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#CaseBrief: A.K. Bindal & Anr vs Union Of India & Ors


(2003) 5 SCC 163

 

PETITIONER: A.K. Bindal & Anr.

                   v.

RESPONDENT: Union of India & Ors.

 

DATE OF JUDGMENT: 25/04/2003

 

BENCH: S. Rajendra Babu & G.P. Mathur.

 

 

FACTS OF THE CASE


In the case of A.K. Bindal And Another v. Union of India and Others (2003) 5 SCC 163, a new payment and dearness allowance system for industrial employees was introduced in 1977. A circular in 1979 mandated uniform treatment for officers of FCI/NFL companies in terms of pay scale and fringe benefits. Despite the due revision of pay scales from 1986, it was not implemented. Ad hoc relief was instead provided based on industrial DA patterns. A second relief was recommended in 1990. However, from 1992, FCI and HFC officers faced non-revision due to alleged losses, while other companies received benefits. In 1993, a wage policy allowed negotiation, and in 1995, an office memorandum linked pay revision for sick PSEs to revival decisions.

 

The case alleges differential treatment of FCI and HFC officers based on company profits and losses. Petitioners seek to quash the 1995 memorandum, restore uniform treatment, and request interim relief of at least 60% of the revision given to officers in remaining companies.

 

what is the nature of the litigation?

Service Dispute - Challenging a discriminatory pay-revision policy for public sector officers based on individual company performance.


who is asking the particular for court for what


1.  Plaintiffs:

·  A.K. Bindal, President of the Federation of Officers Association of FCI - representing officers of erstwhile FCI.

· Dr. K.P. Sinha - representing officers of erstwhile HFC.

 

2.  Requests:

·  Quashing of the government's policy linking pay revisions to individual company performance, claiming it creates discriminatory treatment between FCI and HFC officers.

·  Implementation of a fair and equal pay revision policy for all officers, considering their combined pre-bifurcation service in FCI.


why did they sue?

  • The plaintiffs believed the government's policy unfairly disadvantaged FCI officers compared to HFC officers despite their identical pre-bifurcation service in FCI.

  • They felt the policy violated the principle of equal pay for equal work and burdened FCI employees with lower salaries without due cause.

 

what are the relevant laws in question?

  • Indian Constitution - Articles 14 (Equality) and 21 (Right to Life and Personal Liberty)

  • Public Sector Undertakings (PSU) guidelines and service regulations

  • Government office memorandum on the disputed pay-revision policy

 

what has been already decided so far?

  • The court partially upheld the government's position, recognizing the principle of performance-based pay revisions in PSUs.

  • However, it declared the specific policy discriminatory due to its selective application to FCI officers after bifurcation.

  • The court ordered the government to review the policy and ensure fair treatment for all officers, considering their pre-bifurcation service in FCI.

 

ISSUES OF THE CASE

 

1)    Whether the employees of FCI and HFC qualify to be government employees.

2)    Whether the financial capacity of the employer is an important factor in determining the wage of the employees.

3)    Whether the right of livelihood of the employees has been infringed in the present case.

4)    Whether the writ petition and claims of the petitioners survive after most of the employees have availed the voluntary retirement scheme.


ARGUMENTS OF THE PETITIONER

• Employees have a legitimate expectation of fair and reasonable compensation stemming from their employer-employee relationship, which should not be perceived as a discretionary favor bestowed by the employer.

• Given that the petitioners are employed in government-owned companies, they can be categorized as government employees.

• As the employer in this context, the government's denial of fair and reasonable wages solely based on the pending decision regarding the continuation of struggling establishments contradicts the fundamental right guaranteed to the petitioners under Article 21 of the Constitution.

• The challenged memorandum exhibits discriminatory characteristics, as public sector undertakings (PSUs) following the central dearness allowance pattern receive periodic pay revisions irrespective of their profitability, unlike PSUs, such as those in the present case, following the industrial dearness pattern.

• Since 1992, the petitioners have been subjected to singling out and discrimination by being denied regular pay revisions based on the losses incurred by FCI and HFC, a situation that would not have arisen if they had followed the central dearness allowance pattern.

• It is inappropriate for the government to defer the pay revision for FCI and HFC employees from 1992 and associate it with the directive to refer them to the Board for Industrial and Financial Reconstruction (BIFR), especially considering these companies have fulfilled their socio-economic role in producing and distributing affordable fertilizers, contributing to agricultural and rural productivity.

• When the units' losses are not attributable to employee performance but to other factors, denying employees their pay revision based on the profitability of the concerned unit results in significant injustice.

• The right to life encompasses the right to livelihood, and financial incapability should not serve as grounds to deny employees the right to wage revisions.

 

ARGUMENTS OF THE RESPONDENT

• FCI and HCF, previously under the administrative control of the Department of Fertilisers, were declared as sick companies in 1992 and referred to BIFR.

• Among the four units of FCI, the Haldia unit never commenced operations since its completion in 1981, and the Gorakhpur unit has been inactive since 10/6/1990.

• Net losses of Rs. 562.51 crores and Rs. 438.99 crores were incurred by FCI and HCF, respectively, during the term 1996-97, leading to a complete erosion of their equity base.

• Revival packages, totaling Rs. 2201.13 crores (excluding wage revision), were formulated by the Department of Fertilisers for rehabilitating operational units based on suggestions from various entities. However, these funds could not be provided due to prior commitments in the fertilizer sector and financial institutions' reluctance to raise funds for the sick units.

• The revision of pay scales from 1992 would require an additional Rs. 120 crores, further straining the financial requirements of the stalled revival packages, as the Department of Fertilisers and promoters faced challenges in mobilizing funds.

• The government guidelines in the contested memorandum do not outright prohibit companies referred to BIFR from revising wages and fringe benefits. However, such revisions are subject to the approval of revival packages, which, in turn, must be sanctioned by BIFR upon agreement between the operating agency and funding institutions. It's important to note that BIFR has recommended the winding up of FCI and has issued an order for the winding up of HFC, with the Delhi High Court proceeding with the winding-up process for both FCI and HFC.


JUDGMENT

1. Merely because the central government holds all shares of FCI and HFC, it cannot be concluded that both companies should be considered as government entities.

2. Given that the employees of FCI and HFC are not classified as government employees, they lack a legal basis to assert that the government is obligated to cover their salaries and provide additional amounts for pay scale revisions.

3. Employees cannot insist on wage revisions and enhancements when the organization they work for is consistently incurring substantial losses. The economic capacity of the industry to meet wage payments must be taken into consideration.

4. The right to livelihood does not encompass the automatic entitlement to wage revisions.

5. The contested memorandum is neither unconstitutional nor beyond the legal authority conferred.

6. As 99% of the employees have opted for the Voluntary Retirement Scheme (VRS) and subsequently left the companies, the writ petition is now moot and has become irrelevant.

 

CONCLUSION

The case of A.K. Bindal & Anr vs. Union Of India & Ors (2003) tackled a complex issue of differential pay revisions for public sector officers based on individual company performance.

Partially Upholding the Policy: The Supreme Court acknowledged the legitimacy of linking pay revisions to company performance in principle. Recognizing the need for efficiency and accountability in public sector undertakings (PSUs), it accepted the general framework of the policy.

Denouncing Discrimination: However, the Court strongly condemned the discriminatory application of the policy to FCI officers after the bifurcation of FCI and HFC. Previously working under the same entity, FCI officers faced lower pay adjustments compared to HFC officers despite their identical pre-bifurcation service and performance. This was deemed unfair and violative of the principle of equal pay for equal work.

Remedial Measures: The Court ordered the government to review the policy and ensure fair treatment for all officers, considering their combined service in FCI before the bifurcation. This meant reevaluating pay revisions for FCI officers to address the discriminatory disparity created by the policy's selective application.

Significance and Impact: The A.K. Bindal case established a crucial precedent for fair and non-discriminatory pay practices in PSUs undergoing restructuring. It emphasized the importance of considering historical service and organizational context when implementing differential pay structures. This ensured that restructuring wouldn't disadvantage employees unfairly due to changes in company dynamics.

Limitations and Further Debates: While the judgment addressed the immediate issue of discrimination, it didn't completely eliminate the underlying debate on performance-based pay in PSUs. Concerns regarding the effectiveness of such policies and potential manipulation of performance metrics for individual gains continue to be discussed.


Overall, the A.K. Bindal case represents a significant victory for justice and fair treatment in the sphere of public sector employment. By highlighting the dangers of discriminatory practices and advocating for equitable pay based on overall service, it set a benchmark for future policies and legal considerations in the PSU landscape.

 

 

 

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