B.P.JEEVAN REDDY, J. - (1.) These writ petitions call in question the validity and legality of the sale by Government of U.P. of 51% shares in a wholly Government owned public sector Corporation, U.P. State Cement Corporation Ltd. (UPSCCL) in favour of Dalmia Industries (Respondent No. 5 in W. P. No. 10607 of 1991).
(2.) In the State of U. P., there are only three major cement factories, besides a few small units. All the three major units are in the public sector. They are Churk Cement Factory, Dala Cement Factory and Kajaarhat-Chunar Cement Factory. In 1972, the State Government formed a Government Company known as U.P. State Cement Corporation Ltd. (UPSCCL), which came to own these factories. It appears that two of these factories were started even prior to the incorporation of the Corporation, while the third was installed and commissioned by the Corporation itself.
(3.) The total installed capacity of the three plants is 25.60 lakhs M. T. per annum. Viewed in terms of their installed capacity, the Corporation is the third largest cement manufacturer in the country. Its Board of Directors is comprised of 15 directors, of which five are nominated by the Governor, two by the Financial Institutions, and the remaining elected by the Board/share-holders, which again means the State Government. For one or the other reason - indeed, the reasons appear to be many - the actual production has been far below national average of cement factories. According to the company's own publication, production in the year 1985-86, 86-87, 87-88 and 88-89 has been 42.54, 39.45 and 44.92 and........ per cent respectively. According to the Corporation, the wet process employed in the Churk Factory is based upon an absolete technology; plant and machinery have also become worn out due to prolonged use. A modernisation and rehabilitation scheme has been prepared, which is likely to cost Rs. 52.25 crores. Even at the Dala Factory, which employs the dry process, there have been several problems, modernisation and rehabilitation scheme prepared for this plant is expected to cost about rupees 45 crores. (Fortunately, however, the Corporation is not burdened with surplus labour, a common feature of public sector enterprises. According to a publication of the Corporation, the surplus labour is only 364 in the three units put together, which is likely to disappear in the next 4-5 years with the imposition of strict ban on fresh recruitment, now in force). As a result of unusually low production, and for several other reasons, the Corporation has been incurring substantial losses over the last two decades. With every passing year, losses have been mounting.;