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TMI Blog1980 (11) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... oration dated 1st August, 1977), ("the Corporation" for short) as to whether a writ will issue under article 32 of the Constitution against a Government company, belonging, as it does, to an increasing tribe of soulless ubiquity and claiming, as it does, to constitutional immunity. This is the first issue to which we will address ourselves. Jawaharlal Nehru warned the Constituent Assembly about the problem of poverty and social change : "The service of India means the service of the millions who suffer. It means the ending of poverty and ignorance and disease and inequality of opportunity. The ambition of the greatest man of our generation has been to wipe every tear from every eye. That may be beyond us, but as long as there are tears and suffering, so long our work will not be over". The second question which claims our attention turns on the petitioner's plea of alleged stultification of article 41 by the State itself re-incarnating as a Government company, by defending the paring down of the pension of the petitioner to a pathetic pittance thus sterilising a directive principle to a decorative paper. "Law cannot stand aside from the social changes around it". (Justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be made in calculating the amount of a non-contributing member's pension shall be as follows : (1) A sum equal to four percent of such amount standing to the credit of the member at the relevant date in any Provident Fund as represents any Company's contributions to that fund in respect of the period of the member's Accredited Service (including bonuses and interest on such contributions up to that date). (2) A sum equal to four percent. of any amount which before relevant date the member has withdrawn from a Provident Fund in so far as such withdrawal is under the Rules of the Provident Fund charged against the period of the member's Accredited Service (including bonuses and interest thereon) or has been paid out to him during his Accredited Service under the Rules of Provident Fund, together with interest thereon from the date of such withdrawal or receipt to the relevant date. (3) If the Company so elects, a sum not exceeding six per cent. of the amount of any payments which any company has made or may make or which any Company shall be or have been required by law to make to the member in connection with the termination of his service with that company together wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner's pension, taking its stand on regulation 16 read with regulation 13 already referred to. Indeed, the company went even beyond this, in its letter of 8th May, 1974, by cutting off the monthly payment of Rs. 86 paid as supplementary retirement benefit on the score that it was ex gratia, discretionary and liable to be stopped any time by the employer. The petitioner was intimated by the Burmah Shell that consequent on his drawal of provident fund and gratuity benefits, the quantum of his pension would suffer a pro tanto shrinkage, leaving a monthly puny pension of Rs. 40. Since no superannuated soul can survive, in Indian indigence and inflationary spiral, on Rs. 40 per month, the petitioner has come to this Court challenging the deductions from his original pension as illegal and inhuman and demanding restoration of the full sum which he was originally drawing. His right to property under article 19 has been violated, he claims. It may well be, as urged by the Corporation, that if regulation 16 does govern, the deductions are warranted. Likewise, if the supplementary retiral benefit is purely a mercy gesture, savouring of no manner of right nor subject to restrictions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State action, the contours of "State", conceptually speaking, are largely confined to article 12. We have to study the anatomy of the Corporation in the setting of the Act and decide whether it comes within the scope of that article. We have only an inclusive definition, not a conclusive definition. One thing is clear. Any authority under the control of the Government of India comes within the definition. Before expanding on this theme, we may scan the statutory scheme, the purpose of the legislative project and the nature of the juristic instrument it has created for fulfilment of that purpose. Where constitutional fundamentals, vital to the survival of human rights, are at stake, functional realism, not facial cosmetics, must be the diagnostic tool. Law, constitutional law, seeks the substance, not merely the form. For, one may look like the innocent flower but be the serpent under it. The preamble, which ordinarily illumines the object of the statute, makes it plain that what is intended and achieved is nationalisation of an undertaking of strategic importance : "AND WHEREAS it is expedient in the public interest that the undertakings in India, of Burmah Shell Oil Storage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresents private enterprise become a kind of private Government which is a power unto itself a regimentation of other people's money and other people's lives". This legal facility of corporate instrument came to be used by the State in many countries as a measure of immense convenience especially in its commercial ventures. The trappings of personality, liberation from Governmental stiffness and capacity for mammoth growth, together with administrative elasticity, are the attributes and advantages of corporations. "A corporation is an artificial being, invisible, intangible, and existing only in the contemplation of the law. Being the mere creature of the law, it possesses only those properties which the charter of its creation confers on it, either expressly, or as incidental to its very existence. Those are such as are supposed best calculated to effect the object for which it was created. Among the most important are immortality, and, if the expression be allowed, individuality; properties by which a perpetual succession of many persons are considered the same, and may act as a single individual". (John Marshall J., Dartmouth College v. Woodward, 4 Wheaton 518 [1819]) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree of the right, title and interest as well as the liabilities of Burmah Shell. The device is too obvious for deception that what is done is a formal transfer from Government to a Government-company as the notification clearly spells out : "In exercise of the powers conferred by sub-section (1) of section 7 of the Burmah Shell (Acquisition of Undertakings in India) Act, 1976 (2 of 1976), the Central Government, being satisfied that Burmah-Shell Refineries Ltd., a Government company is willing to comply with such terms and conditions as may be imposed by the Central Government, hereby directs that the right, title and interest and the liabilities of Burmah-Shell Oil Storage and Distributing Co. of India Ltd., in relation to its undertakings in India, shall, instead of continuing to vest in the Central Government vest with effect from the twenty fourth day of January, 1976, in Burmah-Shell Refineries Ltd " . This is the well-worn legal strategy for Government to run economic and like enterprises. We live in an era of public sector corporations, the State being the reality behind. Law does not hoodwink itself and what is but a strategy cannot be used as a stratagem. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xistence may be but a projection of the State. What we wish to emphasise is that merely because a company or other legal person has functional and jural individuality for certain purposes and in certain areas of law, it does not necessarily follow that for the effective enforcement of fundamental rights under our constitutional scheme, we should not scan the real character of that entity; and if it is found to be a mere agent or surrogate of the State, in fact owned by the State, in truth controlled by the State and in effect an incarnation of the State, constitutional lawyers must not blink at these facts and frustrate the enforcement of fundamental rights despite the inclusive definition of article 12 that any authority controlled by the Government of India is itself State. Law has many dimensions and fundamental facts must govern the applicability of fundamental rights in a given situation. Control by Government of the corporation is writ large in the Act and in the factum of being a Government company. Moreover, here, section 7 gives to the Government company mentioned in it a statutory recognition, a legislative sanction and a status above a mere Government company. If the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of disputes relating to employees indicate that some of the features of a statutory corporation attach to this Government company. Sections 9 and 10, in terms, create rights and duties vis a vis the Government company itself, apart from the Companies Act. An ordinary company, even a Government company simpliciter, has not the obligations cast on the second respondent by sections 9 and 10. And, section 11 specifically gives the Act primacy vis a vis other laws. Section 12, although it has no bearing on the specific dispute we are concerned in this case, is a clear pointer to the statutory character of the Government company and the vesting of an authority therein. This provision clothes the Government company with power to take delivery of the property of Burmah Shell from every person in whose possession, custody or control such property may be. There are other powers akin to this one in section 12. The provision for penalties if any person meddles with the property of the second respondent emphasises the special character of this Government company. Equally unique is the protection conferred by section 16 on the Government company and its officers and employees "for anything w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isprudential discernment, it is possible to reach the same destination to which the two rulings referred to above take us. Shri G. B. Pai pressed us to reconsider the latest decisions in view of their error when read in the perspective of prior rulings by referring the issue to a larger Bench. We will presently explain by examining the earlier cases why we hold the recent decisions to be right and reconcilable with the broad approach in the older authorities. Moreover, rulings of this court are calculated to settle the law and not to unsettle it by reconsideration in season and out merely because it hurts one party or the other or tastes sour for one judge or the other. If incompatibility between the ratios stares us in the face we must clear the confusion by the process suggested by Shri Pai. But we are satisfied that the Airport Authority, [1979] 3 SCC 489, has been consistently and correctly decided and, being bound by it, hold that a writ will lie against the second respondent under article 32. An explanatory journey is necessary to make good this assertion. The U. P. Warehousing Corporation case, [1980] 57 FJR 1 the latest on the point related to a statutory corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, belief, faith and worship', and to ensure 'equality of status and of opportunity'. That is the proclamation of the people in the preamble to the Constitution. The desire to attain these objectives has necessarily resulted in intense Governmental activity in manifold ways. Legislative and executive activities have reached very far and have touched very many aspects of a citizen's life. The Government, directly or through the corporations set up by it or owned by it, now owns or manages a large number of industries and institutions. It is the biggest builder in the country: Mammoth and minor irrigation projects, heavy and light engineering projects, projects of various kinds are undertaken by the Government. The Government is also the biggest trader in the country, The State and the multitudinous agencies and corporations set up by it are the principal purchasers of the produce and the products of our country and they control a vast and complex machinery of distribution. The Government, its agencies and instrumentalities, the corporations set up by the Government under statutes and corporations incorporated under the Companies Act but owned by the Government have thus become the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarantees to the Indian people, not fleeting promises in common enactments. So long as they last in the National Charter they should not be truncated in their application unless a contra-indication is clearly written into the prescription, a la articles 31A. 31B and 31C. Article 12 is a special definition with a broader goal. Far from restricting the concept of State it enlarges the scope to embrace all authorities under the control of Government. The constitutional philosophy of a democratic, socialist Republic mandated to undertake a multitude of socio-economic operations inspires Part IV and so we must envision the State entering the vast territory of industrial and commercial activity, competitively or monopolistieally, for ensuring the welfare of the people. This expansive role of the State under Part IV is not played at the expense of the cherished rights of the people entrenched in Part III since both the sets of imperatives are complementary and co-exist harmoniously. Wherever the Constitution has felt the need to subordinate Part III to Part IV it has specificated it and, absent such express provision, both the Parts must and can flourish happily together given benign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Government departments is alertly executed to-day by Government companies, statutory corporations and like bodies and this tribe may legitimately increase tomorrow. This efficiency is not to be purchased at the price of fundamental rights. As Mathew J., stated in V. Punnen Thomas v. State of Kerala, AIR 1969 Ker. 81 : "The Government is not and should not be as free as an individual in selecting the recipients for its largesse. Whatever its activity, the Government is still the Government and will be subject to restraints inherent in its position in a democratic society. A democratic Government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal". "What's in a name ? that which we call a rose By any other name would smell as sweet". Romeo and Juliet II, ii, 43. And the State is fragrant with fundamental rights whatever the legal hue or jural cloak of its surrogate. And, to alter the imagery, Maricha is Ravana, the misleading golden deer mask notwithstanding! This court in Airport Authority, [1979] 3 SCC 489, at pages 503-504, pointed its unanimous finger on these events and portents : "Today with tremendous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nesis of the emergence of corporations as instrumentalities or agencies of Government is to be found in the Government of India Resolution on Industrial Policy, dated April 6, 1948, where it was stated inter alia, that ' management of State enterprise will as a rule be through the medium of public corporations under the statutory control of the Central Government who will assume such powers as may be necessary to ensure this '. It was in pursuance of the policy envisaged in this and subsequent resolutions on industrial policy that corporations were created by Government for setting up and management of public enterprises and carrying out other public functions. Ordinarily these functions could have been carried out by Government departmentally through its service personnel, but the instrumentality or agency of the corporations was resorted to in these cases having regard to the nature of the task to be performed. The corporations acting as instrumentality or agency of Government would obviously be subject to the same limitations in the field of constitutional and administrative law as Government itself, though in the eye of the law, they would be distinct and independent legal e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut and dried formula which would provide the correct division of corporations into those which are instrumentalities or agencies of Government and those which are not". (emphasis added). The Court proceeded to crystallise the tests to determine the "State" complexion of corporate bodies, beyond furnishing the full share capital ([1979] 3 SCC 489 at pages 508-509). But "a finding of State financial support plus an unusual degree of control over the management and policies might lead one to characterise an operation as State action" : Vide Sukhdev v. Bhagatram, [1975] 47 FJR 214. So also the existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. It may also be a relevant factor to consider whether the corporation enjoys monopoly status which is State conferred or State protected. There can be little doubt that State conferred or State protected monopoly status would be highly relevant in assessing the aggregate weight of the corporations' ties to the State. There is also another factor which may be regarded as having a bearing on this issue and it is whether the operation of the corporation is an imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. It is a case of quasi-Governmental beings, not of non-State entities. We have no hesitation to hold that where the chemistry of the corporate body answers the test of "State" above outlined it comes within the difinition in article 12. In our constitutional scheme where the commanding heights belong to the public sector of the national economy, to grant absolution to Government companies and their ilk from Part III may be perilous. The court cannot connive at a process which eventually makes fundamental rights as rare as "roses in December, ice in June" : as Lord Byron lamented in English Bards and Scottish Reviewers. Article 12 uses the expression "other authorities" and its connotation has to be clarified. On this facet also, the Airport Authority's case supplies a solution, [1979] 3 SCC 489 at p. 517 : "If a statutory corporation, body or other authority is an instrumentality or agency of the Government, it would be an 'authority' and therefore 'State' within the meaning of that expression in article 12". The decisions are not uniform as to whether being an instrumentality or agency of Government ipso jure renders the company or other similar body "State". This agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or agency of Government. 5. Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference of the corporation being an instrumentality or agency of Government". The finale is reached when the cumulative effect of all the relevant factors above set out is assessed and once the body is found to be an instrument or agency of Government, the further conclusion emerges that it is "State" and is subject to the same constitutional limitations as Government. This divagation explains the ratio of the Airport Authority, ( supra ) in its full spectrum. There the main contention was that the said authority, a statutory corporation, was not State and enforcement of fundamental rights against such a body was impermissible. As is apparent from the extensive discussion above, the identical issue confronting us as to what are the "other authorities" contemplated by article 12 fell for consideration there. Most of the rulings relied on by either side received critical attention there and the guidelines and parameters spelt out there must ordinarily govern our decision. A careful study of the features of the Airport Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other members were appointed and removed by Government did not make the society a "State". With great respect, we agree that in the absence of the other features elaborated in Airport Authority's case, [1979] 3 SCC 489, the composition of the Governing Body alone may not be decisive. The laconic discussion and the limited ratio in Tewary, [1975] 47 FJR 211, hardly help either side here. Shri G. B. Pai hopefully took us through Sukhdev's case [1975] 47 FJR 214, at length to demolish the ratio in Airport Authority, [1979] 3 SCC 489. A majority of three judges spoke through Ray, C.J. while Mathew, J., ratiocinated differently to reach the same conclusion. Alagiriswamy, J., struck a dissenting note. Whether certain statutory corporations were "State" under article 12 was the question mooted there at the instance of the employees who invoked articles 14 and 16. The judgment of the learned Chief Justice sufficiently clinches the issue in favour of the petitioner here. The problem was posed thus ([1975] 45 Comp. Cas. 285 at page 290): "In short, the question is whether these statutory corporations are authorities within the meaning of article 12". The answer was phrased th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rections, the disobedience of which is punishable as a criminal offence. The power to issue directions and to enforce compliance is an important aspect " (Emphasis added). Dealing with Governmental purposes and public authorities the Court clarified (at page 301): "In the British Broadcasting Corporation v. Johns {Inspector of Taxes ) , [1965] 1 Ch. 32, it was said that persons who are created to carry out Governmental purposes enjoy immunity like Crown servants. Government purposes include the traditional provinces of Government as well as non-traditional provinces of Government if the Crown has constitutionally asserted that they are to be within the province of Government............ A public authority is a body which has public or statutory duties to perform and which performs those duties and carries out its transactions for the benefit of the public and not for private profit " . (emphasis added) Taking up each statute and analysing its provisions the learned Chief Justice concluded (at pages 306 and 308): "The structure of the Life Insurance Corporation indicates that the Corporation is an agency of the Government carrying on the exclusive business of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation is an a fortiori case, what with Part IV of the Constitution and the Government of India Resolution on Industrial Policy of 1956? (at page 314): "Accordingly, the State will progressively assume a predominant and direct responsibility for setting up new industrial undertakings and for developing transport facilities. It will also undertake State trading on an increasing scale". Of course, mere State aid to a company will not make its actions State actions. Mathew, J., leaned to the view that (at page 318): "........State financial support plus an unusual degree of control over the management and policies might lead one to characterise an operation as State action". Indeed, the learned Judge went much further (also at page 318): "Another factor which might be considered is whether the operation is an important public function. The combination of State aid and the furnishing of an important public service may result in a conclusion that the operation should be classified as a State agency. If a given function is of such public importance and so closely related to Governmental functions as to be classified as a Governmental agency, then even the presence or absenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by principal over agent and the control exercised by Government over Public Corporation. That, I think is only a distinction in degree. The crux of the matter is that Public Corporation is a new type of institution which has sprung from the new social and economic functions of Government and that it therefore does not neatly fit into old legal categories. Instead of forcing it into them, the latter should be adapted to the needs of changing times and conditions". There is nothing in these observations to confine the concept of State to statutory Corporations. Nay, the tests are common to any agency or instrumentality, the key factor being the brooding presence of the State behind the operations of the body, statutory or other. A study of Sukhdev's case, [1975] 47 FJR 214, (a Constitution Bench decision of this Court) yields the clear result that the preponderant considerations for pronouncing an entity as State agency or instrumentality are financial resources of the State being the chief funding source, functional character being Governmental in essence, plenary control residing in Government, prior history of the same activity having been carried on by Government and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on whom powers are conferred by law It is not at all material that some of the powers conferred may be for the purpose of carrying on commercial activities. Under the Constitution, the State is itself envisaged as having the right to carry on trade or business as mentioned in article 19(1)( g ) . In Part IV, the State has been given the same meaning as in article 12 and one of the directive principles laid down in article 46 is that the State shall promote with special care the educational and economic interests of the weaker sections of the people The State, as defined in article 12, is thus comprehended to include bodies created for the purpose of promoting the educational and economic interests of the people. The State, as constituted by our Constitution, is further specifically empowered under article 298 to carry on any trade or business. The circumstance that the Board under the Electricity Supply Act is required to carry on some activities of the nature of trade or commerce does not, therefore, give any indication that the Board must be excluded from the scope of the word 'State' as used in article 12". The meaning of the learned Judge is unmistakable that "the State" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity created under a statute, not by a statute, it is not "State". Having regard to the directive in article 38 and the amplitude of the other articles in Part IV, Government may appropriately embark upon almost any activity which in a non-socialist republic may fall within the private sector. Any person's employment, entertainment, travel, rest and leisure, hospital facility and funeral service may be controlled by the State. And if all these enterprises are executed through Government companies, bureaus, societies, councils, institutes and homes, the citizen may forfeit his fundamental freedoms vis-a-vis these strange beings which are Government in fact but corporate inform If only fundamental rights were forbidden access to corporations, companies, bureaus, institutes, councils and kindred bodies which act as agencies of the Administration, there may be a break-down of the rule of law and the constitutional order in a large sector of Governmental activity carried on under the guise of "jural persons". It may pave the way for a new tyranny by arbitrary administrators operated from behind by Government but unaccountable to Part III of the Constitution. We cannot assent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State is the promoter of economic justice, the founding faith which sustains the Constitution and the country is Indian humanity. The public sector is a model employer with a social conscience not an artificial person without soul to be damned or body to be burnt. The stance that, by deductions and discretionary withholding of payment, a public sector company may reduce an old man's pension to Rs. 40 from Rs. 250 is unjust, even if it be assumed to be legal. Law and justice must be on talking terms and what matters under our constitutional scheme is not merciless law but humane legality. The true strength and stability of our polity is society's credibility in social justice, not perfect legalese; and this case does disclose indifference to this fundamental value. We are aware that, Shri G. B. Pai, for the Management, did urge that "principle" was involved and that settlements had been reached between Labour and Management on many issues. We do appreciate the successful exercises of the Management in reaching just settlements with its employees but wonder whether the highest principle of our constitutional culture is not empathy with every little individual. Pathak, J. I mu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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