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Modern Foods staff move Delhi HC against govt divestment

Sudipt Arora in New Delhi

Employees of Modern Food Industries Limited have challenged the government's decision to divest 74 per cent of the company's share capital in favour of Hindustan Lever Limited.

The matter came up for hearing at the Delhi high court last week before Justice N G Nandi who has transferred it to a division bench. It will now be heard on July 18.

The petition filed by MFIL Employees Union secretary G S Yadav challenges the legality of the industry ministry's resolutions passed on August 23, 1996 and January 12, 1998 by which the Disinvestment Commission was constituted.

It said the resolutions vest arbitrary and unguided powers for divestment from sector and are hence unconstitutional. ''Being an advisory body, the Disinvestment Commission has been conferred an unfettered discretion, without any circumscribing standards and norms, which would be in furtherance of constitutional provisions.''

The commission, while advising the government on divestment matters, has to consider the interests of stakeholders, workers, consumers and others having a stake in relevant public sector undertakings, the petition said.

''But a bare reading of recommendations made with regard to the MFIL shows that the commission has not considered all relevant factors. This supports the view that there should be no divestment in MFIL and the company should be further strengthened.''

Yadav said MFIL is not a sick company. It has been picked up merely because someone thought that the government need not be in the business of making bread or maybe some multinational company had set its eyes on it having regard to its assets and vast scope of lucrative market.

Such reasons cannot be the foundation for taking decision contrary to constitutional directives, he said. ''The decision to dinvest 74 per cent of MFIL's share capital is contrary to law, is not designed to promote public interest and will set at naught valuable social justice functions being rendered by the company.''

The petition said MFIL is the country's largest bread manufacturing company with food processing plants at strategic locations. It serves 30 million families every month and participates in nutrition programmes aimed at vulnerable sections of the population by supplying nutritionally fortified and balanced energy food.

In 1997-98, MFIL recorded a net profit of Rs 62.2 million on a turnover of Rs 1.815 billion. It employs 2,400 people but the privatisation will affect the lives and livelihood of these workers and their families, the petition said.

In February 1997, the Disinvestment Commission classified MFIL as a non-core group company. On January 14 last year, the government decided to divest 74 per cent of the share capital in favour of HLL instead of the earlier Cabinet decision of selling only 50 per cent of equity.

UNI

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