PUNJAB & HARYANA HIGH COURT DECLARED THE 75% RESERVATION FOR LOCALS IN HARYANA IN THE PRIVATE SECTOR JOBS AS UNCONSTITUTIONAL

In a recent judgment dated November 17, 2023 titled IMT Industrial Association and another Versus State of Haryana and another, the Division Bench of Punjab & Haryana High Court has held the recent enacted The Haryana State Employment of Local Candidates Act, 2020 (in short 'the 2020 Act') as unconstitutional and violative of Part-III of the Constitution of India.

The 2020 Act was enacted by Haryana Government to provide seventy-five percent (75%) employment to local candidates by employer in the State of Haryana and related matters. The 2020 Act was notified on 06.11.2021 and the 2020 Act came into force w.e.f. 15.01.2022. The 2020 Act applied to an ‘employer’ being a Company, Society, Trust, Limited Liability Partnership (LLP) firms, Partnership firm and any person employing ten (10) or more persons, etc., on salary, wages or other remuneration excluding any Central or State government or an organization owned by Central or State government. Such an employer could be engaged in the activity of manufacturing or providing any service or be any such entity, as may be notified by the Government from time to time. On and from the date of commencement of the 2020 Act, every employer in State of Haryana was required to register such employees receiving gross monthly salary or wages not more than ₹ 30,000/- (Thirty thousand rupees) (USD 400 approx.) on the designated portal available on the official website of Labour Department, Haryana namely Haryana Udhyam Memorandum portal and to update all employment details within three (3) months.

The 2020 Act was challenged by petitioners by filing 9 separate writ petitions before Punjab & Haryana High Court on the grounds that it provided reservation in private employment and created an unprecedented intrusion by the State Government into the fundamental rights of the private employers to carry on their business and trade as provided under Article 19 of Constitution of India. The restrictions thus placed upon the rights of the petitioners were alleged not to be reasonable and were manifestly arbitrary, capricious, excessive and uncalled for and the same being violative of the principles of natural justice, equality, liberty and fraternity laid down in the Preamble of the Constitution of India and was subject to challenge. Similarly, infringement of Article 14 of the Constitution of India was also alleged in as much as all citizens of the country would have a right to equal employment, to reside and to settle in the State of Haryana and the 2020 Act, thus, represented a serious assault on the unity and integrity of the country and the idea of a common Indian identity. The entire aim and objectives of the 2020 Act was alleged to be incorrect, misconceived, fanciful and granting overly broad discretion to the authorized officers appointed thereunder apart from the averments that the Haryana State lacked the legislative competence to pass the same and it being in the domain of the central legislative and, thus, fell foul of Article 246 of the Constitution of India.

The implementation of the 2020 Act was stayed vide order dated 03.02.2022 by the co-ordinate Bench of Punjab & Haryana High Court by noticing that the core issue was whether any State can restrict employment (even in the private sector) on the basis of domicile. The matter was thereafter taken to the Supreme Court of India wherein, it was directed on 17.02.2022 that since challenge was to the Legislation and without any reasons the stay could not have been granted and resultantly, the Supreme Court directed the High Court to decide the writ petition expeditiously within a period of four weeks. However, the State of Haryana was mandated not to take any coercive steps against the employers keeping in view the argument raised that they would face immense hardship as they could not employ anybody from outside the State from the date of the commencement of the 2020 Act.

After hearing the arguments at length, the Division bench of Punjab & Haryana High Court allowed the writ petitions and  the 2020 Act was held ultravires the same and is ineffective from the date it came into force. The Court held that keeping in view the principles laid down by the Supreme Court on the principles of morality, the State cannot direct the private employers to do what has been forbidden to do under the Constitution of India. It cannot as such discriminate against the individuals on account of the fact that they do not belong to a certain State and have a negative discrimination against other citizens of the country. The private employer being a builder, for example, raising a multi-storeyed complex, cannot be asked not to employ a person who is skilled in the work of installation of wood work who might come from a particular area of the country i.e. Kashmir; where this skill has been enhanced, whereas from another part of the country, labour which is more skilled in setting up the steel frames and building are found i.e. Punjab; whereas similar persons with different skills who would be more proficient in just executing the civil work i.e. Uttar Pradesh and Bihar. It is not for the State as such to direct the private employer who it has to employee keeping in view the principles of laissez faire that “the lesser it governs, the better itself”. Once there is a bar under the Constitution of India, the Court does not see any reason how the State can force a private employer to employ a local candidate as it would lead to a large scale similar state enactments providing similar protection for their residents and putting up artificial walls throughout the country, which the framers of the Constitution had never envisaged.

The Court further held that restrictions imposed upon all types of private employers as defined under Article 2(e) are gross to the extent that a person's right to carry on occupation, trade or business is grossly impaired under Article 19(1)(g) of the Constitution of India. The requirement to register any employee on the designated portal within three months who was being paid less than Rs.30,000/- per month upto 75%, thus, is violative of the fundamental rights protected under the Constitution of India. The control of the State by a designated officer having a right to consider the cases of exemption to reject them are onerous. The requirement of submitting quarterly reports and the power of the Authorized Officer to call for records and to inspect premises for purposes of examining the records, registers and documents by just giving one day prior notice as such are conditions which can be termed as the “Inspector Raj” of the State. The private employer, thus, has been put under the anvil of the State as to whom to employ and the penalties which are liable to be imposed on contravention which have already been noticed which multiply on account of any violations apart from leading to criminal prosecution by filing of a complaint. The bar under Section 20 of not being able to challenge the legal proceedings in any Court against any Authorized Officer or designated officer further ties the hands of the employer. Therefore, the State continues to exercise absolute control over a private employer and as noticed, directing it to do which itself is forbidden for public employment.