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TMI Blog1991 (9) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... in the ratio of 60 : 40. Respondent No. 1 is completely under the control of respondent No. 2 under the Ministry of Industry which is managed by a chairman, under the superintendence and control of a board of directors who are appointed by the Central Government and are removable by it. It is this veil behind which the Central Government operates through the instrumentality of respondent No. 1. The activities which are being carried on by respondent No. 1 of manufacture of motor vehicles are of vital national importance. In the above circumstances, respondent No. 1 is a State being an authority within the territory of India and under the control of the Government of India within the meaning of article 12 of the Constitution of India. The petitioner further submits that he is a B.E. (Mechanical). He has specialised in automobile engineering. The petitioner was selected for the post of general manager (marketing and sales) on May 7, 1985. The petitioner was a permanent employee of respondent No. 1. One of the conditions of appointment of the petitioner, i.e., condition No. 6, was that the service of the petitioner would be terminable by a three-month notice without assigning any r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directors on the board of respondent No. 1. Respondent No. 1 thus by no stretch of imagination can be called an instrumentality or agency of the State. The petition is false and frivolous. It is liable to be dismissed. Learned counsel for the petitioner, Mr. Mukul Rohtagi, has vehemently contended that respondent No. 1 is an authority under the control of the Government of India and is as such a State within the parameters of article 12 of the Constitution of India. A term of contract such as this court is concerned with in the present case, i.e., clause 6 of the appointment letter dated May 7, 1985, whereby the services of the petitioner could be terminated on three months' notice given on either side or payment of salary in lieu thereof was vitiated by the inequality of the bargaining power between the parties. The petitioner was admittedly an employee of the respondents, who was the employer. Respondent No. 1 was in a position to have thousands of employees like the petitioner within no time. However, this was not the case with the petitioner. It was a hard nut to crack for him to find a job. The term, i.e., clause 6, was void under section 23 of the Indian Contract Act, bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ften the case, a corporation established by statute may have no shares or shareholders, in which case it would be a relevant factor to consider whether the administration is in the hands of a board of directors appointed by the Government though this consideration also may not be determinative, because even where the directors are appointed by the Government, they may be completely free from governmental control in the discharge of their functions. What then are the tests to determine whether a corporation established by statute or incorporated under law is an instrumentality or agency of the Government ? It is not possible to formulate an inclusive or exhaustive test which would adequately answer this question. There is no cut 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." Their Lordships, after considering the entire case law, laid down the following principles in order to determine as to whether a particular corporation is an instrumentality or agency of the Government within the meaning of article 12 of the Constitution of India in the above-said case (at pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the President." Learned counsel has then contended that there can be increase, reduction and alteration of the share capital only with the approval of the President of India. Article 63(1) deals then with the right of the President to appoint any person as his representative. Learned counsel on the basis of the above has urged that it is evident from the above that there is deep and all-pervasive control of the Government on the above-said company so much so that one of the objects of respondent No. 1 is to act as an instrumentality of the policy of the Central Government. That shows and proves beyond any shadow of doubt that respondent No. 1 is an instrumentality or agency of the Government. It is in fact a veil behind which the Government is acting. So, what the court is required to do is to tear the said veil in order to find out what is behind it. The argument of learned counsel no doubt is an ingenious one but can be brushed aside with an anon. It is well established that there cannot be any cut and dried formula in order to find out as to whether a particular corporation is a State. There cannot be any hard and fast rule and exhaustive test to determine the fact a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e point as to whether the financial assistance of the State is so much as to meet the entire requirements of respondent No. 1. Admittedly, this is not so in the instant case. It is manifest from the above that 40% shares are held by Suzuki Motor Company. Besides that, respondent No. 1 has entered into an agreement with the Consortium of Banks led by Diachi-Kangyo and Fiji Banks, Japan, and with Orient Leasing Company, Japan and Morgan Grenfell and Co. Ltd. for financing a loan of Japanese yen 5 billion and US dollars 45 million respectively. This is quite clear from a letter dated February 24, 1988, from Suzuki Motor Company to respondent No. 1. Thus, the Government of India is not the only source of financing respondent No. 1. Respondent No. 1 admittedly deals in the manufacture and sale of motor vehicles. It does not enjoy any monopoly status in the said field as there are so many other companies who also manufacture automobiles and sell them. It is not the case of the petitioner that any department of the Government has been transferred to respondent No. 1 so as to convert it into an instrumentality or agency of the State. The manufacture of motor vehicles by respondent No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above that the activities of the said company were of vital importance to the nation. However, even then the Kerala High Court held that the said company was not an agency of the State keeping in view the totality of the circumstances. In the present case, we have already observed above that respondent No. 1 does not enjoy monopoly status ; the activities of the company, i.e., sale and manufacture of motor vehicles, are not of vital importance to the country inasmuch as there are various other companies who also deal in the sale and manufacture of motor vehicles. Consequently, respondent No. 1 can, by no stretch of imagination, be called an instrumentality of State. Learned counsel for the petitioner, Mr. Mukul Rohtagi, has then led us through a case as reported in Ashok Kumar Mittal v. Maruti Udyog Ltd., AIR 1986 SC 1923. The petitioner in the said case challenged the allotment of Maruti vehicles out of manufacturer's quota of 5%. The Supreme Court entertained the said writ petition and laid down the guidelines for the allotment of the said vehicles. Learned counsel on the basis of the said authority has contended that the said authority shows beyond any iota of doubt th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormal run of cases of public corporations. Their mainstay is the technology transfer, importation of foreign capital in terms of equity participation and loans which the foreign collaborator is able to bring. The new economic realities have forced us to substantially liberate the economy from licensing controls and restrictions on capital inflow from abroad. Foreign companies are now being invited in a big way to invest in India and to transfer technology. Raising foreign equity participation to 51% is one such step. Foreign investors would prefer to collaborate with public corporations because they require Government guarantees to protect their interest. Proper territorial location, means of communication and transport, peaceful atmosphere for running an industry and assurance of repatriation of profits are some such protections. If they pay handsome remunerations and perquisites to their employees, they would also expect stringent work culture and discipline from the employees. Will it be in the public interest and in the interest of economy to subject such foreign collaborators to the rigour of article 14 by calling these joint ventures instrumentalities of State ? Their memor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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