Supreme Court of India
STATE OF JHARKHAND AND ANOTHERversusHARIHAR YADAV AND OTHERS
- Citation
- 2013 INSC 775
- Decided
- 22 November 2013
- Disposal
- Disposed off
- Bench
- ANIL R DAVE
Holding
Both the State of Bihar and the State of Jharkhand are liable to pay the arrears of salary to the former BHALCO employees, and the employees cannot be compelled to seek relief only under the Companies Act or the Industrial Disputes Act.
Summary
The Bihar Hill Area Lift Irrigation Corporation (BHALCO), a government company of Bihar, was transferred to the newly created Jharkhand Hill Area Lift Irrigation Corporation (JHALCO) after the bifurcation of Bihar under the Bihar Reorganisation Act, 2000. Employees of the erstwhile BHALCO filed writ petitions seeking absorption into JHALCO and payment of arrears of salary dating back to 1995. Both the States of Bihar and Jharkhand argued that liability should be pursued under the Companies Act, 1956 or the Industrial Disputes Act, 1947, and denied responsibility for the unpaid wages. The Supreme Court held that the bifurcation created a constitutional obligation on both States to ensure payment of salaries as a matter of human right under Article 21, rejecting the contention that employees must resort to statutory remedies. It directed the State of Bihar to pay salaries for the period 1 January 1995 to 29 December 2001 and the State of Jharkhand to pay for 29 December 2001 to 13 September 2004, with 7.5% simple interest, and closed the claim for absorption.
Issues considered
- When does BHALCO vest in the State of Jharkhand under the Bihar Reorganisation Act, 2000?
- Whether BHALCO and JHALCO are the same legal entity or distinct entities.
- Whether the employees of BHALCO are entitled to be absorbed in JHALCO.
- Which State is liable for the payment of arrears of salary to the employees.
- Whether the employees can be directed to seek remedy solely under the Companies Act, 1956 or the Industrial Disputes Act, 1947.
Legislation cited
- Bihar Reorganisation Act, 2000s. 47, s. 56, s. 65, s. 85
- Companies Act, 1956s. 529-A
- Constitution of Indias. Art. 12, s. Art. 21, s. Preamble
- Industrial Disputes Act, 1947
Subjects
government companystate bifurcationemployee salary arrearsliability of statemodel employersocial justiceArticle 21Bihar Reorganisation Actabsorption of employeeshuman rights
Judgment
[2013] 14 S.C.R. 904
A STATE OF JHARKHAND AND ANOTHER
v.
HARIHAR YADAV AND OTHERS
(Civil Appeal No. 10515 of 2013)
NOVEMBER 22, 2013
B
[ANIL R. DAVE AND DIPAK MISRA, JJ.)
Government Company - Liability of - Company owned
by State of Bihar (BHALCO) - Non-payment of salary to its
C employees - On bifurcation of the State of Bihar, the
Company taken over by the State of Jharkhand and named
(JHALCO) - Only some of the employees of BHALCO
absorbed by )ha/co - Writ petition before High Court by
employees seeking their absorption in JHALCO and payment
D of their due salaries - Both the States denying their liability
to pay the salary- Direction by High Court to JHALCO to pay
the salaries and absorb the employees of BHALCO - In
appeal, the States took the plea that appropriate remedy for
the employees was under Companies Act and Industrial
E Disputes Act - Employees conceded to forego their claim for
absorption - Held: When a State is bifurcated, both the States
and the Centre are required to take certain decisions under
the Act and cannot leave the poor employees high and dry
and suffer for no fault of theirs - The employees cannot be
F directed to seek remedy under Companies Act or Industrial
Disputes Act, 1947, since the problem in the present case,
is of great magnitude affecting human rights and the purpose
of living as enshrined u!Art. 21 of the Constitution - It is also
not a case where services of employees have been retrenched
G or terminated or posts have been abolished - It is not a case
where the relief can be confined to the litigant-employees
alone - Hence in view of the facts and circumstances of the
case, direction to the States to pay the due salary to the
employees with interest - Claim for absorption stands closed
H 904
STATE OF JHARKHAND v. HARIHAR YADAV 905
- Bihar Re-organization Act, 2000 - s. 65 - Companies Act, A
1956 - Industrial Disputes Act, 1947.
Constitution of India, 1950 - Preamble and Art. 12 -
Government Companies - Duty of, as an employer - Held:
The employer within the meaning of Art. 12 has a sacrosanct 8
duty to act in terms of the sacred objectives of social and
economic justice - In a State of good governance, the
Government cannot act like an alien - It has an active role
to pay.
A Government Company 'Bihar Hill Area Lift C
Irrigation Corporation Limited' (BHALCO) was floated by
the State of Bihar, and the Company was registered
under the Companies Act, 1956. After bifurcation of the
State of Bihar into State of Bihar and State of Jharkhand,
by Bihar Re-organization Act, 2000, the assets and D
liabilities of erstwhile BHALCO was merged/taken over by
JHALCO (Jharkhand Hill Area Lift Irrigation Corporation
Ltd.) and the State of Jharkhand.
A writ petition was filed by the employees of E
erstwhile BHALCO in the Jharkhand High Court claiming
their absorption with JHALCO and also their past salaries,
not paid to them by erstwhile BHALCO from the year
1995.
In the meantime, a writ petition was filed before F
Supreme Court in public interest, stating therein that the
Government Companies and Public Undertakings in the
State of Bihar had not paid salaries to their workmen and
other employees for a long time resulting in deaths and
miseries on large number of families, dependant on such G
employees. BHALCO was also named as one of such
companies. This Court issued number of directions
including liquidation proceedings, formation of a
Committee to scrutinize the assets and liabilities of the
Companies and also directed State of Bihar to deposit Rs. H
906 SUPREME COURT REPORTS [2013] 14 S.C.R.
A 50 crores before High Court for the purpose of payment
of the salaries to the employees of the companies. The
Committee was constituted as per the direction of this
Court. State of Jharkhand took the stand before this
Court that it was not the successor of BHALCO and was·
B a newtCorporation and hence does not owe the liability.
State of Bihar also denied its obligation. This Court
directed the High Court of Jharkhal}d to dispose of the
writ petition pending before it, determining the questions
of final absorption, past salaries and the liability to pay
c the same.
Single Judge of High Court disposed of the writ
.. petition, holding that in view of s. 65 of Bihar
Reorganization Act, 2000, JHALCO is the same entity as
BHALCO and hence the respondent/employees were'
D entitled to be absorbed in the services of JHALCO from
the date, when they had made applications for their
absorption pursuant to direction given by Supreme Court
dated 13.1.2005 and were entitled to get salaries from the
date of their absorption to be paid by JHALCO. Order of
E Single Judge was challenged by way of LPA, which was
dismissed by Division Bench of High Court. Hence the
present appeals.
State of Bihar and BHALCO contended that assets
F and liabilities of erstwhile BHALCO having been taken
over by JHALCO, it is duty of JHALCO to carry out the
obligations; and that grievance with regard to non-
payment of salary and service conditions including
absorption can be taken recourse to the statutory
G remedies as provided under the Companies Act, 1956 and
Industrial Disputes Act, 1947.
State of Jharkhand and JHAl..£0 intera/ia contended
that the High Court committed illegality by directing that
the absorbed employees shall be entitled to the benefit
H
STATE OF JHARKHAND v. HARIHAR YADAV 907
of past services rendered by them in BHALCO~ A
The respondent-employees, though initially pressed
for absorption, yet in the course of hearing, conceded for
direction of the Court regarding payment of salary and
to give a quietus to the /is. 8
Disposing of the appeals, the Court
HELD: 1. Social facet and the economic aspect are
the ideal goal of the welfare State. The Constitution casts
a responsibility on the State to sustain social and C
economic security, for the Preamble of the Constitution
is the floodlight illuminating the path to be persuaded by
the State to set up a sovereign, socialist, secular,
democratic republic. It is the duty of the Court to see that
the philosophy which is ingrained in the Constitution is
not atrophied by the State paving a path of deviency. The D
employer, within the meaning of Article 12 of the
Constitution has a sacrosanct duty to act in terms of the
sacred objectives of social and economic justice. [Paras
14 and 15] [917-C-E]
E
Jagdish Saran (Or) vs. Union of India (1980) 2 SCC 768:
1980 (2) SCR 831; Chameli Singh and Ors. vs. State of U.P.
and Anr. (1996) 2 SCC 549: 1995 (6) Suppl. SCR 827; P.G.
Gupta vs. State of Gujarat and Ors. 1995 Supp. (2) SCC 182:
1994 (6) Suppl. SCR 628; D.S. Nakara vs. Union of India
F
(1983) 1 SCC 3051983 (2) SCR 165; J.K. Cotton Spinning
and Weaving Mills Co. vs. Labour Appellate Tribunal of India
AIR (1964) SC 737: 1964 SCR 724; State of Mysore vs.
Workers of Gold Mines AIR 1958 SC 923: 1959 SCR 895;
Y.A. Mamarde vs. Authority under the Minimum Wages Act G
(1972) 2 SCC 108: 1973 (1) SCR 161; S.P. Gupta vs. Union
of India (1981) Supp SCC 87: 1982 SCR 365; Ramon
Services (P) Ltd. vs. Subhash Kapoor (2001) 1 SCC 118:
2000 (4) Suppl. SCR 550; Harjinder Singh vs. Punjab State
Warehousing Corporation (2010) 3 SCC 192: 2010 (1) SCR
591; Balbir Kaur and Anr. vs. Steel Authority of India Ltd. and H
908 SUPREME COURT REPORTS [2013] 14 S.C.R.
A Ors. (2000) 6 SCC 493: 2000 (3) SCR 1053- relied on.
2. When a State is bifurcated by a Parliamentary
legislation, both the States and the Centre are required
to take certain decisions under the Act and they are
required to be taken in quite promptitude and not leaving
8
the poor employees high and dry and suffer for no fault
of theirs. [Para 37] [937-D-E]
3. The tragedy in the present case has fallen solely
because of the bifurcation. True it is, under the law there
C has been bifurcation and the Central Government has
been assigned the role to settle the controversies that
had to arise between the two States. But the
experimentation that has been done with the employees
as if they are guinea pigs is legally not permissible and
D indubitably absolutely unconscionable. It hurts the soul
of the Constitution and no one has the right to do so.
[Para 50] [944-D-E]
4. The State of Jharkhand took up the responsibility
E and the State of Bihar, as it appears, tacitly acceded to
the position as a result of which the employees remained
at the mercy of JHALCO. At a later stage controversy
cropped up, due to disagreement and difference between
the two States and it was stated that a decision was taken
F to initiate the liquidation proceedings and the Central
Government in exercise of its power under Section 65 of
the Act directed the State of Bihar to initiate liquidation
proceedings. Government of Jharkhand conceded to the
same. Because of the vacillating stand of the State of
Jharkhand a distressing and unusual situation has
G arisen. It is not in dispute that JHALCO absorbed some
of the employees but did not take any steps to deal with
the other employees on some pretext or the other. There
is a cavil over the assets and liabilities. [Para 43] [941-H,
942-A-C]
H
STATE OF JHARKHAND v. HARIHAR YADAV 909
5. Both the States and the Corporations have A
conveniently ostracized the concept of "model
employer". It would not be wrong to say that they have
done so with Pacific calmness, sans vision, shorn of
responsibility and oblivious of their role in such a
situation. Their action reflects the attitude of B
emotionlessness, proclivity of impassivity and deviancy
with cruel impassibility. Neither of the States nor the
Corporations have even thought for a moment about the
livelihood of the employees. They have remained totally
alien to the situation to which the employees have been C
driven to. In a State of good governance the Government
cannot act like an alien. It has an active role to play. It has
to have a constructive and progressive vision. [Para 50)
[943-G, 944-A-C]
6. The plea that it is open to the employees to seek D
their remedy under the Companies Act, 1956 or under
the provisions of the Industrial Disputes Act, 1947, it is
not acceptable regard being had to the facts and
circumstances of the case and the plight in which the
employees have been put in. This Court on earlier E
occasion had also categorically clarified that this is a
different situation and it is not laying down the law that
in every case the State Government should come forward
to pay. It is a problem of great magnitude affecting
human rights and the purpose of living as enshrined F
under Article 21 of the Constitution. That apart, it is not a
case where the services of the employees have been
terminated or retrenched or even there is no decision that
the posts have been abolished. [Para 38) [937-E-H]
7. It is not a case where the Court shall confine the G
relief to the respondents alone. Earlier this Court had
constituted a Committee and the State of Bihar had
deposited rupees fifty crores for all the Corporations and
the employees working in BHALCO who were not paid
salary from 1995 were proportionately paid. Their H
910 SUPREME COURT REPORTS [2013] 14 S.C.R.
A identities are known. The employees who have died, their
legal representatives are easily identifiable. A man in dire
need cannot fight a litigation against two experimenting
States to get his dues. It is the duty of the constitutional
court that all should be paid their dues as this Court may
B think fit. [Para 51] [944-F-H, 945-A]
8. Keeping in view the totality of facts and
circumstances of the case and taking note of the concept
of social justice under the Constitution, role of a model
employer in a welfare State and the conduct of both the
C States, the Court directs that (i) The employees who were
paid certain amount after this Court had directed for
deposit of rupees fifty crores by the State of Bihar and
have not been absorbed by JHALCO, they should be paid
their salary from 1.1.1995 till 29.12.2001. (ii) The State of
D Jharkhand is directed to pay from 29.12.2001 till 13.9.2004.
The cut-off date has been fixed for the State of Jharkhand
as it had issued the notification on 29.12.2001 creating an
erroneous impression and confusion. The date for State
of Bihar has been determined regard being had to the
E date the Central Government took a decision asking the
State of Bihar to go for liquidation. (iii) The State of Bihar
is also directed to deduct the amount already paid by
virtue of the order passed by this Court. However, the
State of Jharkhand shall pay the entire amount of salary
F for the period as directed by this Court as it has not paid
anything to the employees. (iv) Both the States shall
compute the salary component after granting the benefit
of pay revision which has been extended to other
employees. (v) The amount, as directed to be paid, shall
G be paid with 7.5% simple interest per annum. The claim
for absorption stands closed. [Para 52] [945-A-C, E-F, H;
946-A-C]
Som Prakash Rekhi vs. Union of India (1981) 1 SCC
449: 1981 (2) SCR 111; Gurmail Singh and Ors. vs. State of
H Punjab and Ors. (1991) 1 SCC 189: 1990 (2) Suppl. SCR
STATE OF JHARKHAND v. HARIHAR YADAV 911
367; Bairam Gupta vs. Union of India and Anr. 1987 (Supp) A
SC 228: 1987 SCR 1173; State of Haryana vs. Piara Singh
(1992) 4 SCC 118: 1992 (3) SCR 826; Bhupendra Nath
Hazarika and Anr. vs. State of Assam and Ors.(2013) 2 SCC
516: 2012 (12) SCR 587 - relied on.
B
Kapila Hingorani vs. State of Bihar (2003) 6 SCC 1: 2003
(11) Suppl. SCR 175; Kapila Hingorani vs. State of Bihar
(2005) 2 SCC 262: 2005 (1) SCR 456; Kapila Hingorani and
Anr. vs. State of Bihar and Anr. (2008) 17 SCC 394: 2008
(10) SCR 195 - referred to.
c
Case Law Reference:
1980 (2) SCR 831 relied on Para 4
1995 (6) Suppl. SCR 827 relied on Para 5 D
1994 (6) Suppl. SCR 628 relied on Para 6
1964 SCR 724 relied on Para 8
1959 SCR 895 relied on Para 9
E
1973 (1) SCR 161 relied on Para 10
1982 SCR 365 relied on Para 11
2000 (4) Suppl. SCR 550 relied on Para 12
F
2010 (1) SCR 591 relied on Para 13
1983 (2) SCR 165 relied on Para 14
2000 (3) SCR 1053 relied on Para 15
2003 (11) Suppl. SCR 175 referred to Para 18 G
2005 (1) SCR 456 referred to Para 22
2008 (10) SCR 195 referred to Para 23
1981 (2) SCR 111 relied on Para 45 H
912 SUPREME COURT REPORTS [2013] 14 S.C.R.
A 1990 (2) Suppl. SCR 367 relied on Para 46
1987 SCR 1173 relied on Para 47
1992 (3) SCR 826 relied on Para 48
2012 (12) SCR 587 relied on Para 49
B
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
10515 of 2013.
From the Judgment & Order dated 16.06.2011 of the High
c Court of Jharkhand at Ranchi in LP.A. No. 77 of 2009.
WITH
C.A. Nos. 10516, 10517-18 & 10519-20 of 2013.
D Ranjit Kumar, Tapesh Kumar Singh, Mohd. Waquas Kumar
Anurag Singh, Rajiv Shankar Dwivedi, Gopal Singh, Manish
Kumar, Chandan Kumar, Priya Hingorani (for Hingorani &
Associates) for the appearing party.
The Judgment of the Court was delivered by
E
DIPAK MISRA, J. 1. Leave granted in all these Special
Leave Petitions.
THE IMPERATIVE PROLOGUE
F 2. How does a constitutional court respond to a situation
when a human problem of great magnitude frescoed on
constitutional canvas gets painfully projected with intense
sincerity, possibly realizing pain is one of the "sovereign
masters of mankind"? How is the Court required to react in law
G when the workmen are forced to grapple with a colossal
predicament of sense of belonging due to a situation created
making them feel that they are neither here nor there? We
consider it as an unbearable tragedy faced by the unfortunate
employees warranting serious attention of this Court, for some
H
STATE OF JHARKHAND v. HARIHAR YADAV 913
[DIPAK MISRA, J.]
employees have b'reathed their last due to starvation, constant A
stress being unable to meet the keen demands of appetite,
and the impecuniosity that hampered them to avail timely
treatment, and some families have been unwillingly driven to a
state of unmeaningful survival - an animal existence - sans
proper food, sans clothes and sans real shelter. It is not B
because of any natural calamity beyond human control but
because two States, namely, State of Jharkhand and State of
Bihar deliberately have chosen to create an Everstine
catastrophe by their act of abandonment of responsibility to pay
despite availing work for some years and thereafter disowning c
them and nonchalantly shifting the burden to other's shoulder
and ultimately arguing in chorus that Jharkhand Hill Area Lift
Irrigation Corporation (JHALCO) and Bihar Hill Area Lift
Irrigation Corporation (BHALCO) being companies registered
under the Companies Act, 1956, it is open to the aggrieved
0
employees or their legal representatives to initiate necessary
winding up proceedings to get their dues. We can only say that
the stand and stance so adroitly put forth by both the States
are shorn of their constitutional accountability and statutory
answerability. In a way, it seem\) to be orchestrated by some
kind of abstruse and unfathomable idea fostered in fertile mind E
that loves to keep helpless and hapless people in a state of
despair where hope dies an unceremonial death or it lives in
a state of "Trishanku". It indubitably depicts a startlingly unhappy
situation commanding urgent surgical intervention so that the
injury does not become malignant. F
3. Before we proceed to exposit the facts, regard being
had to the questions posed by us, we think it seemly to refer to
certain principles laid down by this Court.
G
4. In Jagdish Saran (Dr) v. Union of lndia, 1 it has been
stated as under:-
"Law, constitutional law, is not an omnipotent abstraction
1. (1980) 2 sec 768. H
914 SUPREME COURT REPORTS [2013] 14 S.C.R.
A or distant idealization but a principled, yet pragmatic,
value-laden and result-oriented, set of propositions
applicable to and conditioned by a concrete stage of
social development of the nation and aspirational
imperatives of the people. India Today - that is the
B inarticulate major premise of our constitutional law and life."
5. In Chameli Singh and Others v. State of U.P. and
Anothefl, after referring to Article 11 (1) of the International
Covenant on Economic, Social and Cultural Rights, 1966 which
laid down that the State parties to the Covenant recognize "the
C right of everyone to an adequate standard of living for himself
and for his family including food, clothing, housing and to the
continuous improvement of living conditions", the Court opined
that the State parties are required to'{ake appropriate action
to ensure that the said right is realized.
D
6. In P. G. Gupta v. State of Gujarat and Others, 3 it has
been opined that the Preamble to the Constitution says that the
people of India having resolved to secure to all its citizens
social and economic justice also made it subject to equality of
E status and opportunity to promote the dignity of the individual
in the united and integrated Bharat. Reference was made to
Article 37 that declares the rights in Part IV or fundamental law
in the governance of the country and also to Article 39(b) which
enjoins that the ownership and control of the material resources
F of the community are to promote the welfare of the people by
securing social and economic justice to the weaker sections.
7. In D.S. Nakara v. Union of lndia, 4 the court stated that
the basic framework of socialism is to provide a proper
standard of life to the people, especially, security from cradle
G to grave. Emphasis has been laid on a vibrant, throbbing
2. (1996) 2 sec 549.
3. 1995 Supp. (2) sec 182.
H 4. (1983) 1 sec 305.
STATE OF JHARKHAND v. HARIHAR YADAV 915
[DIPAK MISRA, J.]
socialist welfare society and what is the duty of the State to A
achieve the said goal.
8. In J.K. Cotton Spinning and Weaving Mills Co. v.
Labour Appellate Tribunal of lnpia, 5 this Court clearly stated
that the concept of social justice is not narrow, one-sided or 8
pedantic, and is not confined to industrial adjudication alone. It
is comprehensive. It is founded on the basic ideal of socio-
economic equality and its aim is to eliminate disparities and
inequalities.
9. In State of Mysore v. Workers of Gold Mines6 the Court C
observed thus: -
"10 .... The concept of social and economic justice is a
living concept of revolutionary import; it gives sustenance
to the rule of law and meaning and significance to the ideal o
of welfare State."
10. In Y.A. Mamarde v. Authority under the Minimum
Wages Act7, the Court observed that under our present
Constitution the State is now expressly directed to endeavour
to secure to all workers (whether agricultural, industrial or E
otherwise) not only bare physical subsistence but a living wage
and conditions of work ensuring a decent standard of life and
full enjoyment of leisure. This directive principle of State policy
being conducive to the general interest of the nation as a whole,
merely lays down the foundation for appropriate social structure F
in which the labour will find its place of dignity, legitimately due
to it in lieu of its contribution to the progress of national
economic prosperity.
11. In S.P. Gupta v. Union of lndia, 6 this Court held as G
under:-
5. AIR 1964 SC 737.
6. AIR 1958 SC 923.
7. (1972) 2 sec 100.
8. (1981) supp sec 87. H
916 SUPREME COURT REPORTS [2013] 14 S.C.R.
A "27 .... The judiciary has. therefore. a socio-economic
destination and a creative function. It has to use the words
of Glanville Austin, to become an arm of the socio-
economic revolution and perform an active role calculated
to bring social justice within the reach of the common man.
B It cannot remain content to act merely as an umpire but it
must be functionally involved in the goal of socio-economic
justice."
[Emphasis added]
c 12. In Ramon Services (P) Ltd. v. Subhash Kapoor9, R.P.
Sethi, J. observed thus: - ·
"21. After independence the concept of social justice has
become a part of our legal system. This concept gives
D meaning and significance to the democratic ways of life
and of making the life dynamic. The concept of welfare
State would remain in oblivion unless social justice is
dispensed. Dispensation of social justice and achieving
the goals set forth in the Constitution are not possible
without the active, concerted and dynamic efforts made by
E
the person concerned with the justice dispensation
system."
13. In Harjinder Singh v. Punjab State Warehousing
Corporation 10 Singhvi, J. opined thus: -
F
"It need no emphasis that if a man is deprived of his
livelihood, he is deprived of all his fundamental and
constitutional rights and for him the goal of social and
economic justice, equality of status and of opportunity, the
G freedoms enshrined in the Constitution remain illusory.
Therefore, the approach of the courts must be compatible
with the constitutional philosophy of which the directive
9. c2001) 1sec11a.
H 10. c2010) 3 sec 192.
STATE OF JHARKHAND v. HARIHAR YADAV 917
[DIPAK MISRA, J.]
principles of State policy constitute an integral part and A
justice due to the workman should not be denied by
entertaining the specious and untenable grounds put
forward by the employer-public or private."
14. We have referred to the aforesaid authorities to 8
highlight the concept of social justice, dignity of living and the
role of the judiciary. The court is bound to respond within the
constitutional framework. In this context, the Preamble of the
Constitution becomes extremely significant. The Preamble
uses the words "social justice" while speaking of "Justice - C
social, economic and political". Thus, social facet and the
economic aspect are the ideal goal of the welfare State. The
Constitution casts a responsibility on the State to sustain social
and economic security, for the Preamble is the floodlight
illuminating the path to be persuaded by the State to set up a
sovereign, socialist, secular, democratic republic. (See: D.S. D
Nakara (supra)].
15. It is the duty of the Court to see that the philosophy which
is ingrained in our Constitution is not atrophied by the State
paving a path of deviency. The employer, within the meaning E
of Article 12 of the Constitution has a sacrosanct duty to act in
terms of the sacred objectives of social and economic justice.
In this content, we may fruitfully reproduce a passage from
Balbir Kaur and Another v. Steel Authority of India Ltd. and
Others 11 :- F
"The concept of social justice is the yardstick to the justice
administration system or the legal justice and as Roscoe
Pound pointed out the greatest virtue of law is in it~
adaptability and flexibility and thus it would be otherwise
an obligation for the law courts also to apply the law G
depending upon the situation since the law is made for the
society and whatever is beneficial for the society, the
11. (2000) 6 sec 493. H
918 SUPREME COURT REPORTS [2013] 14 S.C.R.
A endeavour of the law court would be to administer justice
having due regard in that direction."
THE CHEQUERED HISTORY OF THE LITIGATION
16. Instead of mentioning only history, we have deliberately
B stated chequered history as we are at pains to say that this
Court has dealt with this lis on earlier occasion in many a
context and thereafter left it to the High Court to adjudicate.
Before we chronolo~ically refer to the earlier judgments it can
be stated without any hesitation that the facts which have been
c unfurled are not only disturbing but also reflective of the
scenario how a pyramid of suffering, strain and starvation can
be ingenuously built by both the States, as if they are
determined to compete with each other about gaining s'uccess
in effectively creating a sanctuary of errors.
D 17. A Government company was floated by the State of
Bihar in the name of Bihar Hill Area Lift Irrigation Corporation
Limited and got it registered under the Companies Act, 1956.
The object of that company was to explore, execute, install,
develop, promote, improve, establish, finance, manage,
E administer and maintain water resources for the purposes of
ensuring regular irrigation facilities to the cultivators in the hilly
areas of Chotanagpur and Santhal Pargana and also for other
areas like the districts of Rohtas, Aurangabad, Nawadah,
Gaya, Bhagalpur (South of Ganga) and Monghyr (south of
F Ganga) through the means of bigger diameter wells intake,
wells lift irrigation schemes as well as other suitable devices
appropriate for such irrigation facilities and to manufacture
spare parts, machinery, tools, implements, materials,
substances, goods or things of any description which in the
G opinion of the company are likely to promote or advance the
development of irrigation facilities to the cultivators in the
aforesaid area. As the object of the company would project, it
was floated in public interest and to take challenges in the field
of irrigation and that too in difficult hilly areas in the State of
H Bihar.
STATE OF JHARKHAND v. HARIHAR YADAV 919
[DIPAK MISRA, J.]
18. As the events have been unfolded, in the State of Bihar A
many a Government corporation and companies were not
paying the salaries to the employees and the whole thing was
in utter chaos. An employee of a statutory corporation had
attempted immolation as a consequence of which he sustained
serious injuries and, eventually, succumbed to the same. At that B
stage a public spirited person, Kapila Hingorani, preferred a
writ petition under Article 32 of the Constitution before this
Court asserting, inter alia, that various Government companies/
public undertakings situate in the State of Bihar have not paid
salaries to their workmen and other employees for a long time c
resulting in deaths and insurmountable miseries befell on large
number of families dependant on such employees. The two-
Judge Bench, dealing with the case of Kapila Hingorani v.
State of Bihar12 encapsulated the pivotal controversy thus:. -
"If at all and to what extent the Government of the State of D
Bihar is vicariously liable for payment of arrears of salaries
to the employees of the State-owned corporations, public
sector undertakings or the statutory bodies is the core
question involved in this writ petition."
E
19. Be it noted, a list was provided to this Court on
12.3.2003 and the name of BHALCO featured at SI. No. 19.
The Court addressed the lis at length and took note of the
dismal atmosphere in the State, as the deaths had occurred
owing to starvation or malnutrition and the fact that employees F
had not been paid their salaries for a long time and in some
cases for a decade or more as admitted. A stand was taken
by the State of Bihar that having regard to the fact that most of
the undertakings are companies registered or incorporated
under the Companies Act, 1956, the rights and liabilities of the G
shareholders would be governed by the provisions of the said
Act and the liabilities of the said companies cannot be passed
on to the State by taking recourse to the doctrine of "lifting of
12. (2003) e sec 1. H
920 SUPREME COURT REPORTS [2013] 14 S.C.R.
A veil" or otherwise. A further contention was advanced that having
regard to the magnitude of the problem it would be just and
proper if liabilities directed is met with to the extent of 80% by
the Union of India and 10% by the State Government and the
remaining from the sale of properties belonging to the
B respective companies. The public spirited person, Kapila
Hingorani, appearing in person, contended that the State
cannot escape its liability in the matter of payment of salary to
its own employees though ostensibly they are working in
companies incorporated under the Companies Act, 1956. The
c Court referred to number of authorities and came to hold that
the government companies/public sector undertakings being
"States" would be constitutionally liable to respect life and
liberty of all persons in terms of Article 21 of the Constitution
of India and, therefore, they must do so in cases of their own
employees. It was further opined that the Government of the
0
State of Bihar for all intent and purport is the shareholder,
although in law, its liability towards the debtors of the company
may be confined to the shares held by it but having regard to ·
the deep and pervasive control it exercises over the government
companies; in the matter of enforcement of human rights and/
E or rights of the citizen to life and liberty, the State has also an
additional duty to see that the rights of employees of such
corporations are not infringed. The learned Judges further
observed that the righ1 to exercise deep and pervasive control
would in its turn make the Government of Bihar liable to see
F that the life and liberty clause in respect of the employees is
fully safeguarded. The Government of the State of Bihar had a
constitutional obligation to protect the life and liberty of the
employees of the government-owned companies/corporations
who are the citizens of India. It had an additional liability having
G regard to its right of extensive supervision over the affairs of
the company. It was further held that the State having regard to
its right of supervision and/or deep and pervasive control, could
not be permitted to say that it did not know the actual state of
affairs of the State Government undertakings and/or it was kept
H in the dark that the salaries of their employees had not been
STATE OF JHARKHAND v. HARIHAR YADAV 921
[DIPAK MISRA, J.]
paid for years leading to starvation death and/or commission A
of suicide by a large number of employees. It has been ruled
therein that concept of accountability arises out of the power
conferred on an authority. That apart, the failure on the part of
the State in a case of this nature must also be viewed from the
angle that the statutory authorities had failed and/or neglected B
to enforce the social-welfare legislations enacted in this behalf
e.g. Payment of Wages Act, Minimum Wages Act, etc. Such
welfare activities as adumbrated in Part IV of the Constitution
of India indisputably would cast a duty upon the State being a
welfare State and its statutory authorities to do all things which c
they are statutorily obligated to perform.
20. Thereafter the Court adverted to the concept of human
rights, the duty of the Constitutional Court, financial stringency
and other aspects and expressed thus: -
D
"72. We are of the opinion that the State, thus, has made
itself liable to mitigate the sufferings of the employees of
the public sector undertakings or the government
companies.
E
xxx xxx xxx
74. We, however, hasten to add that we do not intend to
lay down a law, as at present advised, that the State is
directly or vicariously liable to pay salaries/remunerations
of the employees of the public sector undertakings or the F
government companies in all situations. We, as explained
hereinbefore, only say that the State cannot escape its
liability when a human rights problem of such magnitude
involving the starvation deaths and/or suicide by the
employees has taken place by reason of non-payment of G
salary to the employees of public sector undertakings for
such a long time. We are not issuing any direction as
against the State of Jharkhand as no step had admittedly
been taken by the Central Government in terms of Section
65 of the State Reorganisation Act and furthermore as only H
922 SUPREME COURT REPORTS [2013] 14 S.C.R.
A four public sector undertakings have been transferred to
the State of Jharkhand in respect whereof the petitioner
does not make any grievance."
21. Regard being had to the totality of circumstances in
the interest of justice, the Court issued number of directions a
8
part of which relates to liquidation proceedings pending in the
High Court, formation of a committee to be headed by a retired
High Court Judge or a sitting District Judge, to scrutinize the
assets and liabilities of the companies and the High Court to
issue directions/direction from time to time. The directions
C which are relevant in the context of the present lis are as
follows:-
"4. The State for the present shall deposit a sum of
Rs 50 crores before the High Court for disbursement of
D salaries to the employees of the Corporations. The amount
of Rs 50 crores be deposited in two instalments. Half of
the amount shall be payable within one month and the
balance amount within a month thereafter. The High Court
shall see to it that the sum so deposited and/or otherwise
E received from any source including by way of sale of
assets of the government companies/public sector
undertakings be paid proportionately to the employee
concerned wherefor, the parties may file their claims before
it.
F 5. The High Court, however, in its discretion may
direct disbursement of some funds to the needy
employees, on ad hoc basis so as to enable them to
sustain themselves for the time being.
G 6. The rights of the workmen shall be considered in
terms of Section 529-A of the Companies Act.
7. The Central Government is hereby directed to take
a decision as regards division of assets and liabilities of
the government companies/public sector undertakings in
H
STATE OF JHARKHAND v. HARIHAR YADAV 923
[DIPAK MISRA, J.]
terms of the provisions of the State Reorganisation Act, A
2000."
22. In the said case I.As 7 and 9 were filed which were
decided on 13.1.2005 as reported in Kapila Hingorani v. State
of Bihar13 • The Court took note of the fact that in pursuance of 8
the order dated 9.5.2003 it had directed to deposit Rs.50
crores and in furtherance of the said direction the State of Bihar
had deposited a sum of Rs.50 crores and the High Court' of
judicature at Patna had constituted a Committee headed by
Justice Udai Sinha, former Judge of Patna High Court. From C
the report of the Committee which was placed before the Court
it appeared that a sum of Rs.25,98,65,883.00 had been
recommended for payment to the employees of most of the
undertakings. While dealing with JHALCO and BHALCO the
Court addressed I.A. No. 7 of 2004 and took note of the
respective affidavits. The stand of JHALCO in the said case, D
as has been noticed by this Court, is as follows:-
"8. The State of Jharkhand has also been impleaded as
a party herein and it has filed a counter-affidavit affirmed
by one Shri Binod Kumar Verma, Managing Director, E
JHALCO, Ranchi wherein a contention is raised that
BHALCO is still under the control of the State of Bihar. It
has further been affirmed that instead and in place of
BHALCO, a new corporation known as JHALCO had been
incorporated and registered with the Registrar of F
Companies, Jharkhand on or about 22-3-2002. The said
JHALCO is, thus, said to be a new corporation and has
nothing to do with BHALCO and in any event, it is not the
successor of BHALCO."
The Court also took note of the fact that the Central G
Government had taken a decision under Section 65 of the Act.
A contention was raised by the State of Bihar that it was not
under obligation to pay the dues of the employees. Referring
13. (2005) 2 sec 262. H
924 SUPREME COURT REPORTS (2013] 14 S.C.R.
A to the earlier order and various other authorities, the Court
observed thus: -
"26. We, therefore, do not appreciate the stand taken by
the State of Bihar now that it does not have any
constitutional obligation towards a section of citizens viz.
B
the employees of the public sector undertakings who have
not been paid salaries for years.
)()()( )()()( )()()(
c 28. It is really a matter of regret th~t despite statutory power
as also the power of control vested in the State of Bihar
either under the statutes or in terms of articles and
memorandum of association of the respective government
companies, it did not exercise the same and now raised
a contention that the State had no effective control over the
D
functions of the said public sector undertakings. The States
of Bihar and Jharkhand, indisputably, can exercise their
statutory power and in discharge thereof can issue
requisite directions as is permissible in law."
E After so stating, the Court proceeded to deal with the stand
of the State of Bihar and BHALCO and observed as follows: -
"33. It is true, as has been contended on behalf of the State
of Jharkhand, that a new corporation named as JHALCO
F has come into being, but keeping in view the fact that the
State of Jharkhand itself has given option to the employees
of BHALCO, the order of absorption of those employees
who opt for employment may be passed at an early date
and not later than six weeks from date. The employees
concerned need not file any undertaking at this stage as
G
the question as to whether the State of Jharkhand is liable
to pay any salary and other emoluments to the employees
of BHALCO is a question which would fall for decision in
appropriate proceedings."
H The Court reiterated the principle stating as follows: -
STATE OF JHARKHAND v. HARIHAR YADAV 925
[DIPAK MISRA, J.]
"37. We make it clear that we have not issued the A
aforementioned directions to the States of Bihar and
Jharkhand on the premise that they are bound to pay the
salaries of the employees of the public sector undertakings
but on the ground that the employees have a human right
as also a fundamental right under Article 21 which the B
States are bound to protect. The directions, which have
been issued by this Court on 9-5-2003 as also which are
being issued herein, are in furtherance of the human and
fundamental rights of the employees concerned and not by
way of an enforcement of their legal right to arrears of c
. salaries. The amount of salary payable to the employees
or workmen concerned would undoubtedly be adjudicated
upon in the proper proceedings. However, these directions
are issued which are necessary for their survival.
Undoubtedly, any amount paid by Justice Uday Sinha
0
Committee pursuant to these directions shall be duly
credited for."
23. In the said writ petition I.A. No. 21 of 2007 was filed
which was decided on 8.7.2008 vide Kapila Hingorani and
another v. State 'of Bihar and another14 , wherein the principal E
relief sought was for issue of a direction to the respondent
State/JHALCO to immediately comply with the order dated
13.1.2005 and pass the order of absorption in JHALCO with
respect to 213 employees listed in the letters issued by MD,
JHALCO on various dates (annexed to the IA), pursuant to the F
order dated 13.1.2005 leaving the employees who have died.
24. While dealing with the prayer the Court adverted to the
history of the litigation, the further death that had occurred with
t:)e efflux of time as the employees had committed suicide due G
to starvation and thereafter proceeded to dwell upon various
facets. We think it appropriate to summarise what the Court had
stated in the said case: -
14. c2ooa) 17 sec 394. H
926 SUPREME COURT REPORTS (2013] 14 S.C.R.
A (i) It is obvious that while passing an order on I.A. No.
11, this Court was kept in the dark about two factors
- firstly, that advertisement were already made even
before the order dated 13.1.2005 and secondly,
that nothing was done in pursuance of the order
B dated 13.1.2005 excepting that the fresh
applications of 216 employees were accepted by
JHALCO and that they were kept in the cold
storage.
(ii) It must be remembered that all this was in the wake
c of this Court's order dated 9-5-2003 wherein, this
Court had required the State of Bihar to deposit a
sum of 50 crores of rupees for disbursement of the
salaries to the employees of the corporations and
also had directed the disbursement of the funds to
D the needy employees on ad hoc basis. The Court
had also directed creation of a committee for
scrutinising the assets and liabilities of the
companies. Therefore, when. the advertisements
were issued with the cut-off date of 7.8.2003,
E JHALCO had a distinct advantage. However,
thereafter came the order of this Court dated
13.1.2005, whereby, this Court took the notice of
coming into being of JHALCO and further directed
that the employees concerned who were to be
F absorbed need not give an undertaking of
foregoing their claims for the past unpaid salaries.
Till then, it seems from the language of the order
dated 13.1.2005 that no formal order was passed
for absorption. Probably, therefore, this Court gave
G six weeks' time to such employees.
(iii) Again, as in the earlier advertisements, only the
employees foregoing their claims over salaries
could apply, all the employees probably did not
apply restricting the number to only 302. In
H
STATE OF JHARKHAND v. HARIHAR YADAV 927
[DIPAK MISRA, J.]
pursuance of the order dated 13.1.2005, 216 more A
employees had applied and that too without
foregoing their claims over salaries. Because of the
said situation a decision was taken in a meeting
dated 8.8.2005 to review the financial position of
JHALCO to curtail the number of employees and B
to limifthe total number of employees to 214. From
Para A(f) of the additional affidavit is seen, it will
be clear that though there were 152 excess Class
IV employees, there was still requirement of 64
officers, as only 14 officers were engaged as c
against the total sanctioned strength of 78 officers.
The exercise of curtailing the employees and
limiting the total number of employees to 214
appears to be a deliberate exercise in the wake of
the order dated 13.1.2005 of this Court, and
0
incidentally, even that order was not followed in its
true spirit which ultimately required the petitioners
to file IA No. 11. The figures given in the additional
affidavit's Para A(f) were misleading, for if properly
calculated as against the total sanctioned strength E
of 214, 302 employees were engaged. Thus, only
88 excess employees could be said to have been
engaged and that too prior to the decision dated
8.8.2005. The figure of 152 as the excess
employees is, therefore, clearly misleading.
F
(iv) There does not appear any explanation, nor any
statistics to justify the curtailing of the employees
by JHALCO. After all, there was no curtailment of
area or the activities and the decision to curtail the
number of employees of JHALCO itself appears to G
be neither sound, reasonable, nor justifiable and
only appears to be taken to get out of the rigour of
this Court's order dated 13.1.2005. However, this
Court is not in a position to pass any order in favour
of the applicants even if their contentions with H
928 SUPREME COURT REPORTS [2013] 14 S.C.R.
A regard to the existence of vacancies are accepted.
(v) It has been pleaded in the additional affidavit that
JHALCO was running in deficit by 3.16 crores up
to 2005-2006. Its annual wages on date are 3.60
crores and it has already sought 2.60 crores from
B
the State of Jharkhand to make the payment for
Financial Year 2008-2009. The affidavit, however,
does not give any clear idea about the contribution
which will be required to be made by the State of
Bihar on account of the arrears of salaries.
c
(vi) In response of the State of Bihar, barring reference
to the Letter dated 22.1.2001 by the Secretary of
the Government of Bihar to the Secretary of the
Government of Jharkhand recommending that all the
D employees of BHALCO should be absorbed in
JHALCO without any condition, there does not
appear to be anything more. In the name of written
submissions on behalf of the State of Bihar, all that
is stated is that since BHALCO was a corporation
E situated in the State of Jharkhand and its area of
operation was also in the State of Jharkhand only,
therefore, under Sections 47(1) and 56 of the Bihar
Reorganisation Act, 2000, BHALCO is a
corporation of the Government of Jharkhand with all
F its liabilities and assets. The State of Bihar then has
further reiterated that the decision of the Central
Government to treat BHALCO as a property of the
State of Bihar and direction given vide Letter dated
13.9.2004 to take steps for liquidation of BHALCO
is not a correct decision, and that it had written a
G
letter to reconsider the same.
(vii) The stand taken by the State of Bihar is a bald one.
Seen from any angle, the liability could not be
altogether shaken off by the State of Bihar to avoid
H
STATE OF JHARKHAND v. HARIHAR YADAV 929
[DIPAK MISRA, J.]
the same on the specious plea that BHALCO has A
now become JHALCO. That would be an over
simplification of the issue. That is apart from the
fact that in the memorandum of association of
BHALCO, there is a reference to the six districts
of Bihar which continued to be in the State of Bihar B
as its area of operation. That apart, the Order
dated 13.9.2004 which is binding on the State of
Bihar. By that order, the Central Government had
ordered that the State Government of Bihar will
initiate liquidation in respect of BHALCO. If that is c
so, then by the necessary logic, the liability to pay
the arrears of salary is that of the State of Bihar,
which it must discharge.
(viii) As a writ petition is pending in the Jharkhand High
Court by the employees claimir:ig absorption as D
also the past salaries, this Court would desist from
giving final directions, keeping in view it was a
public interest litigation directly filed before this
Court. It would be better if all the questions pending
in the said writ petition are finally decided as early E
as possible.
25. After so stating the two-Judge Bench issued the
following directions: -.
"(A) The High Court of Jharkhand is requested to dispose F
of the writ petition pending before it at the earliest and, if
possible, within six weeks from date. If the High Court finds
it difficult to dispose of the matter within the
aforementioned period, it may pass interim order as it may
deem fit and proper. It is made clear that in the. event the G
High Court finds that the applicants were entitled to be
absorbed in the services of JHALCO from an earlier date
it would be open to it to pass such an order as it may deem
fit and proper so as to adjust the equities between the
H
930 SUPREME COURT REPORTS [2013] 14 S.C.R.
A parties. It is made clear that the question of final
absorption, past salaries and the liability to pay the same
may be determined by the High Court in the said writ
petition.
(B) Managing Director, BHALCO and Managing Director,
B JHALCO as also the Secretaries of the Government of
Bihar and the Government of Jharkhand shall meet within
one month from the date and decide upon and assess the
liability on account of the arrears of the salaries payable
to the employees already absorbed and to be absorbed,
c and make a report thereof within a week of the date of
decision, to the High Court for taking final decision
regarding the mode of payment, etc. to the employees, if
any, so that the liability of JHALCO to that extent would
stand reduced.
D
(C) The Central Government shall take immediate steps
to see that the directions in the Order dated 13-9-2004,
passed by it are complied with by the State of Bihar."
THE LIS BEFORE THE HIGH COURT
E 26. After this Court disposed of the matter, the learned
single Judge took up the hearing of the writ petition and
keeping in view the directions of this Court he framed the
following issue for consideration: -
"Whether BHALCO in view of the provision as enshrined
F in section 65 of the Bihar Reorganisation Act would be
considered to be the same entity only with a change in its
name as JHALCO or JHALCO is a separate entity than
BHALCO?"
G 27. Analyzing the language employed in Section 65 of the
Act and steps taken by JHALCO including the somersault and
further taking note of the interim order dated 8.7.2008 the
learned single Judge opined as follows:-
"lt be noticed that right from the beginning when decision
H
STATE OF JHARKHAND v. HARIHAR YADAV 931
[DIPAK MISRA, J.]
was taken to allow the activities of BHALCO to continue A
in the territory of State of Bihar by the changed name of
JHALCO, no such indication was ever given about the
staffs being surplus. Moreover, even the advertisements
issued by the JHALCO do indicate that applications were
called upon from all the willing employees who want to join B
the services of JHALCO. At that time also no restriction
was imposed over the number of employees to be
absorbed. In this view of the matter, I do also subscribe
the same view as has been expressed by the Hon'ble
Supreme Court by observing "figure of 152 as the c
excess employees is, therefore, clearly misleading.
There does not appear any explanation, nor any
statistics to justify the curtailing of the employees of
JHALCO and such plea seems to have been taken
to get out of the rigor of the court's order dated 0
13.1.2005"
Thus, for the reasons discussed hereinabove BHALCO
and JHA~CO can not be said to be two separate entities
rather BHALCO in terms of section 65 of Bihar
Reorganization Act can be said to have been functioning E
as JHALCO.
Therefore, I do find that the petitioners are entitled to be
absorbed in the services of JHALCO from the date when
they have made applications for their absorption, pursuant F
to direction given by the Hon'ble Supreme Court on
13.1.2005 and they are. entitled to get their salaries from
the date of their absorption which is to be paid by the
JHALCO as other employee-s whose servic.es were
accepted by the JHALCO are also paid from the date of G
joining."
28. Being dissatisfied with the aforesaid judgment and
order the State of Jharkhand and its functionaries preferred
LPA no. 77 of 2009 and JHALCO preferred LPA No. 79 of
H
932 SUPREME COURT REPORTS [2013] 14 S.C.R.
A 2009. The Division Bench; after chronologically stating the
developments and referring to the provisions of the Act, posed
three questions for consideration: -
"(1) Whether BHALCO vests in the State of Jharkhand by
the operation of the Act of 2000?
B
(2) Whether BHALCO and JHALCO are two separate
entities or one and same?
(3) If not as contended by the appellant, then whether the
c petitioners have any right to seek absorption in JHALCO,
being employees of BHALCO?"
29. Dealing with the first issue the Division Bench referred
to the Sections 4 7, 65 and 85 of the Act and taking note of the
order dated 13.9.2004 passed by this Court in W.P. (C) no.
D 488 of 2002 came to hold·that the conclusion arrived at by the
learned Single Judge to the effect that BHALCO and JHALCO
cannot be regarded as two separate entities was
unsustainable. Thereafter, the Division Bench referred to the
decisions rendered by this Court and keeping in view the fact
E that the employees were made to suffer for no fault of theirs
and had been deprived of salary for 11 years when the matter
was decided by the court came to hold that the relationship
between the employ!=les and the employer had not become
extinct by any proceeding or operation of law. Thereafter it
F directed as follows:-
"Therefore, taking this equitable ground also in
consideration with the legal basis in the claim of the
employees, we are of the view that BHALCO is liable to
G pay all the arrears of salary to the employees who have
no been absorbed by the JHALCO till date and also to the
heirs of the deceased employees who died during this
period."
30. Thereafter, the Division Bench dealing with the intra-
H
STATE OF JHARKHAND v. HARIHAR YADAV 933
[DIPAK MISRA, J.]
court appeal addressed the issue with regard to absorption A
and opined that there was no reason that the respondent
employees should face non-absorption by JHALCO and,
accordingly, directed as follows:-
"36. We are also of the considered opinion in view of the
8
fact that these employees continued in service in BHALCO
the salaries be paid to the employees by the BHALCO till
they are absorbed or stand absorbed in the JHALCO and
thereafter JHALCO shall pay the salaries of those
employees. However, JHALCO can take a policy decision
to deal with the employees stand absorbed by virtue of this C
order passed by this Court whether they are to be
retrenched. If retrenched, then it can be done by paying
adequate compensation and that decision is to be taken
by the management by application of mind judiciously, and
keeping in mind the humanitarian approach and our D
observation may not be treated to be the direction or
licence to the JHALCO to remove those employees
without there being any just reasons.
37. Since it was the offer of the JHALCO to absorb the E
employees then as we have already discussed that the
JHALCO shall absorb the employees now from the date
of order of this Court i.e. today 16th June, 2011 and they
shall be deemed to have been absorbed in JHALCO with
the employees entitled to the benefits of past service F
rendered by the employees in the BHALCO. But the State
of Bihar and BHALCO are directed to pay the arrears of
salary and other service benefits to the employees of
erstwhile BHALCO upto order of this date within a period
of three months from today and the liability to pay the salary G
of the employees who stand absorbed in JHALCO, shall
be of JHALCO, however, from the date of joining of these
petitioners and other employees, if they approach
JHALCO within a period of two months form the date of
this order."
H
934 SUPREME COURT REPORTS [2013] 14 S.C.R.
A 31. It is apt to note here that prayer for award of interest
was not accepted by the High Court. The aforesaid judgment
and order by the Division Bench has been assailed by the State
of Jharkhand, State of Bihar, JHALCO and BHALCO. Be it
noted, two review applications that had been filed by BHALCO
B having been rejected it has preferred two appeals, by special
leave, assailing the said orders of rejection.
THE SUBMISSIONS
32. We have heard Mr. Ranjit Kumar, learned senior
c counsel, and Mr. Gopal Singh, learned counsel, for the State
of Bihar and BHALCO, Mr. Amarendra Saran, learned senior
counsel, for the State of Jharkhand and JHALCO and Ms. Priya
Hingorani, learned Advocate for the respondent-workmen in all
the appeals.
D 33. Mr. Ranjit Kumar and Mr. Gopal Singh, appearing for
the State of Bihar, have raised the following contentions:-
(a) The High Court has clearly gone wrong in imposing
the liability on the State of Bihar, for enrichment of
E area of Jharkhand and all the assets including Bank
Accounts, fixed deposits, office, trained employees
the irrigation instruments, huge machineries and
other equipments were taken over by the State of
Jharkhand and now the liability is sought to be
F imposed on the State of Bihar. This factual position
becomes significant in view of Section 47 of the Act
which stipulat~s that the assets and liabilities
relating to any commercial or industrial undertaking
of the existing State of Bihar shall pass to the State
G in which the undertaking is located.
(b) The assets and liabilities of the erstwhile BHALCO
has been merged/taken over by JHALCO and State
of Jharkhand by their conscious decision. The area
of operation, infrastructures, office records/files
H have been amalgamated into the JHALCO and the
STAtE OF JHARKHAND v. HARIHAR YADAV 935
[DIPAK MISRA, J.]
Head Office of the BHALCO is situate in Ranchi, A
Jharkhand. It is evident from the notification dated
29.12.2001 issued by the State of Jharkhand that·
the Head Office of BHALCO which has been
changed as JHALCO would be at Ranchi as before
and under these circumstances to mulct the liability B
on the State of Bihar is neither just nor fair.
(c) The State of Jharkhand has arbitrarily accepted
300 employees of BHALCO to be absorbed in
JHALCO without ascertaining as to how many
workmen were working in BHALCO at the time the C
decision was taken and hence, it is the duty of
JHALCO to carry out the obligation-s.
(d) In any case, if the employees have any grievance
with regard to their non-payment of salary and D
service conditions including absorption they can
take recourse to the statutory remedies as provided
under the Companies Act, 1956 and the Industrial
Disputes Act, 1947.
E
34. Mr. Saran, learned senior counsel, and Mr. Tapas
Kumar Sen, appearing for the State of Jharkhand, have
advanced the following contentions: -
(i) The High Court has fallen into grave error by not
appreciating that JHALCO had issued various F
advertisements to take the employees of BHALCO
on deputation basis only and there was no
unconditional offer to absorb all the employees of
BHALCO in JHALCO.
G
(ii) JHALCO is a commercial organization and it has
to arrange for its establishment expenditure from its
own resources and when it is running in loss it was
inappropriate by the High Court to command
JHALCO to absorb and pay the salaries to those H
936 SUPREME COURT REPORTS (2013] 14 S.C.R.
A employees. That apart, the High Court has
committed further illegality by directing that the
absorbed employees shall be entitled to the benefit
of past service rendered by the employees in
BHALCO.
B
{iii) Five respondents/employees had approached the
Court and if any order is passed, it should be
restricted to them and there should not be a general
order, more so, when I.A. No. 3 of 2012 for
impleadment has been dismissed on 29.8.2013 as
c withdrawn.
{iv) No record is available with JHALCO or BHALCO
about the employees and hence, it would be difficult
to ascertain whether a person is entitled to any
D benefit.
35. Ms. Priya Hingorani, learned counsel appearing for the
workmen-respondents, resisting the aforesaid contentions
urged by the appellants, has contended that the respondents
E are eXtremely unfortunate to have worked in BHALCO without
payment of salary since 1995 and thereafter being not
absorbed by JHALCO, despite JHALCO having absorbed
more than 300 employees of BHALCO. Number of orders
passed by this Court in this case would go a long way to show
the apathy exhibited by both the States and the statutory
F corporations despite the existence of employer and employee
relationship. The attitude of the appellants clearly reflects a
callous and insensitive attitude. It is further urged by her that
the Central Government has taken the decision under Section
65 of the Act determining the liabilities but the same is not
G properly appreciated and applied as a consequence of which
such a disastrous stage has come in. The learned counsel has
seriously controverted about the identification of the employees
on the foundation that the names of the employees mentioned
in the list annexed to the written note of arguments find place
H in the report submitted by Justice Udai Sinha and their original
STATE OF JHARKHAND v. HARIHAR YADAV 937
[DIPAK MISRA, J.]
service books are available. A
36. A chart has been annexed indicating the sum payable
to the respondents and other employees who are similarly
situated. Though the lea med counsel for the respondents initially
pressed for absorption, yet in course of hearing she conceded B
that this Court may mould the relief and issue appropriate
direction with regard to payment of salary and give a quietus
to the lis.
THE NECESSITOUS APPROACH IN PRAESENTI
c
37. We have already adverted to the orders passed by the
High Court, noted the respective contentions at the Bar and
stated the chequered history of the litigation. The factual
expose, as is evident,· reflecls a very sad scenario. We call it
sad as we are disposed to think that when a State is bifurcated o
by a Parliamentary legislation, both the States and the Centre
are required to take certain decisions under the Act and they
are required to be taken in quite promptitude and not leaving
the poor employees high and dry and suffer for no fault of theirs.
38. The submission, so assiduously made, that it is open E
to the employees to seek their remedy under the Companies
Act, 1956 or under the provisions of the Industrial Disputes Act,
1947, leaves us totally unimpressed regard being had to the
facts and circumstances of the case and the plight in which the
employees have been put in. This Court on earlier occasion had F
also categorically clarified that this is a different situation and
it is not laying down the law that in every case the State
Government should come forward to pay. It has been held
earlier that it is a problem of great magnitude affecting human
rights and the purpose of living as enshrined under Article 21 G
of the Constitution. That apart, it is not a case where the
services of the employees have been terminated or retrenched
or even there is no decision that the posts have been abolished.
39. As is manifest, initially the State of Jharkhand took a
H
938 SUPREME COURT REPORTS [2013) 14 S.C.R.
A decision to take over BHALCO and thereafter resiled. The
Division Bench has correctly opined that such a decision could
not have been taken unilaterally by the State of Jharkhand but
the fact remains that it had been taken and some employees
were absorbed. We do not intend to say anything on the status
s of the employees who have already been absorbed as the
application for impleadment I.A. No. 3 of 2012, has been
dismissed as withdrawn by order dated 29.8.2013, because
the controversy pertaining to the same is pending before the
High Court. We are only going to focus on the plight of the
c employees who have not been absorbed and not got salary
from any quarter.
40. At this juncture, it is necessary to refer to the order
dated 13.9.2004 issued by the Government of India, Ministry
of Home Affairs. The said decision was taken in pursuance of
D the order passed by this Court on 13.8.2004 in Writ Petition
No. 488 of 2002. The Competent Authority of the Central
Government, after referring to what transpired in the meetings
and noting the difference in regard to the views by the State of
Bihar and State of Jharkhand, passed the following order: -
E
"And whereas, the Central Government considers that as
on date BHALCO continues to be under the control of the
Government of Bihar in terms of Section 65 of the Bihar
Reorganization Act, 2000 and as Government of Bihar has
F already initiated proceedings for liquidation of fifteen
companies and has decided to initiate liquidation
proceedings in respect of Bihar Hill Area Lift Irrigation
Corporation Ltd. (BHALCO)
Now therefore, in exercise of the powers conferred upon
G it under section 65(1) & (2) of the Bihar Reorganization
Act, 2000, the Central Government hereby directs that
Government of Bihar will initiate liquidation proceedings
in respect of Bihar Hill Area Lift Irrigation Co[poration Ltd.
(BHALCO) to which the Government of Jharkhand has no
H
STATE OF JHARKHAND v. HARIHAR YADAV 939
[DIPAK MISRA, J.]
objection." A
41. At this stage the conduct of the State of Jharkhand is
relevant to be noticed. We repeat, we have already approved
the view of the Division Bench that the State of Jharkhand could
not have taken the decision in a unilateral manner. But what B
steps it had taken are significant for what we are going to direct
at a later stage. From the uncurtaining of facts it is
demonstrable that the issue pertaining to employees of
BHALCO came up for consideration before the State of
Jharkhand for post facto approval of acquisition of BHALCO C
and making it functional as JHALCO. On 9.1.2002 a
memorandum of cabinet was drawn for post facto approval. The
proposal of acquisition and adoption of BHALCO as JHALCO
was placed before the following conditions:-
"6. Thus under the circumstances the proposal of D
acquisition and adoption of BHALCO as JHALCO is
proposed with the following conditions:
A. The establishment expenditure of JHALCO will be
brought down. For this the services of those employees E
who have irregularly been appointed would be terminated
as per rules.
B. JHALCO will be given full autonomy and it shall function
on commercial lines and shall arrange for salaries of its
employees from its own sources. ' F
C. Arrear of salary pertaining to period prior to 15.11.2000
shall not be paid.
D. No new appointment under any circumstances will be G
done in JHALCO.
E. The memorandum and articles of Association of
JHALCO shall be accepted in totality and Bihar state and
Bihar, wherever it has been mentioned shall be replaced
H
940 SUPREME COURT REPORTS [2013] 14 S.C.R.
A by Jharkhand State and Jharkhand respectively.
Accordingly, the memorandum shall be treated as
modified.
F. Govt. will provide JHALCO a sum of Rs. 5.00(five)
Crores as its share capital and also 5.25 Crores for
B
payment of salaries to its employees for the period from
15.11.2000 to 31.3.2000.
7. The proposal under para 6 has the approval of the Law
Department.
c
8. The proposal under para 6 has the approval of the Chief
Secretary.
9. The proposal under para 6 has the approval of Minister
Water Resources Department.
D
10. The proposal under para 4 has the approval of Hon'ble
Chief Minister.
11. The post facto approval of the cabinet is solicited on
E proposals laid in para 4 above."
42. Be it noted, before the High Court a stand was taken
by the State that the proposal that put forth before the
Government on 9.1.2002 was not approved. The plea of the
employees was that it had been approved. Be that as it may,
F as is manifest, thereafter JHALCO issued notices in the local
newspaper calling for applications from the employees of
BHALCO for absorption of their services in JHALCO. The
notice dated 23.2.2003 stipulated.that the officers/employees
of BHALCO who wish to serve JHALCO on the basis of
G deputation can apply to the scrutiny committee constituted for
the said purpose. The officers/employees at the time of
submission of application were required to show proof of being
validly appointed employees of BHALCO. Vide notice dated
11.3.2003 time for submission of application was extended to
H 15.3.2003. On 27.3.2003 a notice was issued to the effect that
STATE OF JHARKHAND v. HARIHAR YADAV 941
[DIPAK MISRA, J.]
the employees of BHALCO who had earlier submitted A
applications would only submit their joining letter and the
employees who had not submitted applications earlier they
shall submit the application Form in the prescribed format and
joining letter as well. It was stipulated that after the joining letter
being accepted they would be treated as employees of B
JHALCO from the date of acceptance of joining letter and their
salary would be payable by JHALCO from that date. Vide notice
dated 31.7.2003 time was extended till 7.8.2003. Eventually,
the Managing Director of JHALCO passed an office order on
17.4.2004 in respect of one of the employees of BHALCO c
which has been brought on record as a sample order. The
conditions laid down in the said office.order are reproduced
below:-
"1. This arrangement is totally temporary.
D
2. Last basic pay and dearness allowance thereon paid
in BHALCO shall be paid.
3. No arrears shall be payable of period prior to date of
joining. E
4. As per requirement and scheme may be posted/
appointed anywhere, in JHALCO.
5. He shall be liable to departmental action if nay
information found in the joining and application is found F
false."
It is relevant to mention here that the services of the said
category of employees were made effective from the date of
joining in JHALCO, i.e., 20.4.2004.
G
43. From the aforesaid action taken by the State .of
Jharkhand it is clear as crystal that it took up the responsibility
and the State of Bihar, as it appears, tacitly acceded to the
position as a result of which the employees remained at the
H
942 SUPREME COURT REPORTS [2013) 14 S.C.R.
A mercy of JHALCO. At a later stage controversy cropped up,
as noticed earlier, due to disagreement and difference between
the two States and it was stated that a decision was taken to
initiate the liquidation proceedings and the Central Government
in exercise of its power under Section 65 of the Act directed
B the State of Bihar to initiate liquidation proceedings.
Government of Jharkhand conceded to the same. Because of
the vacillating stand of the State of Jharkhand a distressing and
unusual situation has arisen. It is not in dispute that JHALCO
absorbed some of the employees but did not take any steps
c to deal with the other employees on some pretext or the other.
There is a cavil over the assets and liabilities. We are neither
concerned with the said controversy nor do we intend to
express any opinion.
44. The High Court has directed the State of Bihar to pay
D the salary till 16.6.2011 and has directed JHALCO to absorb
the unabsorbed employees. Learned counsel for the State of
Jharkhand and JHALCO has painted a picture of frustrated
affairs and further advanced the plea that there is no vacancy.
As stated earlier, the learned counsel for the respondents-
E employees has suggested for moulding the relief to give a
quietus to the litigation.
45. Having regard to the position that has emerged, we
are compelled to dwell upon the role of the State as a model
F employer. In Som Prakash Rekhi v. Union of lndia 15 , Krishna
Iyer, J., has stated thus: -
"Social justice is the conscience of our Constitution, the
State is the promoter of economic justice, the founding
faith which sustains the Constitution and the country is
G Indian humanity. The public sector is a model employer
with a social conscience not an artificial person withol!lt
soul to be damned or body to be burnt."
H 15. (1981) 1 sec 449.
STATE OF JHARKHAND v. HARIHAR YADAV 943
[DIPAK MISRA, J.)
46. In Gurmail Singh and others v. State of Punjab and A
others16 it has been held that the State as a model employer
is expected to show fairness in action.
47. In Bairam Gupta v. Union of India and Another, 17 the
Court observed that as a model employer the Government must 8
conduct itself With high probity and candour with its employees.
48. In State of Haryana v. Piara Singh 16 the Court has ruled
that the main concern of the court in such matters is to ensure
the rule of law and to see that the Executive acts fairly and gives
a fair deal to its employees consistent with the requirements C
of Articles 14 and 16.
49. In Bhupendra Nath Hazarika and another v. State of
Assam and others, 19 while laying emphasis on the role of the
State as a model employer, though in a different context, the D
Court observed:
"It should always be borne in mind that legitimate
aspirations of the employees are not guillotined and a
situation is not created where hopes end in despair. Hope
for everyone is gloriously precious and a model employer E
should not convert it to be deceitful and treacherous by
playing a game of chess with their seniority. A sense of
calm sensibility and concerned sincerity should be
reflected in every step. An atmosphere of trust has to
prevail and when the employees are absolutely sure that F
their trust shall not be betrayed and they shall be treated
with dignified fairness then only the concept of good
governance can be concretized."
50. If the present factual matrix is tested on the anvil of the G
aforesaid principles, there can be no trace of doubt that both
16. (1991) 1 sec 189.
17. 1987 (Supp) SC 228.
18. (1992) 4 sec 118.
19. (2013) 2 sec s16.
H
944 SUPREME COURT REPORTS [2013) 14 S.C.R.
A the States and the Corporations have conveniently ostracized
the concept of "model employer''. It would not be wrong to say
that they have done so with Pacific calmness, sans vision, shorn
of responsibility and oblivious of their role in such a situation.
Their action reflects the attitude of emotionlessness, proclivity
B of impassivity and deviancy with cruel impassibility. Neither of
the States nor the Corporations have even thought for a moment
about the livelihood of the employees. They have remained
totally alien to the situation to which the employees have been
driven to. In a State of good governance the Government cannot
c act like an alien. It has an active role to play. It has to have a
constructive and progressive vision. What would have ordinarily
happened had there not been bifurcation of the State and what
fate of the employees of BHALCO would have faced is a
different matter altogether. The tragedy has fallen solely
0 because of the bifurcation. True it is, under the law there has
been bifurcation and the Central Government has been
assigned the role to settle the controversies that had to arise
between the two States. But the experimentation that has been
done with the employees as if they are guinea pigs is legally
E not permissible and indubitably absolutely unconscionable. It
hurts the soul of the Constitution and no one has the right to do
so.
51. Be it noted, a contention was canvassed with immense
vehemence by the appellants that the directions may be issued
F in respect of the respondents-employees who approached the
Court. It is not a case where we shall confine the relief to the
respondents alone. Earlier this Court had constituted a
Committee and the State of Bihar had deposited rupees fifty
crores for all the Corporations and the employees working in
G BHALCO who were not paid salary from 1995 were
proportionately paid. Their identities are known. The employees
who have died, their legal representatives are easily identifiable.
A man in dire need cannot fight a litigatfon against two
experimenting States to get his dues. It is the duty of the
H constitutional court, as submitted by Ms. Priya Hingorani, that
STATE OF JHARKHAND v. HARIHAR YADAV 945
[DIPAK MISRA, J.]
all should be paid their dues as this Court may think fit. A
52. Keeping in view the totality of facts and circumstances
of the case and taking note of the concept of social justice
under the Constitution, role of a model employer in a welfare
State and the conduct of both the States we proceed to issue
B
the following directions: -
(i) The employees who were paid certain amount after
this Court had directed for deposit of rupees fifty
crores by the State of Bihar and have not been
absorbed by JHALCO, they should be paid their c
salary from 1.1.1995 till 29.12.2001.
(ii) The State of Bihar shall comply with the directions
within a period of three months from today as they
are aware of the names of employees who had D
been paid proportionally out of the deposit made
earlier.
(iii) The State of Jharkhand shall pay from 29.12.2001
till 13.9.2004. We have fixed the cut-off date for the
State of Jharkhand as it had issued the notification E
on 29.12.2001 creating an erroneous impression
and confusion. The date for State of Bihar has been
determined regard being had to the date the
Central Government took a decision asking the
State of Bihar to go for liquidation. F
(iv) The State of Jharkhand shall pay the amount within
a period of four months to those employees or their
legal representatives of the employees who have
received the amount in proportion from the State of G
Bihar.
(v) The State of Bihar shall deduct the amount already
paid by virtue of the order passed by this Court.
However, the State of Jharkhand shall pay the entire
amount of salary for the period as directed by us H
946 SUPREME COURT REPORTS [2013] 14 S.C.R.
A as it is clear from the record that it has not paid
anything to the employees.
(vi) Both the States shall compute the salary component
after granting the benefit of pay revision which has
been extended to other employees.
B
(vii) The amount, as directed to be paid, shall be paid
with 7.5% simple interest per annum.
(viii) The claim for absorption stands closed.
c 53. The appeals stand disposed of with the above
directions and, accordingly, the judgment and order passed by
the Division Bench is modified. There shall be no order as to
costs.
D Kalpana K. Tripathy Appeals disposed of.
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