Reservation in Private Sector

Reservations in Private Sectors – No legal impediment

Meaning of Private Sector : By the word “private sector”, it is normally meant an organization, which is neither a government body nor a body under the control of Government. Such organizations are companies (including foreign companies), governed by Indian Companies Act, Societies registered under the Societies Registration Act, partnerships registered under the Partnership Act and sole proprietorships. All these entities are run only using the funds received either directly from the public or indirectly through some other public organization. When a company issue shares and raise funds from the public or when it gets financial assistance through the banks or gets concessions from the Government, it is run using the fund of the public. Similarly, partnership and ownership firms are also run using such public funds. Therefore, any organization, when it uses the bank loan and other facilities for raising loans, raise most of their funds only from the people, i.e., public. Therefore, no establishment or organization such as Corporation, Public Limited Company or Private Limited Company is purely a private entity or private establishment. All that is meant by the words ‘Private Sector’ is that Government do not involve in the day to day affairs of such entities.

Public - meaning: A restaurant, bar, hotel, resort etc. which is open to general public, though not owned or controlled by govt. is a “public” restaurant, bar etc. Even a temple built by an individual or group of individuals, when general public are allowed to worship is a “public temple”. The canteen run by a company exclusively for its employees and not open to general public, is also a public canteen. A thing may be said to be public, when owned by the public; also when its users are public in general or a section of the public. Even though some entities are generally referred as private sector or private establishments or non-governmental organizations, in fact, every such organization is, in a way, a public organization because of the users are public. The element of “public” is found in every organization.

Power of the State to make laws : It is indisputable fact that the State has the power to make laws on any aspect. The power to legislate is derived from and controlled by the Constitution . Therefore, the only requirement is that there should be legislative competency, and that the law should not violate the fundamental rights.

Constitutional Provisions: The relevant Constitutional provisions are as follows:-
Art.15. Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth.—
(1) The State shall not discriminate against any citizen on grounds only of religion,
race, caste, sex, place of birth or any of them.
(2) No citizen shall, on grounds only of religion, race, caste, sex, place of birth or any
of them, be subject to any disability, liability, restriction or condition with regard to-
(a) access to shops, public restaurants, hotels and places of public entertainment; or
(b) the use of wells, tanks, bathing ghats, roads and places of public resort maintained
wholly or partly out of State funds or dedicated to the use of the general public.
(3) Nothing in this article shall prevent the State from making any special provision
for women and children.
(4) Nothing in this article or in clause (2) of article 29 shall prevent the State from making any special provision for the advancement of any socially and educationally backward classes of citizens or for the Scheduled Castes and the Scheduled Tribes.
(5)Nothing in this article or in sub-clause(g)of clause (1) of Article 19 shall prevent the State from making any special provision, by law, for the advancement of any socially and educationally backward classes of citizens or for Scheduled Castes or the Scheduled Tribes in so far as such special provisions relate to their admission to educational institutions including private educational institutions, whether aided or unaided by the State, other than the minority educational institutions referred to in clause (1) of Article 30.

The Constitution, under Art.15(4) empowers the State to make “any special provision for the advancement” of socially and educationally backward classes of citizens and SC & ST. The phrase “any special provision for the advancement” has very wide meaning/concept. The ambit of this phrase cannot be restricted to mean only reservation of seats in educational institutions. It cannot be said that it does not apply to matters relating to “employment”. There is no reference at all to educational institutions, further it is not restricted to any specific matter or matters. The only limitation is that it should be for the “advancement” of the classes of people referred therein.

Article 16 : reads as follows :
Art.16. Equality of opportunity in matters of public employment.—(1) There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State.
(2) No citizen shall, on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them, be ineligible for, or discriminated against in respect of, any employment or office under the State.
(3) Nothing in this article shall prevent Parliament from making any law prescribing, in regard to a class or classes of employment or appointment to an office under the Government of, or any local or other authority within, a State or Union territory, any requirement as to residence within that State or Union territory prior to such employment or appointment.
(4) Nothing in this article shall prevent the State from making any provision for the reservation of appointments or posts in favour of any backward class of citizens which, in the opinion of the State, is not adequately represented in the services under the State.
(4A) ……………..
(4B) ………………..

Reservation in employment :-

It is a popular view that Art.16 covers the whole aspect of reservation in employment and Art.15 relates to all aspects of reservation in educational institutions and therefore, reservation in employment can be made only under Art. 16(4) and since clause (4) does not provide for reservation other than employment under the State, no such reservations can be made in any non-governmental entities. A careful reading of Art.16 would reveal that Art.16(4) relates only to employment or appointment to any office under the State. Though the marginal note of Art.16 reads “matters of public employment”, in fact, it deals only with matters relating to employment under the State, (that is Govt. employments).
Construction of marginal note: It is a cardinal principle of interpretation that the ‘sub-heading’ or ‘marginal note’ does not control, or cannot be relied upon to construe the substantive provision found in the section. [Such an interpretation given in Golaknath case was held, not good law, in Kesavananda Bharathy case]. Further, the chapter heading to Arts. 29 and 30 is “Cultural and educational rights”. But rights on minorities are conferred only in this chapter. Therefore, the scope of the substantive or operative portion of any provision has to be construed as per the provisions found in the body of the section, uncontrolled by the marginal note to the section. Hence, it could be seen that the provisions of Art. 16(4) do not deal with or relate to any employment other than Govt. employment (employment under the State). That is, any public employment “not under the State” (not a Govt. employment) is not covered or governed by Art.16(4).

“Special Provision for the advancement” :- The phrase “special provision for the advancement” cannot be interpreted in a restricted sense as if it relates only to matters ‘other than employment’, merely because some aspect of public employment is dealt with in Art.16. The special provision also takes within its ambit such of those aspects of employment, other than the employment under the State, not covered under Art.16. That is, employment other than employment “under the State” also falls within the words “any special provision”. The special provision under Art.15(4) includes reservation in admission to educational institutions whether they are governmental, non-governmental, aided or unaided, minority under Art.30(1) or by majority community. In so far as employments are concerned, all employment other than the employment under the State are included.

Classification of Employment: Employment can be classified as Government employment and non-Government employment, which is ordinarily referred as “private employment” or employment in private sectors. Reservation in employment under the Government is dealt with in Art.16. Reservation in employment, such as staff and teachers in non-governmental organizations, including the minority institutions, whether they receive aid from the State or not can be made as “special provision” for the advancement of such of those communities, as the State deem fit.

Reservation in admission to Educational Institutions : As regards the educational institutions, there are educational institutions run by the Government and the institutions run by the non-Governmental organizations. Those institutions not run by the Government can be further classified as institutions receiving aid from the Govt. and those not receiving any aid from the Govt. and yet another classification is those run by the minorities, within the meaning of Art.30(1) and the institutions run by the majority communities.

Art. 15(5) imposes Restriction on the power :-

Though Art.15(4) encompass all educational institutions, whether they are governmental, non-governmental, aided or unaided, minority or majority institutions, yet the Parliament thought it fit to introduce clause (5) in Art.15 by the Constitution 93rd amendment, as follows: -
“(5) Nothing in this article or in sub-clause(g) of clause (1) of Article 19 shall prevent the State from making any special provision, by law, for the advancement of any socially and educationally backward classes of citizens or for Scheduled Castes or the Scheduled Tribes in so far as such special provisions relate to their admission to educational institutions including private educational institutions, whether aided or unaided by the State, other than the minority educational institutions referred to in clause (1) of Article 30.”

By this, the power of the State conferred under clause(4) has been restricted. In so far as it relates to reservation of seats in minority educational institutions, the words “other than minority educational institutions referred to in clause (1) of Art.30” takes away the power conferred under clause (4) of Art.15 to reserve seats in minority institutions. As per the present Art.15(5), reservations can not be made in admissions in the minority-educational institutions even if they are receiving “State aid”. The real intention of introducing clause (5) appears to be to make reservation in the educational institutions run by self-financing (unaided), non-governmental bodies. And in order to overcome an anticipated assault on the basis of Art.19(1)(g) that it imposes a restriction on their freedom to carry on any trade or business, clause (5) appears to have been introduced. Reference to Art.19(1) in this clause is also superfluous in view of the specific mention in clause(5) of Art.19 that reasonable restrictions can be imposed “in the interest of general public” on the rights conferred under Art.19(1)(g). Therefore, Art. 15(5) was not only unnecessary but goes against the intention with which the amendment was made. It, in fact, imposes restrictions on the powers already conferred on the State by clause (4) of Art.15. In view of present Art.15(5), the reservation in admissions to the educational institutions run by minorities, even if they receive aid from the State, cannot be made because minority institutions referred in Art.30(1) includes aided institutions also. Therefore, unless the words “other than the minority institutions referred to in clause (1) of Art.30” are repealed, or the word “including” is substituted for the words “other than” , reservations cannot be made in the aided minority institutions as well as self-financial minority institutions.

Foreign Companies: The policy of reservations in employment would apply even to the foreign companies functioning in India. It is to be noted that foreign companies do not have the rights conferred under Art.19, as those rights are conferred only on citizens of India. A foreign company, by no stretch of imagination can be considered a citizen of India. An Indian company is also considered as non-citizens. But the Supreme Court, in R.C.Cooper’s case (Bank Nationalisation case) held that citizens of India, when they form a company can not be said to have lost the rights conferred under Art.19. So the Indian companies were allowed to enforce the rights under Art.19 through their share holders, who are citizens though the company itself was not a citizen. This was by extension of doctrine of “Lifting the Corporate Veil”. But the same may not be the case for the foreign companies. Further, reasonable restrictions can be imposed by the State “in the interest of general public” on the rights conferred under Art .19(1)(g). Therefore, all companies including foreign companies, are not exempted from any law passed by the State (as defined under Art.12 of the Constitution) in case reservations are made in employment. Therefore, reservations are permissible in employment in non-governmental organizations including foreign companies, Indian companies, societies, partnership firms, proprietorship, and the educational institutions run by majority community as well as minority community, irrespective of the fact whether or not they receive aid from the State.

Conclusion : The mere fact that so far no such law was made by any State providing reservations on employment in the non-governmental organizations does not mean that there is no such power. In view of the powers conferred by Art.15(4), nothing prevents the State from making any special provision, deem fit and appropriate by the State, if it is for the purpose of advancement of the Socially and Educationally Backward Classes and the SC and ST. That is, reservations can be made with respect to employment in the “private sector” also. It need not be the same as made in the Govt. employment – a different percentage may be prescribed for them. In Art.15(5) “including” shall be substituted for the words “other than” in the phrase “other than the minority institutions referred to in clause (1) of Art.30”

What is the kind or nature of steps that are to be taken (provisions are to be made) for the advancement of such communities is a matter of policy of either Central or State Governments.
(Dr. Justice A.K. Rajan)