PIL in India

26PUBLIC INTEREST LITIGATION IN INDIA

Public Interest Litigation (P.I.L):- Meaning and Definition

The words `Public Interest' mean "the common well-being and also public welfare” and the

word 'Litigation' means "a legal action including all proceedings therein, initiated in a court of law

with the purpose of enforcing a right or seeking a remedy." Thus, the expression `Public Interest

Litigation' means "some litigation conducted for the benefit of public or for removal of some

public grievance." In Indian law, PIL means litigation for the protection of public interest.

It is litigation introduced in a court of law, not by the aggrieved party but by the court itself or

by any other private party. It is not necessary, for the exercise of the court's jurisdiction, that the

person who is the victim of the violation of his or her right should personally approach the court.

Public Interest Litigation is the power given to the public by courts through judicial activism.

Such cases may occur when the victim does not have the necessary resources to commence

litigation or his freedom to move court has been suppressed or encroached upon. The court can itself

take cognizance of the matter and proceed suo motu or cases can commence on the petition of any

public-spirited individual.

Any public spirited citizen can move/approach the court for the public cause (or public

interest or public welfare) by filing a petition in the Supreme Court under Art.32 of the Constitution

or in the High Court under Art.226 of the Constitution or before the Court of Magistrate under Sec.

133 of the Code of Criminal Procedure, 1973.

In Black’s law Dictionary (Sixth Edition), “Public Interest” is defined as follows:

“Public Interest.means–

Something in which the public, the community at large has something pecuniary interest,

or some interest by which their legal rights or liabilities are affected. It does not mean anything so

narrow as mere curiosity, or as the interest of the particular localities, which may be affected by

the matters in question. Interest shared by the citizens generally in affair of local, State or

national government………………..”


ORIGIN:-

The Indian PIL is the improved version of PIL of U.S.A. According to “Ford Foundation” of

U.S.A., “Public interest law is the name that has recently been given to efforts that provide legal

representation to previously unrepresented groups and interests. Such efforts have been undertaken

in the recognition that ordinary marketplace for legal services fails to provide such services to

significant segments of the population and to significant interests. Such groups and interests include

the proper environmentalists, consumers, racial and ethnic minorities and others”. The emergency

period (1975-1977) witnessed colonial nature of the Indian legal system. During emergency state

repression and governmental lawlessness was widespread. Thousands of innocent people including

political opponents were sent to jails and there was complete deprivation of civil and political rights.

The post emergency period provided an occasion for the judges of the Supreme Court to openly

disregard the impediments of Anglo-Saxon procedure in providing access to justice to the poor.

Public Interest Litigation popularly known as PIL can be broadly defined as litigation in the

interest of that nebulous entity: the public in general. Prior to 1980s, only the aggrieved party could

personally knock the doors of justice and seek remedy for his grievance and any other person who

was not personally affected could not knock the doors of justice as a proxy for the victim or the

aggrieved party. In other words, only the affected parties had the locus standi (standing required in

law) to file a case and continue the litigation and the non-affected persons had no locus standi to do

so.

However, this entire scenario gradually changed when the post emergency Supreme Court

tackled the problem of access to justice by people through radical changes and alterations made in

the requirements of locus standi and of party aggrieved. The splendid efforts of Justice P N Bhagwati

and Justice V R Krishna Iyer were instrumental of this juristic revolution of eighties to convert the

Apex Court of India into a Supreme Court for all Indians. Justice V. R. Krishna Iyer and P. N.

Bhagwati recognized the possibility of providing access to justice to the poor and the exploited

people by relaxing the rules of standing. In the post-emergency period when the political situations

had changed, investigative journalism also began to expose gory scenes of governmental

lawlessness, repression, custodial violence, drawing attention of lawyers, judges, and social activists.

PIL emerged as a result of an informal nexus of pro-active judges, media persons and social activists.

This trend shows stark difference between the traditional justice delivery system and the modern


informal justice system where the judiciary is performing administrative judicial role. PIL is

necessary rejection of laissez faire notions of traditional jurisprudence.

The first reported case of PIL in 1979 focused on the inhuman conditions of prisons and

under trial prisoners. In Hussainara Khatoon v. State of Bihar , the PIL was filed by an advocate on

the basis of the news item published in the Indian Express, highlighting the plight of thousands of

under trial prisoners languishing in various jails in Bihar. These proceeding led to the release of more

than 40,000 under trial prisoners. Right to speedy justice emerged as a basic fundamental right which

had been denied to these prisoners. The same set pattern was adopted in subsequent cases.

NEW ERA:-

A new era of the PIL movement was heralded by Justice P.N. Bhagawati in the case of S.P.

Gupta v. Union of India . In this case it was held that “any member of the public or social action

group acting bonafide” can invoke the Writ Jurisdiction of the High Courts or the Supreme Court

seeking redressal against violation of a legal or constitutional rights of persons who due to social or

economic or any other disability cannot approach the Court. By this judgment PIL became a potent

weapon for the enforcement of “public duties” where executed in action or misdeed resulted in

public injury. And as a result any citizen of India or any consumer groups or social action groups can

now approach the apex court of the country seeking legal remedies in all cases where the interests of

general public or a section of public are at stake.

Abuse of PIL:

However, the development of PIL has also uncovered its pitfalls and drawbacks. As a result,

the apex court itself has been compelled to lay down certain guidelines to govern the management

and disposal of PILs. And the abuse of PIL is also increasing along with its extended and

multifaceted use.

Of late, many of the PIL activists in the country have found the PIL as a handy tool of

harassment since frivolous cases could be filed without investment of heavy court fees as required in

private civil litigation and deals could then be negotiated with the victims of stay orders obtained in

the so-called PILs.


The lowering of the locus standi requirement has permitted privately motivated interests to

pose as public interests. The abuse of PIL has become more rampant than its use and genuine causes

either receded to the background or began to be viewed with the suspicion generated by spurious

causes mooted by privately motivated interests in the disguise of the so-called public interests.

SCOPE, OBJECT AND PURPOSE:-

At the beginning the Supreme Court started to encourage the public spirited citizens who are

moving the Court for the purpose of vindicating the rights of poor masses. In appropriate cases the

Court started to direct the State to pay to the petitioner costs of the petition.10 A petitioner need not

to incur expenses out of his own pocket for going to a lawyer and preparing a regular writ petition

for enforcement of the fundamental right of the poor and deprived sections of the community.11 It

was well settled that the public interest litigation could be initiated by means of letters and telegrams

addressed to the Court.12 The letter or telegram addressed to an individual justice of the Court

cannot also be rejected merely on the ground that it is not addressed to the Court.13 In other words a

letter or telegram addressed by a public spirited citizen can legitimately be regarded as an

‘appropriate proceeding’ for the purposes of article 3214 of the Constitution. In addition to this a

letter or telegram may be unsupported by an affidavit. The Court found that the purpose of

jurisdiction under article 32 would be frustrated if the Court insists on an affidavit as a condition of

entertaining the letter as petition.15 The Court has liberalized the technical procedural laws,

especially the law relating to pleadings, applicable to public interest litigations. When a matter of

grave public importance is for consideration before the Court every technicality in the procedural law

shall not be available as a defence.16 The Court may also appoint a Commission or other body for

the purpose of investigation of facts to reduce burden of the petitioner to make expenses to collect

evidence.17

The Supreme Court has always regarded the poor and the disadvantaged as entitled to

preferential consideration than the rich, the businessmen and the industrialists. The weaker sections

of Indian humanity have had no access to justice on account of their poverty, ignorance and

illiteracy. The strategy of public interest litigation has been evolved by the Supreme Court with a

view to bring justice within the easy reach of the poor and the disadvantaged sections of the

community.


The approach of the Supreme Court to encourage the public spirited citizens who are moving

the Court for the purpose of vindicating the rights of poor and disabled in initial days resulted in

increase of bogus, evasive and vexatious litigations. The instrument of public interest litigation

started taking different shape. The process of the Court was abused in many cases. The people started

to raise private disputes in the name of public interest litigation. They also started to use the public

interest litigation for getting publicity and for political purposes. It was challenge to the Court to

separate and discourage such litigations from genuine one. The Courts started exercising greater care

and caution in the matter of exercise of public interest litigation jurisdiction. The purpose was to

restrict the free flow of such cases in the name of public interest litigations.

STEPS taken to regulate the abuse of PIL:-

(a) The Courts in the exercise of their public interest litigation jurisdiction cannot transgress into

the field of policy decisions of State.

(b) The Court under the guise of redressing a public grievance should not encroach upon the sphere

reserved by the Constitution to the executive and the legislature. The Court cannot mandate the

executive or the legislature to initiate legislation for a particular purpose.

(c) The public interest litigation should be converted into an adversarial litigation. It should not

venture to take over the functions of the Magistrate or pass any order, which would interfere with its

judicial functions.

(d) The petitioner, who was not party in the earlier proceeding, cannot file a public interest

litigation to review the earlier decision of the Supreme Court.

(e) A third party who is a total stranger to the prosecution, by making a public interest litigation,

cannot be permitted to question the correctness of the conviction and sentence imposed by the Court

after a regular trial

(f) The public interest litigation cannot be filed in service matters.

(g) The public interest litigation should not be a mere cloak. The court must be satisfied that there is

some element of public interest involved in entertaining such a petition.

(h) The public interest litigation cannot be invoked by a person or body of persons to satisfy his or

its personal grudge and enmity.


Who can file a PIL:-

At present, the court can treat a letter as a writ petition and take action upon it. But, it is not

every letter which may be treated as a writ petition by the court. The court would be justified in

treating the letter as a writ petition only in the following cases-

1. It is only where the letter is addressed by an aggrieved person; or

2. a public spirited individual; or

3. a social action group for enforcement of the constitutional or the legal rights of a person

in custody or of a class or group of persons who by reason of poverty, disability or

socially or economically disadvantaged position find it difficult to approach the court for

redress.

According to the guidelines of the Supreme Court any member of public having sufficient

interest may maintain an action or petition by way of PIL provided: -

» There is a personal injury or injury to a disadvantaged section of the population for whom

access to legal justice system is difficult,

» The person bringing the action has sufficient interest to maintain an action of public

injury,

» The injury must have arisen because of breach of public duty or violation of the

Constitution or of the law,

» It must seek enforcement of such public duty and observance of the constitutional law or

legal provisions.

Where a PIL can be filed?

A Public Interest Litigation (PIL) can be filed in any High Court or directly in the Supreme

Court. It is not necessary that the petitioner has suffered some injury of his own or has had personal

grievance to litigate. PIL is a right given to the socially conscious member or a public spirited NGO

to espouse a public cause by seeking judicial for redressal of public injury. Such injury may arise


from breach of public duty or due to a violation of some provision of the Constitution. Public interest

litigation is the device by which public participation in judicial review of administrative action is

assured.

Subjects of Public Interest Litigation

.

Public Interest Litigation is meant for enforcement of fundamental and other legal rights of

the people who are poor, weak, ignorant of legal redressal system or otherwise in a disadvantageous

position, due to their social or economic background. Such litigation can be initiated only for

redressal of a public injury, enforcement of a public duty or vindicating interest of public nature. It is

necessary that the petition is not filed for personal gain or private motive or for other extraneous

consideration and is filed bona fide in public interest. The following are the subjects which may be

litigated under the head of Public Interest Litigation:

(I) The matters of public interest: Generally they include

a. bonded labor matters

b. matters of neglected children

c. exploitation of casual laborers and non-payment of wages to them (except in individual

cases)

d. matters of harassment or torture of persons belonging to Scheduled Castes, Scheduled

Tribes and Economically Backward Classes, either by co-villagers or by police

e. matters relating to environmental pollution, disturbance of ecological balance, drugs, food

adulteration, maintenance of heritage and culture, antiques, forests and wild life,

f. petitions from riot victims and

g. other matters of public importance.

(II) The matters of private nature: They include:

a. threat to or harassment of the petitioner by private persons,

b. seeking enquiry by an agency other than local police,

c. seeking police protection,

d. admission to medical or engineering colleges,

e. early hearing of matters pending in High Court and subordinate courts and are not

considered matters of public interest.

(III) Letter Petitions: Petitions received by post even though not in public interest can be treated as

writ petitions if so directed by the Hon’ble Judge nominated for this purpose. Individual petitions


complaining harassment or torture or death in jail or by police, complaints of atrocities on women

such as harassment for dowry, bride burning, rape, murder and kidnapping, complaints relating to

family pensions and complaints of refusal by police to register the case can be registered as writ

petitions, if so approved by the concerned Hon’ble Judge. If deemed expedient, a report from the

concerned authority is called before placing the matter before the Hon’ble Judge for directions. If so

directed by the Hon’ble Judge, the letter is registered as a writ petition and is thereafter listed before

the Court for hearing.

But this traditional rule was considerably relaxed by the Supreme Court.

Procedure for Filing Public Interest Litigation.

(a) Filing:-

Public Interest Litigation petition is filed in the same manner, as a writ petition is filed. If a

PIL is filed in a High Court, then two (2) copies of the petition have to be filed (for Supreme Court,

then (4)+(1)(i.e.5) sets) Also, an advance copy of the petition has to be served on the each

respondent, i.e. opposite party, and this proof of service has to be affixed on the petition.

(b) The Procedure:-

A Court fee of Rs. 50 per respondent (i.e. for each number of party, court fees of Rs 50) have

to be affixed on the petition. Proceedings, in the PIL commence and carry on in the same manner, as

other cases. However, in between the proceedings if the Judge feels that he may appoint the

commissioner, to inspect allegations like pollution being caused, trees being cut, sewer problems,

etc. After filing of replies, by opposite party, or rejoinder by the petitioner, final hearing takes place,

and the judge gives his final decision.

Against whom Public Interest Litigation can be filed

A Public Interest Litigation can be filed against a State/ Central Govt., Municipal Authorities,

and not any private party. The definition of State is the same as given under Article 12 of the

Constitution and this includes the Governmental and Parliament of India and the Government and the


Legislature of each of the States and all local or other authorities within the territory of India or

under the control of the Government of India. According to Art.12 of the CONSTITUTION OF

INDIA, the term “State” includes the Government and Parliament of India and the Government and

the Legislatures of each of the States and all local or other authorities within the territory of India or

under the control of the Government of India.

Thus the authorities and instrumentalities specified under Art.12 are –

• The Government and Parliament of India

• The Government and Legislature of each of the States

• All local authorities

• Other authorities within the territory of India or under the Government of India.

In Electricity Board, Rajasthan v. Mohan Lal, the Supreme Court held that “other authorities

would include all authorities created by the Constitution of India or Statute on whom powers are

conferred by law”.

However, “Private party” can be included in the PIL as “Respondent”, after making

concerned state authority, a party. For example- if there is a Private factory in Delhi, which is

causing pollution, then people living nearby, or any other person can file a PIL against the

Government of Delhi, Pollution Control Board, and against the private factory. However, a PIL

cannot be filed against the Private party alone.

Cases

1. Balco Employees Union (Regd.) V. Union Of India, AIR 2002 SC 350

2. State of Uttaranchal Vs. Balwant Singh Chaufal and Ors, AIR 2010 SC 2550

3. M. Nagabhushana Vs. State of Karnataka and Ors., AIR 2011 SC 1113

1. Balco Employees Union (Regd.) V. Union Of India: Case Analysis


In the BALCO Disinvestment case, Supreme Court considered the complex questions

relating to effect of disinvestment on the employees and workers and whether the questions of policy

and administrative matters and decision can be heard by Supreme Court. The Supreme Court

delivered a very elaborate, exhaustive and thoughtful opinion on various issues related to the aspects

of disinvestment. Through this article I have tried to analyze in brief the concept of disinvestment,

discuss the case and relate it with the aspects of company law.

FACTS

BALCO (M/s. Bharat Aluminum Company Limited) was incorporated in 1965 as a Government

of India Undertaking under the Companies Act, 1956. It had a paid-up share capital of Rs.

488.85 crores. The company was engaged in the manufacture of aluminum and had plants at

Korba in the State of Chhattisgarh and Bidhanbag in the State of West Bengal. The Company

had integrated aluminum manufacturing plant for the manufacture and sale of aluminum metal

including wire rods and semi-fabricated products.

In, 1996 the Ministry of Industry (Department of Public Enterprises) constituted a Public Sector

Disinvestment Commission initially for a period of three years in pursuance of the Common

Minimum Programme of the United Front Government at the Centre.

On 12th January, 1998 the earlier Resolution was partly modified by the government as:

The Disinvestment Commission shall be an advisory body to the Government on

Disinvestment in those public sector units that are referred to it by the Government.

The Commission shall also advise the Government on any other matter relating to

disinvestment as may be specifically referred to it by the Government, and also carry out

any other activities relating to disinvestment as may be assigned to it by the Government.

In making its recommendations, the Commission will also take into consideration the

interests of workers, employees and others stake holders

The final decision will vest with the Government.

The Union of India, than laid down the broad procedures to be followed for processing the

recommendations of the Disinvestment Commission. It decided that:


The Department of Disinvestment would process the recommendations of the Disinvestment

Commission, by inviting comments from the concerned administrative machinery.

It would submit the recommendations to the Core Group of Secretaries.

The recommendations of the Core Group of Secretaries would then be taken to the Cabinet

for decision.

To implement the decisions, an Inter-Ministerial Group headed by the Secretary/Joint

Secretary of the Administrative Ministry was formed. In case of BALCO, the IMG consisted

of Secretary level officers and was headed by Secretary (Mines).

The Disinvestment Commission in its 2nd Report submitted in April, 1997 advised the

Government of India that BALCO needed to be privatized. The Commission had categorized

BALCO as a non-core group industry. The recommendations it made were:

The Government may immediately disinvest its holding in the Company by offering a significant

share of 40% of the equity to a strategic partner.

There should be an agreement with the selected strategic partner specifying that the Government

would within two years make a public offer in the domestic market for further sale or shares to

institutions, small investors and employees thereby bringing down its holding to 26%.

There should be an on-going review of the situation and the Government may disinvest its

balance equity of 26% in full in favor of investors in the domestic market at the appropriate time.

Appointment of a Financial Advisor to undertake a proper valuation of the company and to

conduct the sale process.

The Chairman of the Commission then recommended to consider offering 51% or more to the

strategic buyer along with transfer of management to enable a smooth transaction with the

participation of more bidder and better price for the shares. The Cabinet Committee on Economic

Affairs in September 1997 granted approval for appointment of a technical and financial advisor, for

managing the strategic sale and restructuring of BALCO. Thus M/s. Jardine Fleming Securities India

Ltd. was appointed. The Cabinet Committee on Disinvestment also approved the proposal of

strategic sale of 51% equity in respect of BALCO.

The decision of the Government to the aforesaid strategic sale was challenged by the BALCO

Employees’ Union by filing Writ Petition in 1999 in the High Court of Delhi which was disposed of

as pre mature with liberty to the Petitioners to approach the Court in the event of any decision

adverse to their interest of the being taken.

On 3rd March, 2000, the Union Cabinet approved the Ministry of Mines’ proposal to reduce the

share capital of BALCO from Rs. 488.8 crores to Rs. 244.4 crores. This resulted in cash flow of Rs.

244.4 crores to the Union Government in the Financial Year 1999-2000. On 16th June, 2000 the


Global Advisor, on behalf of the Government of India, issued an advertisement calling for

“Expression of Interest”, an invitation to Companies and Joint Ventures which may be interested in

acquiring 51% shares of the Government of India in BALCO.

Eight companies submitted their Expression of Interest. After all the deliberations and dropouts

ALCOA, USA, Hindalco and Sterlite conducted due diligence (inspection) on BALCO between

September to December, 2000. In late 2000, to win the confidence of the agitating employees, the

Government of India for the first time announced its decision to offer stock options to the employees

of Balco. It also stated that there would be no retrenchment of labour in Balco for at least one year

after the disinvestments. In case of any decision to reduce the manpower, it would have to offer a

package not less attractive than the government approved VRS package.

The IMG considered the drafts of the Shareholders’ Agreement and the Share Purchase

Agreement and had discussions with three prospective bidders and ultimately the drafts were

finalized on 11th January, 2001.Than Shri P. V. Rao was selected as the registered value.

On 15th February, 2001, an Evaluation Committee headed by the Additional Secretary (Mines) was

constituted. This Committee was required to fix the reserve price of 51% equity of BALCO which

was to be sold to the strategic party. The three contenders, namely, Alcoa, Hindalco and Sterlite

Industries Ltd. submitted their sealed bids to the Secretary (Mines) and Secretary (Disinvestment). It

is thereafter, that M/s. Jardine Fleming presented its valuation report together with the asset valuation

done by Shri P. V. Rao to the Evaluation Committee to work out the reserve price which was as

follows:

Discounted Cash Flow : Rs. 651.2 - 994.7 crores

Comparables : Rs. 587 - 909 crores

Balance Sheet : Rs. 597.2 - 681.9 crores

For 51% of the equity, the range of valuation came out as Rs. 300 to Rs. 507 crores. The Evaluation

Committee then deliberated on the various methodologies and concluded that the most appropriate

methodology for valuing the shares of running business of BALCO would be the Discounted Cash

Flow method. It decided to add a control premium of 25% on the base value of equity and then add

the value of non-core assets to arrive at a valuation of Rs. 1008.6 crores for the company as a whole,

51% of which amounts to Rs. 514.4 crores which was fixed as the Reserve Price. The IMG

recommended the acceptance of the bid of Sterlite Industries (Rs. 551.5 crores) to the core group of

Secretaries. The announcement of the decision to accept the bid of Sterlite Industries led to the

initiation of legal proceedings challenging the said decision.

LEGAL PROCEEDINGS


On 23rd February, 2001, Dr. B. L. Wadhera filed Civil Writ Petition No. 1262 of 2001 in the

Delhi High Court (as PIL)

This was followed by Writ Petition No. 1280 of 2001 filed by the employees of BALCO on 24th

February, 2001 in the High Court of Delhi.

On 24th February, 2001 another employee of BALCO, namely, Mr. Samund Singh Kanwar filed

Civil Writ Petition No. 241 of 2001 in the High Court of Chhattisgarh.

While the aforesaid writ petitions were pending there was a Calling Attention Motion on

Disinvestment with regard to BALCO in the Rajya Sabha and the matter was also discussed in the

Lok Sabha. Soon thereafter on 2nd March, 2001, Shareholders Agreement and Share Purchase

Agreement between the Government of India and Sterlite Industries Limited was signed. Pursuant to

the execution of sale, 51% of the equity was transferred to Sterlite Industries Limited and a cheque

for Rs. 551.5 crores was received.

With the filing of the writ petitions in the High Court of Delhi and in the High Court of Chhattisgarh,

an application for transfer of the petitions was filed by the Union of India in the Honorable Supreme

Court, which was accepted on 9th April 2001. After the notices were issued, the company received

various notices from the authorities in Chhattisgarh for alleged breach of various provisions of

the M. P. Land Revenue Code and the Mining Concession Rules. This led to the filing of the Writ

Petition No. 194 by BALCO in the Supreme Court, inter alia, challenging the validity of the said

notices.

QUESTIONS INVOLVED (ISSUES)

Whether such a decision is amenable to judicial review and if so within what parameters and to

what extent?

Whether disinvestment of the BALCO Ltd was against the interest of the workers and the

employees?

Whether the employees have the right to hearing in the cases of policy and administrative matters

and decision?

Whether in the case of decision regarding disinvestment of the company the principles of natural

justice would be applicable and that the workers, or for that matter any other party having an

interest therein, would have a right of being heard?

Whether PIL can be filed by a stranger to challenge the administrative decision of the government?


SUBMISSIONS

BALCO Employees Union

Workmen have been adversely affected by the decision of the Government of India to disinvest

51% of the shares in BALCO in favor of a private party. They have lost their rights and protection

under Articles 14 and 16 of the Constitution. They had a right to be heard before and during the

process of disinvestment. Further there was no effective protection of the workmen’s interest in the

process of disinvestment.

Balco was a profit-making company and had a huge capital base of about Rs. 500 crores. It was the

only public sector enterprise that had paid its 50% equity, i.e., Rs. 244 crores to the exchequer.

Further The cost of the Korba aluminum plant and Bidhanbag plant, land, quarters and buildings

(Rs 800 crores) and new cold-rolling projects (Rs 184 crores), was been grossly underestimated.

Thus the government should not jeopardize the future of the workers by disinvesting it.

It was contended that before disinvestment, the entire paid-up capital of BALCO was owned and

controlled by the Government of India and its administrative control co-vested in the Ministry of

Mines. BALCO was, therefore, a State within the meaning of Article 12 of the Constitution. So it

was liable.

Workmen have reason to believe that apart from the sale of 51% of the shares in favor of Sterlite

Industries the Agreement postulates that balance 49% will also be sold to them with the result that

when normally in such cases 5% of the shares are disinvested in favor of the employees the same

would not happen in the present case.

The impugned decision defeats the provisions of the M. P. Land Revenue Code and goes against

the fundamental basis on which the land was acquired and allotted to the company.

Union of India:

Disinvestment is necessary as neither the Centre nor the States have resources to sustain

enterprises that are not able to stand on their own in the new environment of intense competition.

BALCO was running on outdated technology and was making profits only because aluminum

prices in international market were ruling high. A downturn in prices would have taken the

company to the state of sickness from which it had recovered in 1988-89. Therefore it was better

to sell the company when it was earning profits to get a good deal. The cash reserve of Rs 437

crores accumulated by Balco by giving fewer dividends to the government was too little for the


modernization of the company. According to government estimates, a total of Rs 4,000 crores

was required for the modernization and expansion of the company and it could be infused only

by bringing in a strategic partner.

The wisdom and advisability of economic policies of Government are not amenable to judicial

review. It is not for Courts to consider the relative merits of different economic policies. It is

neither within the domain of the Courts nor the scope of the judicial review to embark upon an

enquiry as to whether a particular public policy is wise or whether better public policy can be

evolved. Further the Process of disinvestment is a policy decision involving complex economic

factors.

The entire rationale and process of disinvestment was explained to the workers through BALCO

Samachar Newsletter. A meeting was held in May, 2000 by the then Chairman and Managing

Director with the Union leaders where the Joint Secretary of the Ministry of Mines, who was also

Director of the company, was also present. In addition thereto, the workers’ unions had been

making various representations to the Government which were considered by it before finalizing

of various documents. There was a dialogue between the Government and the Union Leaders

where it was culled out that the trade unions are not against the disinvestment, if interest of the

workers is taken care off. So the employees were heard before taking the decision.

There is no case made out by the petitioner that the decision to disinvest in BALCO is in any way

capricious, arbitrary, illegal or uninformed. Even though the workers may have interest in the

manner in which the Company is conducting its business, inasmuch as its policy decision may

have an impact on the workers’ rights, nevertheless it is an incidence of service for an employee

to accept a decision of the employer which has been honestly taken and which is not contrary to

law.

In taking of a policy decision in economic matters at length, the principles of natural justice have

no role to play. Also merely because the workmen may have protection of Articles 14 and 16 of

the Constitution, by regarding BALCO as a State, it does not mean that the erstwhile sole

shareholder viz., Government had to give the workers prior notice of hearing before deciding to

disinvest.

When government chooses to run an industry by forming a company and it becomes its

shareholder then under the provisions of the Companies Act as a shareholder, it would have a

right to transfer its shares. When persons seek and get employment with such a company

registered under the Companies Act, it must be presumed that they accept the right of the

directors and the shareholders to conduct the affairs of the company in accordance with law and

at the same time they can exercise the right to sell their shares.


JUDGEMENT (B. N. Kirpal, Shivaraj V. Patil and P. Venkatarama Reddi, JJ.)

The employees have no vested right in the employer company continuing to be a Government

company or “other authority” for the purpose of Article 12 of the Constitution of India. The

employees cannot claim any right to decide as to who should own the shares of the company. The

State which invested on its own wish, can equally well disinvest.

Article 12 of the Constitution does not place any embargo on an instrumentality of the State or

“other authority” from changing its character and disinvesting itself.

The Government has taken a policy decision that it is in public interest to disinvest in BALCO.

An elaborate process was undergone and majority shares sold. In this process, the change in the

character of the company cannot be validly impugned. While it was a policy decision to start

BALCO as a company owned by the Government, it was a change of policy that disinvestment

took place. If the initial decision could not be validly challenged on the same parity of reasoning,

the decision to disinvest also cannot be impugned without showing that it is against any law or

malafide. There is in law no such obligation to consult in the process of sale of majority shares in

a company. Thus the Honorable Supreme Court distinguished the present case with the landmark

case of National Textile Workers’ Union and others v. P.R. Ramakrishnan AIR 1983 SC 75 on

the basis of facts. The Supreme Court followed the case of Southern Structurals Staff Union v.

Management of Southern Structurals where it was held that the consent of the employees is not

required for disinvest of a government company as it does not effect their right.

The company will not retrench any worker(s) who are in the employment of BALCO on the date

of takeover of the management by the strategic partner, other than any dismissal or termination of

the worker(s) of the company from their employment in accordance with the applicable staff

regulations and standing orders of the company or other applicable laws. (as confirmed by the

shareholders agreement and the Senior Counsel on behalf of the company)

The workers interests are adequately protected in the process of disinvestment. The existing laws

adequately protect workers; interest and no decision affecting a huge body of workers’ can be

taken without the prior consent of the State Government. The service conditions are governed by


the certified orders of the company and any change in the conditions thereto can only be made in

accordance with law. The court further said that it is evident that the Central Government was

aware of the interests of the workers and employees as a class. It was precisely for this reason

that safeguards were inserted in the Share Holders Agreement.

The Supreme Court stayed all notices issued by the state government to Balco management

asking it to show cause why the land leased to its plant not be cancelled as it was situated in a

tribal land. The court asked the government to justify its stand in canceling the land allotment to

Balco while permitting such allotment to two other private companies - Daewoo Power and Essar

Steel. It held that the ratio of the decision inSamatha v. State of A. P., 1997 AIR SCW 3361 is

inapplicable as the legal provisions here are different. The land was validly given to BALCO a

number of years ago and today it is not open the State of Chhattisgarh to challenge the

correctness of its own action. Furthermore even with the change in management the land remains

with BALCO to whom it had been validly given on lease.

The principles of natural justice would not be applicable and that the workers, or for that matter

any other party having an interest therein, would not have a right of being heard. There is no

provision in law which would require a hearing to be granted before taking a policy decision. If

the decision is otherwise illegal as being contrary to law or any constitutional provision, the

persons affected like the workmen, can impugn the same, but not giving a pre-decisional hearing

cannot be a ground for quashing the decision.

It is not for this Court to consider whether the price which was fixed by the Evaluation

Committee at Rs. 551.5 crores was correct or not. What has to be seen in exercise of judicial

review of administrative action is to examine whether proper procedure has been followed and

whether the reserve price which was fixed is arbitrarily low and on the face of it, unacceptable.

After having a long discussion on the concepts and the cases about PIL the court held that the

decision to disinvest and the implementation thereof is purely an administrative decision relating

to the economic policy of the State and challenge to the same at the instance of busy-body cannot

fall within the parameters of Public Interest Litigation (as filed by by Shri B.L. Wadhera) and

therefore the court declined to entertain such PIL.


Therefore it was held that the disinvestment by the Government in BALCO was not invalid.

RATIO OF THE JUDGMENT

Ø Thus it can be concluded that the “Wisdom and advisability of economic policies are ordinarily

not amenable to judicial review unless it can be demonstrated that the policy is contrary to any

statutory provision or the Constitution. Courts would interfere only if there was a clear violation

of Constitutional or statutory provisions or non-compliance by the State with its Constitutional or

statutory duties and none of these contingencies had arisen in this case.”

Ø The policy of disinvestment cannot be questioned as such; the facts herein show that fair, just and

equitable procedure has been followed in carrying out this disinvestment. The allegations of lack

of transparency or that the decision was taken in a hurry or there has been an arbitrary exercise of

power is without any basis.

Thus, the policy of disinvestment followed by the Government of India was upheld by the Supreme

Court stating that the decision to disinvestment and the implementation thereof is purely an

administrative decision relating to the economic policy of the State; that, it is the prerogative of each

elected Government to follow its own policy.

CRITICAL ANALYSIS OF THE JUDGEMENT

The Hon’ble Supreme Court, while validating BALCO-disinvestment and dismissing the petitions,

remarked, “Thus, apart from the fact that the policy of disinvestment cannot be questioned as such,

the facts herein show that fair, just and equitable procedure has been followed in carrying out this

disinvestment.” This judgment facilitated the path of other successful privatizations.

By selling the controlling stake to a strategic partner what the company gets is a professional

management with proven skills and expertise in the field of metal. As far as fear regarding the

worker’s interest getting affected - the government still has control over 49 percent of the equity

holdings in the company which it could use effectively to safeguard workers’ interest. So one cannot

say it is over for the government. It will also have right over the future cash flows in the form of

dividends and could play a significant role in decision making.


But the critics lovingly call it - an example of “selling family silver to butler.” The Balco

Disinvestment deal was at the center of controversy as opposition parties and worker unions at Balco

had been fighting tooth and nail to see that the Disinvestment deal doesn’t get to see the light of the

day. The move to affect a ’strategic sale’ of equity in the profitable and cash-rich public sector

Bharat Aluminum Company Ltd. at a throwaway price is a questionable one for a host of reasons.

i. The bids were valued by four different methods. However, the value arrived at by these bids was

not disclosed. Also, the reserve price was not disclosed nor the value of the bids by Jindal co. and

Alcoa and whether they were higher or lower than the reserve price. In my view once bidding

process is finished, and the government’s decision has been communicated, it would have been

better to have disclosed all the facts. Thus, the Government lost an opportunity to lay down new

norms of transparency.

ii. A direct valuation of BALCO’s assets suggests that with an investment of just Rs.550 crores

Sterlite is to get control over assets that according to some are worth around 10 times that value.

iii. A 51 per cent equity sale at an indefensible price also undermines the value of the remaining

stock that would be held by the government.

iv. The whole procedure has been gone through in haste. Even though the bids had been invited

some time back, the valuation of the firm, the setting of the reserve price and the acceptance of

Sterlite’s bid were all allegedly done within the span of a month.

v. The deal allegedly violates a Supreme Court order banning private sector units from running

mines and industries in tribal population areas.

Hence the disinvestment was improper and ill managed. In my view if the following points and

criticisms would have been taken care of and the disinvestment was planned properly with the help

of experts (economists, legal experts and sociologists) keeping in mind its all effects, at a higher rate,

it would have been proved to be a successful and much accepted disinvestment.

IN THE SUPREME COURT OF INDIA

2. State of Uttaranchal Vs. Balwant Singh Chaufal and Ors, AIR 2010 SC 2550


Civil Appeal Nos. 1134-1135 of 2002

Decided On: 18.01.2010

Appellants: State of Uttaranchal

Vs.

Respondents: Balwant Singh Chaufal and Ors.

Hon'ble Judges: - Dalveer Bhandari and Mukundakam Sharma , JJ.

Ratio Decidendi:

Jurisdiction of the court cannot be invoked in a matter where the controversy itself is no

longer res integra.

FACTS:-

This case was an appeal from the decision of the High Court of Uttarakhand in a public interest

litigation. The High Court had directed the state government to decide whether appointment of

an Advocate General for the state of Uttaranchal beyond the age of 62 years, was valid or not.

The law on this issue is settled that there is no upper limit on age for a person to be appointed

to the constitutional post of an Advocate General. The appeal was allowed.

JUDGEMENT:-

Dalveer Bhandari, J

The Court held that the appointment of Advocate General valid as long as the qualifications

prescribed in the second clause of Article 217 are fulfilled.

In this case, the Court examined various facets of public interest litigation in

the backdrop of criticism from within and outside the system. Dalveer Bhandari, J. made lucid

analysis of the concept and development of public interest litigation in the following three

phases:_


Phase I.—It deals with cases of this Court where directions and orders were passed

primarily to protect fundamental rights under Article 21 of the marginalized groups

and sections of the society who because of extreme poverty, illiteracy and ignorance

cannot approach this Court or the High Courts.

Phase II-It deals with the cases relating to protection, preservation of ecology,

environment, forests, marine life, wildlife, mountains, rivers, historical monuments,

etc. etc.

Phase III.—It deals with the directions issued by the Courts in maintaining the

probity, transparency and integrity in governance.”

While dealing with the first phase of development, the Court referred to large number of

precedents and recorded its conclusion in the following words:

“We would not like to overburden the judgment by multiplying these cases, but a brief resume

of these cases demonstrates that in order to preserve and protect the fundamental rights of

marginalized, deprived and poor sections of the society, the courts relaxed the traditional rule

of locus standi and broadened the definition of aggrieved persons and gave directions and orders.

We would like to term cases of this period where the Court relaxed the rule of locus standi as the

first phase of the public interest litigation. The Supreme Court and the High Courts earned great

respect and acquired great credibility in the eyes of public because of their innovative efforts to

protect and preserve the fundamental rights of people belonging to the poor and marginalized

sections of the society.”

In order to preserve the purity and sanctity of the PIL, the Court laid down the following

guidelines:-

1. The courts must encourage genuine and bona fide PIL and effectively discourage and curb

the PIL filed for extraneous considerations.

2. Instead of every individual judge devising his own procedure for dealing with

the public interest litigation, it would be appropriate for each High Court to properly

formulate rules for encouraging the genuine PIL and discouraging the PIL filed with oblique

motives. Consequently, we request that the High Courts who have not yet framed the rules,

should frame the rules within three months. The Registrar General of each High Court is

directed to ensure that a copy of the Rules prepared by the High Court is sent to the Secretary

General of this Court immediately thereafter.


3. The courts should prima facie verify the credentials of the petitioner before entertaining a

P.I.L.

4. The court should be prima facie satisfied regarding the correctness of the contents of the

petition before entertaining a PIL.

5. The court should be fully satisfied that substantial public interest is involved before

entertaining the petition.

6. The court should ensure that the petition which involves larger public interest, gravity and

urgency must be given priority over other petitions.

7. The courts before entertaining the PIL should ensure that the PIL is aimed at redressal of

genuine public harm or public injury. The court should also ensure that there is no

personal gain, private motive or oblique motive behind filing the public interest litigation.

8. The court should also ensure that the petitions filed by busybodies for extraneous and

ulterior motives must be discouraged by imposing exemplary costs or by adopting similar

novel methods to curb frivolous petitions and the petitions filed for extraneous

considerations.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 1215 of 2011 (Arising out of Special Leave Petition (C) No. 26391/10)

Decided On: 02.02.2011

Appellants: M. Nagabhushana

Vs.

Respondent: State of Karnataka and Ors.

Hon'ble Judges: - G. S. Singhvi and Asok Kumar Ganguly, JJ.

Ratio Decidendi :

3. M. Nagabhushana Vs. State of Karnataka and Ors., AIR 2011 SC 1113


“Once the land is vested in the Government, the provisions of Section 11A are not attracted

and the acquisition proceedings will not lapse.”

.

FACTS:-

This appeal is directed against the judgment and order dated 23rd July 2010 passed by Division

Bench of the High Court of Karnataka whereby the learned Judges dismissed the W.A. No.

1192 of 2007 which was filed impugning an acquisition proceeding to the State of Karnataka. It

may also be noted that while dismissing the appeal, the Division Bench affirmed the judgment

of the learned Single Judge dated 28th May 2007.

From the perusal of the judgment of learned Single Judge it appears that the Appellant claims

to be the owner of the land bearing Sy. No. 76/1 and Sy. No. 76/2 of Thotadaguddadahalli

Village, Bangalore North Taluk. The Appellant alleged that these two plots of land were

outside the purview of the Framework Agreement (FWA) and notification issued under

Sections 28(1) and 28(4) of Karnataka Industrial Areas Development Act (KIAD Act). While

dismissing the writ petition, the learned Single Judge held that the acquisition proceedings in

question were challenged by the writ Petitioner, the Appellant herein, in a previous writ

petition No. 46078/03 which was initially accepted and the acquisition proceedings were

quashed. Then on appeal, the Division Bench (in writ appeal Nos. 713/04 and 2210/04)

reversed the judgment of the learned Single Judge. Thereafter, the Division Bench order was

upheld before this Court and this Court approved the acquisition proceedings.

Therefore, the writ petition, out of which this present appeal arises, purports to be an attempt to

litigate once again, inter alia, on the ground that the aforesaid blocks of land were outside the

purview of FWA dated 3.4.1997. The learned Judges of the Division Bench held the second

round of litigation is misconceived inasmuch as the acquisition proceedings were upheld right

upto this Court. The Division Bench in the impugned judgment noted the aforesaid facts which

were also noted by the learned Single Judge. Apart from that the Division Bench also noted that

another batch of public interest litigation in W.P. No. 45334/04 and connected matters were

also disposed of by this Court directing the State of Karnataka and all its instrumentalities

including the Housing Board to forthwith execute the project as conceived originally and

upheld by this Court and it was also directed that FWA be implemented. The Division Bench,


however, noted that on behalf of the Appellant an additional ground has been raised that the

acquisition stood vitiated since no award was passed as contemplated under Section 11A of the

Land Acquisition Act (hereinafter "the said Act").

One of the contentions raised before the Division Bench on behalf of the Appellant was that the

question of principle of Constructive Res Judicata is not applicable to a writ petition. This

contention was raised in the context of alleged non-publication of award and the consequential

invalidation of the acquisition proceeding. Even though that contention was raised for the first

time before the Division Bench. The Division Bench, after referring to several judgments of

this Court, held that the said contention is not tenable in law. The Division Bench also noted

that in the earlier round of litigation the contentions relating to the land falling outside the area

of FWA being acquired, were raised and were repelled. The acquisition for peripheral road etc.

would be illegal notwithstanding the definition of infrastructural facilities as incorporated under

Section2 (8a) of the Act. The proposed acquisition is in respect of the alleged contract between

the State and M/s. NICE Ltd. which is stated to be based on agreement dated 3.4.1997.

It amounts to colorable exercise of power and fraud on power and in such an event, the entire

acquisition proceedings are to have been quashed by the learned Single Judge.

On reading of the impugned order, it is clear that the proposed acquisition of land as notified

under Section 28(1) of the Act is different from the alleged purpose, which are quite different

and from the same, it is clear that the acquisition initiated is not bonafide, but the same is as a

result of colorable exercise of power coupled with exercise of fraud on power and on this count

also, the notification issued under Section 28(1) also ought to have been quashed.

The Government did not apply its mind to the acquisition proceedings and there is total non-

application of mind by the government to the relevant facts in initiating the acquisition

proceedings under the KIADB Act.

Challenging the aforesaid judgment, the present Appellant filed a special leave petition before

this Court, which, on grant of leave, was numbered as Civil Appeal No. 3878/2005. The

grounds which were substantially raised by the present Appellant in the previous appeal (No.

3878/2005) have been raised again in this appeal. The alleged grounds in the present appeal


about acquisition of land beyond the requirement of FWA were raised by the present Appellant

in the previous appeal No. 3878/2005 also.

Judgment:-

Asok Kumar Ganguly, J

The Hon’ble Supreme Court underlining the principles of res judicata and their universal

application observed that the principles of res judicata are of universal application as they are

based on two age-old principles, namely, interest reipublicae ut sit finis litium, which means

that it is in the interest of the State that there should be an end to litigation and the other

principle is nemo debet bis vexari, si constat curiae quod sit pro una et eademn causa,

meaning thereby that no one ought to be vexed twice in a litigation if it appears to the court that

it is for one and the same cause. This doctrine of res judicata is common to all civilized system

of jurisprudence to the extent that a judgment after a proper trial by a court of competent

jurisdiction should be regarded as final and conclusive determination of the questions litigated

and should forever set the controversy at rest. Therefore, any proceeding which has been

initiated in breach of the principle of res judicata, is prima facie a proceeding, which has been

initiated in abuse of the process of court.

In that view of the matter, this Court makes it clear that the State Government should complete

the project as early as possible and should not do anything, including releasing any land

acquired under this project, as that may impede the completion of the project and would not be

compatible with the larger public interest which the project is intended to serve.

This Court, therefore, dismisses this appeal with costs assessed at Rs. 10 Lacs, to be paid by the

Appellant in favour of Karnataka High Court Legal Services Authority within a period of six

weeks from date. In default, a proceeding will be initiated against the Appellant on a complaint

by the Karnataka High Court Legal Services Authority by the appropriate authority under the

relevant Public Demand Recovery Act for recovery of this cost amount as arrears of land

revenue.

The appeal is, thus, dismissed with costs as aforesaid. Interim orders, if any, are vacated.


Conclusion:-

The public interest litigation jurisdiction was innovated essentially to safeguard and protect the

fundamental rights of poor, ignorant, or socially or economically disadvantaged persons. The misuse

of public interest litigation jurisdiction by the people resulted in flood of bogus, evasive and

vexatious litigations in the Courts. It follows in waste of valuable time of the Supreme Court and

High Courts which are already burdened with huge number of pending cases. The suppression and

separation of such litigations from genuine litigations became the great task for the Supreme Court

and High Courts. It is necessary to find some parameters to restrict the free flow of bogus, evasive

and vexatious cases in the guise of public interest litigation. The Supreme Court of India has laid

down some norms to prevent misuse of public interest litigation jurisdiction. The cases in the name

of public interest litigations should be maintained by the Court only when (a) there is a gross

invasion of fundamental rights, (b) the invaded fundamental right must be of the persons who are

unable to move to the Court due to poverty, illiteracy, social or economical backwardness, or due

to any such other cause, (c) the act invading the fundamental rights must shock the judicial

conscience of the Court, and (d) the matter must be strictly of public interest though the direct

victim of the act of invasion may be some determinate class of individuals. These parameters will

surely help to restrict the free flow of bogus, evasive and vexatious cases in the guise of public

interest litigation. In spite of that if someone initiates bogus, evasive and vexatious petition and

wastes valuable time of the Court he may be severely fined and in serious cases his act of initiation

of such petition may be treated as contempt of Court.

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