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PETITIONER: HEAVY ENGINEERING MAZDOOR UNION

       Vs.

RESPONDENT: THE STATE OF BIHAR & ORS.

DATE OF JUDGMENT: 12/03/1969

BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. BHARGAVA, VISHISHTHA

CITATION:  1970 AIR   82            1970 SCR  (1) 995  1969 SCC  (1) 765  CITATOR INFO :  F          1975 SC1329  (5)  MV         1975 SC1331  (124,127)  F          1975 SC1737  (2,3)  D          1979 SC1628  (29)  RF         1981 SC 212  (38)  F          1982 SC 697  (21)  D          1984 SC1813  (16,21)  R          1984 SC1813  (16,21)  D          1984 SC1897  (6,8)  F          1985 SC 488  (12)  RF         1988 SC 469  (6)  D          1988 SC1369  (13)  F          1988 SC1708  (13)  D          1989 SC1713  (10)

ACT: Industrial  Disputes  Act, 1947, ss.  2(a)  and  10-Industry carried on by company incorporated under the Companies  Act, 1956-Entire share capital subscribed by Central  Government- Whether  industry  carried on "under the authority  of"  the Central Government and if that the "appropriate government". Industrial Employment (Standing Orders) Act,  1946-Questions pending before certifying authority-If bar to a reference of adjudication  under  s.10 of the  Industrial  Disputes  Act, 1947.

HEADNOTE: The  Heavy Engineering Corporation Limited was  incorporated under  the  Companies  Act  and  its  entire  share  capital contributed  by the Central Government.  It was therefore  a Government  Company under s. 617 of the Companies  Act.  its Memorandum  and  Articles  conferred  large  powers  on  the Central Government including the power to give directions as regards the operation of the Company, the wages and salaries of  its employees, and the appointment of directors  of  the company.  Certain disputes arose between the Company and its workmen  whereupon  the State Government of  Bihar  referred these  disputes  by a notification in November 1956  to  the Industrial  Tribunal for adjudication.  The workmen  through their union filed a writ petition under Arts. 226 and 227 of the Constitution disputing the validity of the reference  on

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two grounds :(i)    that the appropriate Government to  make the said reference under s.   10 of the Industrial  Disputes Act,  1947  was  the Central Government and  not  the  State Government;  and  (ii)  that  the  questions  referred   for adjudication  were at the time actually pending  before  the certifying   authority  under  the   Industrial   Employment (Standing   Orders)  Act,  1946,  on  an   application   for modification of the Company’s Standing Orders and  therefore the  said questions would not be industrial  disputes  which could be validly referred for adjudication.  The High  Court negatived  both the contentions and upheld the  validity  of the reference. In  appeal  to  this Court under Art. 133  (i)  (c)  it  was contended  inter  alia on behalf of the appellant  that  the industry in question was "carried on under the authority  of the Central Government" within the meaning of s. 2(a) of the Act and the reference under s. 10 was therefore required to be   made by that Government. HELD,  Dismissing  the  appeal : (i) The  words  "under  the authority of" mean pursuant to the authority, such as where. an  agent  or  a  servant acts  under  or  pursuant  to  the authority of his principal or master.  That obviously cannot be  said of a company incorporated under the  Companies  Act whose  constitution, powers and functions are  provided  for and  regulated  by  its memorandum of  association  and  the articles  of  association.  An incorporated  company  has  a separate  existence and the law recognises it as a  juristic person  separate  and distinct from its members.   The  mere fact that the entire share capital of the respondent-company was contributed by the Central Government and the fact  that all its shares were L 11 Sup Cl/69-14 996 held  by the President and certain officers of  the  Central Government did not make any difference. [998 H-999 G] Salomon  v.  Salomon  &  Co.,  [1897]  A.C.  22;  Janson  v. Driefontain Consolidated Mines, [1902] A.C. 484; Kuenigi  v. Donnersmarck,  [1955]  1 Q.B. 515; Graham  v.  Public  Works Commissioners,  [1901]  (2)  K.B.  781;  The  State  Trading Corporation  of  India Ltd. v. The  Commercial  Tax  officer Visakhapatnam [1964] 4 S.C.R. 99 at 188, per Shah J;  Tamlin v.  Hannaford  [1950]  1 K.B. 18 at 25,  26;  London  County Territorial  and  Auxiliary Forces Association  v.  Nichols, [1948] 2 All.  E.R. 432; referred to. Although   extensive  powers  were  conferred   on   Central Government to give directions in regard to various  matters, these powers were derived from the company’s memorandum  and articles and not by reason of the company being the agent of the Central Government. [1000 B] The definition of "employer" in s. 2(g) of the Act  suggests that  an industry carried on by and under the  authority  of the Government means either the industry carried on directly by  a  department of the Government, such as the  Posts  and Telegraphs  or  the  Railways, or one  carried  on  by  such department through the instrumentality of an agent. [1001 B] Carlsbad Mineral Water Mfg.  Co. v. P. K. Sarkar, [1952] (1) L.L.J. 488; Cantonment Board v. State of Punjab, [1961]  (1) L.L.J.  734:  Abdul  Rehaman Abdul Gafur v.  Mrs.  E.  Paul, A.I.R. 1963 Bom. 267, referred to. (ii) There  was  no  force in the  contention  that  as  the questions  relating  to the modification  of  the  company’s Standing Orders were pending before the certifying authority under  the  Industrial Employees (Standing Orders)  Act,  no reference could be made relating to these under s. 10 of the Act. [1001 D]

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Management  of Bangalore Woollen, Cotton and Silk Mills  Co. Lid. v.   Workmen,  [1968]  1  S.C.R.  581;  Management   of Shahdara (Delhi) Saharanpur Light Railway Co. Ltd. v. S.  S. Railway Workers Union, [1969] 2 S.C.R. 131, followed.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1463  of 1968. Appeal  from the Judgment and order dated September 5,  1967 of   the  Patna High Court in Civil Writ  Jurisdiction  Case No. 921 of 1966. A.   K. Nag, Jai Kishan and Ranen Roy, for the appellant. U.   P. Singh, for respondent No. 1. B.   P. Singh, for respondent No. 2. The Judgment of the court was delivered by Shelat, J.-The Heavy Engineering Corporation Ltd., Ranchi is a  company incorporated under the Companies Act, 1956.   Its entire   share  capital  is  contributed  by   the   Central Government  and all its shares have been registered  in  the name  of the President of India and certain officers of  the Central Government.  It is, therefore, a Government  company within the 99 7 meaning  of s. 617 of the Companies Act.  The Memorandum  of Association  and the Articles of Association of the  company confer large powers on the Central Government including  the power  to give directions as regards the functioning of  the company.   The wages and salaries of its employees are  also determined  in  accordance with the  said  directions.   The directors of the company are appointed by the President.  In its   standing  orders,  the  company  is  described  as   a Government undertaking.  The workmen employed by the company have two unions, the Heavy Engineering Mazdoor Union and the Hatia Project Workers Union. Certain  disputes having arisen between the company and  its workmen, into which it is not necessary for the purposes  of this  judgment to go, the State Government of Bihar  by  its notification dated November 15, 1966 referred two  questions to  the Industrial Tribunal for its adjudication :  firstly, as  regards  the number of festival holidays  and  secondly, whether the second Saturday in a month should be an off-day. The  Mazdoor  Union thereupon filed a  writ  petition  under Arts.  226 and 227 of the Constitution in the High Court  of Patna  disputing the validity of the said reference  on  two grounds  : (1) that the appropriate Government to  make  the said  reference under s. 10 of the Industrial Disputes  Act, 1947 was the Central Government and not the State Government and  (2)  that the questions referred to were  at  the  time actually  pending before the certifying authority under  the Industrial  Employment  (Standing Orders) Act,  1946  on  an ’application  for  modification of  the  company’s  standing orders  and that therefore the said questions would  not  be industrial  disputes  which could be  validly  referred  for adjudication.   Before the High Court it was  conceded  that the  company was not an industry carried on by  the  Central Government but the contention was that considering the  fact that the entire share capital was contributed by the Central Government  and extensive powers were conferred on  it,  the company must be regarded as an industry carried on under the authority  of the Central Government and that  therefore  it was  that  Government which was the  appropriate  Government which  could  make  the  said  reference.   On  the   second question, the contention was that the Industrial  Employment

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(Standing Orders) Act was a self-contained code, that once a question  relating to conditions of service was  before  the certifying  authority  constituted under that  Act  and  was pending  before  him,  the said question  could  not  be  an industrial dispute which could be referred for  adjudication under  s. 10 of the Industrial Disputes Act.  It  was  urged that  consequently  the reference on both  the  grounds  was invalid.  The High Court negatived both the contentions  and upheld  the  validity of the reference.  The  Mazdoor  Union obtained  a certificate under Art. 1 3 3 (1) (c)  and  filed this appeal impugning the correctness of that decision. 998 Under  s. 2(a) ’appropriate Government’ (leaving  aside  the words which are not relevant for our purposes) means (i)  in relation  to any industrial dispute concerning  an  industry carried  on  by  or  under  the  authority  of  the  Central Government, the Central Government, and (ii) in relation  to any  other industrial dispute the State Government.  As  was done  before  the  High Court, Mr. Nag,  appearing  for  the appellant-union, conceded that he would not contend that the company is an industry carried on by the Central  Government but  argued  that  it is an industry carried  on  under  the authority of the Central Government and therefore it is that Government  and  not  the  State  Government  which  is  the appropriate Government for making a reference under s. 10 of the Act.  The first question raised by the  appellant-union, therefore, turns solely upon the construction of the words " carried  on under the authority of the Central  Government". The  contention was primarily grounded on the fact that  the entire share capital of the company has been contributed  by the  Central  Government,  all its shares are  held  by  the President  and  certain officers of the  Central  Government presumably  its nominees and extensive control is vested  in the Central Government. Before  considering the authorities cited by counsel  before us,  we  proceed first to examine the meaning of  the  words used by Parliament in the definition clause of  ’appropriate Government’.  It is an undisputed fact that the company  was incorporated  under the Companies Act and it is the  company so  incorporated  which  carries on  the  undertaking.   The undertaking,  therefore, is not one carried on  directly  by the  Central Government or by any one of its departments  as in  the  case of posts and telegraphs or the  railways.   It was,  therefore, rightly conceded both in the High Court  as also before us that it is not an industry carried on by  the Central  Government.  That being the position, the  question then  is, is the undertaking carried on under the  authority of the Central Government?  There being nothing in s. 2  (a) ,  to the contrary, the word ’authority’ must  be  construed according to its ,ordinary meaning and therefore must mean a legal power given by one person to another to do an act.   A person is said to be authorised or to have an authority when he is in such a position that he can act in a certain manner without  incurring liability, to which he would  be  exposed but for the authority, or, so as to produce the same  effect as if the person granting the authority had for himself done the  act.  For instance, if A authorises B to  sell  certain goods  for  and  on his behalf and B does so,  B  incurs  no liability for so doing in respect of such goods and  confers a good title on the purchaser.  There clearly arises in such a  case the relationship of a principal and an  agent.   The words  "under  the  authority  of"  mean  pursuant  to   the authority, such as where an agent or a servant acts under or pursuant  to the authority of his principal or master.   Can the respondent-company, there-

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99 9 fore, be said to be carrying on its business pursuant to the authority of the Central Government ? That obviously  cannot be  said of a company incorporated under the  Companies  Act whose  constitution, powers and functions are  provided  for and  regulated  by  its memorandum of  association  and  the articles  of  association.  An incorporated company,  as  is well known, has a separate existence and the law  recognises it  as  a juristic person, separate and  distinct  from  its members.   This new personality emerges from the  moment  of its incorporation and from that date the persons subscribing to  its memorandum of association and others joining  it  as members are regarded as a body incorporate or a  corporation aggregate  and  the  new person begins  to  function  as  an entity. (of  Salomon v. Solomon & Co.) (1).  Its rights  and obligations  are different from those of  its  shareholders. Action  taken  against  it  does  not  directly  affect  its shareholders.  The  company  in  holding  its  property  and carrying   on  its  business  is  not  the  agent   of   its shareholders.  An infringement of its rights does not give a cause  of action to its shareholders.  Consequently, it  has been said that if a man trusts a corporation he trusts that legal  persona and must look to its assets for  payment;  he can call upon the individual shareholders to contribute only if the Act or charter creating the corporation so  provides. The  liability of an individual member is not  increased  by the fact that he is the sole person beneficially  interested in  the  property  of the corporation  and  that  the  other members  have  become  members merely  for  the  purpose  of enabling the corporation to become incorporated and  possess only a nominal interest in its property or hold it in  trust for  him. (cf.  Halsbury’s Laws of England, 3rd Ed. Vol.  9, p. 9).  Such a company even possesses the nationality of the country  under  the  laws  of  which  it  is   incorporated, irrespective, of the nationality of its members and does not cease  to have that nationality even if in times of  war  it falls  under  enemy  control. (cf.   Janson  v.  Driefontain Consolidated  Mines(2) and Kuenigi v. Donnersmarck(3).   The company  so  incorporated derives its powers  and  functions from and by virtue of its memorandum of association and  its articles of association.  Therefore, the mere fact that  the entire   share   capital  of  the   respondent-company   was contributed by the Central Government and the fact that  all its shares are held by the President and certain officers of the  Central Government does not make any  difference.   The company  and the shareholders being, as aforesaid,  distinct entitles  the fact that the President of India  and  certain officers  hold all its shares does not make the  company  an agent either of the President or the Central Government.   A notice  to the President of India and the said  officers  of the Central Government, who hold between them all the shares of the company, would not be a notice to the (1)[1897]A.C.22.                   (2) [1902] A.C. 484. (3)  [1955] 1 Q.B. 515. 1000 company;  nor can a suit maintainable by and in the name  of the company be sustained by or in the name of the  President and the said officers.            It  is true that besides the  Central  Government having   contributed  the, entire share  capital,  extensive powers  are  conferred on it, including the  power  to  give directions as to how the company should function, the  power to  appoint  directors and even the power to  determine  the wages and salaries payable by the company to its  employees. But  these powers are derived from the company’s  memorandum

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of  association and the articles of association and  not  by reason  of  the  company  being the  agent  of  the  Central Government.  The question whether a corporation is an  agent of the State must depend on the facts of each case.  Where a statute  setting up a corporation so provides, such  a  cor- poration can easily be identified as the agent of the  State as   in  Graham  v.  Public  Works  Commissioners(1)   where Phillimore,  J.  said that the Crown does in  certain  cases establish  with the consent of Parliament certain  officials or bodies who are to be treated as agents of the Crown  even though they have the power of contracting as principals.  In the absence of a statutory provision, however, a  commercial corporation  acting  on its own behalf, even  though  it  is controlled  wholly or partially by a Government  department, will be ordinarily presumed not to be a servant or agent  of the State.  The fact that a minister appoints the members or directors  of a corporation and he is entitled to  call  for information,  to  give directions which are binding  on  the directors and to supervise over the conduct of the  business of the corporation does not render the corporation an  agent of  the  Government. (see The State Trading  Corporation  of India Ltd. v.  The Commercial Tax Officer,  Visakhapatnam(2) and Tamlin  v. Hannaford(3).   Such  an inference  that  the corporation  is  the agent of the Government  may  be  drawn where  it  is performing in substance governmental  and  not commercial  functions.  (cf. London County  Territorial  and Auxiliary Forces Association v. Nichols(4)    In this connection the meaning of the word ’employer’  as given  in  s. 2 (g) of the Act may be looked  at  with  some profit  as  the legislature there has used  identical  words while  defining  (an employer’.  An employer under  cl.  (g) means, in relation to an industry carried on by or under the authority  of any department of the Central Government or  a State Government, the authority prescribed in that behalf or where  no  such  authority is prescribed, the  head  of  the department.  No such authority has been prescribed in regard to the business carried on by the respondent- (1)  [1901] 2 K.B. 781. (2)  [1964] 4 S.C.R. 99 at 188, per Shah, J (3)  [1950] 1 K.B. 18 at 25, 26. (4)  [1948] 2 All.  E.R. 432. 1001 company.   But  that  does not mean that  the  head  of  the department which gives the directions as aforesaid or  which supervises  over  the  functioning of  the  company  is  the employer  within the meaning of s. 2(g).  The definition  of the  employer,  on the contrary, suggests that  an  industry carried on by or under the authority of the Government means either  the industry carried on directly by a department  of the  Government,  such as the posts and telegraphs,  or  the railways,  or one carried on by such department through  the instrumentality of an agent.  We find that the view which we are  inclined  to take on the interpretation of s.  2(a)  is also  taken  by  the High Courts  of  Calcutta,  Punjab  and Bombay.  (see  Carlsbad  Mineral Water Mfg.  Co.  v.  P.  K. Sarkar(1), Cantonment Board v. State of Punjab(2) and  Abdul Rehaman  Abdul  Gofur v. Mrs. E. Paul(3).  In our  view  the contention  that  the  appropriate Government  to  make  the aforesaid  reference was the Central Government and not  the State Government has no merit and cannot be sustained. The  second contention that the questions referred  to  were regulated   by   the  company’s  standing  orders   and   an application  for a modification of the said standing  orders relating to those questions was actually pending before  the certifying   authority   under  the   Industrial   Employees

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(Standing Orders) Act precluded a reference thereof under s. 10 of the Act requires no discussion as it is covered by the decision  in Management of Bangalore Woollen, Cotton &  Silk Mills  Co. Ltd. v. Workmen(4) and The Management of  Shahdra (Delhi)  Saharanpur Light Railway Co. Ltd. v. S. S.  Railway Workers Union(5). Thus  neither of the two contentions can be upheld.  In  the result the appeal is dismissed but there will be no order as to costs. R.K.P.S.                            Appeal dismissed. (1)  (1952] 1 L.L.J. 388. (2)  [1961] 1 L.L.J. 734. (3)  A.I.R. 1963 Bom. 267. (4)  [1968] 1 S.C.R. 581. (5)  [1969] 2 S.C.R. 131. 1002