original jurisdiction writ petition number 1212 of 1977.  under article 32 of the companystitution . petitioner in person. markendeya and miss a. subhashini for respondent number
1.

b. pai o. c. mathur and k. j. john for respondent
number 2.

r. mridul m. k. ramamurthi and jitendra sharma for
the intervener  the petroleum workers union

n. tiwari  secretary of union  for the intervener
 petroleum employees union . b. sawhney and b. p. ghosh for the intervener  c. h.
kewalramani . the judgment of v. r. krishna iyer and o. c. reddy jj. was delivered by krishna iyer j. pathak j. gave a
dissenting opinion. krishna iyer j.-three seminal issues arise in this
little lis harbouring larger principles. we may state them
each with a quote to drive home the social stakes and then
proceed to the pedestrian factual-legal narrative and
discussion. they  companyporations  cannumber companymit treason number be
out-lawed number excommunicated for they have numbersouls.  edward companye suttons hospital case
a legal power which projects an awesome portent has
been sprung upon the companyrt by the defending respondent-. the
bharat petroleum companyporation limited the companyporation for
short -as to whether a writ will issue under art. 32 of the
constitution against a government companypany belonging as it
does to an increasing tribe of soulless ubiquity and
claiming as it does to companystitutional immunity. this is
the first issue to which he will address ourselves. jawaharlal nehru warned the companystituent 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
ignumberance 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
sufferings so long our work will number be over. the second question which claims our attention turns on
the petitioners plea of alleged stultification of art. 41
by the state itself reincarnating as a government companypany
by defending the paring down the pension of the petitioner
to a pathetic pittance thus sterilising a directive
principle to a decorative paper. law cannumber stand aside from the social changes
around it.  justice brennan in roth v. united states 354 u.s. 476
the third problem number humdrum but heuristic turns on
the companystruction of the relevant legislations and
regulations companyered by the writ petition remembering the
social dynamics of the law of statutory interpretation. this writ petition under art. 32 relates to a poor
employees small pension on retirement and the legality of
the deductions effected by the employer which make the net
sum payable traumatically trivial  rs. 40/- . a principle of
wider application is involved beyond the individuals
pensionary fate. the petitioner was employed as a clerk in the burmah
shell oil storage limited  burmah shell for short  and
retired betimes  at 50  after qualifying for a pension on
april 1 1973. he was also companyered by a scheme under the
employees provident funds and family pension fund act 1952
 for short the pf act . the employer undertaking was
statutorily taken over by force of the burmah shell
 acquisition of undertakings in india  act 1976
 hereinafter called the act . thereafter the central
government acting under the statute took necessary steps
for the vesting of the undertaking in the second respondent
the companyporation and became the statutory successor of the
petitioners employer. his pensionary rights such as he
had therefore became claimable from the second respondent. what was the quantum ? was any cut illegally effected by
burmah shell and companytinued by respondent 2 ? companyld a writ be
issued against the second respondent in respect of the cut ? these are the questions argued before us. the petitioner-
pensioner being too poor shri parekh assigned by the
legal aid society appeared promptly and argued
passionately. at a re-hearing the petitioner preferred to
make a few brief supplementary submissions on his own. the pensionary provision for the burmah shell employees
depended on the terms of a trust deed of 1950 under which a
pension fund was set up and regulations were made for its
administration. regulations 13 and 15 entitled the
petitioner to pension and companytained the formula for
quantification. regulation 13 has a significant clause
less the authorised deductions specified in reg. 16 namely
the bone of companytention between the parties is about
these
deductions and we may set out this regulation  relevant
part  even here

the authorised deductions to be made in
calculating the amount of a number-contributing members
pension shall be as follows

a sum equal to four per cent of such amount
standing to the credit of the member at the relevant
date in any provident fund as represents any companypanys
contributions to that fund in respect of the period of
the members accredited service  including bonuses and
interest on such companytributions upto that date . a sum equal to four per cent of any amount
which before the 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 members 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. if the companypany so elects a sum number exceeding
six per cent of the amount of any payments which any
company has made or may make or which any companypany shall
be or have been required by law to make to the member
in companynection with the termination of his service with
that companypany together with interest thereon from the
date of payments down to the relevant date. the pension fund on the vesting of burmah shell in
respondent 2 came to be administered by the latter under
the burmah shell  acquisition of undertakings in india
 administration of fund  rules 1976. the rules provided for
the government companypany viz. respondent 2 acting in
accordance with the provisions of the rules and regulations
applicable to or of any law governing the respective
provident fund welfare fund or other fund and in force
immediately before the 24th day of january 1976.
if any legal provision overrode the regulation
authorising deductions the 2nd respondent companyld and should
act according to the legislation. thus the statutory rules
for administering pensionary matters direct respondent 2 to
conform to any law governing provident fund and like
items. and if as is companytended before us by the petitioner
such law exists the regulation based deduction ceases to be
an authorised deduction. by virtue of reg. 13 the petitioner was entitled to a
pension of rs. 165.99 subject to certain deductions which
form the companytroversy in this case. he was also being paid
supplementary retirement benefit of rs. 86/- per month for a
period of 13 months after his retirement which was stopped
thereafter. this stoppage is also assailed before us. by letter dated september 25 1974 the employer
 burmah shell  explained that from out of the pension of rs. 165.99 two deductions were authorised by reg. 16. one such
deduction was based on reg. 16 1  because of employees
provident fund payment to the pensioner and the other rested
on reg. 16 3  on account of payment of gratuity. resultantly the pension payable was shown as rs. 40.05.
the case becomes clear if one more fact is mentioned. the petitioner claimed and received his provident fund
amount under the pf act and recovered a gratuity amount due
under the payment of gratuity act 1972  for short the
gratuity act . it is necessary to mention that burmah shell
was refused exemption under s. 5 from the operation of
this act  vide annexure f to the writ petition . in short
two sums one under the pf act and the other under the
gratuity act were drawn by the pensioner. companysequent on
this burmah shell made 2 deductions from the petitioners
pension taking its stand on reg. 16 read with reg. 13
already referred to. indeed the companypany went even beyond
this in its letter of may 8 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 numbersuperannuated soul can survive in indian indigence
and inflationary spiral on rs. 40/- per month the
petitioner has companye to this companyrt 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 art. 19 has
been violated he claims. it may well be as urged by the companyporation that if
reg. 16 does govern the deductions are warranted. likewise
if the supplementary retiral benefit is purely a mercy
gesture savouring of numbermanner of right number subject to
restrictions on discretionary exercise the sudden
stoppage of that sum perhaps number illegal. it may be
heartless but number necessarily lawless for a prosperous
undertaking number in the public sector which pays over-
generous salaries to higher officials and liberal scales
even to its lesser employees to destroy the pensionary
survival of an erstwhile employee who had served 28 long and
fruitful years of his limited span of life for the profit of
his employer. justice according to law being the rule let us examine
the validity of the rival companytentions. the employer relies
on reg. 16 and the pensioner rests his claim on its
invalidity. the mantle of burmah shell has statutorily
fallen on bharat petroleum and it cannumber be companytroverted
that if reg. 16 read with reg. 13 be valid the second
respondent can insist on its pound of flesh and claim
lawfully that the deductions made are authorised and the
discretion to stop supplementary pension is charity which
can be choked off at pleasure or anger. a preliminary objection has been raised by shri g. b.
pai that numberwrit will lie against the second respondent
since it is neither a government department number a statutory
corporation but just a companypany and so the companyrt should
reject out of hand this proceeding under art. 32. we do see
the force of this companytention numberwithstanding the
observations in the airport authority case that the status
of state will attach to the government companypanies like the
second respondent. let us first look at the facts emerging from the act
and the superimpose the law in art. 12 which companyceptualises
state for the purposes of part iii. after all cynicism
apart mark twain is good chewing gum for lawyers  3
get your facts first and then you can distort
them as much as you please. it is companymon ground that the present writ petition invoking
art. 32 is limited to issuing directions or orders or writs
for the enforcement of fundamental rights and the question
is whether the addressee is the state within the meaning
of art. 12 of the companystitution. we will examine this
position more closely a little later but granting that art. 19 is aimed at state action the companytours of state
conceptually speaking are largely companyfined to art. 12. we
have to study the anatomy of the companyporation in the setting
of the act and decide whether it companyes within the scope of
that article. we have only an inclusive definition number a
conclusive definition. one thing is clear. any authority
under
the companytrol of the government of india companyes 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
fulfillment of that purpose. where companystitutional
fundamentals vital to the survival of human rights are at
stake functional realism number facial companymetics must be the
diagnumbertic tool. law companystitutional law seeks the
substance number merely the form. for one may look like the
innumberent 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 and distributing companypany of india limited
should be acquired in order to ensure that the
ownership and companytrol of the petroleum products
distributed and marketed in india by the said companypany
are vested in the state and thereby so distributed as
best to subserve the companymon good
it is true that what is nationalised is a private enterprise
motivated undoubtedly by the need for transferring the
ownership and companytrol of the companypany and its petroleum
products distributed and marketed in india. section 3 is
important from this angle

on the appointed day the right title and
interest of burmah shell in relation to its
undertakings in india shall stand transferred to and
shall vest in the central government. this provision lays bare the central object of making
the central government the proprietor of the undertaking. it
hardly needs argument to companyvince a companyrt that by virtue of
s. 3 the central government is the transferee of the
undertaking. had a writ proceeding been companymenced during the
period of vesting in the central government it companyld number
have been resisted on the score that the employer is number
the state. the appointed day did arrive and the right
title and interest in burmah shell did vest in the central
government. a companymercial undertaking although permitted to be run
under our companystitutional scheme by government may be better
managed with professional skills and on business principles
guided of companyrse by social goals if it were administered
with companymercial fexibility and celerity free from
departmental rigidity slow motion procedures and
hierarchy of officers. that is why a companysiderable part of
the public undertakings is in the companyporate sector. it is interesting that with the industrial expansion
econumberics was assisted by jurisprudence and law invented or
at least expanded the companyporate companycept to facilitate
econumberic development companysistently with the rule of law. said
woodrow wilson several decades back
there was a time when companyporations played a minumber
part in our business affairs but number they play the
chief part and most men are the servants of
corporations. and franklin d. roosevelt mourned
concentration of econumberic power in all embracing
corporationsrepresents private enterprise become a
kind of private government which is a power unto
itself-a regimentation of other peoples money and
other peoples lives. this legal facility of companyporate instrument came to be used
by the state in many companyntries as a measure of immense
convenience especially in its companymercial ventures. the
trappings of personality liberation from governmental
stiffness and capacity for mammoth growth together with
administrative elasticity are the attributes and advantages
of companyporations. a companyporation is an artificial being invisible
intangible and existing only in the companytemplation of
the law. being the mere creature of the law it
possesses only those properties which the charter of
its creation companyfers 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 companysidered the same and
may act as a single individual. although companyporate personality is number a modern invention
its adaptation to embrace the wide range of industry and
commerce has a modern favour. welfare states like ours
called upon to execute many econumberic projects readily resort
to this resourceful legal companytrivance because of its
practical advantages without a wee-bit of diminution in
ownership and companytrol of the undertaking. the true owner is
the
state the real operator is the state and the effective
controllerate is the state and accountability for its
actions to the companymunity and to parliament is of the state. nevertheless a distinct juristic person with a companyporate
structure companyducts the business with the added facilities
enjoyed by companypanies and keeping the quasi-autonumbery which
comes in handy from the point of view of business
management. be it remembered though that while the formal
ownership is cast in the companyporate mould the reality
reaches down to state companytrol. with this background we have
to read s. 7 of the act which runs thus
7.  1  numberwithstanding anything companytained in
sections 3 4 and 5 the central government may if
satisfied that a government companypany is willing to
comply or has companyplied with such terms and companyditions
as that government may think fit to impose direct by
numberification that the right title and interest and the
liabilities of burmah shell in relation to any of its
undertakings in india shall instead of companytinuing to
vest in the central government vest in the government
company
 emphasis added
the companye fact is that the central government through this
provision chooses to make over for better management its
own property to its own offspring. a government companypany is a
mini-incarnation of government itself made up of its blood
and bones and given companyporate shape and status for defined
objectives number beyond. number is this any isolated experiment in government
formally transferring ownership to a companypany. there are a
number of statutory take-overs in india as in other
countries where the initial vesting is in government
followed by a later transfer to anumberher instrumentality-may
be an existing government companypany or a companyporation created
by statute or even a society or other legal person. in the
present case a government companypany was created anteriorly
and by virtue of a numberification under s. 7 it became the
transferee 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 numberification clearly spells out
in exercise of the powers companyferred by sub-section
 1  of section 7 of the burmah shell  acquisition of
under takings in india  act 1976  2 of 1976  the
central government being satisfied that burmah-shell
refineries limited a government companypany is willing to
comply with such terms and companyditions 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 company of india limited in relation to its
undertakings in india shall instead of companytinuing to
vest in the central government vest with effect from
the twenty fourth day of january 1976 in burmah-shell
refineries limited
this is the well-worn legal strategy for government to run
econumberic and like enterprises. we live in an era of public
sector companyporations the state being the reality behind law
does number hoodwink itself and what is but a strategy cannumber
be used as a stratagem
these are the facts when we companye to brass tacks. facts
form the raw material out of which the finished product of
judicial finding is fabricated after processing through
established legal principles. indeed in life as in law it
is as fatal as it is companyardly to blink facts because they
are number to our taste. what then are the basic facts
available from the act ? companystitutional law is number a game of
hide and seek but practical real-life companyclusions. so
viewed we are companystrained to hold that burmah-shell a
government companypany though is but the alter ego of the
central government and must therefore be treated as
definitionally caught in the net of state since a juristic
veil worn for certain legal purposes cannumber obliterate the
true character of the entity for the purposes of
constitutional law. if we distil the essence of art. 12 textually and
apprehend the expanded meaning of state as interpreted
precedentially we may solve the dilemma as to whether the
bharat petroleum is but a double of bharat sarkar. let us be
clear that the jurisprudence bearing on companyporations is number
myth but reality. what we mean is that companyporate personality
is a reality and number an illusion or fictitious companystruction
of the law. it is a legal person. indeed a legal person
is any subject matter other than a human being to which the
law attributes personality. this extension for good and
sufficient reasons of the companyception of personalityis
one of the most numbereworthy feats of the legal imagination. companyporations are one species of legal persons invented by
the law and invested with a variety of attributes so as to
achieve certain purposes sanctioned by the law. for those
purposes a companyporation or companypany has a legal existence all
its own. the characteristics of companyporations their rights
and liabilities functional autonumbery and juristic status
are jurisprudentially recognised as of a distinct entity
even where such companyporations are but state agencies or
instrumentalities. for purposes of the companypanies act 1956
a government companypany has a distinct personality which cannumber
be company-
fused with the state. likewise a statutory companyporation
constituted to carry on a companymercial or other activity is
for many purposes a distinct juristic entity number 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 companypany or other legal person has
functional and jural individuality for certain purposes and
in certain areas of law it does number necessarily follow that
for the effective enforcement of fundamental rights under
our companystitutional scheme we should number 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 companytrolled by the state and in effect an
incarnation of the state companystitutional lawyers must number
blink at these facts and frustrate the enforcement of
fundamental rights despite the inclusive definition of art. 12 that any authority companytrolled 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. companytrol by government of the companyporation is writ large
in the act and in the factum of being a government companypany. moreover here s. 7 gives to the government companypany
mentioned in it a statutory recognition a legislative
sanction and a status above a mere government companypany. if
the entity is numbermore than a companypany under the companypany law
or society under the law relating to registered societies or
co-operative societies you cannumber call it an authority. a
ration shop run by a companyperative store financed by
government is number an authority being a mere merchant number a
sharer of state power. authority in law belongs to the
province of power
authority  in administrative law  is a body having
jurisdiction in certain matters of a public nature. therefore the ability companyferred upon a person by the
law to alter by his own will directed to that end the
rights duties liabilities or other legal relations either
of himself or of other persons must be present ab extra to
make a person an authority. when the person is an agent
or instrument of the functions of the state the power is
public. so the search here must be to see whether the act
vests authority as agent or instrument of the state to
affect the legal relations of oneself or others. sometimes the test is formulated over-simplified
fashion by asking whether the companyporation is formed by a
statute or under a statute. the true test is functional. number
how the legal person is born but why it is created. nay
more. apart from discharging functions or doing business as
the proxy of the state wearing the companyporate mask there
must be an element of ability to affect legal relations by
virtue of power vested in it by law. in the present instance the source of both read in
the light of ss. 3 and 7 is saturated with state functions. avowedly the statutory companytemplation as disclosed by s. 7
is that the companypany should step into the shoes of the
executive power of the state. the legislative milieu in
which the second respondent came to be the successor of
burmah shell suggests that the former is more than a mere
company registered under the companypanies act. it has a
statutory flavour acquired under s. 7. moreover everything
about the second respondent in the matter of employees
their provident superannuation and welfare funds is
regulated statutorily unlike in the case of ordinary
companies. sections 9 and 10 deal with these aspects. these
two provisions which regulate the companyditions of service and
even provide for adjudication of disputes relating to
employees indicate that some of the features of a statutory
corporation attach to this government companypany. sections 9
and 10 in terms create rights and duties vis a vis the
government companypany itself apart from the companypanies act. an
ordinary companypany even a government companypany simpliciter has
number the obligation cast on the second respondent by ss. 9
and 10. and s.11 specifically gives the act primacy vis a
vis other laws. section 12 although it has numberbearing on
the specific dispute we are companycerned 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 companypany with power to take
delivery of the property of burmah shell from every person
in whose possession custody or companytrol such property may
be. there are other powers akin to this one in s. 12. the
provision for penalties if any person meddles with the
property of the second respondent emphasises the special
character of this government companypany. equally unique is the
protection companyferred by s. 16 on the government companypany and
its officers and employees for anything which is in good
faith done or untended to be done under this act. such an
immunity does number attach to employees of companypanies
simpliciter even if they happen to be government companypanies. in the same strain is the indemnity companyferred by s. 18. this
review though skeletal is sufficient strikingly to bring
home the point that the companyporation we are companycerned with is
more than a mere government companypany. whatever its character
antecedent to the act the provisions we have adverted to
have transformed it into an instrumentality of the central
government with a strong statutory flavour super-added and
clear indicia of power to make it an authority. although
registered as a companypany under the indian companypanies act the
second respondent is clearly a creature of the statute the
undertaking having vested in it by force of s. 7 of the act. the various provisions to which our attention was drawn an
elaboration of which is number called for emphasise the fact
that the second respondent is number a mere companypany but much
more than that and has a statutory flavour in its operations
and functions in its powers and duties and in its
personality itself apart from being functionally and
administratively under the thumb of government. it is a limb
of government an agency of the state a vicarious creature
of statute working on the wheels of the acquisition act. we
do number mean to say that for purposes of art. 309 or
otherwise this government companypany is state but limit our
holding to art. 12 and part iii. we may number proceed to examine the authorities cited
before us by both sides on this point with special reference
to art. 12 of the companystitution vis a vis government
companies and like bodies. shri g. b. pai companycedes that the
recent trend of rulings of this companyrt has broadened the
concept of authorities under the companytrol of the
government of india. for instance the airport authority
case and the u.p. warehousing companyporation case. his
submission is that the companye question which called for
decision in those cases did number demand pronumberncement on the
larger issue of what is state under art. 12 and also ran
counter to the earlier rulings by larger benches. true a
tour of the case-law runs zigzag but guided by principle
and jurisprudential 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 companyrt are calculated
to settle the law and number 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 companyfusion by the process suggested by shri
pai. but we are satisfied that the airport authority
 supra  has been companysistently and companyrectly decided and
being bound by it hold that a writ will lie against the
second respondent under art. 32. an explanatory journey is
necessary to make good this assertion. the up warehousing companyporation case  supra -the latest
on the point-related to a statutory companyporation and the
litigation was by an employee for wrongful dismissal. one of
the questions companysidered there was the maintainability of a
writ petition against a statutory companyporation at the
instance of an employee. the companyrt reviewed many decisions
indian and english and upheld the employees companytention
that the writ companyld and should issue to such a body if
illegality were established. it is significant that pointed
reference has been made to sukhdev singh airport authority
 supra  and the judgment of the house of lords in malloch

aberdeen companypn. sarkaria j. adverted to the
observations of lord wilberforce that in cases where there
is an element of public employment or service or support by
statute or something in the nature of public office or
status the companyrt would companyrect illegal acts. of companyrse the
specific question as to whether such a body companyld be
regarded as state did number and companyld number arise in the
english case. but it did arise in the airport authority
 supra  where bhagwati j. launched on an international
survey of this branch of jurisprudence and highlighted the
factors which made a legal person-a statutory companyporation a
government companypany or even a registered society-an agency
or instrumentality of government and therefore an
authority for purposes of art. 12. the forensic focus was
turned sharply by one of us  chinnappa reddy j. who was
party to that decision  on the target issue of what it the
state for purposes of part iii. the crucial observations
which have pertinence to the point argued before us deserve
excerption and enjoy our affirmation
i find it very hard indeed to discover any
distinction on principle between a person directly
under the employment of the government and a person
under the employment of an agency or instrumentality of
the government or a companyporation set up under a statute
or incorporated but wholly owned by the government. it
is self-evident and trite to say that the function of
the state has long since ceased to be companyfined to the
preservation of the public peace the exaction of taxes
and the defence of its frontiers. it is number the
function of the
state to secure social econumberic and political
justice to preserve liberty of thought expression
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 companystitution. the
desire to attain these objectives has necessarily
resulted in intense governmental activity in manifold
ways. legislative and executive activity have reached
very far and have touched very many aspects of a
citizens life. the government directly or through the
corporations set up by it or owned by it number owns or
manages a large number of industries and institutions. it is the biggest builder in the companyntry. mammoth and
minumber 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 companyntry. the state and the multitudinumbers
agencies and companyporations set up by it are the
principal purchasers of the produce and the products of
our companyntry and they companytrol a vast and companyplex
machinery of distribution. the government its agencies
and instrumentalities companyporations set up by the
government under the statutes and companyporations
incorporated under the companypanies act but owned by the
government have thus become the biggest employers in
the companyntry. there is numbergood reason why if government
is bound to observe the equality clauses of the
constitution in the matter of employment and in its
dealings with the employees the companyporations set up or
owned by the government should number be equally bound and
why instead such companyporations companyld become citadels
of patronage and arbitrary action. in a companyntry like
ours which teems with population where the state its
agencies its instrumentalities and its companyporations
are the biggest employers and where millions seek
employment and security to companyfine the applicability
of the equality clauses of the companystitution in
relation to matters of employment strictly to direct
employment under the government is perhaps to mock at
the companystitution and the people. some the employee
beyond the reach of the rule which denies him access to
a companyrt to enforce a companytract of employment and denies
him the protection of articles 14 and 16 of the
constitution. after all employment in the public sector
has grown to vast dimensions and employees in the
public sector often discharge as onerous duties as
civil servants and parti-
cipate in activities vital to our companyntrys econumbery. in
growing realisation of the importance of employment in
the public sector parliament and the legislatures of
the states have declared persons in the service of
local authorities government companypanies and statutory
corporations as public servants and extended to them
by express enactment the protection usually extended to
civil servants from suits and prosecution. it is
therefore but right that the independence and
integrity of those employed in the public sector should
be secured as much as the independence and integrity of
servants. the companypelling force of this reasoning in the indian setting
and companystitutional matrix cannumber be missed. let us dilate a little on the living essence of
constitutional fundamentals if we are number to reduce
fundamental rights to paper hopes and peoples dupes the
judicial branch shall number companymit breach of faith with the
bill of rights by interpretative exoneration of the state
from observance of these founding faiths. the higher values
enacted into part iii of the companystitution certainly bind the
state in its executive and legislative branches. they are
constitutional guarantees to the indian people number fleeting
promises in companymon enactments. so long as they last in the
national charter they should number be truncated in their
application unless a companytra-indication is clearly written
into the prescription a la arts. 31a 31b and 31c. art. 12
is a special definition with a broader goal. far from
restricting the companycept of state it enlarges the scope to
embrace all authorities under the companytrol of government. the
constitutional philosophy of a democratic socialist
republic mandated to undertake a multitude of socioeconumberic
operations inspires part iv and so we must envision the
state entering the vast territory of industrial and
commercial activity companypetitively or monumberolistically for
ensuring the welfare of the people. this expansive role of
the state under part iv is number played at the expense of the
cherished rights of the people entrenched in part iii since
both the sets of imperatives are companyplementary and companyexist
harmoniously. wherever the companystitution has felt the need to
subordinate part iii to part iv it has specificated it and
absent such expression provision both the parts must and
can flourish happily together given benign judicial
comprehension a kerala v. thomas. there is numberinherent
conflict between the two parts if orchestrated humanely. we
are at pains to emphasise this perspective because the
substance of part iii save where the companystitution says so
shall number be sacrificed at the altar of part iv by the
stratagem of incorporation. it is well knumbern and
surely within the erudite and experienced ken of our
founding fathers that government embarks on myriad modern
commercial activities by resort to the jurisprudential gift
of personification through incorporation. this companytrivance
of carrying on business activities by the state through
statutory companyporations government companypanies and other
bodies with legal personality simplifies and facilitates
transactions and operations beyond the traditional and tardy
processes of governmental desks and cells numbered for their
red tape exercise and drowsy dharma. but to use the
corporate methodology is number to liberate the state from its
basic obligation to obey part iii. to don the mantle of
company is to free the state from the inevitable companystraints
of governmental slow-motion number to play truant with the
great rights. otherwise a cunning plurality of companyporations
taking over almost every state business-the post and the
rail-road the t.v. and the radio every econumberic ministrys
activity why even social welfare work-will cheat the
people of part iii rights by the easy plea numberadmission
for the bill of rights numberstate here. from indian posts
and telegraphs limited to indian defence manufacturers
limited from social welfare board to backward classes
corporation the nation will be told that the state has
ceased to be save for the number-negotiable sovereign
functions and fundamental rights may suffer eclipse only to
be viewed in museum glass cases. such a situation will be a
treachery on the founding fathers a mockery of the
constitution and a government by puppetry because the crowd
of companyporations which have carved out all functions will
still be companytrolled companypletely by the switch boards of
bureaucrats and political bosses from remote companytrol rooms
in government secretariats. the extended definition of the
state in art. 12 is number to be deadened but quickened by
judicial companystruction. before our eyes the companyporate
phenumberenumber is becoming ubiquitous. what was archaically done
yesterday by government departments is alertly executed to-
day by government companypanies statutory companyporations and like
bodies and this tribe may legitimately increase tomorrow. this efficiency is number to be purchased at the price of
fundamental rights. as mathew j. stated in v. punnan thomas

state of kerala
the government is number and should number 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 cannumber lay down arbitrary and
capricious standards for the choice of persons with
whom alone it will deal. whats in a name that which we call a rose by any other
name would smell as sweet. 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 numberwithstanding
this companyrt in airport authority  supra  pointed its
unanimous finger on these events and portents
today with tremendous expansion of welfare and
social service functions increasing companytrol of
material and econumberic resources and large scale
assumption of industrial and companymercial activities by
the state the power of the executive government to
affect the lives of the people is steadily growing. the
attainment of socioeconumberic justice being a companyscious
end of state policy there is a vast and inevitable
increase in the frequency with which ordinary citizens
came into relationship of direct encounter with state
power-holders. this renders it necessary to structure
and restrict the power of the executive government so
as to prevent its arbitrary application or
exercise
today the government in a welfare state is the
regulator and dispenser of special services and
provider of a large number of benefits including jobs
contracts licences quotas mineral rights etc. the
government pours forth wealth money benefits
services companytracts quotas and licences. the valuables
dispensed by government take many forms but they all
share one characteristic. they are steadily taking the
place of traditional forms of wealth. these valuables
which derive from relationships of government are of
many kinds. they companyprise social security benefits
cash grants for political sufferers and the whole
scheme of state and local welfare. then again
thousands of people are employed in the state and the
central governments and local authorities. licences are
required before one can engage in many kinds of
businesses or work. the power of giving licences means
power to withhold them and this gives companytrol to the
government or to the agents of government on the lives
of many people. many individuals and many more business
enjoy largesse in the form of government companytracts
all these mean growth in the government
largesse and with the increasing magnitude and range of
governmental
functions as we move closer to a welfare state more
and more of our wealth companysists of these new forms. we do number suggest that there is any vice at all in
government undertaking companymercial or other activities
through the facile device of companypanies or other bodies. but
to scuttle part iii through the alibi of companypany number
state-ay theres the rub the rationale of this
proposition is well brought by bhagwati j
so far as india is companycerned the genesis of the
emergence of companyporations 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 companyporation under the statutory companytrol 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 companyporations were
created by government for setting up and management of
public enterprises and carrying out other public
functions. ordinarily these functions companyld have been
carried out by government departmentally through its
service personnel but the instrumentally or agency of
the companyporations 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 companystitutional and
administrative law as government itself though in the
eye of the law they would be distinct and independent
legal entities. if government acting through its
officers is subject to certain companystitutional and
public law limitations it must follow a fortiori that
government acting through the instrumentality or agency
of companyporations should equally be subject to the same
limitations.  emphasis added
article 12 gives the cue to forbid this plea. other
authorities  under the companytrol of the government
of india are companyprehensive enumbergh to take care of part iii
without unduly stretching the meaning of the state to rope
in whatever any autonumberous body which has some nexus with
government. a wide expansion companypled
with a wise limitation may and must readily and rightly be
read into the last words of art. 12.
addressing itself to the question of identifying those
bodies which are agencies or instrumentalities of
government the companyrt in airport authority observed
a companyporation may be created in one of two ways. it may be either established by statute or incorporated
under a law such as the companypanies act 1956 or the
societies registration act 1860. where a companyporation
is wholly companytrolled by government number only in its
policy-making but also in carrying out the functions
entrusted to it by the law establishing it or by the
charter of its incorporation there can be numberdoubt
that it would be an instrumentality or agency of
government when does such a companyporation become
an instrumentality or agency of government ? is the
holding of the entire share capital of the companyporation
by government enumbergh or is it necessary that in
addition there should be a certain amount of direct
control exercised by government and if so what should
be the nature of such companytrol ? should the functions
which the companyporation is charged to carry out possess
any particular characteristic or feature or is the
nature of the functions immaterial ? number one thing is
clear that if the entire share capital of the
corporation is held by government it would go a long
way towards indicating that the companyporation is an
instrumentality or agency of governmentwhat
then are the tests to determine whether a companyporation
established by statute or incorporated under law is
instrumentality or agency of government ? it is number
possible to formulate an all-inclusive or exhaustive
test which would adequately answer this question. there
is numbercut and dried formula which would provide the
correct division of companyporations into those which are
instrumentalities or agencies of government and those
which are number.  emphasis added
the companyrt proceeded to crystallise the tests to
determine the state companypletion of companyporate bodies beyond
furnishing the full share capital
but a finding of state financial support plus an
unusual degree of companytrol over the management and
policies might
lead one to characterise an operation as state action. vide sukhdev v. bhagatram. so also the existence of
deep and pervasive state companytrol may afford an
indication that the companyporation is a state agency or
instrumentality. it may also be a relevant factor to
consider whether the companyporation enjoys monumberoly status
which is state companyferred or state protected. there can
be little doubt that state companyferred or state protected
monumberoly status would be highly relevant in assessing
the aggregate weight of the companyporations ties to the
state. there is also anumberher factor which may be regarded
as having a bearing on this issue and it is whether the
operation of the companyporation is an important public
function. it has been held in the united states in a
number of cases that the companycept of private action must
yield to a companyception of state action where public
functions are being performed. vide arthur s. millers
the companystitutional law of the security state. if the functions of the companyporation are of public
importance and closely related to governmental
functions it would be a relevant factor in classifying
the companyporation as an instrumentality or agency of
government. this is precisely what was pointed out by
mathew j. in sukhdev v. bhagatram  supra  where the
learned judge said that institutions engaged in
matters of high public interest or performing public
functions are by virtue of the nature of the functions
performed government agencies. activities which are too
fundamental to the society are by definition too
important number to be companysidered government functions. bhagwati j. dwelt on the functional formula and reasoned
but the decisions show that even this test of
public or governmental character of the function is number
easy of application and does number invariably lead to the
correct inference because the range of governmental
activity is broad and varied and merely because an
activity may be such as may legitimately be carried on
by government it does number mean that a companyporation
which is otherwise a private entity would be an
instrumentality or agency of government by reason of
carrying on such activity. in fact it is difficult to
disting-
uish between governmental functions and number-
governmental functions. perhaps the distinction between
governmental and number-governmental functions is number
valid any more in a social welfare state where the
laissez faire is an outmoded companycept and herbert
spencers social statics has numberplace but the
public nature of the function if impregnated with
governmental character or tied or entwined with
government or fortified by some other additional
factor may render the companyporation an instrumentality
or agency of government. specifically if a department
of government is transferred to a companyporation it would
be a strong factor supportive of this inference. the companyclusion is impeccable that if the companyporate body
is but an instrumentality or agency of government then
part iii will trammel its operations. it is a case of quasi-
governmental beings number of number-state entities. we have no
hesitation to hold that where the chemistry of the companyporate
body answers the test of state above outlined it companyes
within the definition in art. 12. in our companystitutional
scheme where the companymanding heights belong to the public
sector of the national econumbery to grant absolution to
government companypanies and their ilk from part iii may be
perilous. the companyrt cannumber companynive at a process which
eventually makes fundamental rights as rare as roses in
december ice in june. article 12 uses the expression
other authorities and its companynumberation has to be clarified. on this facet also the airport authority case supplies a
solution
if a statutory companyporation 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 number uniform as to whether being an
instrumentality or agency of government ipso jure renders
the companypany or other similar body state. this again
involves a navigation through precedents and bhagwati j. in
airport authority  supra  has spoken for the companyrt after
referring to rajasthan electricity board v. mohan lal
sukhdev v. bhagatram praga tool companyporation v. c. a.
immanuel heavy engineering mazdoor union v. state of bihar

l. aggarwal v. general manager hindustan steel limited and
sabhajit tewari v. union of india
we may point out here that when we speak of a
corporation being an instrumentality or agency of
government we do number mean to suggest that the
corporation should be an agent of the government in the
sense that whatever it does should be binding on the
government. it is number the relationship of principal and
agent which is relevant and material but whether the
corporation is an instrumentality of the government in
the sense that a part of the governing power of the
state is located in the companyporation and though the
corporation is acting on its own behalf and number on
behalf of the government its action is really in the
nature of state action. let us cull out from airport authority  supra  the
indicia of other authoritiesunder the companytrol of
the government of india bringing a companyporation within the
definition of the state. the following factors have been
emphasised in that ruling as telling though number clinching. these characteristics companyvert a statutory companyporation a
government companypany a companyperative society and other
registered society or body into a state and they are number
confined to statutory companyporations alone. we may decoct the
tests for ready reference

one thing is clear that if the entire share capital
of the companyporation is held by government it would go a long
way towards indicating that the companyporation is an
instrumentality or agency of government. existence of deep and pervasive state companytrol may
afford an indication that the companyporation is a state agency
or instrumentality. it may also be a relevant factor whether
the companyporation enjoys monumberoly status which is the state
conferred or state protected. if the functions of the companyporation are of public
importance and closely related to governmental functions it
would be a relevant factor in classifying the companyporation as
an instrumentality or agency of government. specifically if a department of government is
transferred to a companyporation it would be a strong factor
supportive of this inference
of the companyporation 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 companyclusion emerges that it is state and is
subject to the same companystitutional 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 number 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 art. 12 fell for companysideration 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 authority and a government
company companyered by ss. 7 9 10 and 12 of the act before us
discloses a close parallel except that the airport authority
is created by a statute while bharat petroleum  numberified
under s. 7 of the act  is recognised by and clothed with
rights and duties by the statute. there is numberdoubt that bhagwati j. broadened the scope
of state under art. 12 and according to shri g. b. pai the
observations spill over beyond the requirements of the case
and must be dismissed as obiter. his submission is that
having regard to the fact that the international airport
authority is a companyporation created by statute there was no
occasion to go beyond the narrow needs of the situation and
expand upon the theme of state in art. 12 vis a vis
government companypanies registered societies and what number. he
assails the decision also on anumberher ground namely the
contradiction between sukhdev and airport authority. we will
examine both these companytentions and incidentally companysider
what the law laid down in the other rulings is. we are free
to companyfess that the propositions have number been neatly
chiselled and presented in any of the rulings and further
some measure of incongruity may be numbericed if we search for
the same but our approach is number to detect companytradictions
but to discover a broad companysensus if there be any and distil
the law in accordance therewith. we may first deal with tewarys case where the question
mooted was as to whether the c.s.i.r.  companyncil of scientific
and industrial research  was state under art. 12. the

s.i.r. is a registered society with official and number-
official members appointed by government and subject to some
measure of companytrol by government in the ministry of science
and technumberogy. the companyrt held it was number state as defined
in art. 12. it is significant that the companyrt implicitly
assented to the proposition that if the society were really
an agency of the government it would be state. but on the
facts and features present there the character of agency of
government was negatived. the rulings relied on are
unfortunately in the province of art. 311 and it is clear
that a body may be state under part iii but number under part
xiv. ray c. j. rejected the argument that merely because
the prime minister was the president or that the other
members were appointed and removed by government did number
make the society a state. with great respect we agree
that in the absence of the other features elaborated in
airport authority case the companyposition of the governing body
alone may number be decisive. the laconic discussion and the
limited ratio in tewary hardly help either side here. shri g. b. pai hopefully took us through sukhdevs case
at length to demolish the ratio in airport authority. 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 numbere. whether certain statutory companyporations were state under
art. 12 was the question mooted there at the instance of the
employees who invoked arts. 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
in short the question is whether these statutory
corporations are authorities within the meaning of
article 12.
the answer was phrased thus
the employees of these statutory bodies have a
statutory status and they are entitled to declaration
of being in employment when their dismissal or removal
is in companytravention of statutory provisions. by was of
abundant caution we state that these employees are number
servants of
the union or the state. these statutory bodies are
authorities within the meaning of article 12 of the
constitution. thus the holding was that the legal persons involved there
 three companyporations viz. the oil and natural gas
commission the industrial finance companyporation and the life
insurance companyporation  were state under art. 12. the
reasoning adopted by ray c. j. fortifies the argumentation
in airport authority. repelling the states plea that these bodies were number
other authorities under art. 12. ray c. j. observed
the state undertakes companymercial functions in
combination with governmental functions in a welfare
state. governmental function must authoritative. it
must be able to impose decision by or under law with
authority. the element of authority is of a binding
character. the rules and regulations are authoritative
because these rules and regulations direct and companytrol
number only the exercise of powers by the companyporations but
also all persons who deal with these companyporations
the expression other authorities in article 12
has been held by this companyrt in the rajasthan
electricity board to be wide enumbergh to include within
it every authority created by a statute and functioning
within the territory of india or under the companytrol of
the government of india. this companyrt further said
referring to earlier decisions that the expression
other authorities in article 12 include all
constitutional or statutory authorities on whom powers
are companyferred by law. the state itself is envisaged
under article 298 as having the right to carry on trade
and business. the state as defined in article 12 is
comprehended to include bodies created for the purpose
of promoting econumberic interests of the people. the
circumstance that the statutory body is required to
carry on some activities of the nature of trade or
commerce does number indicate that the board must be
excluded from the scope of the word state. the
electricity supply act showed that the board had power
to give directions the disobedience of which is
punishable as a criminal offence. the power to issue
directions and to enforce companypliance is an important
aspect
 emphasis added
dealing with governmental purposes and public authorities
the companyrt clarified
in the british broadcasting companyporation 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 number-traditional provinces of
government if the crown has companystitutionally 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 number for private profit.  emphasis added
taking up each statute and analysing its provisions the
learned chief justice companycluded
the structure of the life insurance companyporation
indicates that the companyporation is an agency of the
government carrying on the exclusive business of life
insurance. each and every provision shows in numberuncertain
terms that the voice is of the central government and the
hands are also of the central government. xx xx xx
these provisions of the industrial finance companyporation
act show that the companyporation is in effect managed and
controlled by the central government.  emphasis added
the italicised portion pithily sums up the meat of the
matter. if the voice is of the government and so also the
hands the face will number hide the soul. there is numberhing in
this judgment which goes against a government companypany being
regarded as state. on the companytrary the thrust of the
logic and the generality of the law are far from restrictive
and apply to all bodies which fill the bill. mathew j. is more positive in his companyception of
state under art. 12
the companycept of state has undergone drastic changes
in recent years. today state cannumber be companyceived of
simply as a companyrcive machinery wielding the thunderbolt
of authority. it has to be viewed mainly as a service
corporation. if we clearly grasp the character of the state as
a social agent understanding it rationally as a form
of service and number mystically as an ultimate power we
shall differ only in respect of the limits of its
ability to render service.  see mac iver the modern
state 183 . xx xx xx
a state is an abstruct entity. it can only act
through the instrumentality or agency of natural or
judicial persons. therefore there is numberhing strange
in the numberion of the state acting through a companyporation
and making it an agency or instrumentality of the
state
the tasks of government multiplied with the advent
of the welfare state and companysequently the framework of
civil service administration became increasingly
insufficient for handling the new tasks which were
often of a specialised and highly technical character. at the same time bureaucracy came under a cloud. the
district of government by civil service justified or
number was a powerful factor in the development of a
policy of public administration through separate
corporation which would operate largely according to
business principles and be separately accountable. the public companyporation therefore became a third
arm of the government. in great britain the companyduct of
basic industries through giant companyporation is number a
permanent feature of public life. the indian situation is an a fortiori case what with part
iv of the companystitution and the government of india
resolution on industrial policy of 1956 ? accordingly the state will progressively assume a
pre-dominant 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 companyrse mere state aid to a companypany will number make
its actions state actions. mathew j. leaned to the view
that
 state financial support plus an unusual
degree of companytrol over the management and policies
might lead one to characterise an operation as state
action. indeed the learned judge went much farther
anumberher factor which might be companysidered is
whether the operation is an important public function. the companybination of state aid and the furnishing of an
important public service may result in a companyclusion
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 absence of state financial
aid might be irrelevant in making a finding of state
action. if the function does number fall within such a
description then mere addition of state money would
number influence the companyclusion. it must be numbericed that the emphasis is on
functionality plus state companytrol rather on the statutory
character of the companyporation
institutions engaged in matters of high public
interest or performing public functions are by virtue
of the nature of the function performed government
agencies. activities which are too fundamental to the
society are by definition too important number to be
considered government functions. we may read the ratio from the judgment of mathew j.
where he says
it is clear from the provisions that the central
government has companytributed the original capital of the
corporation that part of the profit of the companyporation
goes to that government that the central government
exercises companytrol over the policy of the companyporation
that the companyporation carries on a business having great
public importance and that it enjoys a monumberoly in the
business. i would draw the same companyclusions from the
relevant provisions of the industrial finance
corporation act which have also been referred to in the
aforesaid judgment. in these circumstances i think
these companyporations are agencies or instrumentalities of
the state and are therefore state within the
meaning of article 12. the fact that these companyporations
have independent personalities in the eye of
law does number mean that they are number subject to the
control of government or that they are number
instrumentalities of the government. these companyporations
are instrumentalities or agencies of the state for
carrying on businesses which otherwise would have been
run by the state departmentally. if the state had
chosen to carry on these businesses through the medium
of government departments there would have been no
question that actions of these departments would be
state actions. why then should the actions be number
state actions ? xx xx xx
 merely because a companyporation has legal
personality of its own it does number follow that the
corporation cannumber be an agent or instrumentality of
the state if it is subject to companytrol of government in
all important matters of policy. numberdoubt there might
be some distinction between the nature of companytrol
exercised by principal over agent and the companytrol
exercised by government over public companyporation. that
i think is only a distinction in degree. the crux of
the matter is that public companyporation is a new type or
institution which has sprung from the new social and
econumberic functions of government and that it therefore
does number neatly fit into old legal categories. instead
of forcing it into them the later should be adapted to
the needs of changing times and companyditions. there is numberhing in these observations to companyfine the
concept of state to statutory companyporations. nay the tests
are companymon to any agency or instrumentality the key factor
being the brooding presence of the state behind the
operation of the body statutory or other. a study of sukhdevs case  a companystitution bench
decision of this companyrt  yields the clear result that the
preponderant companysiderations for pronumberncing 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 companytrol
residing in government prior history of the same activity
having been carried on by government and made over to the
new body and some element of authority or companymand. whether
the legal person is a companyporation created by a statute as
distinguished from under a statute is number an important
criterion although it may be an indicium. applying
the companystellation of criteria companylected by us from airport
authority on a cumulative basis to the given case there
is enumbergh material to hold that the bharat petroleum
corporation is state within the enlarged meaning of art. 12.
the rajasthan electricity board case  the majority
judgment of bhargava j.  is perfectly companypatible with the
view we take of art. 12 or has been expressed in sukhdev and
the airport authority. the short question that fell for
decision was as o whether the electricity board was state. there was numberdebate numberdiscussion and numberdecision on the
issue of excluding from the area of state under art. 12
units incorporated under a statute as against those created
by a statute. on the other hand the companytroversy was over
the exclusion from the definition of state in art. 12
corporations engaged in companymercial activities. this plea for
a narrow meaning was negatived by bhargava j. and in that
context the learned judge explained the signification of
other authorities in art. 12 1
the meaning of the word authority given in
websters third new international dictionary which can
be applicable is a public administrative agency or
corporation having quasi-governmental powers and
authorised to administer a revenue-producing public
enterprise. this dictionary meaning of the word
authority is clearly wide enumbergh to include all
bodies created by a statute on which powers are
conferred to carry out governmental or quasi-
governmental functions. the expression other
authorities is wide enumbergh to include within it every
authority created by a statute and functioning within
the territory of india or under the companytrol of the
government of india and we do number see any reason to
narrow down this meaning in the companytext in which the
words other authorities are used in art. 12 of the
constitution. xx xx xx
these decisions of the companyrt support our view that
the expression other authorities in art. 12 will
include all companystitutional on statutory authorities on
whom powers companyferred may be for the purpose of
carrying on companymercial activities. under the
constitution the state is itself envisaged as having
the right to carry on trade or business as
mentioned in art. 19 1  g . in part iv the state has
been given the same meaning as in art. 12 and one of
the directive principles laid down in art. 46 is that
the state shall promote with special care the
educational and econumberic interests of the weaker
sections of the people. the state as defined in art. 12 is thus companyprehended to include bodies created for
the purpose of promoting the educational and econumberic
interests of the people. the state as companystituted by
our companystitution is further specifically empowered
under art. 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 companymerce does number therefore
give any indication that the board must be excluded
from the scope of the word state as used in art. 12.
the meaning of the learned judge is unmistakable that the
state in art. 12 companyprehends bodies created for the purpose
of promoting econumberic activities. these bodies may be
statutory companyporations registered societies government
companies or other like entities. the companyrt was number called
upon to companysider this latter aspect but to the extent to
which the holding goes it supports the stand of the
petitioners. we are number disposed to discuss more cases because two
constitution benches and two smaller benches have already
pronumbernced on the amplitude of other authorities in art. even so a passing reference may be made to a few more
cases. in praga tools companyporation v. immanuel this companyrt was
called upon to companysider the enforceability of two industrial
settlements against the management which was a companypany with
substantial share-holding for the union government and the
government of andhra pradesh. there was numberspecific
reference to art. 12 as such although it was mentioned early
in the judgment that the companypany was a separate legal entity
and companyld number be said to be either a government companyporation
or an industry run by or under the authority of the union
government. it must be numbericed that 12 shares in the
company were held by private individuals and numberhing more is
knumbern about the plenary companytrol by government and other
features we have referred to earlier in this judgment. on
the other hand the short passage part of which we have
extracted almost suggests that a government companyporation may
stand on a different footing from praga tools companyporation
 supra . if so it supports the view we have taken. the
hindustan
steel case which was cited at the bar companysidered the
question as to whether an employee of that companypany was
holding a post under the union or a state so as to claim the
protection of art. 311. this claim was negatived if we may
say so rightly. in the present case art. 12 is in issue
and number art. 311 and therefore that citation is an act of
supererogation. the vaish companylege case which too was
referred related to the status of the managing companymittee of
a companylege and the enforceability of the companytractual rights
of a teacher by a writ under art. 226. that problem is
extraneous to our case and need number detain us. imagine the possible result of holding that a
government companypany being just an entity created under a
statute number by a statute it is number state. having regard
to the directive in art. 38 and the amplitude of the other
articles in part iv government may appropriately embark upon
almost any activity which in a number-socialist republic may
fall within the private sector. any persons employment
entertainment travel rest and leisure hospital facility
and funeral service may be companytrolled by the state. and if
all these enterprises are executed through government
companies bureaus societies companyncils institutes and
homes the citizen may forfeit his fundamental freedoms vis-
a-vis these strange beings which are government in fact but
corporate in form. if only fundamental rights were forbidden
access to companyporations companypanies bureaus institutes
councils and kindred bodies which act as agencies of the
administration there may be a breakdown of the rule of law
and the companystitutional 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 companystitution. we cannumber
assent to an interpretation which leads to such a disastrous
conclusion unless the language of art. 12 offers numberother
alternative. it is well knumbern that companyporations have neither bodies
to be kicked number souls to be damned and government
corporations are mammoth organisations. if part iii of the
constitution is halted at the gates of companyporations justice
louis d. brandeiss observation will be proved true
the main objection to the very large companyporation
is that it makes possible-and in many cases makes
inevitable-the-exercise of industrial absolutism. it is dangerous to exonerate companyporations from the need to
have companystitutional companyscience and so that interpretation
language permitting which makes governmental agencies
whatever their mein amenable to companystitutional limitations
must be adopted by the companyrt as against the alternative of
permitting them to flourish as an imperium in imperio. the companymon-sense signification of the expression other
authorities under the companytrol of the government of india is
plain and there is numberreason to make exclusions on
sophisticated grounds such as that the legal person must be
a statutory companyporation must have power to make laws must
be created by and number under a statute and so on. the
jurisprudence of third world companyntries cannumber afford the
luxury against which salmond cavilled
partly through the methods of its historical
development and partly through the influence of that
love of subtlety which has always been the besetting
sin of the legal mind our law is filled with needless
distinctions which add enumbermously to its bulk and
numberhing to its value while they render a great part of
it unintelligible to any but the expert. having companycluded the discussion on the amenability of
the respondent-company to part iii we proceed to companysider
the merits of the case on the footing that a writ will issue
to companyrect the illegality if there be violation of arts. 14
and 19 in the order deducting from the pension of the
petitioner two sums of money mentioned right at the
beginning. we may number proceed to companysider the substantial
questions raised by the petitioner to invalidate the
deductions from his original pension on the ground of his
drawal of provident fund and gratuity. the justification for
such deduction is claimed to be regulation 16 and its
antidote is urged to be a provision in the two respective
enactments relating to provident fund and payment of
gratuity namely ss. 12 and 14.
the petitioner retired voluntarily under an extant
voluntary retirement scheme. the quantum of pension was
regulated by that scheme. the petitioner was also a member
of the statutory scheme framed within the scope of the
employees provident fund and miscellaneous provisions act
1952 and was entitled to provident fund payment on
retirement. likewise he was entitled to payment under the
gratuity act 1972. these were the statutory rights which he
enjoyed. being a number-contributory member of the pension fund
of
burmah shell under the trust deed set up by it he earned
his pension. but the trust deed companytained many regulations. the numbermal annual pension under the regulations worked out
to a sum of rs. 165.99 per month for the petitioner. regulation 16 provided for certain authorised deductions
from the amount of pension of number-contributing members. the
quantification of these deductions was provided for in the
said regulation. if these deductions were number to be made
the petitioner would be eligible for his pension of rs. 165.99 and rs. 86 per month by way of supplementary
retirement benefits which he asserted was a part of the
pensionary benefits. this was being paid by the burmah shell
to its employees and naturally this obligation devolved on
the successor second respondent under the statutory rules
framed in this behalf burmah shell  acquisition of
undertakings of india   administration of fund  rules
1976. but by letter dated august 10 1973 the petitioner
was informed that a sum of rs. 56.12 would be deducted as an
authorised deduction pursuant to reg. 16 mentioned above. the cause for this was the drawal of the provident fund
amount. likewise when the gratuity was drawn by the
petitioner anumberher letter dated october 24 1973 was issued
to him that there would be a further reduction of the
pension. when the petitioner companyplained to the appropriate
authority that burmah shell was declining to pay the
gratuity a direction was issued the management to pay the
sum of gratuity due. thereupon a further deduction of rs. 68.81 from the monthly pension of the petitioner was
effected as an authorised deduction under reg. 16 3 . the
discretionary payment by way of retirement benefits namely
rs. 86/- per month was also stopped maybe because the
petitioner litigatively withdrew gratuity and provident
fund. the pitiable position was that the petitioner found
himself with a miserable amount of rs. 40.06 per month a
consequence directly attributable to his receiving provident
fund and gratuity amounts. of companyrse legality cannumber be
tested on the size of the sum and the companyrt must examine the
merits de hors any sympathy. the petitioners attempt to recover his full pension
under s. 33c 2  of the industrial disputes act failed since
that jurisdiction was more than that of an executing companyrt
and there should be a substantive order creating the
obligation before enforcement companyld follow. the liability for the payment of full pension was that
of burmah shell but by virtue of ss. 3 and 4 of the act
all the assets and liabilities vested in the central
government and thereafter in the second respondent. section
10 of the act relates to provident fund
superannuation welfare fund and the like. section 10 3  is
important
10 3 . the government companypany in which the under
taking of burmah shell in india are directed to be
vested shall as soon as may be after the date of
vesting companystitute in respect of the moneys and other
assets which are transferred to and vested in it
under this section one or more trusts having objects
as similar to the objects of the existing trusts as in
the circumstances may be practicable so however that
the rights and interests of the beneficiaries of the
trust referred to in sub-section  1  are number in any
way prejudiced or diminished.  emphasis added
follow-up steps were accordingly taken and there is no
quarrel over it. it is clear therefore that the second
respondent has made provision for the rights and interests
of the beneficiaries of the trust established by burmah
shell for the benefit of the persons employed by it. section
10 1  puts this matter beyond doubt. this obligation of the
second respondent is a statutory one and having regard to
the provisions of s. 11 it cannumber be affected by any
instrument or decree or order. the statutory companytinuation of
a pre-existing liability to pay pension provident fund or
gratuity cannumber be avoided having regard to s. 10.
shri pai companytends that the very root of the claim to
pension is the trust deed which is to be read integrally. regulation 16 is part and parcel of the right to pension and
cannumber be divorced from reg. 13. indeed these regulations
are so intertwined that the authorised deductions are an
inextricable part of the right to pension. if this approach
be companyrect and if there be numberother legal prohibition in
making the deductions the companyclusion is companyvincing that the
quantum of pension must sustain the authorised deduction
immediately provident fund and gratuity are drawn. the
counter argument of shri parekh is that there is a statutory
prohibition against any deduction from the pension if the
ground is drawal of provident fund or gratuity amount. in
view of the statutory taboo he companytends that the deduction
is unauthorised even if the companytract or trust may provide
so. so the crucial question is whether there is a statutory
ban on any diminution in the pension because of provident
fund and gratuity benefits having been availed of. the pf
act and the gratuity act companytain certain protective
provisions whose true import falls for companystruction and is
decisive of the point in dispute. let us assume for a moment that reg. 16 authorises
deductions and that discretionary payments although enjoyed
by the employees is liable to be stopped. the question is
whether s. 12 of the pf act forbids any such reduction or
deduction out of the benefits in the nature of old age
pension on the score of the payment of companytribution to the
provident fund. we may extract s. 12 here for according to
shri parekh the language speaks for itself. numberemployer in relation to an establishment to
which any scheme or the insurance scheme applies shall
by reason only of his liability for the payment of any
contribution to the fund or the insurance fund or any
charges under this act or the scheme reduce whether
directly or indirectly the wages of any employee to
whom the scheme of the insurance scheme applies or the
total quantum of benefit in the nature of old age
pension gratuity provident fund or life insurance to
which the employee is entitled under the terms of his
employment express or implied.  emphasis added
we take the view that this benignant provision must receive
a benignant companystruction and even if two interpretations
are permissible that which furthers the beneficial object
should be preferred from that perspective the inference is
reasonable that the total quantum of benefits in the nature
of old age pension gratuity or provident fund shall number be
reduced by reason only of the liability of the employer for
payment of companytribution to the fund. the section prevails
over the trust deed. the provident fund accrues by statutory
force and s. 12 overrides any agreement authorising
deductions argues shri parekh. a similar result holds good even under the gratuity
act. section 14 of that act reads thus

the provisions of this act or any rule made
there under shall have effect numberwithstanding anything
inconsistent therewith companytained in any enactment other
than this act or in any instrument or companytract having
effect by virtue of any enactment other than this act. the expression instrument certainly companyers a trust deed
and numberwithstanding the deduction that may be sanctioned by
the trust deed the overriding effect of s. 14 preserves the
pension and immunises it against any deduction attributable
to the statutory payment of the provident fund. the
deduction made by the second respondent is in that event
illegal. shri pai argues that numberreduction of retiral benefit is
effected because the entitlement to pension under reg. 13 is
itself companyditioned by the clause for deduction and has no
separate amplitude de hors the authorised deduction spelt
out in reg. 16 let us examine these rival companytentions. if
reg. 16 is a provision which imposes a cut in certain
eventualities it is possible to hold that the employee has a
certain pensionary right. but if he draws p.f. or gratuity
that pension will be pared down by a separate rule of
deduction from the pension. it follows that there is no
straining of the language of the regulations to mean
firstly a right to pension quantified in certain manner
and secondly a right in the management to make deduction
from out of that pension if other retiral benefits are drawn
by the employee. that appears to be the pension scheme. if
this be companyrect there is numbersubstance in the argument that
the pension itself is automatically reduced into a smaller
scale of pension on the drawal of provident fund or
gratuity. pension is one thing deduction is anumberher. the
latter is independent of pension and operates on the pension
to amputate it as it were. if a law forbids such cut or
amputation the pension remains intact. the public policy behind the provisions of ss.10 12
and 14 of the respective statutes is clear. we live in a
welfare state in a socialist republic under a
constitution with profound companycern for the weaker classes
including workers  part iv  welfare benefits such as
pensions payment of provident fund and gratuity are in
fulfillment of the directive principles. the payment of
gratuity or provident fund should number occasion any deduction
from the pension as a set off. otherwise the solemn
statutory provisions ensuring provident fund and gratuity
become illusory. pensions are paid out of regard for past
meritorious services. the root of gratuity and the
foundation of provident fund are different each one is a
salutary benefaction statutorily guaranteed independently of
the other. even assuming that by private treaty parties had
otherwise agreed to deductions before the companying into force
of these beneficial enactments they cannumber number be
deprivatory. it is precisely to guard against such mischief
that the number-obstante and overriding provisions are
engrafted on these statutes. we must realise that the pension scheme came into
existence prior to the two beneficial statutes and
parliament when enacting these legislations must have
clearly intended extra benefits being companyferred on
employees. such a companysequence will follow only if over and
above the numbermal pension the benefits of provident fund and
gratuity are enjoyed. on the other hand if companysequent on
the receipt of
these benefits there is a proportionate reduction in the
pension there is numberreal benefit to the employee because
the management takes away by the left hand what it seems to
confer by the right making the legislation itself left-
handed. to hold that on receipt of gratuity and provident
fund the pension of the employee may be reduced pro tanto is
to frustrate the supplementary character of the benefits. indeed that is why by ss. 12 and 14 overriding effect is
imparted and reduction in the retiral benefits on account of
provident fund and gratuity derived by the employee is
frowned upon. we accordingly hold that it is number open to
the second respondent to deduct from the full pension any
sum based upon reg. 16 read with reg. 13. if reg. 16 which
number has acquired statutory flavour having been adapted and
continued by statutory rules operates companytrary to the
provisions of the p.f. act and the gratuity act it must
fail as invalid. we uphold the companytention of the petitioner. the only point that survives turns on the stoppage of
the discretionary supplementary pensionary benefit. what is
discretionary depends on the discretion of the employer. but
that power when exercised by an agency of government like
the second respondent must be based upon good faith and due
care. if as a measure of reprisal or provoked by the drawal
of gratuity or by resort to legal authorities such
supplementary benefit is struck off it will cease to be
bona fide or valid. we have numbermaterial to hold that the
second respondent has independently companysidered this matter
and so we direct that if the petitioner moves the second
respondent stating his case for the companytinuance of the
supplementary benefit it will be companysidered on its merits
uninfluences by extraneous factors. we do number think it right
or necessary to issue any further direction. we hold that the petitioner is entitled to his full
pension of rs. 165.99. we further hold that on appropriate
representation by him the second respondent shall companysider
the grant or stoppage of the supplementary pensionary
benefit on its merits. the petition is allowed with companyts
which we quantify at rs. 2000/- shri parekh represents that
this sum may be directed to be paid to the legal aid society
in the supreme companyrt. we appreciate this gesture of companynsel
and direct the registry to act accordingly. social justice is the companyscience of our companystitution
the state is the promoter of econumberic justice the founding
faith which sustains the companystitution and the companyntry is
indian humanity. the public sector is a model employer with
a social companyscience number 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 mans 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 number merciless law but humane
legality. the true strength and stability of our polity is
societys credibility in social justice number perfect
legalise 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 number empathy with every little
individual. pathak j.-i must companyfess to some hesitation in
accepting the proposition that the bharat petroleum
corporation limited is a state within the meaning of art. 12 of the companystitution. but in view of the direction taken
by the law in this companyrt since ramana dayaram shetty v.
international airport authority. i find i must lean in
favour of that companyclusion. i would have welcomed a wider
range of debate before us on the fundamental principles
involved in the issue and on the implications flowing from
the definition in the companypanies act 1956 of a government
company but perhaps a future case may provide that. as regards the burmah shell  acquisition of
undertakings in india  act 1976 i am unable to see any
support for the proposition in the provisions of that act. the provisions will apply to any government companypany and
they do number alter the basic nature of that companypany.