AFFIRMATIVE ACTION

Assignment on

CONSTITUTIONALITY AND LEGITIMACY OF RESERVATION IN

PRIVATE SECTOR

Submitted to: Submitted By:

Prof. I.P.Massey Utkarsh Singh

Dean (Faculty of Law) X semester,
National Law University, Roll no. 1045
Jodhpur.
 INTRODUCTION
Indian constitution provides reservation in public sector education and employment as a legal form of
affirmative action designed to provide greater opportunities to communities and social groups
traditionally deprived and excluded. The reservation under Constitution is provided in three manners:
(1) Reservation in employment in services under the government, (2) Reservation in educational
institutions and (3) Reservation of seats in legislature.
The Supreme Court ruling on reservation in private higher education institutions1 and the consequent
moves towards enabling legislation in this regard have further stoked the fire. The resulting spate of
articles on the subject has been of such ability that ordinary citizens can be forgiven for feeling quite
mystified. A revelation of the reduction of employment opportunities in the pubic sector made some
political parties and their leaders advance the demand for extending reservations to the expanding
private sector. There is an implicit assumption in this demand that employment opportunities are
increasing in the private sector merely because it is expanding2. This problem has pushed the
government to take remedial actions.
There is also a political background to this issue, which on one hand is consistent with their general
political philosophy while on the other hand also guided by purely opportunistic political game plan.
Some in order to regain their lost committed constituency while other not to lag behind in this run,
are demanding reservation in private sector. As soon as taking power in centre the Government
constituted a Group of Minister to look in the issue of affirmative action in private sector, which
recommended for affirmative action in private sector thus the party which was once champions of
liberalization strongly lean in favour of reservation in private sector.Somehow, reservation is
construed as a concession extended with the intent of uplifting ‘low’ caste people. There is never an
iota of reference to the intrinsic disability of the Indian society to treat all people equally and justly,
which necessitates an externally imposed mandate of reservation. The former, that is, extending a
helping hand to uplift these downtrodden people, may have been a consideration but certainly not a
major one. Had it been otherwise, there is no justification for restricting the scope of reservations
only to the SCs and STs; for there are scores of other communities including the brahmans having
people who certainly needed such a helping hand from the State. The real reason for reservations is
the latter. It is not the disability of the dalits but the disability of Indian society that necessitate

1
T.M.A. Pai Foundation Vs. State of Karnataka (2002) 8 SCC 481 And P.A. Inamdar Vs. State of Maharashtra
2005 AIR (SC) 3226)
2
G Thimmaiah ,implication of reservation in private sector, Feb 19 Economic and political weekly 745.

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reservation. The former connotes just the economic dimension and implies that when the SC and ST
communities statistically come on a par with the rest of the population, reservation should come to an
end. Much of the confusion around this issue, including recommendations of Mandal Commission,
reservations for the economically poor people maliciously proposed by the BJP or the current
controversy on reservation in the private sector stems from this erroneous conception.
Generally the concern over the reservation in is deeply related with the aim of ensuring social justice,
which is enshrined as an objective in the preamble to the Indian constitution. The principle of social
or distributive justice derives its legitimacy from the basic human right of equality of opportunity.
But the problem is that there are inbuilt discriminations and biases in the society, with certain
sections of population being historically marginalized and discriminated. Hence to ensure true
equality of opportunity, one has to ensure equality of outcome as well. The Indian Constitution under
articles 14, 15 and 16 puts the onus on the legislature and executive to frame laws and to take suitable
administrative measures respectively.

DIFFICULTIES FOR RESERVATION IN PRIVATE SECTOR

The reservation of jobs even up to 100 percent in the corporate private sector is not difficult to
achieve. The will to legislate reservation is all that is needed. The abolition of the system of
privy purses and the nationalisation of banks were achieved with ease and earnestness and
through democratic means. The idea of reservation is not new too. Sitaram Kesri, as leader of the
Congress, was earnest about reservation in the private sector.

Birdsall and Sabot have summarized the central implications of mainstream theory of
discrimination in a World Bank study as:3

“In sum, discrimination will tend to slow economic growth by reducing efficiency in the
allocation of labour among firms and the economy by reducing the job commitment and efforts
of workers who perceive them to be victims of injustices, and by reducing the magnitude of
investments in human capital, and the return on those investments. The losses due to
discrimination are likely to be greater, the more rapid the pace of change in an economy.”

3
Birdsall, Nancy and Sabot, Richard, “Unfair Advantage - Labour Market Discrimination in Developing Countries”,
World Bank Studies, W.D.C, 1991

3
The economic theories of caste also predict the same consequences of caste discrimination,
which form the basis for reservation policy in India. Exclusion and discrimination in occupation,
and labour employment, is thus internal to the system and necessary outcome of its economics. It
is reasonable to assume that in a market economy framework the occupational immobility would
operate through restrictions in various markets such as labour, land, credit, other inputs and
services necessary in any economic activity. Immobility of labour, and capital, under caste-wise
division, essentially means segmentation by occupationally segregated, and imperfectly (though
not completely) immobile market situations. Hence, theoretical models would necessarily imply
that occupationally segmented, and imperfectly mobile labour, and capital markets would
generate economic outcomes, which will be less than optimum, and hamper overall economic
growth. In its ultimate outcome, the economic efficiency of the caste economy would be
lowered, than posited in the model of a perfectly competitive market.4

ARGUMENTS IN FAVOUR OF RESERVATION IN PRIVATE SECTOR

The following argument can be given in the favour of reservation in Private Sector in India:

1. Reservation is a potent instrument to rectify the historic discrimination and prejudice that
has been meted out to weaker sections since ages.

2. It is in consonance with the principle of social justice, which is a vital constitutional aim.

3. There is no other practically viable alternative other than reservation.

4. A significant proportion of population (50%) is socially deprived.

5. Many private sector firms get government aids and many other tax benefits. Then why
not they must have a provision for quota in their jobs?5

6. Economic backwardness of the Dalits will make them helpless to acquire new skills to
compete in the private sector. So reservation can help them.6

4
Sukhadeo Thorat, Reservation in Private Sector- Issues, Concern and Prospects, Volume 1 Number 1, 2006, page
26-27
5
Reservation in Private Sector- Pros and Cons by Jiya Tiwari.
6
Ibid.

4
 ARGUMENTS AGAINST RESERVATION IN PRIVATE SECTOR
The following argument can be given against of reservation in Private Sector in India:

1. People speaking for reservation talk about the upliftment of backward castes. That is all
well good but that does not mean it should happen at the cost of deserving people.
2. It should be borne in mind that such attempts may accentuate an already divided society.
Further doesn’t such effort go against the spirit of free trade and Laissez Faire, to which
India has committed itself, under WTO obligations?
3. Private sector runs on talent and ability. And it is a bitter fact that talent is compromised
in reservation.7
4. Private sector is a profit making enterprise and it is least concerned with the
representation of different castes in its workforce.8
5. Reservation policy has not yield the desired results and implementing a back fired policy
is disastrous for the country.9
6. The private sector will lose its competitiveness and efficiency to function if people with
less talent are hired only on the basis of the caste to which they belong.10
7. As of now, only private sector is somehow handling the unemployment issue of India.
With reservation, even the private sector will explode.11

Reservations based on caste distinctions have a negative effect on the economy, because of the
resulting deterioration in the quality of the workforce due to the deviation from assessing merit-
based criteria for admission/job opportunities. Reservations should also take into account the
economic background of the citizens under its ambit so that its benefits are reaped by those who
are genuinely downtrodden.

CONSTITUTIONALITY OF RESERVATION IN PRIVATE SECTOR

For the study of opinion of Indian judiciary on the critical issue of Reservation in India we find
that there is change in the judicial idea o this issue from time to time. To study the issue from
judicial point of view we find four different phases with the change of views, so we have to
7
Ibid
8
Ibid
9
Ibid
10
Ibid
11
Ibid

5
study these phases separately. Phase-I, 1950-1976; Phase-II, 1976-1993; Phase-III, 1993-2006
and Phase-IV, 2006 to till date.

In the initial phase of judicial pronouncements on reservation there are many decisions of apex
court of the land but more importantly I would like to mention some important decisions of the
court regarding the reservation. The first case in the Indian democratic system regarding the
reservation was the case of State of Madras Vs. Champakam Dorairajan. In this case first time
Supreme Court decided that directive principles of the state policy cannot prevail to the
fundamental rights given under part III of the Indian Constitution.

The Locus classicus12 on this question is the Balaji case. In this case, the Court attempted to
impose a constitutional limit on the extent of preference, not on the “narrower ground of
reservation,” but on the broader grounds of policy.

Immediately thereafter come the Devadasan case13 before the Supreme Court in which the Court
was required to adjudge the validity of “carry forward” rule.

In State of Kerala Vs. N.M. Thomas14 the Supreme Court held that it was permissible to give
preferential treatment to Scheduled Cases/Tribes under Art.16 (1) outside Art.16 (4).

After the judgement of Thomas case another important litigation regarding to reservation came
before the Supreme Court was A.B.S.K. Sangh Vs. Union of India 15 the supreme court again
went into the question of reservation in public sector under article 16. The court upheld
reservation of posts at various levels and making of various concessions in the favour of the
members of Sc’s and ST’s.

In the case of K.C. Vasanth Kumar Vs. State of Karnataka16, the Supreme Court had an occasion
to consider the question of characterizing backward classes.

This period (1993-2006) of judicial pronouncements on the issue of reservation was very crucial,
touchy and motivated by LPG policy. In this period the controversial Mandal Commission

12
Indian Constitutional Law, Prof. M.P. Jain, 6 th Edition 2011, pp. 1045
13
AIR 1964 SC 179
14
AIR 1976 SC 490
15
Akhil Bhartiya Shoshit Karamacharis Sangh Vs. Union of India AIR 1981 SC 291
16
AIR 1985 SC 1495

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Report on reservation was accepted by the Supreme Court and the concept of “Creamy Layer”
among OBCs was operated. In this era many important cases were decided by court on
reservation but following judgments are importantly noticeable.

Indira Sawhney Vs. Union of India17 Known as the Mandal Commission case, is a very
significant pronouncement of the Supreme Court on the question of reservation of posts for
backward classes. The Court has dealt with this question in very exhaustive manner.

In accordance with the direction given by the Supreme Court the Union Government had
appointed an expert committee known as the Justice Ram Nandan Committee to identify the
creamy layer among the socially and educationally backward classes (SEBC).

On March 26, 1993 Parliament passed the Bill setting up a National Commission for Backward
Classes for considering inclusions in and exclusion from the lists of castes notified as backward
for job reservation purpose. The Commission is a statutory body and therefore would enable it to
comply with the directions given by the Supreme Court in the Mandal case.

In a landmark decision in T.M.A Pai Foundation Vs. State of Karnataka18, an 11 Judge

Constitution Bench of the Supreme Court headed by Chief Justice B.N. Kirpal held that state
governments and universities cannot regulate the admission policy of unaided educational
institutions run by linguistic and religious minorities, but state governments and universities can
specify academic qualifications for students and make rules and regulations for maintaining
academic standards.

In Islamic Academy of Education v. State of Karnataka19, a 7 Judge Bench of the Supreme Court
added certain conditions by way of clarification which were not found in the T.M.A Pai’s
judgment.

A 7 Judge Bench of the Supreme Court20 held that the Constitution Bench in T.M.A Pai's case
has not accepted the reservation policy. Neither in the judgment of T.M.A Pai nor in Kerala

17
AIR 1993 SC 477
18
AIR 2003 SC 355
19
AIR 2003 SC 355
20
P.A. Inamdar V. State of Maharasthra AIR 2005 SC 3236

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Education Bill decision21 there is anything which would allow the State to regulate or control
admissions in the unaided educational institutions. Thus, the private unaided professional
institutions (minority and non minority) cannot be forced to accept reservation policy of the
State.

In fourth phase new dimension of judicial views on reservation can be seen. Many important
judgments for reservation in the field of both aided and unaided educational institutions were
pronounced by the Supreme Court. With the demand of dalit intellectuals for reservation in
private sector employment, these judicial decisions are very important.

In a landmark judgment in M. Nagraj Vs. Union of India22 a five judge bench held that the
Constitutional Amendments by which Articles 16 (4A) and 16 (4B) have been inserted flow from
Article 16 (4) and do not alter the basic structure of Article 16 (4).23

In the case of Ashok Kumar Thakur Vs Union of India24 93rd Constitutional amendment was
challenged on the ground of destroying the autonomous character of private educational
institution. According to the petitioners the 93rd constitutional amendment is unconstitutional
being ultra virus to the constitutional mandate and it is voilative of basic structure of the Indian
constitution. But the court held that the basic structure of the constitution is to provide safeguards
to the socially and educationally backwards, hence 93rd constitution amendment is not voilative
of the basic structure of the constitution. Thus, we see a road map being prepared for the
reservation in private sector.

CONCLUSION
Reservation has become a controversial issue these days owing to politicization of this issue in
India. Apart from this, the dwindling condition of government jobs with the advent of
globalization, liberalization and privatization has aggravated the condition. Actually, the policy
of reservation can be reaped and utilized only in government sector. But a big question has arisen
that what would happen when there would be no scope of getting jobs in case of lack of
government jobs. Because the governments opportunities are shrinking due to heavy

21
In Re Kerala Education Bill AIR 1958 SC 956
22
AIR 2007 SC 71
23
The Constitutional Law of India, Dr. J.N. Pandey, 45 th Edition 2008, pp. 162
24
(2008) 6 SCC 1

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disinvestment policy pursued by the State. This issue has in turn given rise to issue of providing
reservation in private sector. But private sectors have been adamant to eschew introduction of
this defective policy in their domain. Their contention is that reservation is based on anti-merit
policy, and that is why it would badly affect the quality and credit of their working.

This is a stark reality that jobs in government sector is decreasing but only this reasoning cannot
be a convincing ground for introducing reservation policy in private sector. A pertinent question
in this juncture arises that what was the main reason behind privatizing any sector. The easy
answer to this would be to maintain quality and bring sharpness in the sector which was lacking
in case it was government owned and regulated. Therefore it is humbly suggested in the line of
the proposal of private sector that the stakeholders of reservation can be given some sort of
monetary or pre-joining training by these sectors rather than taking them directly in the garb of
reservation or so called affirmative action.

Further, it is argued that the vacuum created by closing of government sectors has taken away all
hopes of the claimants of reservation to get a government job and mingling themselves in the
mainstream of society. In response to this argument it can be said that the need of hour is to
make a more feasible policy to strike a balance between the interest of claimants and the interests
of private sectors. This will truly help in securing the goals of constitution and the interests of
private sectors.

Another related finding is that the Constitution was framed in way back in 1950s and it was
guided only by the ethos of communism and socialism and did not ever considered capitalism as
basis of the framework which was devised. Therefore the provisions of the Constitution were
reflection of socialistic pattern of society in which maximum benefit to maximum number was
the guiding principle. Ultimately with 42nd Amendment the socialism became one of the basic
features of the Constitution. Therefore the constitutional provisions which framed for the
inclusive development of the country are now found to be worthless in the present era of
globalization, liberalization and privatization.

Apart from that the private sector would also suffer from the discrepancies and demerits existing
in the present formula. Therefore it would also suffer from the inefficiency, lethargicity, red-
tappism, corruption resulting into low productivity ultimately failure of the enterprise as we have

9
seen in the past in respect of public sector enterprises. Besides the political motives would
always play a determinant role in any action taken by the private employer against the delinquent
or inefficient employee availing reservation.

All this brings us to an irresistible conclusion that the present framework of constitution or law
reservation in private sector employment in present form is constitutionally invalid.

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