homework help,online homework help,online tutors,online tutoring,research paper help,do my homework,

1. 1
Homework Help
https://www.homeworkping.com/
Research Paper help
https://www.homeworkping.com/
Online Tutoring
https://www.homeworkping.com/
click here for freelancing tutoring sites
Balco Employees Union (Regd.)V. Union Of India: Case Analysis
INTRODUCTION *AnjaniNandan1
Disinvestment of a company basically means the action of an organization or government selling
or liquidating an asset or subsidiary. It is also known as “divestiture“. It may also be a reduction
in capital expenditure, or the decision of a company not to replenish depleted capital
goods. Thus Disinvestment refers to the sale or liquidation of an asset or subsidiary of
an organization or equity and bond capital by the government to the private sector. It also implies
the sale of government’s loan capital in PSUs through securitization. However, it is the
government and not the PSUs who receive money from disinvestment.
In the BALCODisinvestment 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
12nd Semester, Roll 100, Sec B, National University Of Study And Research In Law, Ranchi.

2. 2
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 OF THE CASE:
The decision of the Government of India to disinvest M/s Bharat Aluminum Company Limited,
popularly known as BALCO was challenged by the employees ofBALCO , State ofChattisgarh
(the state in which BALCO is located) and by some public spirited individuals before various
High Court and finally before the Supreme Court. It was challenged that the decision to disinvest
BALCO was contrary to the legal and social interests of the employees as well as certain other
legal issues were raised by different parties.
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 RajyaSabha and the matter was also
discussed in the LokSabha. 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 Codeand 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.

3. 3
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?
ARGUMENTS ADVANCED By:-
BALCO Employees Union: (Petitioner)
I. Workmen have been adversely affected by the decision of the Government of India to disinvest
51% of the shares in BALCO in favour 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.
II. 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 Korbaaluminium 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.
III. 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

4. 4
Ministry of Mines. BALCO was, therefore, a State within the meaning of Article 12 of the
Constitution. So it was liable.
IV. Workmen have reason to believe that apart from the sale of 51% of the shares in favour 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 favour of the
employees the same would not happen in the present case.
V. 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&Ors.: (Respondent):
 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
aluminium 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 SamacharNews letter. 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

5. 5
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. VenkataramaReddi, 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.

6. 6
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 Honourable Supreme Court
distinguished the present case with the landmark case of National Textile Workers’ Union
and others v. P.R. Ramakrishnan2 on the basis of facts. The Supreme Court followed the
case of Southern Structurals Staff Union v. Management of Southern Structurals3 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
2National Textile Workers’ Union and othersv. P.R. Ramakrishnan,AIR 1983 SC 75
3Southern StructuralsStaff Union v. Management of Southern Structurals,1994 81 CompCas 389 Mad, (1994) IILLJ
1243 Mad

7. 7
Power and Essar Steel. It held that the ratio of the decision inSamatha v. State of A. P.,4 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 Chattisgarh 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 byShri
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 DICENDI OF THE JUDGMENT
i. 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.”
4Samatha v. State of A. P.,1997 AIR SCW 3361

8. 8
ii. 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 judgement 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 Aluminium Company Ltd. at a throwaway price is a questionable one for a
host of reasons.
a) 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 Hindalco 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

9. 9
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
b) A direct valuation of BALCO’s assets suggests that with an investment of just Rs.550
croresSterlite is to get control over assets that according to some are worth around 10
times that value.
c) 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.
d) 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.
e) The deal allegedly violates a Supreme Court order banning private sector units from
running mines and industries in tribal population areas.
Hence in my thoughts the disinvestment was improper and ill managed. In my view if the above
mentioned 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.
CONCLUSION
I seriously like to criticize this judgment because in my view it is the duty of the judiciary, which
is at the threshold, to dispense justice and fairness. But by holding that judiciary can’t interfere
into policy matters and further employees do not have the right to challenge the administrative
and policy decision of disinvestment of the company taken by the central government, it gave
unlimited and unchecked powers in the hands of the executive. So it can now take decisions at its
whims and fancies and behave like an unruly horse. Further it has taken away the power of
hearing and right of the employees to approach the courts for justice if their rights are affected.
This judgement has given power and authority in the hands of private companies and left the
employees to their fate. Further there is no check on ongoing parallel politics and violations of
law and contracts taking place after such disinvestment.

10. 10
Disinvestment in my view is a good and effective policy to revive the corporate sector owned by
the government. But it needs to be free from politics and other curses and flaws it suffers from.
Everything done should be for the welfare of the nation and its people as a whole.
BIBLIOGRAPHY
From the following sources, the valuable &relevant materials cum supplements were extracted:-
a. http://www.indiankanoon.org/doc/1737583/
b. http://www.damodarcollege.org/dhiru_final/makarandvol3.1.html
c. A critical analysis of the BALCO case by TARUNA JAIN .
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1087593&http://www.google.co.in/u
rl?sa=t&rct=j&q=balco case supreme court&source.
. Homework Help
https://www.homeworkping.com/
Math homework help
https://www.homeworkping.com/
Research Paper help
https://www.homeworkping.com/
Algebra Help
https://www.homeworkping.com/
Calculus Help
https://www.homeworkping.com/
Accounting help

11. 11
https://www.homeworkping.com/
Paper Help
https://www.homeworkping.com/
Writing Help
https://www.homeworkping.com/
Online Tutor
https://www.homeworkping.com/
Online Tutoring
https://www.homeworkping.com/