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Synopsis

The Rourkela Mazdoor Sabha, through Senior Advocate Satya Sabharwal, filed a writ petition before the Delhi High Court. The petition challenges the disinvestment procedures adopted by several Union Ministries, including the Ministry of Finance and Steel. 

The petitioners invoked Article 226 of the Indian Constitution to challenge the “arbitrary, non-transparent and opaque process” used by the Union of India in the disinvestment of the FERRO SCRAP NIGAM LIMITED (FSNL). The petitioners, Rourkela Mazdoor Sangh, also sought a court monitoring investigation or a CBI-led investigation into the matter.

The Sangh alleged that the Union had invited Expressions of Interest (EOI) from interested bidders, who have a minimum net worth of Rs. 150 crores. However, they submitted that the valuation of FSNL amounted to Rs. 950 crores. The petition also mentioned that, as per the Memorandum of Agreement with the National Joint Committee for the Steel Industry (NJCS), a decision was made to not engage contractual laborers for jobs of a permanent or perennial nature.

Instead, these jobs would continue to be carried out by regular employees. The Mazdoor Sangh cited the problems caused to the interests of workers due to this measure. They described in their petition that the FSNL and the Rashtriya Ispat Nigam (another steel PSU) were being considered for disinvestment, but the Ministry of Steel pushed for the merger of RINL instead. This was done keeping in mind the interests of the PSU’s workers, who were being sent on deputation.

Criticizing the decision of the Union, the petitioners argued that the sale had been under-valued, raising concerns about the transparency and bona fides of the transaction. The successful bidder is a logistical-based company, with no experience of handling steel companies in India. Further, the decision to disinvest the company was not based on an in-depth study or the opinion of experts, raising questions about whether or not it was necessary or required.

The petition also challenged the basis of the directions given by the respondent ministries, which, they argued, was arbitrary and in opposition to existing policies.

In their petition, the Sangh mentioned that FSNL is a leading organization in the steel mill service sector. It is based in eight steel plants in the country and provides services at competitive rates on the basis of what they described as “world-class technology.”

According to Sangh, the CCEA had initially granted in-principle approval to this decision, but at a later stage, the government decided to merge the FSNL with its holding company, MSTC Limited. Additionally, the approval of the CCEA came after several meetings of the IMG were held, under the chairmanship of the Ministry of Steel. However, at the time not enough bids were received for disinvestment.

This led to a recommendation that the FSNL be merged with MSTC Limited or another PSU. These facts were reflected in the minutes of the meeting of the IMG. At the time, however, these measures were discouraged by the MSTC Limited and Steel Authority of India Limited (SAIL). It was then decided to retain FSNL as a subsidiary of MSTC Limited.

Eventually, the Ministry of Steel sought exemption from the strategic disinvestment of FSNL. This again brought up the issue of its merger. However, a detailed study of this proposal was carried out by MSTC Limited, which led to the conclusion that such a merger would not benefit either MSTC Limited or FSNL because of a lack of synergy.

After successive meetings, MSTC Limited was directed to appoint a Transactions Advisor, Legal Advisor, and Assets Valuer for the strategic disinvestment of FSNL.  Arguing that the criteria for the successful bidders grossly undervalued the company, which is not only a profit-making enterprise but also a dividend-paying company, the petitioners sought relief from the court.

Discussing the rights of the workers, they also stated that, as per guidelines, the term “fixed employment” is not mentioned. However, FSNL had recruited fixed-term employees, whose future was now not being considered. These employees were not going to receive benefits such as bonuses or medical allowances. Writing that “the proposed sale/disinvestment has arbitrarily ignored any prior conditions of the workers or any form of consultation with employees or key stakeholders,” the petitioners questioned the legality of this decision.

Citing risks to the livelihood and job security of workers, in the light of the absence of employee protection, the petitioners sought a writ of mandamus or any other appropriate writ to be issued, which would prevent the respondent bidder from participating in the disinvestment process. The Sangh also requested the court to issue a writ directing the Union to submit a report on the methodology adopted in the valuation of FSNL.

Case Title: Rourkela Mazdoor Sabha V/s Union of India and Ors.