Fertilizer Corporation Kamgar Union (Regd.), Sindri & Ors. v. Union of India & Ors.
Case Brief: Fertilizer Corporation Kamgar Union (Regd.), Sindri & Ors. v. Union of India & Ors.
Citation: AIR 1981 SC 344
Court: Supreme Court of India
Year: 1981
Legal Area: Industrial Law, Labour Law, Public Sector Undertakings, Right to Livelihood
Facts:
Fertilizer Corporation of India Ltd., a public sector undertaking (PSU), decided to close down its Sindri unit due to financial losses and non-viability.
The workers’ union, Fertilizer Corporation Kamgar Union (Sindri), opposed the closure.
The Union filed a writ petition challenging the government’s decision to close the plant, arguing that the closure violated workers’ rights, including the right to livelihood under Article 21 of the Constitution.
The case raised the issue of whether the government and management have the authority to close a public sector undertaking in the face of workers’ protests and whether closure affects constitutional and statutory protections available to workers.
Issues:
Whether the government can close down a public sector undertaking on grounds of non-viability and losses?
Whether such closure violates the workers’ fundamental rights, especially the right to livelihood under Article 21?
What are the statutory protections available to workers against closure?
What is the scope of judicial review over decisions to close public sector units?
Judgment:
The Supreme Court upheld the power of the government and management to close the public sector unit, while also balancing the rights of workers:
1. Right to Livelihood vs. Economic Policy:
The Court acknowledged that while the right to livelihood is a fundamental right under Article 21, it is not absolute.
The government has the authority to take economic decisions, including closure, if a public enterprise is not viable.
Such policy decisions are subject to judicial review only to ensure no mala fide intent or violation of statutory procedures.
2. Closure of Public Sector Undertakings:
The Court held that closure of a PSU for valid reasons such as financial losses, lack of viability, and public interest is permissible.
The government must exercise this power reasonably and fairly, considering workers’ interests.
Workers are entitled to statutory benefits, including severance compensation, retrenchment benefits, and notice period under the Industrial Disputes Act, 1947.
3. Judicial Review and Economic Decisions:
Economic and commercial decisions by the government or management are generally not interfered with by courts unless there is arbitrariness, mala fide or violation of law.
Courts do not substitute their views for policy decisions on viability or closure.
4. Protection of Workers’ Rights:
The Court emphasized the need to balance workers’ rights and economic realities.
Appropriate compensation and benefits must be provided as per law.
The closure should be carried out with transparency and fairness.
Legal Principles Established:
| Principle | Explanation |
|---|---|
| Right to Livelihood (Article 21) | Fundamental but subject to reasonable restrictions in public interest |
| Government Power to Close PSUs | Permissible on grounds of viability, loss, and public interest |
| Statutory Worker Protections | Retrenchment benefits, notice, compensation under Industrial Disputes Act |
| Judicial Review | Limited to ensuring legality and fairness, not economic merits |
| Balance of Interests | Protection of workers while allowing economic policy decisions |
Significance:
This case is a key authority on the closure of public sector undertakings and workers’ rights.
It clarified that the government can close loss-making PSUs but must adhere to statutory safeguards for workers.
It balanced fundamental rights of workers with the state’s economic policy prerogatives.
The judgment set a precedent limiting courts from interfering in policy matters unless there is illegality or arbitrariness.
Related Case Law:
Workmen of A.P. Steel Plant v. Union of India (1983): Closure and retrenchment of public sector units.
Bank of India Staff Union v. Union of India (1987): Government’s powers and worker protections.
S.R. Chaudhuri v. Union of India (1961): Retrenchment and compensation under Industrial Disputes Act.
M.C. Chockalingam v. Union of India (1972): Closure of industrial units and workers’ rights.
Summary Table:
| Aspect | Details |
|---|---|
| Parties | Fertilizer Corporation Kamgar Union (Sindri) v. Union of India |
| Court | Supreme Court of India |
| Year | 1981 |
| Legal Issue | Closure of PSU, right to livelihood, workers’ protections |
| Holding | Government can close PSU on valid grounds; workers must get statutory benefits |
| Impact | Balanced economic policy and fundamental rights of workers |
Conclusion:
Fertilizer Corporation Kamgar Union (Regd.), Sindri & Ors. v. Union of India & Ors. is a landmark decision that strikes a crucial balance between the right to livelihood of workers and the state’s authority to close unviable public sector units. While the right to livelihood is fundamental, it is subject to reasonable restrictions for broader economic interests. The ruling mandates statutory safeguards and fairness in implementing closure decisions.
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