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TMI Blog1982 (6) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... n dated March 1, 1982, of the first respondent, Cochin Refineries Ltd., a Government company, incorporated under the Companies Act, 1956, sealed item rate tenders were invited from experienced and financially sound contractors for constructing a new service building at the company's premises to house a canteen, changing room, co-operative society, etc . Tenders were to be accompanied with earnest money deposit of Rs. 20,000 and to be submitted on or before April 2, 1972. Ex. R-6 stated that the tenders will be opened immediately after 3.00 p.m. The first respondent reserved the right to reject any or all tenders without assigning any reason. The petitioner, the managing partner of a construction firm, the third respondent and two others submitted tenders, satisfying the conditions in Ex. R-6. The total amount shown in the petitioners' tender was slightly over rupees twenty lakhs. The third respondent's tender showed about rupees three and a half lakhs above the petitioner's tender. The two other tenders were for still higher amounts. Not being satisfied with the tenders (according to the counter-affidavit of the company secretary, all the tenders showed ex-horbitantly high rates f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner contends that the company, as an authority under article 12 of the Constitution, could not reject the lowest tender without reason and at its sweet will, that the company violated the norms and standards fixed by it in the tender notification, that its action was arbitrary and violated the equality clause in article 14 of the Constitution, that the procedure of securing confidential information and acting on the same without putting it to the petitioner and without giving him an opportunity to give an explanation or to challenge the confidential information offends the doctrine of fair play in administrative action and violates the rules of natural justice. He also contends that the rejection of his tender on the ground of his alleged unsuitability and alleged unsatisfactory past performance adversely affected his civil rights. It is further contended that the acceptance of the substantially higher tender of the third respondent was a purely arbitrary act violative of the equality clause. The company contends that it is not an authority under article 12 of the Constitution or a statutory authority and, therefore, not amenable to writ jurisdiction, that the petitioner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Bihar [1969] 39 Comp. Cas. 905 (SC), the Supreme Court was not construing article 12 of the Constitution, but only considering whether the company was "carried on under the authority of the Central Government" for the purpose of section 2( a )( ii ) of the Industrial Disputes Act, 1947. In that context, it was held that an incorporated Government company has a separate legal existence and is not an agent of its shareholders, that is, the Central Government. Sukhdev Singh's case [1975] 45 Comp. Cas. 285 (SC) dealt with three statutory corporations and not any Government company. These aspects have been considered in Airport Authority's case, AIR 1979 SC 1628 and Som Prakash Rekhi's case, AIR 1981 SC 212; [1981] 51 Comp. Cas. 71 (SC), the former dealing with a statutory corporation, and the latter dealing with an incorporated Government company, though with a statutory aura. In Airport Authority's case, AIR 1979 SC 1628, the Supreme Court observed at pp. 1638 1647 : "A corporation may be created in one of two ways. It may be either established by statute or incorporated under a law such as the Companies Act, 1956, or the Societies Registration Act, 1860. Where a Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, a Government company has a distinct personality which cannot be confused with the State. Likewise, a statutory corporation constituted to carry on a commercial or other activity is for many purposes a distinct juristic entity not drowned in the sea of State, although, in substance, its existence 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 a State." The Supreme Court referred to Rajasthan State Electricity Board, AIR 1967 SC 1857, and found it perfectly compatibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant factors, whether the company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression 'authority' in article 12." It is not correct to say, the Supreme Court has taken the view (on the decisions placed before me) that a Government company, because it is not created by a statute, but only incorporated under a statute, i.e ., the Companies Act, is shut out from being regarded as an authority under the control of the Government of India within the meaning of article 12. On the other hand, the Supreme Court has laid down unambiguously that a Government company be so regarded as an "authority" for the purpose of article 12, if it has the attributes of an instrumentality or agency of the Government of India. A Government company, though it has a distinct juristic personality, will be treated as an instrumentality of the Government if it is seen to be a mere agent of the Government, owned and controlled by the Government. This is not to say that every Government company or a mere Government company, without anything more, is an "authority". The question must be decided on the features and circumstances existing in each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the P.P.C. and the Duncan Brothers Co. Ltd., to carry into effect the contract with the Phillips Petroleum International Corporation, to enter into arrangements with the Government of India or any State Government, Rulers, landlords or other persons that may seem conducive to the company's objects and obtain from them powers, privileges, concessions, licences, grants, etc . The articles of association explain the powers of the board of directors. The board has full powers of management subject to certain specified limitations. Approval of the President of India is necessary only in certain matters, i.e ., to secure repayment of borrowings, to undertake works involving capital expenditure exceeding rupees fifty lakhs, to appoint officers on pay scale with maximum pay of Rs. 2,250 or more per month, to invest moneys in securities, to set apart any part of profits to provide a fund to provide for pensions, gratuities, and to create provident fund. The board of directors can elect one of them as managing director. The chairman of directors' meetings could be nominated by the President of India. Proposals or decisions of the board raising an important issue is to be referred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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