opting for YRS. However they,
in their wisdom thought that in the fact situation YRS was a better option
available and chose the same. After having applied for YRS and taken the
money it is not open to them to contend that they exercised the option under
G any kind of compulsion. In view of the fact that nearly ninety nine per cent
of employees have availed of the YRS Scheme and have left the companies
(FCI & HFC), the writ petition no longer survives and has become infructuous.

Shri Nageshwar Rao, learned senior counsel appearing in Transferred
Case No. 35 of 2000 (Writ Petition filed by employees of HFC in Calcutta
H High Court) apart from challenging the validity of the Office Memorandum
A.K. BINDAL v. U.OJ. [MATHUR. J.] 957
on the sa1ne grounds also urged that the price of urea was fixed by the A
Government under Fertilizer Control Order which was wholly unremunerative
and, therefore, the employees cannot in any way be held responsible for the
losses suffered by the Units and consequently they should not be made to
suffer on that account. We are unable to entertain this submission as the
factual foundation for such a plea has not been laid in the pleadings. That B
apart, learned counsel for the respondents has made a statement that the
Government had reimbursed the Units in that regard.

For the reasons discussed above, we find no merit in the Transferred
Petitions which are accordingly dismissed. No costs.

S.K.S. Answered the Questions. C