Introduction: -

M/s Bharat Aluminum Company Limited (BALCO) was established in 1965 as a government
of India undertaking under the Companies Act, 1956. Prior to its disinvestment, it was owned
and controlled by the Government of India and was engaged in aluminium production with
plants in Chhattisgarh and West Bengal.

A Public Sector Disinvestment Commission was established in accordance with the industrial
policy of disinvestment by a resolution dated August 23, 1996, to act as an advisory body and
assist the government in making decisions regarding the disinvestment of companies and the
mode of disinvestment. The government's decision was to be implemented by Public Sector
Undertakings (PSUs) under the supervision of the Disinvestment Commission.

In its second report, the Disinvestment Commission recommended that the government
should disinvest its holding in BALCO by offering a 40% stake to a strategic partner and
making an agreement that within the next two years, the government will make a public offer
to domestic markets for further sales of its shares to institutions, small investors, and
employees, reducing its holding to 26% and leading to the company's privatisation. However,
realising that getting multilateral financial institutions to take up BALCO shares would be
difficult, the Chairman of the Disinvestment Commission recommended that the government
to consider offering 51% of its shares in BALCO, transferring management to strategic
partners and encouraging more bidders to participate.

Jardine Fleming Securities India Ltd.'s bid was accepted, and the Cabinet Committee on
Disinvestment approved the proposal for a strategic sale of 51% of BALCO's shares. The
BALCO Employees Union challenged the government's decision by filing a writ petition in
the Delhi High Court, which was later dismissed by the court.

Later, on behalf of the government, the Global Advisor issued an advertisement seeking
'Expressions of Interest,' to which eight parties responded. This was done on the basis of the
company's overall credibility as well as its financial and technical competence. Following the
completion of the filtration process and careful consideration of the Shareholders Agreement
and the Share Purchase Agreement, quotations, financial bids, and the report of the
Evaluation Committee, Sterlite Industries' bid was accepted. This announcement led to the
initiation of legal proceedings challenging the said decision. On February 23, 2001, Dr. B.L.
Wadhera filed a civil writ petition in the Delhi High Court, which was followed by a writ
petition filed by another BALCO employee, Mr. Samund Singh Kanwar, in the High Court of
Chhattisgarh.

Meanwhile, on February 27, 2001, the Rajya Sabha passed a motion to disinvest BALCO,
which was later discussed in the Lok Sabha on March 1, 2001. The motion "the House
disapproves the proposed disinvestment of BALCO" was defeated by 239 votes to 119 votes
in the Lok Sabha.

Following that, on March 2, 2001, the Government of India and Sterlite Industries Limited
entered into a Shareholders Agreement and Share Purchase Agreement. Sterlite Industries
Limited received 51% of the equity after the sale was completed. These events prompted the
filing of petitions in the Delhi and Chhattisgarh High Courts, which were eventually
transferred to the Supreme Court after the Union of India filed an application.

Facts In Issue: -

 The courts lack the power to evaluate the merits or correctness of the executive's
economic policies, as this authority is held by the legislature.
 The government's divestment of BALCO will limit workers' access to remedies
because the company will no longer be considered a "State" under Article 12 and they
will be unable to seek relief under Articles 14 and 16 of the Indian constitution.
 The case does not meet the criteria for filing a PIL.

Petitioner’s Argument: -

1. Prior to disinvestment, since the Government of India owned and controlled

BALCO's entire paid-up capital, and administrative control was shared with the
Ministry of Mines, BALCO was a State under Article 12 of the Constitution. As a
result, the workers' rights under Articles 14 and 16 had been violated. As this would
have a significant impact on them, they had the right to be heard before proceeding
with the disinvestment process.
2. Under the terms of the agreement, after the sale of 51% of the shares, the remaining
49% of the shares would have also been sold to Sterlite Industries, and the workers
would have lost the 5% of the shares that should have been disinvested in their favour.
 3. The Disinvestment Commission had recommended that a part of the equity share be
offered to the workers to entice their participation, but the government did not provide
any documentation or records to support their claim that they had addressed this issue,
which would have had an impact on the rights and benefits of the workers. This
suggests that the relevant details was not taken into account when the decision was
made.
4. Another argument was that the land on which BALCO was built was tribal land; as a
result, the land could have been used by a public sector enterprise, but once the
majority shares were transferred, the land could not be transferred to a non-tribal
entity. Even under a public sector undertaking, the aforementioned land could have
been acquired and used by an organisation, but the tribal land could not be transferred
to a non-tribal entity because of the prohibition against the transfer of tribal land.

Respondent’s Argument: -

1. The rate of return on government enterprises was low. The rate of return on central
enterprises was minus four percentage points, while the rate of return on government
borrowing was ten to eleven percentage points, indicating the urgent need for a
disinvestment strategy.
2. It was also argued that the government's economic policies could not be challenged in
court and that the courts could not consider the merits, correctness, or rationality of
any government economic policies. The court is not the proper forum for resolving
conflicting clauses concerning the advisability of a policy.
3. Since the government made provisions for the workers' benefit when it entered into
the agreement, there was never any doubt about their rights after the shares were
transferred.

Analysis: -
 Judicial review of the economic policy
 In the case of Premium Granites and Anr v. State of T.N. 1, the court considered the
challenges faced by the government as the government has expanded its existence in
the field of trade, economic enterprises, and so on, which has increased concerns
about reducing costs, increasing efficiency, better management skills, avoiding time
and cost overruns in projects, and so on. As a result, the government must select a
suitable policy to help it survive the competition. As stated in the case of Bhavesh D.
Parish and Ors. v. Union and India 2, the courts should resort to judicial review only
if an economic policy violates the constitution or legal limits or amounts to an abuse
of power.

The court stated in the case of Rustom Cavasjee Cooper v. Union of India 3 that it is
not the court's duty to go into the merits of an economic policy formulated by the
executive or legislature; rather, the court has the power to check whether it is arbitrary
or in violation of the constitution or any other provision of law.
A careful examination of the judgement in the case of BALCO v. Union of India
4
reveals that, despite the fact that the case was filed to challenge the government's
disinvestment policy, the Supreme Court only addressed workers' rights and job
security after the government had disinvested from BALCO. The court refused to
address the issue of the policy's correctness and refused to review the policy. This
may be a valid decision on the point because the only issue raised in the case was
whether the workers would lose their rights under Articles 14 and 16 that they had
previously had when BALCO was a 'State' under Article 12. Thus, if the court had
considered the merits of the case, it would have erred because this power is reserved
for the legislature, as stated in State of Punjab and Ors. v. Ram Lubhaya Bagga5.

However, it should be noted that the significance of the judgement went beyond the
specifics of the current case and established principles that will have a far-reaching
impact on economic jurisprudence. The most prominent example is the case of CPIL

1
1994 SCR (1) 579

2
WRIT PETITION (L.) NO.14172 of 2021
3
1970 AIR 564
4
2001 IIIAD Delhi 717
5
(1998) 4 SCC 117
 v. Union of India6, in which the court, while dealing with the issue of disinvestment,
allowed the disinvestment to take place, stating that because the court had approved
the same in the BALCO case, there was no need for debate on that point. However, it
failed to consider that the BALCO case judgement never addressed the merits of the
disinvestment policy because the issue was of a different nature.

Judicial scrutiny of policies, particularly those relating to disinvestment, does not fall
within the purview of the courts, nor does the scope of judicial review extend to the
question of whether the policy was wise or correct. The courts cannot overturn a
policy simply because the petitioner believed that another policy would have been
better, more reasonable, and advantageous. Only the legislature has the authority to
question the executive's policies, and since they were passed in parliament, there is no
basis to challenge them. It must also be understood that framing economic policies is
the responsibility of experts, and sometimes even the opinions of experts differ, so
courts should refrain from discussing the benefits and drawbacks of a policy, or
testing the utility of the policy, etc., as this is the domain of the executive.

The case will also serve as a deterrent to future cases that would call the Union
government's credibility into question, as when the court addressed the question of
malfeasance on the part of the Union as alleged by the state, it found that the policy
was fair, just, and had followed the equitable procedure in carrying out this
disinvestment, and that the allegations of lack of transparency or exercise of arbitrary
power were found to be without any basis. As a result, it will serve as a deterrent,
preventing further challenges by state governments to the Union government's rights
and sanctions, particularly regarding privatization.

 Admissibility of a PIL
The court stated in S.P. Gupta v. Union of India & Others 7that a PIL must be filed
only to enforce public rights and duties, to remedy public injury, to protect social and
collective rights and interests, or to vindicate public interest. Later, in Sachidanand
Pandey and Others v. State of West Bengal & Others 8, the court limited the
6
WRIT PETITION (C) NO. 382 OF 2014

7
AIR 1982 SC 149
8
1987 AIR 1109
 procedure for filing a PIL by stating that a PIL should only be filed in cases of gross
violation of fundamental rights or human rights or complaints that shake the judicial
minds.

Only a bona fide person with a sufficient interest in the proceeding, or any other
person representing the poor and needy who cannot seek justice on their own, will
have a locus standi if their fundamental rights are violated, but any person with
personal gain, private profit, or political motive should not be allowed to file a PIL, as
stated in the case of Janta Dal v. H.S. Chowdhary & Others9.

The current case would not fall under the purview of PIL because it challenged the
executive's economic policy, rendering the decision to divest from BALCO purely
administrative. The court made an accurate observation, as the main purpose of filing
a PIL is to protect the public interest in cases where fundamental rights of people
from socially and economically disadvantaged backgrounds who lack the means to
represent themselves are violated. However, no fundamental rights of the workers
were violated in the current case, and the PIL was filed to discuss the future
consequences of the disinvestment policy and whether the workers will have recourse
under Articles 14 and 16 of the Indian Constitution. As no fundamental rights were
violated, the PIL should not have been allowed to be filed.

Judgment: -

The court determined that the sale procedure was legal. The procedure ruling was based on
the findings that:

 Laborers had no fundamental right or legal right to be heard by management, despite

the fact that the decision concerned the company's future.
 The protective clauses in the shareholder's agreement provided sufficient evidence
that the labourers' rights and benefits had been adequately addressed.
 The sale was made on the advice and guidance of the Disinvestment Commission,
which is made up of experts in the field, and which was satisfactory in admitting the
propriety of the procedure and the valuation of the company adopted by the executive.
9
AIR 1993 SC 892
  The sale did not violate any land laws because the enterprise operated from legally
leased premises.

Conclusion: -

The executive function gives it the authority to make and implement policies, whereas the
legislative function ensures that the policies proposed and implemented by the executive have
merit and are best suited to the welfare of the country. The court has the responsibility to
ensure that the policy implemented is in accordance with existing laws and does not violate
people's fundamental rights.

Thus, the government and the courts have the authority to decide whether or not to implement
a policy. This is precisely why, in the current case, the court refused to consider the merits of
the disinvestment policy. Normally, the merits of a public policy, whether wise or not, and
whether it is superior to other policies, cannot be challenged in court; however, because a
case was filed stating that if the policy is implemented, workers' rights under articles 14 and
16 would be violated, the case was allowed to be filed.

The purpose of introducing PIL was also to ensure that people's interests were protected and
that if the fundamental rights of the poor, socially and economically disadvantaged people
were violated, they would have a remedy and could seek justice by filing a PIL. It was not
intended to be used as a weapon to challenge any policy or decision made by the executive or
legislature, or to challenge financial or economic decisions made by the government in the
exercise of their administrative power. Despite the fact that many judgments have attempted
to limit the scope of PIL, some people in the name of representing the poor use PIL to benefit
themselves, and this requires strict action to be taken against anyone who commits this act.

Disinvestment is a policy decision involving numerous economic factors. The Courts have
consistently refrained from interfering with economic decisions because it has been
recognised that economic feasibility lacks adjudicative character, and unless the economic
decision, based on economic feasibility, is demonstrated to be in gross violation of
constitutional or legal limits on power, or so abhorrent to reason, that the courts would
decline to intervene in a matter relating to economic issues, the Government has the right as a
lon while making a decision.
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