Introduction
Recently, Karnataka has cleared ‘The Karnataka State Employment of Local Candidates in the Industries, Factories and Other Establishments Bill, 2024’ mandating the reservation of 50 per cent jobs for management and 70 per cent jobs for non-management positions in private sector. However, the Bill was put on hold after few hours amid criticism from the stakeholders. While the reservations exist in public institutions, the Bill sought to reserve jobs for its local population in private sector. This Bill presents a complex interplay of constitutional provisions, judicial precedents, and policy objectives. While it aims to address local unemployment and promote economic development, it faces significant legal and practical challenges. Karnataka is not the only state to provide domicile reservations; Haryana and Andhra Pradesh had made similar attempts at passing laws reserving jobs and opportunities for their local population. The domicile reservation challenges the laissez-faire principles traditionally governing private institutions. Therefore, this blog analyses the economic impact of such domicile-based reservations, their constitutionality, and what has been the stance of judiciary in this regard.
Constitutionality of Private Sector Reservations
Before we delve into the constitutionality of domicile reservations, it is crucial to understand that India follows common citizenship across the states and union territories. By applying the principle of common citizenship and India being a Union of States as mentioned in Article 1 of the Constitution, it is clear that citizens of India have a right to access other states and territories irrespective of their place of birth or residence. Article 19 of the constitution guarantees this fundamental right to its citizens to move freely throughout India; and to reside in any part of the country; and practice any profession or occupation.
The Supreme Court of India in TMA Pai Foundation v. State of Karnataka hs interpreted the autonomy of private educational institutions under Article 19(1)(g) of the Constitution of India and upheld their right to operate without dominant government intervention. Although it is a case which primarily deals with educational institutions, it still provides a judicial insight into recognizing the autonomy of private establishments to operate freely without government intervention.
In the case of Dr. Jagdish Saran v. Union of India, the Supreme Court emphasized that reservations must not compromise merit and excellence. The principle laid down by the apex court in this case is crucial to understand the impact of domicile reservation in the private sector while assessing the quality of the workforce. Employability of local candidates in private sector through domicile reservation in Karnataka must not undermine the merit and essential skillset required by the organization.
Karnataka is not the only state to bring the domicile reservation bill, in the past states like Haryana and Andhra Pradesh have tried the same to benefit their local population. The Punjab and Haryana High Court quashed a similar bill which mandated 75 per cent reservation for local candidates in private jobs. The Court took a welcoming view in holding that states cannot discriminate against individuals based on their place of residence or through domicile. Similarly, the Andhra Pradesh High Court also observed that 75 per cent reservation for locals might be unconstitutional and questioned whether the bill was enacted by the principles of the Constitution.
The courts have been reluctant to allow the interference of the state in private institutions and have also emphasised that reservations must not undermine merit. This represents a tough situation for the Karnataka Bill as it contradicts the existing stance of the judiciary. If the Bill is introduced it might get struck down by the courts resulting in further chaos and could be seen as a failure in terms of the state’s part.
However, it is important to note that a domicile reservation bill does not discriminate among the citizens on the basis of place of birth as enshrined in the Article 15 of the Constitution which prohibits the discrimination on grounds of religion, race, caste, sex or place of birth. Place of birth and place of residence are different. Any person staying in Karnataka for a long period of time as specified in the state’s law can claim the domicile of the state even if he/she is born into some other state. This distinction allows for a more inclusive interpretation of localism, as individuals who have lived and contributed to the state’s socio-economic fabric for a specified period, even if they were born elsewhere, can rightfully claim domicile status. In this particular aspect, the Bill aligns with the broader constitutional principles of equality while addressing local employment concerns.
The legislature thus, has to carefully balance the needs of the local population without violating judicial precedent and basic principles of constitution. If the Bill is passed without considering all the major stakeholders, it would cause an uproar and could also deter the state’s economic performance.
Laissez-Faire in Danger
The domicile reservation Bill of Karnataka is also in conflict with the laissez-faire principles of minimum interference in the functioning of private institutions by the state. It could have serious consequences as the businesses in the state could perceive it as a threat to their autonomy and might term the state as non-business friendly, thus hurting its economy. Bangalore, which is regarded as the Silicon Valley of India, could face serious consequences if industries perceive the bill as a threat to their autonomy. This could result in the reluctance of industries to invest in Karnataka which could in turn hurt the local population even more than the expected benefits of the Bill. When the bill was passed in Haryana mandating domicile reservation, industrialists criticized the move outrightly and labelled it as non-business friendly, despite the state being one of the prime choices to set up big businesses and corporations.
Karnataka must ensure that in the garb of providing opportunity to its local population, it does not deter the state’s capability to attract investments. Capital investments are crucial for the state’s growth and employment and therefore the state must re-consider the Bill. Laisses-Faire is crucial if the state seeks increased growth and employment for its local population. Therefore the government must not pass a bill which can have serious consequences to its stakeholders.
Critical Analysis
The spirit of India lies in unity in diversity, overcoming regional and cultural differences to foster national solidarity. Domicile-based reservations in the private sector, such as those proposed in Karnataka threaten this unity by promoting localism. These policies risks the creation of a divisive environment for individuals of different states and cultures, undermining national fabric of the country. The bill therefore not only undermines Article 1 of the Constitution of India which states that India is a union of states but also principles of common citizenship and Article 19 which allows citizens to move freely and to reside in any part of the country and practice any profession or occupation. Even the judiciary has been reluctant in upholding private sector reservations and has emphasized merit as seen in Dr. Jagdish Saran v. Union of India case. The introduction of private sector reservations, regardless of the criterion in consideration, has the potential of undermining meritocracy and disrupting India’s unity in diversity principle. By prioritising quotas based on identity, these policies create division within the workforce. With caste-based reservations already present in public sector jobs and educational institutions, extending them to the private sector is a potential political tool to permit reverse discrimination because extension of these domicile based reservations to private sector jobs deprives people of merit to get selected in the workforce pushing them outside the scope of employment. Top tier educational institutions of the country already have reservations for marginalized and weaker sections of the society, providing them with industry-ready skillsets and a chance to develop and enhance their merit allowing them to compete fairly in job market. Therefore, additional quotas in the private sector would disadvantage individuals with merit and qualifications thereby unfairly limiting their opportunities even in the private job market.
These policies can also result in unintended economic consequences as seen in the Haryana case where industries planned to move out from the state when a similar bill was passed. Violation of laissez faire principles can be perceived as a threat to businesses. This perception could lead to a reluctance in investments in the state, thereby weakening the economy and employment of the people living in the state. It therefore can cause more harm than good. Ultimately, the intention behind the bill might be to protect local interests, but the broader implications suggest a need for caution.
Conclusion
In conclusion, while the domicile-based reservations in private sector may seem to protect local interests but the broader implications suggest a tough road ahead. The Karnataka domicile Bill can be seen as a violation of constitutional principles. Judiciary’s stance with respect to Haryana and Andhra Pradesh indicates that the Karnataka Bill if passed might not get constitutional validity. The Bill should not scare away potential investors from investing in Karnataka as it can seriously hurt local population and the state’s economy. The spirit of unity in diversity should be kept in mind while discussing domicile-based reservation and therefore a balanced approach is required which helps the local population without hurting the prospects of other Indians.
The Author is a second-year student of National Law University, Nagpur.
Image Credit: Karnataka Legislature
Constitutional Law Society 
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