Fertilizer Corporation Kamgar v Union of India and Others.

This judgement is a landmark Judgement on the maintainability of a writ petition under article 32. The court in this case has widened the scope of “aggrieved” person and allowed the petition to move forward to hear the contention of both sides.
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The Matter was before the Supreme Court of India. The Judgement was delivered on November 13, 1980

Introduction

The scope of access to justice is changing every day. Even with all the provisions available for access to justice, a few gray areas remain, which then become the point of contention. In the case of fertilizer Corporation Kamgar v Union Of India And Others[1], the Judges have tried to broaden the scope of “locus standi” in respect to Article 32[2] of the Constitution of India. The scope has now been increased from “aggrieved” person to “any” person fighting for a proper cause. In this Judgement, Justice Krishna Iyer has cited the works of several scholar to show how the Rule of Law must prevail even while ensuring the proper access to justice to the people. In this article, I shall be discussing the relevant portions of the judgement and analyzing it in the light of the relevant case laws. 

Facts in brief

The Fertilizer Corporation of India (FCI), a government company, invited tenders for the sale of retired and overworked chemical plants of the Sindri Fertilizer factory. The tenderers had to submit three different envelopes- first one regarding payment, second envelope, regarding conditions of the sale and a third envelope containing for the bid amount offered by that tenderer. After all the envelopes bearing “No. 1” had been opened, the authorities and the valid tenderes decided to amend the bids offer and remove specific terms from the offer. Subsequently, envelopes bearing “No.4” were submitted by the tenderers. The other envelopes were opened and it was found that Respondent No. 4 made the highest initial and modified bid of Rs. 7.6 Crores and 6.2 Crores respectively. In the meantime, certain units of the FCI had requested for certain specific parts of that plant. So, fresh tenders were invited by the FCI for the remaining parts. The invitation to make new tenders was limited to only those tenderers who had made bids worth more than Rs.4 Crores for the original sale. The highest bid came from Respondent No. 4 worth Rs.4.25 Crores. The FCI Board of Management approved the acceptance of the offer made by Respondent No. 4.

The Union of Workers of the Fertilizer Factory(petitioner), the President of the Union (petitioner 2) and the workers of that factory( petitioner 3 & 4) filed a writ petition under article 32 of the Constitution challenging the validity of the sale, asking to vitiate the sale on the ground of it being unfair and violative of the fundamental rights of the workers.

The case was dismissed after considering all the relevant facts.

Issues in the case

Whether the petitioner had a locus standi to file the writ petition. Whether the fundamental rights of the workers were violated due to the sale.[3]

Arguments on behalf of the petitioners

  1. The decision to sell the factory plant and equipment was made without consulting any expert or calling of any report.
  2. The sale violated article 14 of the constitution as it was unfair and arbitrary and unconstitutional to ask only those tenderers who made the initial offer of more than Rs. 4 Crores, to make fresh bids. Had the invitation to make tenders been open to the public, higher price for the parts could have been realised. Thus, the sale had also caused loss to the public exchequer.  It was also argued that the new lower price at which the parts were sold, had been set with an ulterior motive.
  3. The sale had risked the employment of thousands of workers for which had to face retrenchment. The sale, if allowed, would deprive them of their fundamental rights guaranteed under article 19(1)(g) of the constitution[4].

Arguments on behalf of the Respondents

  1. The first contention by the Attorney-general of India, appearing on behalf of the government was regarding the sustainability of the writ petition on the grounds that : (I) the petitioner had no “locus standi” to file the writ petition (II) the sale had not violated any “fundamental” rights of the workers for which they approached the court under article 32.
  2. Regarding the violation of fundamental rights, it was argued that Chief Engineer RG Malhotra of the Sindri Unit had submitted affidavits, on behalf of FCI, that the parts or equipments of that unit had become old, hazardous and unsafe to work for the workers and thus, had to be shut down before 1979. However, none of the workers were removed from their jobs for this reason. Further, the managing board of the FCI had decided to provide alternative employment to the workers, who lost their jobs due to shutdown, in the different units of the same complex.
  3. Regarding the sale being allegedly “arbitrary and unfair”, it was argued on the basis of the reports and affidavits submitted by the Government of India-Department of Chemicals and Fertilizers under-secretary, that:
  4. Sindri Unit was commissioned in 1951 and has also, for so many years, outlived its performance. The unit was modified and improved from time to time under various schemes so as to ensure the employment of the workers- one such scheme being Sindri Rationalization Scheme that suggested to shut down the old ammonia plant, as the performance of the plant was deteriorating, and replace it with new efficient and less hazardous plant. The main criteria of the management board was to ensure the safety of the workers.
  5. One by one, the parts of the plant were shut down as they became hazardous, unfit for use and uneconomical. Also, the raw material required for operating the plant i.e, a special quality coal, was short in supply.

Several reports had also “advised” the disbanding of the plant, while some had suggested to sell it. Since the plant had become uneconomical and some of its parts were sold to the FCI’s other units, the price of the plant, thus, was fairly reduced.

Judgement

On “the maintainability of the writ petition”:

It was held that Article 32 is the heart and soul of the constitution and the jurisdiction it confers on the Supreme Court forms an important part of the Constitution of India. There should be a violation of a fundamental right in order to exercise the right guaranteed under article 32 i.e. a writ petition can be filed under article 32 when there is a violation of “fundamental right” only and not “any” right. The distinction has to be made between “maintainability of the writ petition” and the “locus standi” to file it and to see whether the petitioner has the “locus standi” , it is important to see whether there was a violation of any fundamental right.

On “violation of rights under article 19(1)(g)”:

The court found that there was no case of violation of fundamental rights under article 19(1)for two reasons:

on the basis of the affidavits submitted by the Sindri Unit Chief Engineer- that the machinery had become old, obsolete, hazardous and uneconomical. The workers that lost their jobs due to the shutdown of the plant, were alternatively engaged in other units of the same Sindri complex.

The right to carry on an occupation doesn’t mean the right to have a job. If the workers were rendered unemployed due to the sale- their right to carry on an occupation is not affected as, they are free to work as industrial workers. The closing of a system, which provided employment to the workers, doesn’t per se constitute a violation of their fundamental right. Even though the sale had affected the position of the workers, it does not affect their right to work as industrial workers.

On “violation of fundamental right guaranteed under article 14”:

On the basis of the counter-affidavits and reports submitted by the chief engineer of the Sindri Unit and the Government under-secretary, it was held that(i) that the plant had become obsolete and uneconomical and there was a shortage of the special quality raw material required for the operation of the plant and (ii) no workers were retrenched as a result of the sale, the court held that there was no violation of the right under article 14 and the sale was not “unjust”, “arbitrary” or “unconstitutional”. To assure that there were no mala fides in the reason behind the sale, the court closely looked into the figures of the sale to see if the reduction in the original price of the bid was justified and proper and was necessary as a fair consequence of the exclusion of the outer parts for sale. The court further held that even though there was a possibility that a better price could have been realized for the parts had the invitation to make bids been open to the entire public, that possibility cannot pere prove mala fide or scarp and put an end to the sale.

On “the limits of Judicial Review”:

The courts must ensure to not abdicate or usurp the parameters of judicial review and the parameters must be clearly defined and not be exceeded. If the board of a government company has acted fairly, even though that act had some serious repercussions, the court, even as a super auditor, cannot question or intervene in the decision of the Board of Directors. The power of judicial review is to check whether that action by the administration is free from mala fides or unreasonableness and is fair and done in compliance with the procedures set for the proper administration. Thus, it was held that the court cannot indulge in examining the business dealing and internal discussions of the administration.

Analysis

In this judgement the main task of the Court was to show the distinction between the “maintainability of a writ petition” and the “locus standi” to file it. For a case to be heard, the locus standi is important. Here, it was important to check whether the petitioners actually had a “locus standi”.

In R v Paddington[5], the court said regarding locus standi that “ the court would not listen, of course, to a mere busybody, who was interfering in things which did not concern him. But it will listen to anyone whose interests are affected by what has been done”. Here, the petitioners claimed to have been affected by the sale and alleged violation of fundamental rights. Thus, the court was right in hearing the case, as in order to ensure whether there is a “locus standi”, it must be seen whether there was a violation of any fundamental rights.

The Supreme Court has liberalized and broaden the rule of Locus Standi. The concept of locus standi was broadened to include public interest litigation (PIL). The scope of “aggrieved party” has been broadened to include any “public spirited individual or association” if they are fighting for a proper cause. Presently, to seek justice in matter of violation of fundamental rights , a third party appeal can be made. However, it has to be seen that the right affected is a “fundamental” right and not “any” right, so as to have a “locus standi” under article 32.

In Amrit Lal Berry v CCE[6] it was observed that “ when there is a violation of any fundamental right of the people employed by the state, there is no objection in filing a writ petition in representative capacities under article 32 or aricle 226 of the constitution”.

In Sadhu Ram v Custodian General of Evacuee Property[7], it was held that for maintainability of a writ petition, there must be a violation of a fundamental right. In State ofT.N. v. P. Krishnamurthy[8], it was observed that “the Impugned Government Order is illegal if there is a Violation of Fundamental Rights guaranteed under the Constitution of India”

The court decided the sale is not unconstitutional or arbitrary and does not violate article 14 of the constitution. In Bhatnagar & Co. Ltd. v UoI[9], it was held that “ conclusion of facts of an authority cannot be challenged as erroneous under article 32”. The court held similar opinion, as upon considering the facts that the plant had become obsolete, uneconomical and hazardous, the best option was to sell it, it was held the contention that FCI did not consult any expert cannot be accepted.

The Court held that even though there was no arbitrariness in the decision taken by the FCI and Sindri unit Board, the court has to ensure that there were no mala fides behind taking that decision. In MI Builders (p) Ltd v Radhey Shyam Sahu[10]“Action of state or its instrumentality, which is illegal, in contravention of a prescribed procedure, unreasonable, irrational or mala fide, is open to judicial review”. However, the court cannot indulge in examining the internal dealing and discussion of the administration as by doing so it would exceed the limits of judicial review. Works of several scholars were cited by Justice Krishna Iyer to point out how important it is to make everyone have access to justice. In cases like these, where it is a few verses the entire system, the need to ensure justice becomes more important. The court must ensure that the Rule of Law persists. Similarly, Regarding administrative actions, it was held in In Union of India v. G. Ganayutham[11], by the Supreme Court that  “ to test the validity of executive action or of administrative action taken in exercise of statutory powers, the Courts and tribunals in our country can only go into the matter, as a secondary reviewing Court to find out if the executive or the administrator in their primary roles have arrived at a reasonable decision on the material before them in the light of Wednesbury and CCSU tests. The choice of the options available is for the authority; the court/tribunal cannot substitute its view as to what is reasonable.”

Conclusion

Thus, this judgment is a landmark Judgement on the maintainability of a writ petition under Article 32. Several later cases have decided on the same lines that were followed in this judgment. The court has widened the scope of an “aggrieved” person and allowed the petition to move forward to hear the contention of both sides. The court has also given a clear idea of “locus standi” in such cases and held that in order to check whether a person has a locus standi to file a writ petition under Article 32 of the constitution, it must be seen whether there is a violation of a fundamental right. The court has also held back from exercising its power of judicial review by refraining from looking into the internal discussions and decisions of the FCI and Sindri Factory as it would have led to the court exceeding its limits of Judicial review.  Similar approaches were followed in the cases of Amrit Lal Berry v CCE[12] and Sadhu Ram v Custodian General of Evacuee Property[13]. The court also held that, the mere shutdown of a place of work of workers doesn’t affect their fundamental rights. This became a very important precedent for similar future cases.

Also read Articles of Association of a Company


[1] Fertilizer Corporation Kamgar v Union Of India And Others 1981 1 SCC 568

[2] The Constitution of India 1950

[3] Fertilizer Corporation Kamgar v Union Of India And Others 1981 1 SCC 568

[4] The Constitution of India 1950

[5] R v Paddington [1996] 1 QB 380

[6]Amrit Lal Berry v CCE (1975) 4 SCC 714 para 28

[7] Sadhu Ram v Custodian General of Evacuee Property 1979 AIR 1609

[8] State of T.N. v. P. Krishnamurthy (2006) 4 SCC 517 para 15

[9] Bhatnagar & Co. Ltd. v UoI AIR 1975 SC 478 para 21

[10]. In MI Builders (p) Ltd v Radhey Shyam Sahu (1999) 6 SCC 464 para 64, 59

[11] In Union of India v. G. Ganayutham AIR 1997 SC 3387 para 27, 29

[12] Amrit Lal Berry v CCE (1975) 4 SCC 714

[13]  Sadhu Ram v Custodian General of Evacuee Property 1979 AIR 1609

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