1963 (7) TMI 35 - SC - Companies Law

Whether the State Trading Corporation, a company registered under the Indian Companies Act, 1956, is a citizen within the meaning of article 19 of the Constitution and can ask for the enforcement of fundamental rights guaranteed to citizens under the said article? Whether the State Trading Corporation is, notwithstanding the formality of incorporation under the Indian Companies Act, 1956, in substance a department and organ of the Government of India with the entirety of its capital contributed by Government and can it claim to enforce fundamental rights under Part III of the Constitution against the State as denned in article 12 thereof ? Held that - We cannot accept the argument that there can be citizens of this country who are neither to be found within the four corners of Part II of the Constitution or within the four corners of the Citizenship Act. We are of opinion that these two provisions must be exhaustive of the citizens of this country, Part II dealing with citizens on the date the Constitution came into force and the Citizenship Act dealing with citizens thereafter. We must, therefore, hold that these two provisions are completely exhaustive of the citizens of this country and these citizens can only be natural persons. The fact that corporations may be nationals of the country for purposes international law will not make them citizens of this country for purposes of municipal law or the Constitution. Nor do we think that the word citizen used in article 19 of the Constitution was used in a different sense from that in which it was used in Part II of the Constitution. The first question, therefore, must be answered in the negative. In view of this answer, we do not consider it necessary to answer the second question as that would have arisen only if the first question had been answered in the affirmative.

Issues Involved:

1. Whether the State Trading Corporation, a company registered under the Indian Companies Act, 1956, is a citizen within the meaning of article 19 of the Constitution and can ask for the enforcement of fundamental rights guaranteed to citizens under the said article.
2. Whether the State Trading Corporation is, notwithstanding the formality of incorporation under the Indian Companies Act, 1956, in substance a department and organ of the Government of India with the entirety of its capital contributed by Government, and can it claim to enforce fundamental rights under Part III of the Constitution against the State as defined in article 12 thereof.

Issue-Wise Detailed Analysis:

1. Whether the State Trading Corporation is a citizen within the meaning of article 19 of the Constitution:

The court examined whether the State Trading Corporation (STC), an incorporated company, could be considered a citizen under Article 19 of the Constitution, which guarantees certain fundamental rights exclusively to citizens. The court noted that the term "citizen" is not defined in the Constitution, and Part II of the Constitution, which deals with citizenship, addresses natural persons and not artificial entities like corporations. The Citizenship Act, 1955, also excludes companies from its definition of "person."

The court analyzed the historical context and common law principles, emphasizing that citizenship and nationality are distinct concepts. Citizenship pertains to full civil and political rights under municipal law, while nationality relates to international law. The court observed that while corporations have nationality, they do not possess citizenship in the traditional sense, which involves allegiance and the capacity to exercise all civil and political rights.

The court referred to previous judgments and legal literature, including the decision in Chiranjit Lal Chowdhuri v. Union of India, which suggested that fundamental rights are available to corporate bodies except where the language or nature of the right indicates otherwise. However, the court concluded that the Constitution and the Citizenship Act do not contemplate corporations as citizens. Therefore, the STC, as a corporation, could not claim the fundamental rights guaranteed to citizens under Article 19.

2. Whether the State Trading Corporation is a department and organ of the Government of India:

The court addressed whether the STC, despite being incorporated under the Companies Act, functioned as a department or organ of the Government of India, given that its entire capital was contributed by the government and its shares were held by government officials.

The court examined the nature and functions of the STC, noting that it was established to undertake commercial activities and was not performing governmental functions. The STC was incorporated as a private limited company, with its own legal identity distinct from the government. The court emphasized that the mere fact that the government holds shares and exercises control over the corporation does not make it a government department or organ.

The court referred to the decision in Tamlin v. Hannaford, which held that a corporation with government control is not an agent of the government. Similarly, the STC, despite government control, was not an agent or servant of the government but a separate legal entity. Therefore, the STC could not be considered a department or organ of the Government of India.

Conclusion:

The court concluded that the State Trading Corporation, being a corporation, is not a citizen within the meaning of Article 19 of the Constitution and cannot claim the fundamental rights guaranteed to citizens under that article. Additionally, the STC is not a department or organ of the Government of India and can claim to enforce fundamental rights under Part III of the Constitution against the State as defined in Article 12 thereof. The matter was referred back to the Bench for hearing on merits with this opinion.

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