THE HON’BLE SRI JUSTICE N.V. RAMANA W.P. No. 22642 of 2006 O r d e r: The petitioners are employees of respondent No.3, namely M/s. Bharat Heavy Plates and Vessels Limited, which is a subsidiary of respondent No. 2, namely M/s. Bharat Yantra Nigam Limited (hereinafter referred to as “the holding company”). They invoked the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India, by way of this writ petition, praying this Court to grant the following relief: To issue an appropriate writ, order or direction, more particularly, one in the nature of writ of Mandamus, declaring the action of the respondents in not implementing revised pay scales of V Pay Revision Commission (PRC) w.e.f. 01.01.1997, as per the memorandum dated 25.06.1999 and the recommendations of the 3rd respondent-Board as arbitrary, illegal, unjust, discriminatory, violative of the fundamental rights guaranteed under Articles 14 and 21 of the Constitution of India, apart from being contrary to Judge-made law and issue a consequential direction to the respondents to implement the scales of V Pay Revision Commission w.e.f 01.01.1997 with all consequential benefits and pass such other order or orders as the Hon’ble Court may deem fit and proper in the circumstances of the case. M/s. Bharat Heavy Plates and Vessels Limited (hereinafter referred to as “the subsidiary company”) was incorporated in the year 1966. It started its commercial production in the year 1969. Since then it has been consistently meeting the requirements of core industries like refineries, fertilizers, petro-chemicals, steel, defence and space application centres. The subsidiary company has on its rolls about 1,500 employees, of which 296 are working in officer cadre, 167 are working in supervisory cadre and the rest are workmen. The subsidiary company registered profits till the year 1999, but thereafter, started making loses and has been facing severe economic crisis, for one or the other reason. The subsidiary company from time to time has been revising the pay scales of its employees. While so, the V Pay Revision Commission, appointed by respondent No.1-Central Government, has come up with a new wage structure, recommending revised pay scales to its employees. The Central Government extended the said revised scales to all its employees working in its various Departments and also Undertakings. To consider the modalities for extending the revised pay scales to employees working in the Public Sector Undertakings, the Central Government appointed a high-level Committee headed by a retired Judge of the Supreme Court. The said Committee having examined the modalities and having deliberated with all concerned, submitted its report to the Central Government on 30.10.1998. The Central Government having accepted the said report, issued proceedings dated 25.06.1999 framing guidelines for implementation of the revised pay scales to employees working in the Public Sector Undertakings. As per the guidelines issued by the Central Government, the benefit of the revised pay scales should be extended only to employees of those Public Sector Undertakings, which have made profits for three years w.e.f. 1996. Since the subsidiary company made profits for the said period, the petitioners state that as per the guidelines, they being its employees, are entitled to be extended the benefit of the revised pay scales. The petitioners state that even the Board of Directors of the subsidiary company in their 155th meeting held on 26.02.2002 have recommended, extension of the benefit of the revised pay scales to the employees. Though the said recommendations were forwarded to the Central Government for approval, and despite the petitioners making several representations, no action thereon had been taken by the Central Government. The petitioners state that when respondent No.2-holding company did not extend the benefit of the revised pay scales to its employees, its employees filed writ petition in W.P. No. 40590 of 2005 on the file of the Allahabad High Court, which vide order dated 04.05.2006 allowed the writ petition and directed the respondents therein to extend the benefit of the revised pay scales to its employees w.e.f. 01.01.1997 and respondent No.1-Central Government has also implemented the same vide proceedings 26.07.2006. The petitioners state that M/s. Hindustan Shipyard Limited and M/s. Bridge & Roof Company Limited are also subsidiaries of respondent No.2, despite not making any profits, yet the Central Government has extended the benefit of the revised pay scales to the employees of the said companies, and the action of the respondents in not extending the benefit of the revised pay scales to the employees of the company, as directed by the Central Government in its memorandum dated 25.06.1999, is illegal, arbitrary, discriminatory and violative of Articles 14 and 21 of the Constitution of India. The learned senior counsel representing the petitioners submitted that as per the memorandum dated 25.06.1999 issued by the Central Government, which is binding on all Public Sector Undertakings, including respondent No. 3, the benefit of revised pay scales should be extended to employees of Public Sector Undertakings, which have made profits continuously for a period of three years from 1996. Since, respondent No.3-subsidiary company has made profits during the said three years period, the petitioners who are its employees, are also entitled to be extended the benefit of the revised pay scales. He submits that the Board of Directors of respondent No.3- subsidiary company have also, in their 155th meeting held on 26.02.2002, passed resolution recommending respondent No.1- Central Government to implement the revised pay scales to employees of respondent No.3-subsidiary company, and the action of the respondents in not taking any action thereon, and more so when a Memorandum of Understanding was entered into by respondent No.3- subsidiary company with the representatives of the Union with respect to implementation of the revised pay scales on 31.10.2001, is illegal and arbitrary. He further submitted that when respondent No.2-holding company, did not pay the revised pay scales to its employees, the employees moved the Allahabad High Court by filing writ petition in W.P. No. 40590 of 2005, and the Allahabad High Court, by order dated 04.05.2006 allowed the said writ petition and directed the respondents therein to implement the revised pay scales to the petitioners. In pursuance of the said directions, the Central Government issued consequential orders dated 26.07.2006 for implementation of the revised pay scales to the employees of the holding company. Apart from this, the revised pay scales were also implemented to employees of other subsidiary companies of the holding company, namely M/s. Hindustan Shipyard Limited and Bridge & Roof Company Limited, despite they not making any profits, and the action of the respondents in not extending the revised pay scales to the petitioners, even though it is one of the subsidiary companies of the holding company, amounts to discriminating them, which is violative of Articles 14 and 21 of the Constitution of India. He submitted that even though the subsidiary company became sick, it is now making profits and, in fact, it has registered a profit of Rs.1051 lakhs during the year 2006, and this is evident from the letter dated 30.09.2006 addressed by the Managing Director of respondent No.3-subsidiary company to all the employees, which was kept on the Notice Board. Relying on a copy of the extract of pending order book position on 31.08.2007, he submitted that respondent No.3-subsidiary company is having on hand orders worth Rs.271.33 crores, and this suggests that respondent No.3-subsidiary company’s financial position is improving. He thus submitted, that the action of the respondents in not implementing the revised pay scales as directed by the Central Government in its memorandum dated 25.06.1999, is illegal and arbitrary, and thus prayed for appropriate directions. On behalf of respondent No.1-Central Government, the Under Secretary in the Department of Heavy Industries filed counter. The learned Assistant Solicitor General appearing on behalf of respondent No.1 while reiterating the counter averments submitted that since the subsidiary company was making continuous losses, it was declared as a sick unit by the Board for Industrial and Financial Reconstruction (hereinafter referred to as “the BIFR”), and the matter is pending before it for a rehabilitation package. He submitted that by the end of September, 2006, the current losses of the subsidiary company stood at Rs.21.81 crores. He submitted that petitioners not being the employees of the Central Government, cannot seek implementation of the revised pay scales, as a matter of right, and implementation of revised pay scales to them depends upon the financial position of their company. He submitted that the since the subsidiary company was declared as a sick unit, if any approval for implementation of the revised pay scales is given, the amounts which would be liable to be paid, would become an additional burden to the Central Government, for the subsidiary company is not making any profits. In support of his argument that the employees of a sick company cannot claim revision of pay as a matter of right and that the additional expenditure to be incurred for such revision should be borne by the Government, the learned Assistant Solicitor General, placed reliance on the judgment of the apex Court in A.K. Bindal v. Union of India[1]. He, however, submitted that Bharat Heavy Electricals Limited has evinced interest in the company, and if BHEL decides to take the company, the aspect relating to pay revision to the employees of the company will be included in the revival proposal to be placed before the Board for Reconstruction of Public Sector Enterprises for its recommendations, and once the Central Government approves the revival proposal in respect of the subsidiary company, BIFR’s permission would be taken for implementing the revised pay scale to the employees of the subsidiary company, and the whole exercise in this regard would take some more time. Respondent No.2 filed counter. The learned Standing Counsel for respondent No.2 reiterating the counter averments submitted that the memorandum dated 25.06.1999 issued by the Central Government with respect to implementation of pay scales to the employees is binding on respondent No.3-subsidiary company. He however submitted that since the subsidiary company has been declared sick and now that the matter is referred to and is pending before BIFR, respondent No.3-subsidiary company, cannot implement the said memorandum, unless there is a rehabilitation package approved by the BIFR. Respondent No.3 also filed counter. The learned Standing Counsel for respondent No.3-subsidiary company submitted that company has been making losses continuously since the year 1999, and it is able to survive only with the assistance of the Central Government, which is providing monetary support to meet the statutory and non-statutory requirement. He admitted that the memorandum dated 25.06.1999 issued by the Central Government for implementation of the revised pay scales is binding on the subsidiary company, but submitted that in the said memorandum it has been made clear that resources required for meeting the increased salaries and wages must be internally generated and must come from improved performance in terms of productivity and profitability and not from the Central Government. He further submitted that in respect of sick companies, the memorandum prescribes that revision of salaries should be strictly in accordance with the rehabilitation package approved or to be approved by the BIFR and after providing additional expenditure on account of pay revision in the said packages. He admitted that the Unions and Management of respondent No.3 arrived at an understanding on 31.10.2001 with respect to revision of pay scales and other benefits, but contended that as per Clause 13.3 thereof, the understanding shall be subject to approval of the holding company, namely respondent No.2 and respondent No.1, namely the Central Government, and after approval from them, the Memorandum of Settlement will be signed. He submitted that since the Memorandum of Understanding did not receive approval from respondent Nos. 1 and 2, the same cannot be implemented. He further submitted that unless the BIFR draws up a rehabilitation package, containing provision for payment of revised pay scales to the employees, the subsidiary company cannot implement the same. All the counsel representing the respondents submitted that the petitioners cannot equate themselves with employees of respondent No. 2 and other subsidiary companies where revised pay scales were implemented, because at the time when the pay scale were implemented, the said companies were profit making companies, but after implementation, they became sick. Since as at the time of issuance of memorandum dated 25.06.1999 by the Central Government, the subsidiary company was making losses and ultimately it became sick and was referred to BIFR, the revised pay scales were not implemented, and as such, the petitioners cannot complain of any discrimination. Heard the learned counsel for the petitioner, the learned Assistant Solicitor General for respondent No.1-Central Government, the learned Standing Counsel for respondent No.2-holding company and the learned Standing Counsel for respondent No.3-subsidiary company. There is no dispute about the fact that in pursuance of the recommendations made by the Committee headed by Justice S. Mohan, the Central Government has issued memorandum dated 25.06.1999 for implementation of revised pay scales w.e.f. 01.01.1997 to employees occupying Board level posts and below Board level posts including non-unionised Supervisors in Public Sector Enterprises. The procedure for approval and adoption of the new scales of pay on IDA pattern by PSEs is stated in Annexure-VI, and clauses (a) to (c), which are relevant for the purpose of deciding this case, read as under: (a) PSEs which have been making profit consistently for the last 3 years viz., 1996-97, 1997-98 and 1998-99 would be allowed to adopt the scales of pay for the executives holding posts at and below the Board level and non- unionised supervisors strictly in accordance with these guidelines. (b) PSEs which did not make profit during the last 3 years viz., 1996-97, 1997- 98 and 1998-99 or had incurred net loss during any of these financial years would also be allowed to adopt these scales of pay or their executives holding posts at and below the Board level and non-unionised supervisors with the approval of the Govt. i.e. the administrative Ministry acting in consultation with the DPE, provided they give an estimate as to how resources would be generated by them to meet the extra expenditure. (c) In respect of sick enterprises referred to BIFR, revision of pay scales for all employees following IDA pattern would be strictly in accordance with the rehabilitation packages approved or to be approved by the BIFR and after providing for the additional expenditure on account of pay revision in these packages. From a reading of the above, it becomes clear that as per clause (a), Public Sector Enterprises which have made profit consistently for the last three years, namely 1996-97, 1997-98 and 1998-99 were entitled to adopt the revised scales of pay to their employees, and as per clause (b), even those Public Sector Enterprises which did not make any profit for the said years or had incurred net losses during any of the said financial years, were entitled to adopt the revised scales of pay to their employees, provided Government in consultation with the Department of Public Enterprises, approves the estimate to be provided by the company showing how they would generate the resources to meet the extra expenditure, and as per clause (c) the revised pay scales to the employees of companies which have become sick and referred to BIFR, would be strictly in accordance with the rehabilitation packages approved or to be approved by BIFR and after providing for additional expenditure on account of pay revision in these packages. It is the contention of the petitioners that since respondent No.3- subsidiary company registered profits during the financial years 1996- 97, 1997-98 and 1998-99, the petitioners, who are employees of respondent No.3-company are entitled to be extended the benefit of the revised pay scales as directed by the Central Government in its above memorandum dated 25.06.1999. In the instant case, admittedly, respondent No.3-subsidiary company registered profits in all the three years viz., 1996-97, 1997-98 and 1998-99, and if one goes by the clause (a) of the above memorandum dated 25.06.1999 issued by the Central Government, the employees are entitled to be extended the benefit of the revised pay scales. But, unfortunately, by the time the Central Government issued the above memorandum dated 25.06.1999, for implementation of the revised pay scales to the employees of all the Public Sector Enterprises, respondent No.3- subsidiary company started making losses, and the losses started accumulating year by year, and ultimately it was referred to BIFR, which declared respondent No.3-subsidiary company as having become sick. In fact, it is the specific case of the respondents that since respondent No.3-subsidiary company became sick, and its losses started mounting year after year, they could not implement the revised pay scales to its employees. Even though, as per clause (a), the employees of respondent No.3-subsidiary company are entitled to the extension of the revised pay scales, the fact remains, the financial position of the subsidiary company, is on the deterioration year after year, and it is the specific case of the respondents that it is dependant on the financial support being provided by the Central Government for meeting its statutory and non-statutory obligations. This stand taken by the respondents reflects that the subsidiary company is unable to generate its own funds and is dependant on the Government, and in fact, the petitioners also did not dispute the fact that respondent No.3-subsidiary company has been making losses since 1999 and now it is on the recovery path. There is no doubt that a Memorandum of Understanding dated 31.10.2001 was entered into between the representatives of the employees Unions and the management of respondent No.3- subsidary company, but the fact remains, it is the case of the respondents that as per clause 13.3 thereof, the Memorandum of Understanding shall be subject to approval by the holding company as also the Central Government, and it is only after receiving, their approval, the Memorandum of Understanding, would be signed and thereafter implemented. In fact, as of now there is no Memorandum of Understanding signed between the employees Unions and the management of respondent No.3-subsidiary company because approval of respondent No.2-holding company and respondent No.1- Central Government is yet to be obtained. Since the Board of Directors of respondent No.3-subsidiary company in their 155th meeting on 26.02.2002 have recommended to the Central Government to implement the revised pay scales to its employees, and having regard to the fact that the subsidiary company has registered profits to the tune of Rs.1051 lakhs, as is evident from the letter dated 30.09.2006 addressed by the Managing Director of respondent No.3-subsidiary company to all the employees and this apart, and the company having on hand work orders worth Rs. 271.33 crores, as is evident from the extract of the pending order book position as on 31.08.2007, the learned counsel for the petitioner submits that the respondents should be directed to implement the revised pay scales to its employees. This contention of the petitioners cannot be accepted. A reading of the letter dated 30.09.2006 would indicate that during the year, (for the period from April to September), the subsidiary company registered profit of Rs.1651 lakhs, and after deduction of the said amount from the losses sustained by the subsidiary company, still the subsidiary company is in losses to the tune of Rs.2181 lakhs, and in fact, the respondents in their counters have stated that still the subsidiary company is in losses; that it made losses to the tune of Rs.36.02 crores and; that its total outstanding liability approximately stood at Rs. 880.39 crores. The letter of the Managing Director, on which the learned counsel for the petitioners placed reliance for to show that the company made profits and as such it can implement the revised pay scales, at the most reflects that the subsidiary company is on the road to recovery, and in fact, acknowledges the said achievement to the employees. It is not disputed by the learned Assistant Solicitor General for respondent No.1-Central Government, the learned counsel for respondent No.2-holding company and the learned counsel for respondent No.3-subsidiary company that when respondent No.2- holding company did not extend the benefit of the revised pay scales to its employees, its employees filed writ petition in W.P. No. 40590 of 2005 on the file of the Allahabad High Court, which vide order dated 04.05.2006 allowed the writ petition and directed the respondents therein to extend the benefit of the revised pay scales to its employees w.e.f. 01.01.1997, and that in pursuance thereof, respondent No.1-Central Government and respondent No.2-holding company have also implemented the same vide proceedings 26.07.2006. They have also admitted that the revised pay scales were also implemented in respect of the employees working in M/s. Hindustan Shipyard Limited and M/s. Bridge & Roof Company Limited, which are also subsidiaries of respondent No.2, even though they are not making any profits. It is their case that the facts situation of this case being similar to the one before the Allahabad High Court, in terms of the said judgment, they are also entitled to be extended the benefit of the revised pay scales. All the learned counsel appearing on behalf of the respective respondents only stated that since the holding company had less number of employees, they have implemented the revised pay scales in the said company, even though they became sick subsequently, and they could not implement the revised pay scales to the employees of the subsidiary company because by the time the Central Government issued orders dated 25.06.1999, the subsidiary company, started making losses continuously year after year. The law is well settled that the Court would be slow in giving directions to the Government to implement schemes/policies which favour employees, but involve financial implications. I n State of Punjab v. Ram Lubhaya Bagga[2], the apex Court while considering the question whether the policy decision taken by the Government restricting reimbursement of full medical expenses incurred to an employee, violated the provisions of Article 21 of the Constitution of India, held thus: Now we revert to the last submission, whether the State policy is justified in not reimbursing an employee, his full medical expenses incurred on such treatment, if incurred in any hospital in India not being a Government hospital in Punjab. Question is whether the new policy which is restricted by the financial constraints of the State to the rates in AIIMS would be in violation of Article 21 of the Constitution of India. So far as questioning the validity of Governmental policy is concerned, in our view, it is not normally within the domain of any Court, to weigh the pros and cons of the policy or to scrutinize it and test the degree of its beneficial or equitable disposition for the purpose of varying, modifying or annulling it, based on howsoever sound and good reasoning, except whether it is arbitrary or violative of any constitutional, statutory or any other provision of law. When Government forms its policy, it is based on a number of circumstances on facts, law including constraints based on its resources. It is also based on expert opinion. It would be dangerous if Court is asked to test the utility, beneficial effect of the policy or its appraisal based on facts set out on affidavits. The Court would dissuade itself from entering into this realm, which belongs to the executive. It is within this matrix that it is to be seen whether the new policy violates Article 21 when it restricts reimbursement on account of its financial constraints. Be that as it may, in the counter filed on behalf of respondent No.1-Central Government, it is stated as follows: Respondent No.3-subsidiary company has been referred to BIFR and the matter is pending before it for rehabilitation, and that M/s. Bharat Heavy Electricals Limited, has evinced interest to take over respondent No.3-subsidiary company, and in case, the proposal of taking over the company materializes, they will include the element of extending the benefit of the revised pay scales to the employees of respondent No.3-subsidiary company from 1997 in the revival proposal to be placed before the