Delhi High Court Dismisses PIL Against Corporatisation Of Ordnance Factories, Says Interest Of Employees Already Protected

In 2021, the Government of India decided to corporatize the functions of 41 production units (Ordnance Factories) of the OFB. Vide notification dated 01.10.2021, the OFB was converted from a subordinate office functioning under the Department of Defence Production, Ministry of Defence, into seven 100% Government owned corporate entities, registered under the Companies Act, 2013.

The bench comprising Chief Justice Satish Chandra Sharma and Justice Sanjeev Narula said the corporatisation of OFB was a policy decision of the Government of India taken in national interest keeping in view the defence requirements of the country, and therefore, no case of interference was made out.

Dismissing the plea filed by trade union Bharatiya Pratiraksha Mazdoor Sangh (BPMS), the court said, “In the present case, corporatization of the OFB, in no way, is violating or infringing the constitutional rights guaranteed to the citizens and the policy decision has been taken in larger public interest and in the interest of the nation to strengthen the defence production in the country ensuring quality products and a regular supply of arms & ammunitions to the Armed Forces.”

In its PIL, the BPMS had stated that the impugned notification was violative of Article 14 of the Constitution of India and was not based on any sound reasoning. The Union of India submitted that several Committees, set up in the past to improve the performance of OFB, have recommended conversion of the OFB from a government department into a public sector company as a measure to improve the country’s self-reliance in defence preparedness.

The court noted that the conversion of Ordnance Factories from a government department into a public sector company has been recommended by a number of committees that have been established by different governments in the past, including the T K A Nair Committee (2010), Kelkar Committee (2004), Raman Puri Committee (2015) and Shekatkar Committee (2016). “The recommendation has been made as a measure to improve self- reliance in our defence preparedness,” the court said.

It further observed that in order to enhance functional autonomy and innovation in Ordnance Factories, the Cabinet Committee on Security (CCS) in 2020 had approved the proposal to convert the OFB – a subordinate office of Ministry of Defence, into one or more than one 100% Government owned corporate entities, registered under the Companies Act, 2013. “The CCS accorded approval to constitute an EGoM to oversee and guide the entire process including transition support and redeployment plan of employees while safeguarding their wages and retirement benefits,” the court noted.

The bench ruled that the reason for corporatisation was rational and logical. “This decision allowed companies autonomy as well as helps improve accountability and efficiency in the functioning of the 41 factories under the new companies. This restructuring is also aimed at transforming the Ordnance Factories into productive and profitable assets, deepen specialisation in product range, enhance competitiveness. Thus, the reason for corporatisation is rational and logical,” said the court.

The bench added that when the OFB had been working as a government department, all their expenditure were being met from the Consolidated Fund of India, with no real relation to the input and the outcomes. “With corporatisation, the restructured units of OFB will be free from govt. control/rules/regulations and attain much needed autonomy in their operations and thus get an opportunity to improve their performance & become more competitive in the export market as well,” the court said

Perusing the reply filed by the Union of India, the court remarked that while taking the decision to convert OFB into seven corporate entities, the government has ensured that the service conditions of the existing employees of OFB are protected as central government employees.

“The Government of India has decided that all employees of OFB (Group A, B & C) belonging to production units would be transferred to the corporate entities on deemed deputation initially for a period of two years without altering their service conditions as Central Government employees. It has also been stated on affidavit that the pension liabilities of the retirees and the existing employees will continue to be borne by the Government. Meaning thereby, it has been stated on affidavit that the service condition of the employees will not be changed. They will be entitled to the same benefit which they were drawing prior to conversion of OFB into corporate entities registered under the Companies Act, 2013 and 100% owned by the Government,” said the court.

The court concluded that the policy was in national interest keeping in view the defence requirements of the country. Therefore, the question of interference by the court did not arise especially in light of the fact that the interest of the employees had been protected, the bench said.

“The policy decision in the present case, by no stretch of imagination, is violative of Article 21 nor any other constitutional provision,” the court ruled, while dismissing the writ petition.

Case Title: Bharatiya Pratiraksha Mazdoor Sangh vs Union of India

Citation: 2023 LiveLaw (Del) 656

Counsel for the Petitioner: Mr. Adarsh Kumar Tiwari & Mr. Vinit Pathak, Advocates

Counsel for the Respondent: Mr. Ajay Digpaul, CGSC with Mr. Kamal R. Digpaul, Ms. Swati Kwatra and Mr. Pushpesh Digpaul, Advocates for respondent/ UOI