1983 (8) TMI 229 - HC - Companies Law

Powers of Central Government to assume management or control of an industrial undertaking in certain cases

Summary

Issues:
1. Whether the company, under government management, is considered an authority under Article 12 of the Constitution.
2. Whether the termination of the petitioners' services by the company was arbitrary and violated principles of natural justice.
3. Whether the company's control and management being temporarily taken over under section 18A of the Industries (Development and Regulation) Act, 1951, makes it an instrumentality of the State.

Analysis:
1. The judgment addressed whether the company, under government management, qualifies as an authority under Article 12 of the Constitution. The court examined various tests laid down by previous cases to determine if the company could be considered an agency or instrumentality of the State. It was noted that the company did not satisfy most of the tests, such as having share capital held by private individuals, lacking monopoly status, and not performing functions of public importance related to governmental functions. The court concluded that the company did not exhibit sufficient "deep and pervasive State control" to be classified as an authority under Article 12, thus rejecting the argument made by the petitioners.

2. The judgment also delved into the issue of whether the termination of the petitioners' services by the company was arbitrary and violated principles of natural justice. The petitioners contended that the termination was punitive and infringed Article 14 of the Constitution. However, the court found that since the company did not qualify as an authority under Article 12, the petitioners could not claim a violation of their constitutional rights. The court did not delve into the merits of the termination itself, leaving it open for resolution in a civil court.

3. Lastly, the judgment scrutinized whether the company's control and management being temporarily taken over under section 18A of the Industries (Development and Regulation) Act, 1951, rendered it an instrumentality of the State. The court analyzed the provisions of the Act, emphasizing that the State assumed management and control for a limited duration without acquiring ownership. The court concluded that the temporary takeover did not establish the company as an authority under Article 12 of the Constitution. Consequently, the writ application was deemed not maintainable, and the rule was discharged without costs, leaving other legal proceedings open for the parties to pursue.