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PETITIONER: SOM PRAKASH REKHI

       Vs.

RESPONDENT: UNION OF INDIA & ANR.

DATE OF JUDGMENT13/11/1980

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. REDDY, O. CHINNAPPA (J) PATHAK, R.S.

CITATION:  1981 AIR  212            1981 SCR  (2) 111  1981 SCC  (1) 449  CITATOR INFO :  RF         1986 SC1499  (16)  R          1986 SC1571  (55)  R          1987 SC  51  (3)  R          1987 SC1086  (18)  APL        1988 SC 469  (9,10)  F          1989 SC1642  (24)  RF         1990 SC1167  (10,14)  RF         1992 SC  76  (2)

ACT:      Constitution  of  India-Burmah  Shell  (Acquisition  of Undertakings in  India) Act,  1976-Company acquired  by  the Government and vested in a statutory corporation-Corporation if State-Test for determining whether a body is State within the meaning of article 12.

HEADNOTE:      Under a  voluntary retirement  scheme in  force in  the company the  petitioner, a clerk in Burmah Shell Oil Storage Ltd., retired  voluntarily after qualifying for pension. The pension payable to him was regulated by the terms of a trust deed of  1950 under  which a  pension fund  was set  up  and regulations were made for its administration. The petitioner was also  covered by  a scheme under the Employees Provident Fund and  Miscellaneous Provisions Act, 1952 and to gratuity under the Payment of Gratuity Act, 1972.      The annual  pension to  which he was entitled under the trust deed,  without making  the  authorised  deductions  as provided under  regulation 16  of the trust deed, worked out to a  sum of  Rs.  165.99  per  mensem.  He  was  also  paid supplementary retirement benefit of Rs. 86/- per month for a period of  13 months  after his retirement which was stopped thereafter.      The employer  informed the  petitioner that from out of his pension  of Rs.  165.99 two deductions were made, one of which was  on account  of employees  provident fund  payment made to the pensioner and the other on account of payment of gratuity with  the result  the pension  payable to  him  was shown as  Rs. 40.05.  The company  also cut  off the monthly payment  of   Rs.  86/-  which  was  paid  as  supplementary retirement benefit  on the  score that  it  was  ex  gratia,

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discretionary and  liable to  be stopped  at any time by the employer.      In the  meantime the company was statutorily taken over by force of the Burmah Shell (Acquisition of Undertakings in India) Act,  1976. Thereafter  the Central  Government  took steps to  vest the undertaking in the second respondent, the Bharat Petroleum,  which then became the statutory successor of the  petitioner’s employer. His pensionary rights such as he  had,   therefore,  became   claimable  from  the  second respondent.      A preliminary  objection was  raised on  behalf of  the corporation that  no  writ  would  lie  against  the  second respondent since it is neither a government department nor a statutory corporation but just a company. ^      HELD : By the Court :      The petitioner  is entitled  to  the  payment  of  full pension. (per majority Krishna Iyer and Chinnappa Reddy, JJ Pathak, J dissenting).      1. The  Bharat Petroleum is State within the meaning of Article 12  of the  Constitution and a writ will lie against it under Article 32. [128A] 112      (a) The  settled position  in law is that any authority under the  control of  Government of  India comes within the definition of  State. On  the appointed  day the right title and interest  in  Burmah  Shell  did  vest  in  the  Central Government and by virtue of section 3 the Central Government was the  transferee of  the undertaking.  While  the  formal ownership was  cast in  the  corporate  mould,  the  reality reaches down  to State  control. The  core fact  is that the Central Government, through section 7 chose to make over its own property  to its  own offspring.  Therefore, the  Burmah Shell though  a government  company 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 cannot obliterate the true character  of the entity for purposes of constitutional law. [121A; G; 124 D-E]      (b) Corporate  personality is  a  reality  and  not  an illusion or  fictitious construction  of the  law. It  is  a legal person. Merely because a company or other legal person has functional  and jural individuality for certain purposes and in  certain areas of law, it does not necessarily follow that for  the effective  enforcement of  fundamental  rights under the  constitutional scheme,  the Court should not scan the real  character of  that entity.  In  the  instant  case section 7 gives a statutory recognition and a status above a mere government  company. If  the entity  is no  more than a company under  the Company  Law or  society  under  the  law relating to  registered societies  or cooperative  societies one cannot call it an authority. [124F; 125B, E]      (c) An authority in administrative law is a body having jurisdiction  in   certain  matters   of  a  public  nature. Therefore, the ability conferred 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. [125F-H]      Sometimes the test is formulated, by asking whether the corporation is  formed by  a statute or under a statute. The true test  is not  how legal  person is  born but  why it is

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created. Apart  from discharging functions or doing business as the  proxy of  the State  there must  be  an  element  of ability to  affect legal relations by virtue of power vested in it by law. [126A-B]      (d) In  the instant  case sections  3 and  7 clothe the company with  State functions.  Section 7  contemplates that the company  should step  into the  shoes of  the  executive power  of   the  State.   The  legislative  history  of  the corporation shows  that it  is  more  than  a  mere  company registered under  the Companies Act. Matters like conditions of service  of employees,  adjudication of disputes relating to employees, superannuation and welfare funds and so on are regulated  statutorily   unlike  in  the  case  of  ordinary companies. Sections  9 and 10 create rights and duties vis a vis the  government company  itself apart from the Companies Act. Section 11 specifically gives the Act primacy vis a vis other laws.  Section 12  clothes the Government company with power to  take delivery of the property of Burmah Shell from every person  in whose  possession, custody  or control such property may  be. Whatever  its character  antecedent to the Act all  the relevant provisions have transformed it into an instrumentality of  the Central  Government  with  a  strong indicia of  power to make it an "authority". It is a limb of the Government, an agency of the State, a vicarious creature of statute. [126C-H, 127B-C] 113      2. Some  of the  tests laid  down  by  this  Court  for deciding whether  a body  is State  within  the  meaning  of Article 12 are :      (i) If  the entire  share capital of the corporation is held  by   Government,  it  would  go  a  long  way  towards indicating that  the corporation  is an  instrumentality  or agency of the Government;      (ii) A  finding of  State  financial  support  plus  an unusual degree  of control  over the management and policies might lead,  one  to  characterise  an  operation  as  State action.      (iii) The existence of deep and pervasive State control may afford  an indication  that the  Corporation is  a State agency or instrumentality.      (iv) Whether  the corporation  enjoys  monopoly  status which is  State conferred  or State  protected is a relevant factor.      (v) If  the functions  of the corporation are important public functions  and related  to governmental  functions it would be a relevant factor in classifying the corporation as instrumentality or agency of the Government.      (vi) If  a department of Government is transferred to a corporation, it  would be  a strong factor supportive of the inference that it is an instrumentality of the State. [137E- H]      (vii) Where the chemistry of the corporate body answers the test  of State it comes within the definition of Article 12. [136D]      (viii)  Whether  the  legal  person  is  a  corporation created by  a statute, as distinguished from under a statute is  not  an  important  criterion  although  it  may  be  an indicium. [144H]      Airport Authority  [1979] 3  S.C.C. 489, UP Warehousing Corporation case (Managing Director, U.P. Warehousing Corpn. v. V.  N. Vajpayee)  [1980] 3  S.C.C. 459 & Sukhdev Singh v. Bhagatram [1975] 3 S.C.R. 619 referred to.      Rajasthan Electricity  Board  v.  Mohan  Lal  [1967]  3 S.C.R. 377,  Sukhdev v. Bhagatram [1975] 3 S.C.R. 619, Praga Tool Corporation  v. C.  A. Immanuel  [1969] 3  S.C.R.  773;

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Heavy Engineering  Mazdoor Union  v. State of Bihar [1969] 3 S.C.R. 995,  S. L.  Aggarwal v.  General Manager,  Hindustan Steel Ltd. [1970] 3 S.C.R. 363 & Sabhajit Tewari v. Union of India [1975] 3 S.C.R. 616 distinguished.      3(a) Having  regard to  the directive in Article 38 and the amplitude  of the  other articles  in part IV Government may appropriately embark upon almost any activity which in a non-socialist republic  may fall  within the private sector. Any person’s  employment, entertainment,  travel,  rest  and leisure,  hospital  facility  and  funeral  service  may  be controlled by  the State  and if  all these  enterprises are executed through  government companies,  bureaus, societies, councils, institutes  and homes, the citizen may forfeit his fundamental freedoms  vis a  vis these  strange beings which are government  in fact  but  corporate  in  form.  If  only fundamental rights  were forbidden  access to  corporations, companies, bureaus,  institutes, councils and kindred bodies which act  as agencies  of the administration there may be a breakdown of the rule of law and the constitutional order in a large sector of governmental activity carried on under the guise of ‘jural persons’. It may 114 pave the  way for  a new tyranny by arbitrary administrators operated from behind by Government but unaccountable to part III of  the Constitution.  The Court  cannot  assent  to  an interpretation which  leads to  such a disastrous conclusion unless  the   language  of   Article  12   offers  no  other alternative. [147C-F]      (b) It  is dangerous to exonerate corporations from the need  to   have  constitutional   conscience;  and  so  that interpretation,    language    permitting,    which    makes governmental agencies,  whatever  their  mein,  amenable  to constitutional limitations  must be  adopted by the court as against the alternative of permitting them to flourish as an imperium in imperio. [148A-B]      (c) The  common-sense signification  of the  expression "other authorities  under the  control of  the Government of India" is plain and there is no reason to make exclusions on sophisticated grounds  such as that the legal person must be a statutory  corporation, must have power to make laws, must be created by and not under a statute and so on. [148C]      4(a) It  is clear  from section 10 which relates to the provident fund,  pension, welfare fund and the like 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 persons employed by it. Sub- section (1)  puts this  matter beyond doubt. This obligation of the  second respondent  is a  statutory  one  and  having regard to  the  provisions  of  section  11,  it  cannot  be affected by  any instrument or decree or order. The stautory continuation of  a pre-existing  liability to  pay  pension, provident fund  or gratuity, cannot be avoided having regard to section 10. [150D-E]      (b) Assuming  that regulation  16 authorities deduction and that  discretionary payments,  although enjoyed  by  the employees are  liable  to  be  stopped  section  12  of  the Provident Fund  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 contribution to the provident fund. The benignant provision contained in section 12 must receive a benignant construction 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 not be

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reduced by  reason only of the liability of the employer for payment of  contribution to  the fund.  The section prevails over the trust deed. The provident fund accrues by statutory force and  section 12  overrides any  agreement  authorising deductions. The expression ‘instrument’ contained in section 15 covers  a trust  deed and  notwithstanding the  deduction that may  be sanctioned  by the  trust deed,  the overriding effect of  section 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. [151A-H]      (c) If regulation 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 provident fund  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. 115 If this  be correct,  there is  no substance in the argument that the  pension itself  is automatically  reduced  into  a smaller scale  of pension  on the drawl of provident fund or gratuity. Pension  is one  thing, deduction  is another. 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. [152B-D]      (d) The  payment of  gratuity or  provident fund should not 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  coming into force of these beneficial enactments they cannot  now be  deprivatory. It  is precisely  to guard against such  mischief that  the non-obstante and overriding provisions are engrafted on these statutes. [152F-G]      (e) It  is not  open to the second respondent to deduct from the  full pension any sum based upon regulation 16 read with regulation  13. If regulation 16 which now has acquired statutory flavour,  having been  adapted  and  continued  by statutory rules,  operates contrary to the provisions of the P.F. Act  and the  Gratuity Act,  it must  fail as  invalid. [153C]      (f) 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 drawl  of gratuity,  or by  resort to legal authorities, such  supplementary benefit  is struck  off, it will cease to be bona fide or valid. [153D-E] Pathak, J. (dissenting)      On the  merits the  petitioner should be granted relief as proposed by the majority. [154 G]      It is  difficult to  accept the  proposition  that  the Bharat Petroleum Corporation Limited is a "State" within the meaning of  Article 12  of the  Constitution, but the matter appears to  be concluded  because of  the direction taken by the law since Ramana Dayaram Shetty v. International Airport

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Authority [1979] 3 S.C.R. 489 a wider range of debate on the fundamental principles involved in the issue would have been welcomed in  view  of  the  implications  flowing  from  the definition of  a "government  company" in the Companies Act, 1956. [154 D]      The provisions  of the  Burmah  Shell  (Acquisition  of Undertakings in  India) Act,  1976 do  not alter  the  basic nature of  a "government company". They are provisions which could well  have been  applied to  a private corporation, if the Act  had selected one for vesting the undertaking in it. Had that  been done,  they would  not have  made the private corporation a State. [154F]

JUDGMENT:      ORIGINAL JURISDICTION : Writ Petition No. 1212 of 1977.      (Under Article 32 of the Constitution).      Petitioner in Person.      S. Markendeya and Miss A. Subhashini for Respondent No. 1.      G. B.  Pai, O.  C. Mathur and K. J. John for Respondent No. 2. 116      P. R.  Mridul, M. K. Ramamurthi and Jitendra Sharma for the Intervener (The Petroleum Workers’ Union)      P. N.  Tiwari (Secretary  of Union)  for the Intervener (Petroleum Employees’ Union).      B. 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 (corporations) cannot commit treason, nor be      out-lawed, nor excommunicated, for they have no souls."                      (Edward Coke, Sutton’s Hospital Case)      A legal  power, which  projects an  awesome portent has been sprung upon the court by the defending respondent-. The Bharat  Petroleum  Corporation  Ltd  (the  Corporation,  for short)-as to  whether a writ will issue under Art. 32 of the Constitution against  a government company, belonging, as it does, to  an  increasing  tribe  of  soulless  ubiquity  and claiming, as  it does,  to constitutional  immunity. This is the first issue to which he will address ourselves.      Jawaharlal Nehru  warned the Constituent Assembly about the problem of poverty and social change :           The service  of India  means the  service  of  the      millions who suffer. It means the ending of poverty and      ignorance and  disease and  inequality of  opportunity.      The ambition  of the greatest man of our generation has      been to  wipe every  tear from  every eye.  That may be      beyond  us,   but  as  long  as  there  are  tears  and      sufferings, so long our work will not be over.      The second question which claims our attention turns on the petitioner’s  plea of  alleged stultification of Art. 41 by the  State itself  reincarnating as a government company, by defending  the paring  down the pension of the petitioner to  a   pathetic  pittance   thus  sterilising  a  directive principle to a decorative paper. 117

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         Law cannot  stand aside  from the  social  changes      around it.      (Justice Brennan in Roth v. United States 354 U.S. 476)      The third  problem, not humdrum but heuristic, turns on the  construction   of   the   relevant   legislations   and regulations covered  by the  writ petition,  remembering the social dynamics of the law of statutory interpretation.      This writ  petition under  Art. 32  relates to  a  poor employee’s 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  individual’s pensionary fate.      The petitioner  was employed  as a  clerk in the Burmah Shell Oil  Storage  Ltd.,  (Burmah  Shell,  for  short)  and retired betimes  (at 50)  after qualifying for a pension, on April 1,  1973. He  was also  covered 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 Corporation  and became  the statutory  successor of the petitioner’s 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 continued by respondent 2 ? Could 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   contained  the  formula  for quantification. Regulation  13 has  a significant  clause  : "less the authorised deductions specified in reg. 16, namely ......". The bone of contention between the parties is about these 118 deductions and  we may  set out  this  Regulation  (relevant part) even here :           16.  The  authorised  deductions  to  be  made  in      calculating the  amount of  a non-contributing member’s      pension shall be as follows :           (1) 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 Company’s      contributions to  that fund in respect of the period of      the member’s  Accredited Service (including bonuses and      interest on such contributions upto that date).           (2) 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   member’s   Accredited   Service      (including bonuses  and interest  thereon) or  has been      paid out to him during his Accredited Service under the      Rules of Provident Fund, together with interest thereon      from the  date of  such withdrawal  or receipt  to  the

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    relevant date.           (3) If  the Company so elects, a sum not exceeding      six per  cent of  the amount  of any payments which any      company has made or may make or which any company shall      be or  have been  required by law to make to the member      in connection  with the termination of his service with      that company  together 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   company,  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 could 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 contended before us by the petitioner, 119 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  controversy 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. Consequent  on this, Burmah  Shell made  2 deductions from the petitioner’s pension, taking  its stand  on reg.  16 read  with  reg.  13 already referred  to. Indeed,  the company  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 no superannuated soul can survive, in Indian indigence and  inflationary   spiral,  on  Rs.  40/-  per  month,  the petitioner has come to this court challenging the deductions from  his  original  pension  as  illegal  and  inhuman  and demanding  restoration   of  the   full  sum  which  he  was originally drawing.  His right to property under Art. 19 has

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been violated, he claims.      It may  well be,  as urged  by the Corporation, that if reg. 16 does govern, the deductions are warranted. Likewise, if the  Supplementary Retiral  Benefit  is  purely  a  mercy gesture, savouring  of no  manner of  right nor  subject  to restrictions on discretionary exercise, the sudden 120 stoppage  of  that  sum  perhaps  not  illegal.  It  may  be heartless, but  not necessarily  lawless, for  a  prosperous undertaking, now  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 contentions. 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 cannot be controverted 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  no writ  will lie  against the  second  respondent since it  is neither a government department nor a statutory corporation but  just a  company and  so  the  court  should reject out  of hand this proceeding under Art. 32. We do see the  force   of   this   contention,   notwithstanding   the observations in  the Airport Authority Case, that the status of ‘State’  will attach to the government companies like the second respondent.      Let us  first look  at the  facts emerging from the Act and the  superimpose the law in Art. 12 which conceptualises ‘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 common 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  Constitution.  We  will  examine  this position more closely a little later, but granting that Art. 19 is  aimed  at  State  action  the  contours  of  ‘State’, conceptually speaking,  are largely  confined to Art. 12. We have to  study the anatomy of the Corporation in the setting of the  Act and  decide whether it comes within the scope of that Article.  We have  only an  inclusive definition, not a conclusive definition.  One thing  is clear.  Any  authority under 121 the control  of the  Government of  India comes  within  the definition. Before  expanding on this theme, we may scan the statutory scheme, the purpose of the legislative project and the nature  of the  juristic instrument  it has  created for fulfillment   of    that   purpose.   Where   constitutional fundamentals, vital  to the survival of human rights, are at stake functional  realism, not facial cosmetics, must be the diagnostic  tool.   Law,  constitutional   law,  seeks   the substance, not  merely the  form. For, one may look like the innocent flower  but be  the serpent under it. The preamble, which ordinarily  illumines the object of the statute, makes

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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  Company  of  India  Limited,      should  be   acquired  in  order  to  ensure  that  the      ownership  and   control  of   the  petroleum  products      distributed and  marketed in  India by the said company      are vested  in the  State and thereby so distributed as      best to subserve the common good; It is true that what is nationalised is a private enterprise motivated, undoubtedly,  by the  need for  transferring  the ownership and  control of  the  company  and  its  petroleum products distributed  and marketed  in India.  Section 3  is important from this angle :           3. 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 convince a court that by virtue of s. 3,  the Central  Government  is  the  transferee  of  the Undertaking. Had a writ proceeding been commenced during the period of  vesting in  the Central  Government, it could not have been  resisted on  the score  that the  employer is not "the State".  The appointed  day did  arrive and  the right, title and  interest in  Burmah Shell did vest in the Central Government.      A commercial  undertaking although  permitted to be run under our constitutional scheme by Government, may be better managed with professional skills and on business principles, guided, of  course, by social goals, if it were administered with  commercial   fexibility   and   celerity   free   from departmental rigidity, slow motion procedures and 122 hierarchy of  officers. That  is why  a considerable part of the public undertakings is in the corporate sector.      It is  interesting that  with the industrial expansion, economics was  assisted by jurisprudence and law invented or at  least  expanded  the  corporate  concept  to  facilitate economic development consistently with the rule of law. Said Woodrow Wilson, several decades back :           There was  a time when corporations played a minor      part in  our business  affairs, but  now they  play the      chief  part,   and  most   men  are   the  servants  of      corporations. And Franklin D. Roosevelt mourned :           Concentration of  economic power  in all embracing      corporations.....represents private enterprise become a      kind of  private  government  which  is  a  power  unto      itself-a regimentation  of  other  people’s  money  and      other people’s lives. This legal  facility of corporate instrument came to be used by the  State in  many countries  as a  measure  of  immense convenience  especially  in  its  commercial  ventures.  The trappings  of   personality,  liberation  from  governmental stiffness and  capacity for  mammoth growth,  together  with administrative elasticity, are the attributes and advantages of corporations.           A corporation  is an  artificial being, invisible,      intangible, and  existing only  in the contemplation of      the law.  Being  the  mere  creature  of  the  law,  it      possesses only  those properties  which the  charter of      its creation  confers on  it, either  expressly, or  as

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    incidental to its very existence. Those are such as are      supposed best calculated to effect the object for which      it  was   created.  Among   the  most   important   are      immortality,  and,   if  the   expression  be  allowed,      individuality;  properties   by   which   a   perpetual      succession of many persons are considered the same, and      may act as a single individual. Although corporate  personality is  not 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 economic projects readily resort to  this   resourceful  legal  contrivance  because  of  its practical advantages  without a  wee-bit  of  diminution  in ownership and  control of the Undertaking. The true owner is the 123 State, the  real operator  is the  State and  the  effective controllerate  is  the  State  and  accountability  for  its actions to  the community and to Parliament is of the State. Nevertheless, a  distinct juristic  person with  a corporate structure conducts  the business,  with the added facilities enjoyed by  companies and  keeping the  quasi-autonomy 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  corporate  mould,  the  reality reaches down  to State control. With this background we have to read s. 7 of the Act which runs thus :           7.  (1)   Notwithstanding  anything  contained  in      sections 3,  4 and  5, the  Central Government  may, if      satisfied that  a  Government  company  is  willing  to      comply, or  has complied with such terms and conditions      as that  Government may  think fit to impose, direct by      notification that the right, title and interest and the      liabilities of  Burmah Shell  in relation to any of its      undertakings in  India, shall  instead of continuing to      vest in  the Central Government, vest in the Government      company....                                             (emphasis added) The core  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 company is a mini-incarnation of  Government itself, made up of its blood and bones  and given  corporate shape and status for defined objectives, not beyond.      Nor is  this  any  isolated  experiment  in  government formally transferring  ownership to  a company.  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 another instrumentality-may be an  existing government  company or a corporation created by statute  or even  a society or other legal person. In the present case,  a government  company was  created anteriorly and by  virtue of  a notification  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 notification clearly spells out :           In exercise of the powers conferred 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 Ltd.,  a Government  company is  willing  to      comply with such terms and conditions as may be imposed      by the Central Government

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124      hereby directs  that the  right, title and interest and      the  liabilities   of  Burmah-Shell   Oil  Storage  and      Distributing Co.  of India  Ltd.  in  relation  to  its      undertakings in  India, shall, instead of continuing to      vest in  the Central  Government vest  with effect from      the twenty fourth day of January, 1976, in Burmah-Shell      Refineries Ltd. This is  the well-worn  legal strategy for government to run economic and  like enterprises.  We live in an era of public sector corporations, the State being the reality behind, Law does not  hoodwink itself  and what is but a strategy cannot be used as a stratagem :      These are  the facts when we come 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  cowardly to blink facts because they are not  to our  taste". What,  then, are  the  basic  facts available from the Act ? Constitutional law is not a game of hide  and  seek  but  practical  real-life  conclusions.  So viewed, we  are constrained  to hold  that  Burmah-Shell,  a government company  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 cannot 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 corporations is not myth but reality. What we mean is that corporate personality is a  reality and not an illusion or fictitious construction 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  conception of personality....is one of  the most noteworthy feats of the legal imagination." Corporations 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 corporation or company has a legal existence all its own.  The characteristics  of corporations, their rights and liabilities,  functional autonomy  and juristic  status, are jurisprudentially  recognised as  of a  distinct  entity even where  such corporations  are  but  State  agencies  or instrumentalities. For  purposes of the Companies Act, 1956, a government company has a distinct personality which cannot be con- 125 fused with  the State.  Likewise,  a  statutory  corporation constituted to  carry on  a commercial  or other activity is for many  purposes a distinct juristic entity not drowned in the sea  of State, although, in substance, its existence may be but  a projection of the State. What we wish to emphasise is that  merely because  a company or other legal person has functional and  jural individuality for certain purposes and in certain areas of law, it does not necessarily follow that for the  effective enforcement  of fundamental  rights under our constitutional  scheme, we  should  not  scan  the  real character of  that entity;  and if  it is found to be a mere agent or surrogate of the State, in fact owned by the State, in  truth   controlled  by   the  State  and  in  effect  an

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incarnation of  the State,  constitutional lawyers  must not blink at  these  facts  and  frustrate  the  enforcement  of fundamental rights  despite the inclusive definition of Art. 12 that  any authority controlled by the Government of India is itself  State. Law  has many  dimensions and  fundamental facts must govern the applicability of fundamental rights in a given situation.      Control by  Government of the corporation is writ large in the  Act and in the factum of being a government company. Moreover,  here,  s.  7  gives  to  the  government  company mentioned in  it  a  statutory  recognition,  a  legislative sanction and  a status  above a  mere government company. If the entity  is no  more than a company under the Company Law or society under the law relating to registered societies or co-operative societies  you cannot  call it  an authority. A ration  shop   run  by   a  cooperative  store  financed  by Government is  not an authority being a mere merchant, not 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 conferred 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. 126      Sometimes  the   test  is  formulated,  over-simplified fashion, by  asking whether  the corporation  is formed by a statute or under a statute. The true test is functional. Not 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 corporate  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 contemplation, as disclosed by s. 7, is that  the company  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  Companies  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 conditions 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 company.  Sections 9 and 10,  in terms,  create rights  and duties  vis a vis the government company  itself apart  from the Companies Act. An ordinary company,  even a government company simpliciter has not the  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 no bearing on the specific  dispute we  are concerned  in this  case, is a clear pointer  to the  statutory character of the government company and  the  vesting  of  an  authority  therein.  This

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provision clothes  the government company with power to take delivery of  the property  of Burmah Shell from every person in whose  possession, custody  or control  such property may be. There  are other  powers akin  to this one in s. 12. The provision for  penalties if  any  person  meddles  with  the property of  the second  respondent emphasises  the  special character of  this government company. Equally unique is the protection conferred  by s. 16 on the government company 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   not  attach   to  employees   of  companies simpliciter, even if they happen to be government companies. In the same strain is the indemnity conferred by s. 18. This review, though  skeletal, is  sufficient strikingly to bring home the point that the Corporation we are concerned with is more than a mere government company. Whatever its character 127 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 company under the Indian Companies 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  not called for, emphasise the fact that the  second respondent  is not  a mere company 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 not  mean to  say  that  for  purposes  of  Art.  309  or otherwise this  government company  is State  but limit  our holding to Art. 12 and Part III.      We may  now proceed  to examine  the authorities  cited before us by both sides on this point with special reference to  Art.  12  of  the  Constitution  vis  a  vis  government companies and  like bodies. Shri G. B. Pai concedes that the recent trend  of rulings  of this  Court has  broadened  the concept  of   "authorities....  under  the  control  of  the Government of  India." For  instance, the  Airport Authority Case  and   the  U.P.   Warehousing  Corporation  case.  His submission is  that  the  core  question  which  called  for decision in  those cases did not demand pronouncement 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 court are calculated to settle  the law and not to unsettle it by reconsideration in season  and out  merely because it hurts one party or the other or  tastes  sour  for  one  judge  or  the  other.  If incompatibility between  the ratios stares us in the face we must clear  the confusion  by the  process suggested by Shri Pai. But we are satisfied that the Airport Authority 128

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(supra) has  been consistently  and correctly  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 Corporation case (supra)-the latest on the  point-related to  a statutory  corporation  and  the litigation was by an employee for wrongful dismissal. One of the questions  considered there was the maintainability of a writ  petition   against  a  statutory  corporation  at  the instance of  an employee. The court reviewed many decisions, Indian and  English, and  upheld the  employee’s  contention that the  writ could  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 v.  Aberdeen   Corpn.,  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 court would correct illegal acts. Of course, the specific question  as  to  whether  such  a  body  could  be regarded as  ’State’ did  not and  could not  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 corporation, a government company  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 corporation, 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 confined to the      preservation of the public peace, the exaction of taxes      and the  defence  of  its  frontiers.  It  is  now  the      function of the 129      State  to   secure  ’social,   economic  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 Constitution.  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      citizen’s life. The government, directly or through the      corporations, set  up by it or owned by it, now owns or      manages, a large number of industries and institutions.      It is  the biggest  builder in the country. Mammoth and      minor irrigation  projects, heavy and light engineering      projects, projects  of various  kinds are undertaken by      the government.  The government  is  also  the  biggest      trader in  the country. The State and the multitudinous      agencies  and   corporations  set  up  by  it  are  the      principal purchasers of the produce and the products of

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    our  country  and  they  control  a  vast  and  complex      machinery of distribution. The government, its agencies      and  instrumentalities,  corporations  set  up  by  the      government  under   the   statutes   and   corporations      incorporated under  the Companies  Act but owned by the      Government have  thus become  the biggest  employers in      the country. There is no good 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 corporations set up or      owned by the government should not be equally bound and      why, instead,  such corporations  could become citadels      of patronage  and arbitrary  action. In  a country like      ours which  teems with population, where the State, its      agencies, its  instrumentalities and  its  corporations      are the  biggest  employers  and  where  millions  seek      employment and  security, to  confine the applicability      of  the   equality  clauses  of  the  Constitution,  in      relation to  matters of  employment, strictly to direct      employment under  the government  is perhaps to mock at      the Constitution  and the  people.  Some  the  employee      beyond the reach of the rule which denies him access to      a court  to enforce a contract 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- 130      cipate in activities vital to our country’s economy. 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 companies  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 compelling force of this reasoning in the Indian setting and constitutional matrix cannot be missed.      Let us  dilate  a  little  on  the  living  essence  of constitutional  fundamentals   if  we   are  not  to  reduce fundamental rights  to paper  hopes and people’s dupes ! The judicial branch  shall not  commit 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 Constitution certainly bind the State in  its executive  and legislative  branches. They are constitutional guarantees to the Indian people, not fleeting promises in  common enactments.  So long as they last in the National Charter  they should  not  be  truncated  in  their application unless  a contra-indication  is clearly  written into the  prescription, a la Arts. 31A, 31B and 31C. Art. 12 is a  special definition  with  a  broader  goal.  Far  from restricting the  concept of  State it  enlarges the scope to embrace all authorities under the control of Government. The constitutional  philosophy   of  a   democratic,   socialist Republic mandated  to undertake a multitude of socioeconomic operations inspires  Part IV  and so  we must  envision  the State  entering   the  vast   territory  of  industrial  and commercial activity,  competitively or monopolistically, for ensuring the  welfare of  the people. This expansive role of

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the State  under Part IV is not played at the expense of the cherished rights  of the people entrenched in Part III since both the  sets of imperatives are complementary and co-exist harmoniously. Wherever the Constitution has felt the need to subordinate Part  III to Part IV it has specificated it and, absent such  expression provision,  both the  Parts must and can  flourish   happily  together   given  benign   judicial comprehension a   Kerala  v. Thomas.  There is  no  inherent 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 Constitution says so, shall not  be sacrificed  at the  altar of  Part IV  by  the stratagem of incorporation. It is well known, and 131 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 contrivance of carrying  on business  activities by  the  State  through statutory  corporations,   government  companies  and  other bodies with  legal personality,  simplifies and  facilitates transactions and operations beyond the traditional and tardy processes of  governmental desks  and cells  noted for their red  tape  exercise  and  drowsy  dharma.  But  to  use  the corporate methodology  is not 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 constraints of governmental  slow-motion, not  to play  truant with  the great rights. Otherwise, a cunning plurality of corporations taking over  almost every  State business-the  post and  the rail-road, the T.V. and the radio, every economic ministry’s activity, why,  even  social  welfare  work-will  cheat  the people of  Part III  rights by  the easy plea: "No admission for the  bill of  rights; no  State 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  non-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 corporations  which have  carved out  all functions  will still be  controlled completely  by  the  switch  boards  of bureaucrats and  political bosses  from remote control rooms in Government  Secretariats. The extended definition of "the State" in  Art. 12  is not  to be  deadened but quickened by judicial  construction.   Before  our   eyes  the  corporate phenomenon is becoming ubiquitous. What was archaically done yesterday by  government departments is alertly executed to- day by government companies, statutory corporations and like bodies and  this tribe  may legitimately  increase tomorrow. This efficiency  is not  to be  purchased at  the  price  of fundamental rights.  As Mathew J. stated in V. Punnan Thomas v. State of Kerala:           The Government,  is not  and should not be as free      as an  individual in  selecting the  recipients for its      largesse. Whatever  its  activity,  the  Government  is      still the  Government and will be subject to restraints      inherent in  its position  in a  democratic society.  A      democratic Government  cannot lay  down  arbitrary  and      capricious standards  for the  choice of  persons  with      whom alone it will deal. 132      What’s in a name that which we call a rose By any other

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    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 notwithstanding!      This court  in Airport  Authority (supra)  pointed  its unanimous finger on these events and portents:           Today with  tremendous expansion  of  welfare  and      social  service   functions,  increasing   control   of      material  and   economic  resources   and  large  scale      assumption of  industrial and  commercial activities by      the State,  the power  of the  executive Government  to      affect the lives of the people is steadily growing. The      attainment of  socioeconomic justice  being a conscious      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, contracts, 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 comprise  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 control 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  contracts      ........All  these   mean  growth   in  the  Government      largesse and with the increasing magnitude and range of      governmental 133      functions as  we move  closer to  a welfare State, more      and more of our wealth consists of these new forms. We do  not  suggest  that  there  is  any  vice  at  all  in government  undertaking   commercial  or   other  activities through the  facile device of companies or other bodies. But to scuttle  Part III  through the  alibi  of  ’company,  not State’-’ay,  there’s  the  rub  !’  The  rationale  of  this proposition is well brought by Bhagwati, J :           So far  as India  is concerned, the genesis of the      emergence  of   corporations  as  instrumentalities  or      agencies of Government is to be found in the Government      of India Resolution on Industrial Policy dated April 6,      1948 where it was stated inter alia that "management of      State enterprise  will as  a rule be through the medium      of public  corporation under  the statutory  control of      the Central  Government who  will assume such powers as      may be  necessary to  ensure this". It was in pursuance      of  the   policy  envisaged   in  this  and  subsequent      resolutions on industrial policy that corporations were

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    created by  Government for setting up and management of      public  enterprises   and  carrying  out  other  public      functions. Ordinarily  these functions  could have been      carried out  by Government  departmentally through  its      service personnel,  but the instrumentally or agency of      the corporations  was resorted to in these cases having      regard to  the nature  of the task to be performed. The      corporations acting  as instrumentality  or  agency  of      Government would  obviously  be  subject  to  the  same      limitations  in   the  field   of  constitutional   and      administrative law  as Government itself, though in the      eye of  the law, they would be distinct and independent      legal  entities.   If  Government  acting  through  its      officers  is  subject  to  certain  constitutional  and      public law  limitations, it must follow a fortiori that      Government acting through the instrumentality or agency      of corporations  should equally  be subject to the same      limitations.      (emphasis added)      Article 12  gives the  cue to  forbid this plea. "Other authorities ..........  under the  control of the Government of India"  are comprehensive enough to take care of Part III without unduly stretching the meaning of "the State" to rope in whatever  any autonomous  body which  has some nexus with government. A wide expansion coupled 134 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 court, in Airport Authority, observed:           A corporation  may be  created in one of two ways.      It may be either established by statute or incorporated      under a  law such  as the  Companies Act,  1956 or  the      Societies Registration  Act, 1860.  Where a corporation      is wholly  controlled by  Government not  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 no  doubt      that it  would  be  an  instrumentality  or  agency  of      Government........ When  does such a corporation become      an instrumentality  or agency  of Government  ? Is  the      holding of  the entire share capital of the corporation      by  Government  enough  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 control  ? Should the functions      which the  corporation is  charged to carry out possess      any particular  characteristic or  feature, or  is  the      nature of  the functions immaterial ? Now, 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  corporation  is  an      instrumentality  or  agency  of  Government........What      then are  the tests  to determine whether a corporation      established by  statute or  incorporated under  law  is      instrumentality or  agency of  Government ?  It is  not      possible to  formulate an  all-inclusive or  exhaustive      test which would adequately answer this question. There      is no  cut and  dried formula  which would  provide the      correct division  of corporations  into those which are      instrumentalities or  agencies of  Government and those      which are not.      (emphasis added)      The  court   proceeded  to  crystallise  the  tests  to

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determine the ’State’ completion of corporate bodies, beyond furnishing the full share capital:           But "a  finding of State financial support plus an      unusual degree  of  control  over  the  management  and      policies might 135      lead one to characterise an operation as State action".      Vide Sukhdev  v. Bhagatram.  So also  the existence  of      deep  and   pervasive  State   control  may  afford  an      indication that  the Corporation  is a  State agency or      instrumentality. It  may also  be a  relevant factor to      consider whether the corporation enjoys monopoly status      which is  State conferred or State protected. There can      be little doubt that State conferred or State protected      monopoly status  would be  highly relevant in assessing      the aggregate  weight of  the corporations’ ties to the      State.           There is also another factor which may be regarded      as having a bearing on this issue and it is whether the      operation of  the corporation  is an  important  public      function. It  has been  held in  the United States in a      number of cases that the concept of private action must      yield to  a conception  of State  action  where  public      functions are  being performed. Vide Arthur S. Millers:      The Constitutional Law of the ’Security State.           If the  functions of the corporation are of public      importance  and   closely   related   to   governmental      functions, it would be a relevant factor in classifying      the corporation  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 not to be considered 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 not      easy of application and does not 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  not mean  that a  corporation,      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- 136      uish   between    governmental   functions   and   non-      governmental functions. Perhaps the distinction between      governmental  and  non-governmental  functions  is  not      valid any  more in  a social  welfare State  where  the      laissez  faire  is  an  outmoded  concept  and  Herbert      Spencer’s social  statics has  no place.......  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  corporation an instrumentality      or agency  of Government. Specifically, if a department      of Government is transferred to a corporation, it would      be a strong factor supportive of this inference.      The conclusion is impeccable that if the corporate body is but  an ’instrumentality  or agency’  of Government, then

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Part III will trammel its operations. It is a case of quasi- governmental beings,  not of  non-State entities. We have no hesitation to hold that where the chemistry of the corporate body answers  the test  of ’State’  above outlined  it comes within the  definition in  Art. 12.  In  our  constitutional scheme where  the commanding  heights belong  to the  public sector of  the national  economy,  to  grant  absolution  to government companies  and their  ilk from  Part III  may  be perilous. The  court  cannot  connive  at  a  process  which eventually makes  fundamental rights  as rare  as "roses  in December, ice  in June".  Article  12  uses  the  expression "other authorities" and its connotation has to be clarified. On this  facet also,  the Airport  Authority case supplies a solution:           If  a   statutory  corporation,   body  or   other      authority  is  an  instrumentality  or  agency  of  the      Government, it  would be  an ’authority’  and therefore      ’State’  within  the  meaning  of  that  expression  in      Article 12.      The decisions  are not  uniform as  to whether being an instrumentality or  agency of  Government ipso  jure renders the company  or  other  similar  body  ’State’.  This  again involves a navigation through precedents and Bhagwati, J. In Airport Authority  (supra) has  spoken for  the Court, after referring  to  Rajasthan  Electricity  Board  v.  Mohan  Lal Sukhdev v.  Bhagatram,  Praga  Tool  Corporation  v.  C.  A. Immanuel, Heavy Engineering Mazdoor Union v. State of Bihar, 137 S. L. Aggarwal v. General Manager, Hindustan Steel Ltd., 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  not  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 not 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 Corporation  and  though  the      Corporation is  acting on  its own  behalf and  not  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 authorities.........under  the control of the Government  of India"  bringing a corporation within the definition of  "the State".  The following factors have been emphasised in  that ruling as telling, though not clinching. These characteristics  convert a  statutory  corporation,  a government  company,   a  cooperative   society  and   other registered society  or body  into a  State and  they are not confined to  statutory corporations alone. We may decoct the tests for ready reference:      1. "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  corporation   is   an instrumentality or agency of Government."      2. Existence  of "deep  and pervasive State control may afford an  indication that the Corporation is a State agency or instrumentality."      3. "It  may also  be a  relevant factor........ whether the corporation  enjoys monopoly  status which  is the State conferred or State protected."      4. "If  the functions  of the corporation are of public importance and closely related to governmental functions, it

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would be a relevant factor in classifying the corporation as an instrumentality or agency of Government."      5. "Specifically,  if a  department  of  Government  is transferred to  a corporation,  it would  be a strong factor supportive of this inference" 138 of the  corporation being  an instrumentality  or agency  of Government."      The finale is reached when the cumulative effect of all the relevant  factors above set out is assessed and once the body is  found to  be an instrument or agency of Government, the further  conclusion emerges  that it  is ’State’  and is subject  to   the   same   constitutional   limitations   as Government.      This divagation  explains  the  ratio  of  the  Airport Authority (supra)  in its  full  spectrum.  There  the  main contention  was   that  the   said  authority,  a  statutory corporation, was  not State  and enforcement  of fundamental rights against such a body was impermissible. As is apparent from the  extensive discussion  above, the  identical  issue confronting us  as  to  what  are  the  "other  authorities" contemplated by  Art. 12  fell for consideration there. Most of the  rulings relied  on by  either side received critical attention there  and the guidelines and parameters spelt out there must  ordinarily govern  our decision. A careful study of the  features of  the Airport  Authority and a government company covered  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  (notified under s.  7 of  the Act)  is recognised  by and clothed with rights and duties by the statute.      There is no doubt 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 corporation  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 companies,  registered societies and what not. He assails the  decision also  on another  ground, namely,  the contradiction between Sukhdev and Airport Authority. We will examine both  these contentions  and, incidentally, consider what the  law laid down in the other rulings is. We are free to confess  that  the  propositions  have  not  been  neatly chiselled and  presented in  any of the rulings and further, some measure  of incongruity may be noticed if we search for the same;  but our  approach is not to detect contradictions but to discover a broad consensus if there be any and distil the law in accordance therewith. 139      We may first deal with Tewary’s case where the question mooted was as to whether the C.S.I.R. (Council of Scientific and Industrial  Research) was  ’State’ under  Art.  12.  The C.S.I.R. is  a registered  society with  official  and  non- official members appointed by Government and subject to some measure of  control by Government in the Ministry of Science and Technology. The court held it was not ’State’ as defined in Art.  12. It  is significant  that the  court  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 not under Part

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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  not make the  Society a  ’State’. With  great respect,  we agree that in  the absence  of the  other features  elaborated  in Airport Authority case the composition of the Governing Body alone may  not be  decisive. The  laconic discussion and the limited ratio in Tewary hardly help either side here.      Shri G. B. Pai hopefully took us through Sukhdev’s 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  note. Whether certain  statutory corporations  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  contravention of statutory provisions. By was of      abundant caution  we state that these employees are not      servants of 140      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  corporations,   viz.  The   Oil  and   Natural   Gas Commission, the  Industrial Finance Corporation and the Life Insurance Corporation)  were  ’State’  under  Art.  12.  The reasoning adopted  by Ray, C. J. fortifies the argumentation in Airport Authority.      Repelling the  State’s plea  that these bodies were not ’other authorities’ under Art. 12. Ray, C. J. observed :           The  State   undertakes  commercial  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 control      not only the exercise of powers by the Corporations but      also all persons who deal with these corporations.....           The expression  "other authorities"  in Article 12      has  been   held  by   this  Court   in  the  Rajasthan      Electricity Board  to be  wide enough to include within      it every authority created by a statute and functioning      within the  territory of India, or under the control of      the  Government  of  India.  This  Court  further  said      referring to  earlier  decisions  that  the  expression      "other  authorities"   in  Article   12   include   all      constitutional or  statutory authorities on whom powers      are conferred  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  economic interests  of  the  people.  The      circumstance that  the statutory  body is  required  to      carry on  some activities  of the  nature of  trade  or

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    commerce does  not 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  compliance is  an important      aspect                                             (emphasis added) 141 Dealing with  governmental purposes  and public authorities, the court clarified:           In the  British Broadcasting  Corporation v. Johns      (Inspector of  Taxes) (1965)  (1 Ch.  32), it  was said      that persons  who are created to carry out governmental      purposes enjoy immunity like Crown servants. Government      purposes   include   the   traditional   provinces   of      Government as  well  as  non-traditional  provinces  of      Government if  the Crown  has constitutionally asserted      that  they   are  to   be  within   the   province   of      Government.....           A public  authority is  a body which has public or      statutory duties  to perform  and which  performs those      duties and carries out its transactions for the benefit      of the public and not for private profit.                                             (emphasis added) Taking up  each statute  and analysing  its  provisions  the learned Chief Justice concluded:      The  structure   of  the   Life  Insurance  Corporation indicates  that   the  Corporation   is  an  agency  of  the Government  carrying  on  the  exclusive  business  of  life insurance. Each  and every  provision shows  in no uncertain 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 Corporation Act show  that the  Corporation 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 not hide the soul. There is nothing in this judgment  which goes against a government company being regarded as  ’State’. On  the contrary,  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  conception  of ’State’ under Art. 12: 142           The concept of State has undergone drastic changes      in recent  years. Today  State cannot  be conceived  of      simply as a coercive 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 not 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 nothing strange      in the notion of the state acting through a corporation      and making  it an  agency  or  instrumentality  of  the

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    State........           The tasks of government multiplied with the advent      of the welfare state and consequently, 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      not, 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  corporation, therefore, became a third      arm of the Government. In Great Britain, the conduct of      basic industries  through giant  corporation is  now  a      permanent feature of public life. The Indian  situation is  an a fortiori case, what with Part IV  of   the  Constitution   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 course,  mere State  aid to  a company will not make its actions  State actions.  Mathew, J.  leaned to  the view that: 143           ....... State  financial support  plus an  unusual      degree of  control over  the  management  and  policies      might lead  one to  characterise an  operation as state      action. Indeed, the learned Judge went much farther:           Another  factor   which  might  be  considered  is      whether the  operation is an important public function.      The combination  of state  aid and the furnishing of an      important public  service may  result in  a  conclusion      that the  operation should  be classified  as  a  state      agency.  If   a  given   function  is  of  such  public      importance  and  so  closely  related  to  governmental      functions as to be classified as a governmental agency,      then even  the presence  or absence  of state financial      aid might  be irrelevant  in making  a finding of state      action. If  the function  does not  fall within  such a      description, then  mere addition  of state  money would      not influence the conclusion.      It  must   be  noticed   that  the   emphasis   is   on functionality plus  State control  rather on  the  statutory character of the Corporation:           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  not  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  contributed the original capital of the      Corporation, that part of the profit of the Corporation      goes to  that Government,  that the  Central Government      exercises control  over the  policy of the Corporation,      that the Corporation carries on a business having great      public importance  and that it enjoys a monopoly in the      business. I  would draw  the same  conclusions from the

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    relevant   provisions   of   the   Industrial   Finance      Corporation Act which have also been referred to in the      aforesaid judgment.  In these  circumstances, I  think,      these corporations are agencies or instrumentalities of      the ’State’  and are,  therefore,  ’State’  within  the      meaning of Article 12. The fact that these corporations      have independent personalities in the eye of 144      law does  not mean  that they  are not  subject to  the      control  of   government   or   that   they   are   not      instrumentalities of the government. These corporations      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  not      state actions ?           xx          xx          xx           ....... merely  because a  corporation  has  legal      personality of  its own,  it does  not follow  that the      corporation cannot  be an  agent or  instrumentality of      the state, if it is subject to control of government in      all important  matters of policy. No doubt, there might      be some  distinction  between  the  nature  of  control      exercised by  principal  over  agent  and  the  control      exercised by  government over public corporation. That,      I think  is only  a distinction  in degree. The crux of      the matter  is that public corporation is a new type or      institution which  has sprung  from the  new social and      economic functions  of government and that it therefore      does not  neatly fit into old legal categories. Instead      of forcing it into them, the later should be adapted to      the needs of changing times and conditions.      There is  nothing in  these observations to confine the concept of  State to  statutory corporations. Nay, the tests are common  to any agency or instrumentality, the key factor being  the   brooding  presence  of  the  State  behind  the operation of the body, statutory or other.      A  study   of  Sukhdev’s  case  (a  Constitution  Bench decision of  this Court)  yields the  clear result  that the preponderant considerations  for pronouncing  an  entity  as State agency  or instrumentality  are financial resources of the  State   being  the  chief  funding  source,  functional character being  governmental in  essence,  plenary  control residing in  Government, prior  history of the same activity having been  carried on  by Government  and made over to the new body  and some  element of authority or command. Whether the legal  person is  a corporation created by a statute, as distinguished from  under a  statute, is  not  an  important criterion although it may be an indicium. Applying 145 the constellation  of criteria  collected by us from Airport Authority, on  a cumulative  basis, to the given case, there is  enough  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 compatible 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  no debate,  no discussion  and no decision on the issue of  excluding from the area of ’State’, under Art. 12,

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units incorporated  under a statute as against those created by a  statute. On  the other  hand, the controversy was over the exclusion  from the  definition  of  State  in  Art.  12 corporations engaged in commercial 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      Webster’s 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  enough  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 enough to include within it every      authority created  by a  statute and functioning within      the territory  of India,  or under  the control  of the      Government of  India; and  we do  not see any reason to      narrow down  this meaning  in the  context in which the      words "other  authorities" are  used in  Art. 12 of the      Constitution.           xx         xx         xx           These decisions of the Court support our view that      the expression  "other authorities"  in  Art.  12  will      include all  constitutional on statutory authorities on      whom  powers  conferred  may  be  for  the  purpose  of      carrying   on    commercial   activities.   Under   the      Constitution, the  State is  itself envisaged as having      the right to carry on trade or business as 146      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   economic  interests  of  the  weaker      sections of  the people.  The State, as defined in Art.      12, is  thus comprehended to include bodies created for      the purpose  of promoting  the educational and economic      interests of  the people.  The State, as constituted by      our Constitution,  is  further  specifically  empowered      under 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 commerce  does not, 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 comprehends bodies created for the purpose of  promoting  economic  activities.  These  bodies  may  be statutory  corporations,  registered  societies,  government companies or  other like  entities. The court was not called upon to  consider this  latter aspect,  but to the extent to which the  holding  goes,  it  supports  the  stand  of  the petitioners.      We are  not disposed  to discuss more cases because two constitution benches  and two  smaller benches  have already pronounced on  the amplitude  of "other authorities" in Art. 12. Even  so, a  passing reference may be made to a few more cases. In Praga Tools Corporation v. Immanuel this court was called upon to consider the enforceability of two industrial settlements against  the management which was a company with substantial share-holding  for the  Union Government and the

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Government  of   Andhra  Pradesh.   There  was  no  specific reference to Art. 12 as such although it was mentioned early in the judgment that the company was a separate legal entity and could not be said to be "either a government corporation or an  industry run  by or  under the authority of the Union Government." It  must be  noticed that  12%  shares  in  the company were held by private individuals and nothing more is known about  the plenary  control 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 corporation may stand on  a different  footing from  Praga Tools Corporation (supra). If  so, it  supports the  view we  have taken.  The Hindustan 147 Steel case  which was  cited  at  the  bar,  considered  the question as  to whether  an employee  of  that  company  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 not  Art. 311 and, therefore, that citation is an act of supererogation.  The   Vaish  College  case  which  too  was referred, related to the status of the managing committee of a college  and the  enforceability of the contractual rights of a  teacher by  a writ  under Art.  226. That  problem  is extraneous to our case and need not detain us.      Imagine  the   possible  result   of  holding   that  a government company,  being just  an entity  created under  a statute, not  by a statute, it is not ’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  non-socialist republic may fall within  the private  sector. Any  person’s  employment, entertainment, travel,  rest and  leisure, hospital facility and funeral  service may  be controlled by the State. And if all  these   enterprises  are  executed  through  government companies,  bureaus,  societies,  councils,  institutes  and homes, the citizen may forfeit his fundamental freedoms vis- a-vis these  strange beings which are government in fact but corporate in form. If only fundamental rights were forbidden access  to  corporations,  companies,  bureaus,  institutes, councils and  kindred bodies  which act  as agencies  of the Administration, there  may be a breakdown of the rule of law and  the   constitutional  order   in  a   large  sector  of governmental activity  carried on  under the guise of ’jural persons’. It may pave the way for a new tyranny by arbitrary administrators  operated   from  behind  by  Government  but unaccountable to  Part III  of the  Constitution. We  cannot assent to an interpretation which leads to such a disastrous conclusion unless  the language  of Art.  12 offers no other alternative.      It is well known that "corporations have neither bodies to be  kicked,  nor  souls  to  be  damned"  and  Government corporations are  mammoth organisations.  If Part III of the Constitution is  halted at the gates of corporations Justice Louis D. Brandeis’s observation will be proved true:           The main  objection to  the very large corporation      is that  it makes  possible-and  in  many  cases  makes      inevitable-the-exercise of industrial absolutism. 148 It is  dangerous to  exonerate corporations from the need to have constitutional conscience; and so, that interpretation, language  permitting,  which  makes  governmental  agencies, whatever their  mein, amenable to constitutional limitations must be  adopted by  the court as against the alternative of

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permitting them to flourish as an imperium in imperio.      The common-sense signification of the expression "other authorities under the control of the Government of India" is plain  and   there  is  no  reason  to  make  exclusions  on sophisticated grounds  such as that the legal person must be a statutory  corporation, must have power to make laws, must be created  by and  not under  a  statute  and  so  on.  The jurisprudence of  Third World  countries cannot  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 enormously  to  its  bulk  and      nothing to its value, while they render a great part of      it unintelligible to any but the expert.      Having concluded  the discussion  on the amenability of the respondent-company  to Part  III we  proceed to consider the merits of the case on the footing that a writ will issue to correct  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   now  proceed   to  consider  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 non-contributory member of the Pension Fund of 149 Burmah Shell  under the  Trust Deed  set up by it, he earned his pension.  But the Trust Deed contained many regulations. The normal  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 non-contributing members. The quantification of  these deductions  was provided for in the said regulation.  If these  deductions were  not 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, another letter dated October 24, 1973 was issued to him  that there  would be  a  further  reduction  of  the

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pension. When  the petitioner  complained 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 course,  legality cannot  be tested on the size of the sum and the court must examine the merits de hors any sympathy.      The petitioner’s  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 court and  there  should  be  a  substantive  order  creating  the obligation before enforcement could 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, 150 superannuation, welfare  fund and the like. Section 10(3) is important:           10(3). The  Government company  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, constitute, 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 not, 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  cannot  be  affected  by  any instrument or decree or order. The statutory continuation of a pre-existing  liability to  pay pension, provident fund or gratuity, cannot be avoided having regard to s. 10.      Shri Pai  contends 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 cannot 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 correct  and if  there be  no other  legal prohibition in making the deductions, the conclusion is convincing 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 contends, that the deduction

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is unauthorised  even if  the contract  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  contain  certain  protective provisions whose  true import  falls for construction and is decisive of the point in dispute. 151 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 contribution to the provident fund.  We may extract s. 12 here for, according to Shri Parekh, the language speaks for itself.           12. No employer 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  construction 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 not be reduced by  reason only of the liability of the employer for payment of  contribution 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:           14. The  provisions of  this Act  or any rule made      there under  shall have effect notwithstanding anything      inconsistent therewith contained in any enactment other      than this  Act or  in any instrument or contract having      effect by virtue of any enactment other than this Act. The expression  "instrument" certainly  covers a  Trust Deed and, notwithstanding 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. 152      Shri Pai argues that no reduction of retiral benefit is effected because the entitlement to pension under reg. 13 is itself conditioned  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 contentions. 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

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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  correct, there is no substance 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 another. 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 concern  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 not 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 coming into force of  these   beneficial  enactments   they  cannot   now   be deprivatory. It  is precisely to guard against such mischief that  the   non-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   conferred   on employees. Such  a consequence  will follow only if over and above the normal pension, the benefits of provident fund and gratuity are  enjoyed. On  the other  hand, if consequent on the receipt of 153 these benefits  there is  a proportionate  reduction in  the pension, there  is no  real 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 not 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 now has  acquired statutory flavour, having been adapted and continued by  statutory  rules,  operates  contrary  to  the provisions of  the P.F.  Act and  the Gratuity  Act, it must fail as invalid. We uphold the contention 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  no material  to hold that the

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second respondent  has independently  considered this matter and so  we direct  that if  the petitioner  moves the second respondent stating  his case  for  the  continuance  of  the supplementary benefit,  it will  be considered on its merits uninfluences by extraneous factors. We do not 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 consider the  grant  or  stoppage  of  the  supplementary  pensionary benefit on  its merits.  The petition  is allowed with costs which we quantify at Rs. 2,000/- Shri Parekh represents that this sum may be directed to be paid to the Legal Aid Society in the  Supreme Court. We appreciate this gesture of counsel and direct the Registry to act accordingly.      Social justice  is the  conscience of our Constitution, the State  is the promoter of economic justice, the founding faith which  sustains the  Constitution and  the country  is Indian humanity.  The public sector is a model employer with a social conscience not an artificial person without soul to be  damned  or  body  to  be  burnt.  The  stance  that,  by deductions  and  discretionary  withholding  of  payment,  a public sector 154 company may  reduce an old man’s pension to Rs. 40/-from Rs. 250/- is  unjust, even if it be assumed to be legal. Law and justice must  be on talking terms and what matters under our constitutional  scheme  is  not  merciless  law  but  humane legality. The  true strength  and stability of our polity is society’s  credibility   in  social   justice,  not  perfect 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 not  empathy  with  every  little individual.      PATHAK,  J.-I   must  confess  to  some  hesitation  in accepting  the   proposition  that   the  Bharat   Petroleum Corporation Limited  is a "State" within the meaning of Art. 12 of  the Constitution.  But in view of the direction taken by the  law in  this Court  since Ramana  Dayaram Shetty  v. International Airport  Authority. I  find  I  must  lean  in favour of  that conclusion.  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  Companies 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 Company,  and they do not alter the basic nature of that company. They are provisions which  could well  have been applied to a private corporation, if  the Act  had selected  one for  vesting the undertaking  in   it.  Would  that  have  made  the  private corporation a "State"?      On the  merits of  the petitioner’s claim I need say no more than  that I  agree with  my learned  brothers that the petitioner should be granted the relief proposed by them. P.B.R.                                     Petition allowed. 155

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