Haryana State Employment of Local Candidates Act, 2020 struck down as unconstitutional

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Haryana State Employment of Local Candidates Act, 2020 struck down as unconstitutional

Sudipto

@Sudipto

November 28, 2023

Public Policy

Chronology of events

In 2021, the State of Haryana enacted the Haryana State Employment of Local Candidates Act, 2020 (“HSELC Act”) to provide for 75% employment of local candidates by private employers where the gross monthly salary or wages are less than a specified amount (initially Rs.50,000, later amended to Rs.30,000).
The HSELC Act was expected to become effective from January 15, 2022, as per notification issued by the Haryana government.
The constitutionality of the law was challenged in multiple petitions before the High Court of Punjab & Haryana and the High Court stayed the operation of the law until the matter was decided.
The Haryana Government challenged the stay order before the Supreme Court.
In February 2022, the Supreme Court lifted the stay on operation of the law as the High Court order was deficient in not providing sufficient reasons for staying the legislation. The Supreme Court in the same judgment requested the High Court to expeditiously provide its decision on the matter. The Haryana government was directed not to take any coercive steps against employers under the said law.
The matter was heard by the co-ordinate Bench and the judgment was reserved. The matter was thereafter listed again on 07.09.2022 as certain points were needed to be clarified. The matter could not be taken up since Special Bench had to be constituted in view of the change of the roster thereafter.
Fresh hearings were held before the Special Bench which delivered this judgement.

The High Court framed the following four substantial questions of law:

Whether the writ petition would be maintainable keeping in view the fact that the HSELC Act has been challenged principally by an association of persons and whether they could claim the violations of the fundamental rights under Part-III of the Constitution of India and whether they are liable to be heard on merits?
Whether it was within the ambit of the State to legislate upon the and other connected matters issue in question in view of the specific bar provided under Article 35 of the Constitution of India and whether the legislation would be covered under Entry No.81 of the Union List?
If Question No.2 is answered either way, whether the State could provide for a legislation to private employers to do what was forbidden for it to do under the Constitution of India?
Whether the legislation provides reasonable restrictions in the interest of the general public and thus gives the right to the State under Article 19(5) and 19(6) of the Constitution of India to justify the same?

Decision of the High Court – November 17, 2023

The High Court decided all the above 4 questions of law in favour of the petitioners.

Question no 1: Maintainability of petition.

The petition is maintainable even if it is filed by the industry association stating that the Court has the duty to decide on the constitutionality of the Act. Referring to past Supreme Court judgments, like the Bank Nationalisaiton case and the News Print Policy judgements, the Court reaffirmed that it is not necessary that only citizens can challenge a law.

Question no 2: Ambit of the State to legislate upon matters in view of the specific bar provided under Article 35 of the Constitution of India.

The High court relied on several decisions (like Supreme Court decision in Justice KS Puttaswamy case and IR Coelho’s case) and considered that there is a specific bar to a state legislature legislating on matters which are under Article 16(3) of the Indian Constitution, which provides for equality in matters of public employment. The court also considered that there is a bar under the Indian Constitution regarding discrimination against Indian citizens relating to employment based on their place of birth and residence, making them ineligible or discriminated against in respect of employment in a state.

In this context, the court highlighted a person’s absolute freedoms guaranteed under Part III of the Indian Constitution (Fundamental Rights) including an individual’s right to move freely within India, and right to free trade, commerce, and intercourse throughout the territory of India.

The court observed that the powers of the state legislature cannot be to the detriment of national interest and directly encroaching upon the power of the Union. The effect of the HSELC Act is to make it impermissible for employers to engage employees from rest of the country in certain vacancies, leaving the employer limited discretion to choose their workforce on account of the state.

Question no 3: whether Haryana could provide for a legislation to private employers to do what was forbidden for it to do under the Constitution of India.

The court stated in this context that the freedom provided under Article 19 of the Indian Constitution cannot be infringed and the provisions of HSELC Act falling foul of the same are liable to be declared unconstitutional. The Court held that:

“Once there is a bar under the Constitution of India, we do 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.”

Question no 4: Whether the HSELC Act provides reasonable restrictions in the interest of the general public?

The High Court in this context discussed that the HSELC Act imposes an unreasonable restriction on an individual’s right of free movement throughout the territory of India. The court stated:

“The 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.”

As part of the judgement, the High Court also stated that if a law like HSELC is allowed, it will lead to multiple states coming up with similar laws. Similar laws have been enacted by states like, Andhra Pradesh (date of operation notified but the Act has been challenged before the Andhra Pradesh High Court) and Jharkhand (the Bill is pending assent from the Governor as per information available in May, 2023). While the Punjab and Haryana High Court has declared 75% domicile reservation for locals in Haryana in the private sector jobs having a monthly salary of less than Rs 30,000 as "unconstitutional”, the State Government of Haryana has an option to go the Supreme Court.

Please see attachment for the judgement delivered by the High Court of Punjab and Haryana. For any queries on the above matter, you can write to sudipto@nasscom.in and priyanshi@nasscom.in with a copy to policy@nasscom.in.

job haryana reservation private sector

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Sudipto