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PETITIONER: SUKHDEV SINGH & ORS

       Vs.

RESPONDENT: BAGATRAM SARDAR SINGH RAGHUVANSHI AND ANR.

DATE OF JUDGMENT21/02/1975

BENCH: RAY, A.N. (CJ) BENCH: RAY, A.N. (CJ) MATHEW, KUTTYIL KURIEN CHANDRACHUD, Y.V. ALAGIRISWAMI, A. GUPTA, A.C.

CITATION:  1975 AIR 1331            1975 SCR  (3) 619  1975 SCC  (1) 421  CITATOR INFO :  R          1976 SC 888  (9)  R          1976 SC1027  (14)  RF         1976 SC1913  (11)  RF         1976 SC2216  (7)  D          1978 SC 252  (12)  D          1979 SC  65  (3,10)  D          1979 SC1084  (20)  F          1979 SC1628  (10,13,15,16,18,27,33)  R          1980 SC 840  (8,10,14,21)  RF         1980 SC2181  (136)  RF         1981 SC 212  (32,36,38,42,44,46,48,49,50,52  RF         1981 SC 487  (8,14,16)  RF         1981 SC 818  (19)  RF         1981 SC1395  (10)  R          1982 SC 917  (20)  F          1984 SC 363  (22)  F          1984 SC 541  (13)  RF         1984 SC1130  (53)  RF         1984 SC1361  (26,27)  RF         1984 SC1897  (7,8)  APL        1985 SC1046  (5)  RF         1986 SC1370  (101)  R          1986 SC1571  (43,51,69,105)  RF         1987 SC1086  (12,15,26)  RF         1988 SC 469  (6,7,8,9)  APL        1989 SC 341  (9)  F          1991 SC 101  (12,32,35,40,170,201,223,236)  RF         1992 SC  76  (2)

ACT: Statutory  Corporations--Regulations made by,  whether  have force of law--Whether employees of corporation are  servants of Union or State. Constitution   of   India,   Art.   12--Whether    statutory corporations are ’State’ or ’authority’.

HEADNOTE: The  Oil and Natural Gas Commission, the Industrial  Finance Corporation  and the Life Insurance Corporation are  created

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by statutes. The Oil and Natural Gas Commission is owned  by the  Government, the management is by the Government and  it could be dissolved only by the Government. The provisions of the  Oil and Natural Gas Commission Act, 1954, creating  it. show  that it acts as an agency of the  Central  Government. The  Provisions of the Industrial Finance  Corporation  Act, 1948, creating the Industrial Finance Corporation show  that the Corporation is under the complete control and management of the Central Government.  Provisions of the Life Insurance Act,  1956,  which creates the Life  Insurance  Corporation. show  that  this  Corporation  is  also  an  agency  of  the Government  carrying  on  the exclusive  business  of  Life- Insurance.   The  Corporation. is owned and managed  by  the Government  and it can be dissolved only by the  Government. All  the  three statutes constituting  the  three  statutory corporations enabled them to make regulations which provide, inter  alia, for the terms and conditions of employment  and services of their employees. On the question whether, (i) the regulations have the  force of  law,  and (ii) whether the  statutory  corporations  are ’State’ within the meaning of Art. 12 of the Constitution, HELD  :  (Per A. N. Ray, C.J., Y. V. Chandrachud and  A.  C. Gupta, JJ.) The regulations have the force of law and the employees  are entitled  to  the declaration of being  in  employment  when their  dismissal  or  removal is  in  contravention  of  the regulations. [642E-F] (a)  Regulations  under an Act are framed in exercise  of  a specific power conferred by the    statue      to       make regulations.   The  authority making  the  regulations  must specify  the sources of its specific power.  The essence  of law  is  that it is made by the law makers  in  exercise  of specific authority.  The vires of such of law is capable  of being Challenged if the power is absent or has been exceeded by  the authority making rules or regulations.   The  manner and  procedure  adopted  in making the  regulations  in  the instant  case,  by the ’three statutory  corporations,  have this characteristic of law. [629G-A] (b) Another characteristic of law is its content.  Law is  a rule  of general conduct while  administrative  instructions relate to a particular person.[630A] (c)  Broadly  stated  the  distinction  between  rules   and regulations on one hand, and administrative instructions  on the  other, is that rules and regulations can be  made  only after  reciting the source of power  whereas  administrative instructions  are  not issued after reciting the  source  of power.  There is, however, no substantial difference between rules  and  regulations inasmuch as  ’both  are  subordinate legislation  under  powers  conferred  by  the  statute.   A regulation framed under statute applies uniform treatment to everyone  or to all members of some group of  class.  [630G; 633G] (d) The regulations in the present case are, inter alia, for the  purpose of defining the duties, conduct and  conditions of service of officers and other 620 employees.   They  contain  the  terms  and  conditions   of appointment  which are imperative.  The form and content  of the contract with a particular employee is prescriptive  and statutory.   The  notable feature is  that  these  statutory bodies have no free hand in framing the conditions and terms of service of their employees.  They are bound to apply  the terms and conditions as laid down in the regulations.  These regulations  are not only binding on the authority but  also on  the public.  They imposed obligations on  the  statutory

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authorities.  The statutory authorities cannot deviate  from the  conditions of service.  Any deviation will be  enforced by  legal  sanction  of  courts  to  invalidate  actions  in violation of rules and regulations.  The existence of  rules and  regulations  under  the statute is  to  ensure  regular conduct  with  a distinctive attitude to that conduct  as  a standard.   The  statutory regulations in the  instant  case give   the   employees  a  statutory   status   and   impose restrictions on the employer and the employee with no option to vary the conditions.  An ordinary individual, in the case of  master  and servant contractual  relationship,  enforces breach  of  contract.  the  remedy  being  damages   because personal service is not capable of enforcement.  In the case of  statutory bodies, however, there is no personal  element whatsoever  because  of  the  impersonal  character  of  the bodies.  In their case the element of public employment  and service  and  the support of statute require  observance  of rules  and regulations.  Failure to observe requirements  of the regulation by statutory bodies is enforced by courts  by declaring   the   dismissal  in  violation  of   rules   and regulations  to  be  void.   Whenever  a  man’s  rights  are affected  by  a decision under statutory  powers  the  court would resume the existence of a duty to observe the rules of natural  justice and compliance with rules  and  regulations imposed by statute. [630C-D; 633H; 634A-D] (e)  Further  the  executive  power  of  a  ’state’  is  not authorised to frame rules under Art. 162. [630G] (f) The rules and regulations in the present case cannot  be equated  to the regulation framed by a company  incorporated under  the Companies Act.  A company incorporated under  the Companies Act is not created by the Companies Act but  comes into  existence in accordance with ’the provisions  of  that Act.  It is not a statute body because it is not created  by statute  itself.  A company makes rules and  regulations  in accordance with the provisions of the Companies Act  whereas the source of the power for making rules and regulations the case  of  corporations  created by statute  is  the  statute itself.    A  statutory  body  when  it  makes   rules   and regulations  does so under the powers conferred  by  statute creating it. [631B-D] (g)  In  U.P. State Warehousing Corporation  Case  [1970]  2 S.C.R.  250  and Indian Airlines Corporation Case  [1971]  2 S.C.C.  192  the terms of the regulations  were  treated  as terms and conditions of relationship between the corporation and  its  empolyees.   But  that  could  not  lead  to   the conclusion  that they are of the same nature and quality  as the  terms  and  conditions  laid  down  in  a  contract  of employment.    Those   terms  and   conditions   not   being contractual   are  imposed  by  one  kind   of   subordinate legislation, viz., regulations made in exercise of the power conferred  by the statute which constitute the  corporation. Terms  of  the  regulation are not  terms  of  contract.   A corporation  had no power to alter or modify or rescind  the provisions  of the regulations at it’s discretion  which  it could  do  in respect of the terms of contract that  it  may wish  to  enter  with its  employees  independent  of  these regulations.   So  far as the terms of the  regulations  are concerned  the actions of the corporation are controlled  by the  Central Government.  The decisions, therefore, in  U.P. Warehousing Corporation and Indian Airlines Corporation  are in  direct  conflict  with the decision  of  this  Court  in Naraindas  Barot  Divisional  Controller  S.T.C.,  [1966]  3 S.C.R. 40 and are wrongly decided. [633B-D] The  Sirsi  Municipality v. Cecelia Kom  Francis,  [1973]  1 S.C.C. 409, followed.

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(2) The statutory bodies are authorities within the  meaning of  Art. 12 of the Constitution though their  employees  are not the servants of the Union or of a State. [642F] 621 (a) The State undertakes commercial functions in combination with governmental functions in a welfare State.  It must  be able to impose decisions by or under law with authority.  An clement of authority is of binding character.  The rules and regulations  are  authoritative  because  these  rules   and regulations direct and control not only the exercise of  the powers by the corporation but also of persons who deal  with these  corporations.   The State itself is  envisaged  under Art. 298 as having the right to carry on trade and business. The State as defined in Art. 12 comprehended bodies  created for  the  purpose  of promoting economic  interests  of  the people.  The circumstance that the statutory bodies required to  carry  on  some activities of the  nature  of  trade  or commerce does not indicate that it must be excluded from the scope  of  the word ’State’.  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.   Such an  authority is not precluded from making a profit for  the public benefit. [634F; H; 635A-B & G] (b) The power to give directions, the disobedience of  which would  be punishable as criminal offences would furnish  one of  the reasons for characterising the body as an  authority within  the  meaning of Art. 12.  The Oil  and  Natural  Gas Commission  Act confers Power of entry on employees  of  the Commission  upon  any land or premises for the  purposes  of lawfully carrying out works by the commission.  The  members and  employees of the Commission are public servants  within the  meaning  of  s.  21 ’of the  Indian  Penal  Code.   The Commission enjoys protection of action taken under the  Act. The Life Insurance Act provides that if any person  wilfully withholds  or  fails  to  deliver  to  the  corporation  any property  which  has  been transferred  and  vested  in  the corporation and wilfully applies them to purposes other than those  expressed or authorised by the Act. he shall, on  the complaint   of   the   Corporation,   be   punishable   with imprisonment.   The  Corporation also enjoys  protection  of action   taken  under  the  Act.   The  Industrial   Finance Corporation  Act states that whoever in any bill of  lading, warehouse, receipt or other instrument given to the Corpora- tion  whereby  security  is given  to  the  Corporation  for accommodation  granted  by  it  wilfully  makes  any   false statement  or  knowingly permits any false statement  to  be made  shall  be  punishable  with  imprisonment.    Further, whoever, without the consent in writing of the  Corporation, uses its name in any prospectus or advertisements shall also be  punishable  with  imprisonment.   The  corporation  also enjoys protection of action taken under the Act.  A  company incorporated  under the Indian Companies Act does not  enjoy these privileges. [641F; 642A-D] (c)  The  fact that a statutory corporation is  not  granted immunity  from taxation and therefore is under liability  to be  taxed would not indicate that the corporation is  not  a state authority.  Art. 289 of the Constitution empowers  the Union  of  India  to impose a tax in  respect  of  trade  or business carried on by on behalf of the State. [641G-H] Per Mathew J. (Concurring) 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.   A

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State  is an abstract entity.  It, can only act through  the instrumentality  or agency of natural or juridical  persons. There  is nothing strange in the notion of the State  acting through  a  Corporation and making it an agency  or  instru- mentality of the State.  With the advent of a welfare  State the   framework  of  civil  service  administration   became increasingly  insufficient for handling the new tasks  which were often of a specialised and highly technical  character. The  distrust of Government by civil service was a  powerful factor   in   the  development  of  a   policy   of   public administration  through  separate Corporations  which  would operate  largely  according to business  principles  and  be separately accountable.  The Public Corporation,  therefore, became  a  third arm of the Government.   The  employees  of public  Corporation  are not civil servants. in  so  far  as public  corporations  fulfil  public  tasks  on  behalf   of government, they are public authorities and as such, subject to  control  by Government, The public Corporation  being  a creation  of  the  State is subject  to  the  constitutional imitation as the State itself.  The governing power wherever located must be 622 subject to the fundamental constitutional limitations.   The ultimate  question  which  is relevant for  our  purpose  is whether  the Corporation is an agency or instrumentality  of the Government for carrying on a business for the benefit of the public. [644E; 645B; G; 646C; 647B] A finding of State financial support plus an unusual  degree of  control over the management and policies might lead  one to  characterize  an  operation as  state  action.   Another factor  which might be. considered is whether the  operation is an important public function.  In America corporations or associations, private in character, but dealing with  public rights, have been held subject to constitutional  standards. Activities  which are too fundamental to the society are  by definition  too  important not to be  considered  government function.  The State today has an affirmative duty of seeing that  all  essentials  of life are  made  available  to  all persons. [650B-C; 651D-G] It  is  clear  from  these provisions  of  the  statutes  in question  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.   These  corporations  are  agencies   or instrumentalities of the ’state’ and are, therefore, ’state’ within  the  meaning  of  Art.  12.   The  fact  that  these corporations  have independent personalities in the  eye  of 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  be  ’state actions’.  Why then should be actions of corporations be not state actions ? [653H; 654A-C] The  ultimate question which is relevant for our purpose  is whether  such a corporation is an agency or  instrumentality of the government for carrying on a business for the benefit of  the public.  In other words, the question is, for  whose benefit was the corporation carrying on the business ?  When

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it  is  seen  from  the  provisions  of  that  Act  that  on liquidation of the Corporation, its assets should be devided among  the  shareholders,  namely’  the  Central  and  State governments  and  others, if any, the implication  is  clear that  the benefit of the accumulated income would go to  the Central  and  State governments.  Nobody will deny  that  an agent  has  a legal personality different from that  of  the principal.   The  fact  that the agent  is  subject  to  the direction  of  the principal does not mean that  he  has  no legal  personality of his own.  Likewise, 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   of 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 latter should be adopted to the needs  of changing times and conditions. [654F-H] (ii)  The learned Chief Justice has dealt with the  question in  his  judgment  whether the  regulations  framed  by  the corporations have the force of law and he has arrived at the conclusion that the regulations being framed under statutory provisions  would have the force of law.  I agree with  that conclusion.   Even  assuming that the  regulations  have  no force  of  law,  I think since the  employment  under  these corporations  is public employment" an employee would get  a status which would enable him to obtain declaration for cent nuance in service if he was dismissed or discharged contrary to the regulations. [655E-F] (iii)  If  a job is regarded as analogous  to  property,  it ought  to  be  recognized  that  a  man  is  entitled  to  a particular job just as the courts of Equity acknowledged his right  to  a particular piece of property.  Where  a  public authority is 623 concerned, this can be implemented by a declaration.  In the case  of  private  employment English  law  has  devised  no suitable  remedy.   That this is possible is  shown  by  the example  of  other countries.  The  Court  must,  therefore, adopt the attitude that declaration is the normal remedy for a wrongful dismissal in case of public employees which  will only be refused in exceptional circumstances.  The remedy of declaration  should  be a ready-made instrument  to  provide reinstatement in public sector.  Once it is accepted that  a man’s  job is like his property of which he can be  deprived of for specific reasons, this remedy becomes the primary one though   it  will  need  to  be  reinforced  where   private individuals  are being sued.  The law of master and  servant has not kept pace with the modern conditions and the mandate of  equality  embodied in the Constitution.  The  law  still attaches  to  the  servant  a  status  of  inferiority   and subjection  to his master.  Though fundamental  reforms  can only emanate from the legislature, the principles  fashioned by public law if applied to master servant relationship  can bring  about  a  change in law to  accord  with  the  social conditions of the 20th century. [658D-G] [Per Alagiriswami, J. (Dissenting)] (i)  In order that an Institution must be an "authority"  it should exercise part of  the sovereign power or authority of

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the   State.   Port  Trust  is  given  the  power  to   make regulations  and to provide that breach of  its  regulations would  be  punishable.  In such a case,  it  is  undoubtedly exercising  part  of  the power of  the  State.   The  whole purpose  of  the Part III of the Constitution is  to  confer fundamental  rights on the citizen, as against the power  of the  State or those exercising the power of the  State.   In the present case none of the Corporations exercise the power of  the State and, therefore, cannot be the State or  Autho- rity.  The regulations framed by these Corporations have  no force of law.  The employees of these statutory bodies  have no statutory status and they are not entitled to declaration of being in employment when their dismissal or removal is in contravention of statutory provisions. [670A; 671A-C] (ii) Under the Indian Legislative practice Governments  make the  rules  and regulations are made by any  institution  or Organisation  established  by  a Statute  and  where  it  is intended that the regulation should have effect as law,  the Statute itself says so.  Administrative instructions are not necessarily in relation to the particular persons.  They may relate  to  a  whole  class of persons  even  as  rules  and regulations  do.   To  say  that  because  the   regulations contained  the terms and conditions of appointment they  are statutory  is to beg the question.  An institution like  the L.I.C.   the country has necessarily got to have a  standard set  of  conditions of service for its  various  classes  of employees.   It  is not correct to say  that  the  statutory bodies have no free hand in framing the conditions and terms of service of their employees.  They are the authorities  to make   the   regulations  and,  therefore,  can   make   any regulations regarding the conditions and terms of service of their  employees  and also change them as they  please.   It cannot,  therefore,  be said that they are  bound  by  these terms and conditions of service. [668E-H; 669H] (iii) There is no fallacy in equating-rules and  regulations of  a  Company  with  rules  and  regulations  framed  by  a statutory  body.   Where an institution or  Organisation  is established  by  a Statute or under a Statute  in  principle there is no difference between their powers. [670-F] (iv)  While rules are generally made by the Government,  the regulations  are made by a body which is a creature  of  the statute  itself  with  its powers limited  by  the  statute. While rules apply to all matters covered by the statute, the scope of the regulations is narrower being usually  confined to  internal  matters  of the statutory  body  such  as  the conditions  of service of its employees.   When  regulations standardise  the conditions of service of the  employees  or purport  to  formulate  them.  their  character  is  further diluted by the nature of the subjectmatter.  For, service or employment is basically a contract which is deeply rooted in private  law.  A mere standardisation or enumeration of  the terms  of a service contract is not,  therefore,  ordinarily sufficient to convert it into a statutory status. [669B-D] , 624

JUDGMENT: CIVIL APPELLATE JURISDICTION Civil  Appeal No. 2137 of 1972. From the Judgment and order dated the 14th July, 1972 of the Gujarat High Court in Spl.  Civil Appln.  No. 1470 of 1968.              CIVIL APPEAL NO. 1655 OF 1973 Appeal  by special leave from the Judgment and  order  dated the  15th October, 1973 of the Gujarat-High Court in  L.P.A. No. 95 of 1973.

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            CIVIL APPEAL NO. 1879 OF 1972 AND                 CIVIL APPEAL NO. 115 of 1974 Appeal  by  special leave from the Judgment dated  the  29th January,  1973  of the Delhi High Court in LPA  No.  155  of 1972. F. S. Nariman, Addl.  Sol.  Gen (In CA.  No. 2137/72), A. K. Sen (In CA 1655/73), B. Dutta for the Appellants. Pramod Swarup for the appellant (In CA No. 1879/72). M.  K. Ramamurthy, Janardan Sharma and Jitendra  Sharma  for Appellant in C.A. No. 115/74. R. K. Garg, S. C. Agarwala, S. S. Bhatnagar, Y. J.  Francis, Ramamurthy & Co. for Respondent No. 1. M.  K.  Ramamurthy, J. Ramamurthy for Respondents  (In  CAs. Nos. 1655/73 and 1879/72 and for Intervener (In CA No. 1655/ 73). F. S. Nariman, Addl.  Sol.  Gen. of India, I. N. Shroff  for Respondent No. 1 (In CA. 115 of 1974). P. K. Pillai for Intervener (In CA No. 2137/72). F.   S.  Nariman,  Addl.   Sol.   Gen.  of  India,   Y.   J. Taraporewala, O.  C.  Mathur,  Mohan Prasad Jha and K.  J.  John  for  the Applicant/ Intervener (Air India) The following Judgments were delivered RAY, C.J.-There are two questions for consideration in these appeals.   First, whether an order for removal from  service contrary to regulations framed under the Oil and Natural Gas Commission  Act,  1959; the Industrial  Finance  Corporation Act,  1948;  and the Life Insurance  Corporation  Act,  1956 would  enable  the employees to a  declaration  against  the statutory  corporation  of continuance in service  or  would only  give rise to a claim for damages.  Second  whether  an employee  of  a statutory corporation is entitled  to  claim protection  of Articles 14 and 16 against  the  Corporation. In   short   the  question  is   whether   these   statutory corporations  are authorities within the meaning of  Article 12. 625 The  statutes for consideration are the Oil and Natural  Gas Commission Act, 1956; the Indutrial Finance Corporation Act. 1948;  and  the Life Insurance Corporation Act,  1956.   The question   which  really  falls  for  decision  is   whether regulations  framed under these statutes have the  force  of law. The  Oil  and Natural Gas Commission Act,  1959  hereinafter referred to as the 1959 Act established the Commission as  a body  corporate  having perpetual succession  and  a  common seal.   The composition of the Commission is  the  Chairman, and  not  less  than two, and not  more  than  eight,  other members  appointed  by the Central Government.  One  of  the members  shall be a whole-time, Finance Member in charge  of the  financial  matters  relating to  the  Commission.   The Central  Government may, if it thinks fit, appoint  one,  of the  members  as  Viw-Chairman  of  the  Commission.   Under section  12  of  the 1959 Act the Commission  may,  for  the purpose  of  performing  its  functions  or  exercising  its powers, appoint such number of employees as it may  consider necessary.   The functions and the terms and  conditions  of service  of such employees shall be such as may be  provided by  regulations  made  under the 1959  Act.   There  was  an existing Organisation set up in pursuance of a resolution of the  Government  of  India No. 22/29/55-O  &  G  dated  14th August,  1956.  Every person employed by the  said  existing Organisation  before  the establishment  of  the  Commission became an employee of the Corporation in accordance with the provisions contained in section 13 of the 1959 Act.

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Sections  31 and 32 of the 1959 Act are important.   Section 31  states that the Central Government may, by  notification in  the Official Gazette, make rules to give effect  to  the provisions of the Act.  The rules provide inter alia for the term  of  office  of,  and  the  manner  of  filling  casual vacancies  among  the  members,  and  their  conditions   of service;   the  disqualifications  for  membership  of   the Commission  and the procedure to be followed in  removing  a member  who is or becomes subject to  any  disqualification; the  procedure to be followed in the discharge of  functions by members; the conditions subject to which and the mode  in which  contracts may be entered into by or on behalf of  the Commission  and some other matters.  Every rule  made  under section  31 of the 1959 Act shall be laid as soon as may  be before each House of Parliament as mentioned in the section. Both Houses may agree to or annul the rule or modify Under  section 32 of the 1959 Act the Commission  may,  with the   previous  approval  of  the  Central  Government,   by notification  in the Official Gazette, make regulations  not inconsistent with the Act and the rules made thereunder, for enabling  it to discharge its functions under the Act.   The regulations provide inter alia for the terms and  conditions of  appointment  and  service  and the  scaler,  of  pay  of employees  of the Commission the time and place of  meetings of  the Commission, the procedure to be, followed in  regard to  the  transaction  of  business  at  such  meetings;  the maintenance of minutes of meetings of the Commission and the transmission of copies thereof to the 626 Central Government; the persons by whom, and the, manner  in which  payments,  deposits and investments may  be  made  on behalf  of the Commission; the custody of  ’moneys  required and the maintenance of accounts.  The Central Government may amend, very or rescind any regulation which it has approved, and  thereupon the regulation shall have effect  accordingly but  without prejudice to the exercise of the powers of  the Commission under sub-section. (1) of section 32. The   Life  Insurance  Corporation  Act,  1956   hereinafter referred  to  as the 1956 Act  established  the  Corporation under  section 3 of the Act.  Under section 11 of  the  1956 Act  existing  employees  of  an  insurer  whose  controlled business  was transferred to and vested in  the  Corporation and  who  were employed by the insurer wholly or  mainly  in connection  with his controlled business immediately  before the  appointed day became on and from the appointed  day  an employee  of the, Corporation.  Section 11 of the  1956  Act further  states that the employees of the Corporation  would hold  office  upon  the same on the  appointed  day.   These employees  were further to continue terms and with the  same rights and duties as they would have held under the 1956 Act unless  and until their employment was terminated  or  until the remuneration, terms and conditions were duly altered  by the Corporation. The  two important sections of 1956 Act are sections 48  and 49.   Section 48 states that the Central Government may,  by notification  in the Official Gazette, make rules  to  carry out the purposes of this Act.  The rules inter-alia  provide for  the  term of office and the conditions  or  service  of members; the jurisdiction of the Tribunals constituted under section 17 of the Act,, the manner in which and the  persons to  whom, any compensation under this Act may be  paid;  the condition-,  subject  to which the Corporation  may  appoint employees.   All rules made shall be laid as started in  the section  before  both  Houses of Parliament  and.  shall  be subject to such modification as Parliament may make.

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Section 49 of the 1956 Act states that the Corporation  may, with  the  previous approval of the Central  Government,  by notification  in the Gazette of India, make regulations  not inconsistent With the Act. and the rules made thereunder  to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of this  Act. The  regulations may provide inter alia for the  powers  and functions  of the Corporation which may be delegated to  the Zonal  Managers; the method of recruitment of employees  and agents  of the Corporation and the terms and  conditions  of service   of  such  employees  or  agents;  the  terms   and conditions  of service of persons who have become  employees of the Corporation under section 11 of the Act; the  number, term  of  office  and conditions of service  of  members  of Boards  constituted under section 22 of the Act; the  manner in  which the Fund of the Corporation shall  be  maintained; the  form  and manner in which policies may  be  issued  and contracts binding on the Corporation may be executed. 627 The  industrial  Finance Corporation Act,  1948  hereinafter referred  to  as the 1948 Act  establishes  the  Corporation under  section  3 of the Act.  The  superintendence  of  the business of the Corporation shall be entrusted to a Board of Directors.   Section  42  of the 1948 Act  enacts  that  the Central Government may make, rules in consultation with  the Development  Bank  not inconsistent with the  provisions  of this Act and to give effect to the provisions of the Act and where there is any inconsistency with rules and  regulations the rules shall prevail.  The rules under the Act are to  be laid before each House of Parliament in the same. manner  as in the Oil and Natural Gas Commission Act. section 43 of the 1948  Act  enacts  that  the Board  may  with  the  previous approval  of  the  Development  Bank  make  regulations  not inconsistent  with the Act and the rules made thereunder  to provide for all matters for which provision is necessary  or expedient for the purpose of giving effect to the provisions of  this  Act.  The Development Bank  means  the  Industrial Development   Bank   established   under   the    Industrial Development Act, 1964.  The shares of the Central Government in   the   Corporation  shall  stand  transferred   to   the Development  Bank  when  the  Central  Government  shall  so notify.  The regulations provide inter alia for the  holding and conduct of elections under this Act including the  final decision of doubts or disputes regarding the validity of the election; the manner in which and the conditions subject  to which  the  shares  of  the  Corporation  may  be  held  and transferred; the manner in which general meeting’s shall  be convened,  the procedure to be followed thereat; the  duties and conduct, salaries, allowances and conditions of  service of  officers and other employees and of advisers and  agents of the Corporation. The   contentions  on  behalf  of  the  State   are   these. Regulations  are  framed under powers given by  the  statute affecting  matters of internal management.   Regulations  do not   have  a  statutory  binding  character.    Terms   and conditions of employees as laid down in the regulations  are not  a  matter of statutory  obligations.   Regulations  are binding  not  as law but as contract.  Regulations  have  no force of law.  Regulations provide the terms and  conditions of employment and thereafter the, employment of each  person is contractual. The  contentions  on  behalf of  the  employees  are  these. Regulations  are  made under the statute.   The  origin  and source  of  the  power to  make  regulations  is  statutory. Regulations are self binding in character.  Regulations have

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the force of law inasmuch as the statutory authorities  have no right to make any departure from the regulations. Rules,  Regulations,  Schemes, Bye-laws, orders  made  under statutory powers are all comprised in delegated  legislation The  need for delegated legislation is that statutory  rules are  framed  with  care and minuteness  when  the  statutory authority mating the rules is after the coming into force of the  Act  in a better position to adapt the Act  to  special circumstances.  Delegated legislation permits utilisation of experienced and consultation with interests affected by  the practical operation of statues. 628 In  England the Statutory Instruments (Confirmatory  Powers) Order,   1947  contemplates  orders  in  Council  or   other instruments  which  are  described  as  orders.   The  Rules Publication  Act  1893  in  England  defines  "rule   making authority" to include every authority authorised to make any statutory  rules.   Statutory  rules are  defined  there  as rules, regulations or by-laws made under any Act of  Parlia- ment,  in England.  Orders are excluded from  the  statutory definition  of statutory rules as being administrative.   In England regulation is the term most popularly understood and the one favoured by the Committee on Ministers, Powers,  who suggested  that regulations should be used for  substantive, law  and  rules for procedural law, while orders  should  be reserved to describe the exercise of executive power or  the taking of a judicial or quasi judicial decision (See  Craies on  Statute  Law,  7th  Ed. at p.  303).   The  validity  of statutory  instruments  is generally a  question  of  vires, i.e., whether or not the enabling power has been exceeded or otherwise wrongfully exercised. Subordinate  legislation  is  made by a person  or  body  by virtue  of the powers conferred by a statute.   By-laws  are made  in the main by local authorities or similar bodies  or by  statutory  or  other  undertakings  for  regulating  the conduct of persons within their areas or resorting to  their undertakings.  Regulations may determine the class of  cases in  which  the exercise of the statutory power by  any  such authority constitutes the making of statutory rule. The  words "rules" and "regulations" are used in an  Act  to limit  the power of the statutory authority.  The powers  of statutory  bodies are derived, controlled and restricted  by the statutes which create them and the rules and regulations framed  thereunder.  Any action of such bodies in excess  of their  power or in violation of the, restrictions placed  on their powers is ultra vires.  The reason is that it goes  to the  root  of  the  power  of  such  corporations  and   the declaration of nullity is the only relief that is granted to the aggrieved party. In  England  subordinate legislation has, if  validly  made, tile full force and effect of a statute, but it differs from a  statute in that its validity whether as respects form  or substance is normally open to challenge in the, Courts. Subordinate  legislation  has, if validily made,  the,  full force,  and effect of a statute.  That is so whether or  not the  statute under which it is made provides expressly  that it  is  to  have  effect  as  if  enacted  therein.   If  an instrument made in the exercise of delegated powers  directs or  forbids the doing of a particular thing the result of  a breach  thereof  is,  in the absence  of  provision  to  the contrary, the same as if the command or prohibition had been contained  in  the enabling statute itself.   Similarly,  if such  an instrument authorises or requires the doing of  any act,  the principles to be applied in determining whether  a person injured by the act has any right of action in respect

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of the injury are not different from those applicable 629 whether  damage  results from an act done under  the  direct authority of a statute, Re Langlois and Biden, (1891) 1 Q.B. 349 and Kruse v. Johnson, (1898) 2 Q.B. 91. The  authority of a statutory body or public  administrative body  or  agency ordinarily includes the power  to  make  or adopt  rules and regulations with respect to matters  within the   province  of  such  body  provided  such   rules   and regulations are not inconsistent with the relevant law.   In America  a  "public agency" has been defined  as  an  agency endowed with governmental or public functions.  It has  been held  that  the  authority  to  act  with  the  sanction  of Government   behind   it  determines  whether   or   not   a governmental  agency  exists.   The  rules  and  regulations comprise those actions of the statutory or public bodies  in which the legislative element predominates.  These statutory bodies cannot use the power to make rules and regulations to enlarge  the  powers  beyond  the  scope  intended  by   the legislature.   Rules and regulations made by reason  of  the specific  power conferred on the statute to make  rules  and regulations establish the pattern of conduct to be followed. Rules are duly made relative to the subject matter on  which the  statutory  bodies act subordinate to the terms  of  the statute  under which they are promulgated.  Regulations  are in aid of the enforcement of the provisions of the  statute. Rules and regulations have been distinguished from orders or determination  of  statutory bodies in the  sense  that  the orders  or determination are actions in which there is  more of  the judicial function and which deal with  a  particular present situation.  Rules and regulations on the other  hand are actions in which the legislative element predominates. The process of legislation by departmental regulations saves time ’and is intended to deal with local variations and  the power  to legislate by statutory instrument in the  form  of rules and regulations is conferred by Parliament and can  be taken  away by Parliament.  The legislative function is  the making of rules.  Some Acts of Parliament decide  particular issues and Po not lay down general rules. The  justification for delegated legislation  in  threefold. First, there is pressure on parliamentary time.  Second, the technicality    of    subjectmatter    necessitates    prior consultation  and  expert  advice  on  interests  concerned. Third, the need for flexibility is established because it is not possible to foresee every administrative difficulty that may  arise to make adjustment that may be called  for  after the  statute  has begun to operate.   Delegated  legislation fills those needs. The  characteristic  of  law is  the  manner  and  procedure adopted  in  many  forms of  subordinate  legislation.   The authority  making  rules  and regulation  must  specify  the source  of  the rule and regulation  making  authority.   To illustrate,  rules  are  always framed in  exercise  of  the specific  power  conferred  by the statute  to  make  rules. Similarly,  regulations are framed in exercise  of  specific power  conferred  by the statute to make  regulations.   The essence  of  law  is that it is made by  the  law-makers  in exercise of specific authority.  The vires of law is capable of  being  challenged  if the power is absent  or  has  been exceeded by the authority making rules or regulations. 630 Another characteristic of law is its content.  Law is a rule of general conduct while administrative instruction  relates to   particular  person.   This  may  be  illustrated   with reference to regulations under the Acts forming the  subject

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matter of these appeals.  The Life Insurance Corporation Act as  well as the Industrial Finance Corporation  Act  confers power  on  the Corporation to make regulations  as  ’Lo  the method  of  recruitment  of  employees  and  the  terms  and conditions of service of such employees or agents.  The  Oil and Natural Gas Commission Act under section 12 states  that the  functions  and  terms  and  conditions  of  service  of employees  shall be such as may be provided  by  regulations under the Act.  Regulations under the 1959 Act provide inter alia  the terms and conditions of appointment and scales  of pay  of  the employees of the Commission.   The  regulations containing  the  terms  and conditions  of  appointment  are imperative.  The administrative instruction is the  entering into  contract  with a particular person but  the  form  and content of the contract is prescriptive and statutory. The noticeable feature is that these, statutory bodies- have no free hand in framing the conditions and terms of  service of  their  employees.  These statutory bodies are  bound  to apply the terms and conditions as laid down the regulations. The statutory bodies are not free to make such terms as they think  fit and proper.  Regulations prescribe the  terms  of appointment,   conditions  of  service  and  procedure   for dismissing employees. These regulations in the statutes  are described :as "status fetters on freedom of contract".   The Oil   and  Natural  Gas  ,Commission  Act  in   section   12 specifically  enacts that the terms and ,conditions  of  the employees  may  be such as may be provided  by  regulations. There is a legal compulsion on the Commission to comply with the  regulations.  Any breach of such compliance would be  a breach  of the regulations which are  statutory  provisions. In  other  ,statutes  under consideration,  viz.,  the  Life Insurance   Corporation  Act  and  the  Industrial   Finance Corporation  Act  though  there  is  no  specific  provision comparable  to  section  12 of the 1959 Act  the  terms  and conditions  of  employment  and conditions  of  service  are provided for by regulations.  These regulations are not only binding on the authorities but also on the public. Broadly   stated,   the  distinction   between   rules   and regulations on the one hand and administrative  instructions on the other is that rules and regulations can be made  only after  reciting the source of power  whereas  administrative instructions are not issued after reciting source of  power. Second  the executive power of a State is not authorised  to frame  rules  under Article 162.  This Court held  that  the Public   Works  Department  Code  was  not   a   subordinate legislation  (See G. J. Fernandes v. State of Mysore &  Ors. (1967)  3 S.C.R. 636.  The, rules under Article 309  on  the other hand constitute not only the constitutional rights  of relationship  between the State and the Government  servants but  also  establish that there must be  specific  power  to frame rules and regulations. The Additional Solicitor General submitted that  regulations could  not have the force of law because  these  regulations are similar to regulations framed by a company  incorporated under the Companies 631 Act.  The fallacy lies in equating rules and regulations  of a  company with rules and regulations framed by a  statutory body.   A company makes rules and regulations in  accordance with the provisions of the Companies Act.  A statutory  body on the other hand makes rules and. regulations by and  under the  powers conferred by the Statutes creating such  bodies. Regulations  in  Table-A  of the Companies  Act  are  to  be adopted by a company.  Such adoption is a statutory require- ment.   A  company cannot come into existence unless  it  is

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incorporated  in  Accordance  with  the  provisions  of  the Companies Act.  A company cannot exercise powers unless  the company follows the statutory provisions.  The provision  in the  Registration Act requires registration of  instruments. The  provisions  in  the Stamp Act  contain  provisions  for stamping  of documents.  The non-compliance  with  statutory provisions will render a document to; be of no effect.   The source of the, power for making rules and regulations in the case  of  Corporation created by a statute  is  the  statute itself.  A company incorporated tinder the Companies Act  is not created by the Companies Act but comes into existence in accordance  with  the provisions of the Act.  It  is  not  a statutory body because it is not created by the statute.  It is  a body created in accordance with the provisions of  the statute. The  character of regulation has been decided by this  Court in several decisions.  One group of decisions consists of S. R.  Tewari v. District Board Agra (1964) 3 S.C.R. 55);  Life Insurance  Corporation  of India v.  Sunil  Kumar  Mukherjee (1964)  5 S.C.R. 528); Calcutta Dock Labour Board v.  Jaffar Imam  (1965)  3  S.C.R. 453); Mafarlal  Naraindas  Barot  v. Divisional Controller S.T.C. (1966) 3 S.C.R. 40); The  Sirsi Municipality  v. Cecelia Kom Francis (1973) 1  S.C.C.  409); U.P.  State Warehousing Corporation v. C. K. Tyagi (1970)  2 S.C.R.  250) and Indian Airlines Corporation v. Sukhdeb  Rai (1971 2 S.C.C. 192). In   Naraindas  Barot’s  case  this  Court  held  that   the termination of services by Corporation created by a  statute without  complying with the requirements of the  regulations framed   by  the  Corporation  under  the  State   Governing conditions of the employees of the Corporation was bad.  The reason  is that the termination contravened  the  provisions contained in the regulations. In Tewari’s case the termination of the employment of Tewari was  challenged  on the ground that the  resolution  of  the District  Board terminating the services was  invalid.   The High Court dismissed Tewari’s application under Article  226 in  limine.   This Court held that the Courts  are  invested with  the power to declare invalid the, act of  a  statutory body,  if by doing the act the body has acted in  breach  of the  mandatory obligation imposed by statute.  The  District Boards  Act  conferred power upon the  State  Government  by section 172 to make rules under the Act.  The District Board relied  on  a  notification  headed  "Regulation   regarding dismissal, removal or reduction of officers and servants  of District Board".  It was treated as a rule inasmuch as  sec- tion  173  (2) of the District Boards  Act  which  conferred power to frame regulations did not confer any power to frame powers regulating the exercise of the power of dismissal  of officers of servants of the Board. 632 This  Court held that under the rules dismissal, removal  or reduction  of an officer or servant might be  effected  only after  affording  him a reasonable  opportunity  of  showing cause  against the action proposed to be taken in regard  to him.   In Tewari’s case this Court also said that the  order of  dismissal  involving punishment must be  exercised  con- sistently  with  the rules or regulations framed  under  the Statute. In   the  Life  Insurance  Corporation  case,   there   were regulations  framed  under  the Act.   Clause  4(3)  of  the Regulations  prescribed  that in Judging a  Field  officer’s work, the Corporation shall observe the principles contained in  the  circular  issued  by the  Managing  Director  on  2 December, 1957.  Paragraph 4(h) of the circular which became

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an  integral part of the regulations inter alia stated  that where  the  Committee  of  its own  decided  that  the  poor performance of a Field Officer was not due to  circumstances beyond  his control or that he had made no efforts  and  not shown  inclination or willingness to work, the  services  of such  Field Officer would be terminated.  There was also  in existence  a  Field  Officer’s order  which  was  issued  in exercise  of the powers conferred on the Central  Government by  section  11(2)  of  the Act.  Clause  10  of  the  order provided  for  penalities and termination of  service.   The contention  of  the  employee was that  the  termination  of service  could be brought about only under clause 10 of  the Order.  This Court held that the regulations to be framed by the Corporation were not to be inconsistent either with  the Act  or  with orders made under section 11 (2) of  the  Act. The  circular  which  was a part of  the  regulations  under clause  4(3)  thereof  and  clause  10  of  the  order  were reconciled  by this Court by stating that paragraph 4(b)  of the  circular could be availed of to terminate the  services of  the officers but such termination was to be effected  in the manner prescribed by clause 10.  The termination was not in accordance with either clause 10(a) or (b) of the  order. Therefore,  the termination was invalid. The Life  Insurance case (supra) recognised regulations framed under Act to have the force of law. In the Indian Airlines Corporation case this Court said that there  being no obligation or restriction in the Act or  the rules  subject  to  which only the power  to  terminate  the employment could be exercised the employee could not contend that  he was entitled to a declaration that the  termination of his employment was null and void.  In the Indian Airlines Corporation  case reliance was placed upon the  decision  of Kruse v. Johnson (1898) 2 O.B. 91 for the view that not  all by-laws  have  the force of law.  This  Court  regarded  re- gulation as the same thing as by-laws.  In Kruse v.  Johnson the  Court was simply describing the effect that the  county by-laws  have on the public.  The observations of the  Court in  Kruse v. Johnson that the by-law "has the force  of  law within  the  sphere  of its legitimate  operation"  are  not qualified  by the words that it is so "only  when  affecting the public or some section of the public .... ordering some- thing  to be done or not to be done and accompanied by  some sanction or penalty for its non-observance." In this view  a regulation is not an agreement or contract but a law binding the  corporation, its officers, servants and the members  of the   public  who come within the sphere of       its 633 operations.   The  doctrine  of ultra vires  as  applied  to statutes,  rules  and  orders should equally  apply  to  the regulations  and  any other  subordinate  legislation.   The regulations  made under power conferred by the  statute  are subordinate  legislation and have the force and  effect,  if validly   made,   as  the  Act  passed  by   the   competent legislature. In U.P. Warehousing Corporation and Indian Airlines Corpora- tion  cases  the terms of the regulations  were  treated  as terms and conditions of relationship between the Corporation and  its  employees.’ That does not lead to  the  conclusion that  they are of the same nature and quality as  the  terms and  conditions  laid down in the  contract  of  employment. Those  terms  and  conditions  not  being  contractual   are imposed.  by  one  kind of  subordinate  legislation,  viz., regulations  made in exercise of the power conferred by  the statute  which constituted that Corporation.  Terms  of  the regulations  are  not  terms of  contract.   In  the  Indian

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Airlines  Corporation  case  under section  45  of  the  Air Corporations  Act,  1953, the Corporation had the  power  to make regulations not inconsistent with the Act and the rules made by the Central Government thereunder.  The  Corporation had no power to alter or modify or rescind the provisions of these  regulations  at its discretion which it could  do  in respect  of the terms of contract that it may wish to  enter with its employees independent of these regulations.  So far as  the terms of the regulations are concerned, the  actions of the Corporation are controlled by the Central Government. The decisions of this Court in U.P. Warehousing  Corporation and Indian Airlines Corporation are in direct conflict  with decision  of this Court in Naraindas Barot’s case which  was decided by the Constitution Bench. In Sirsi Municipality v. Cecelia Kom Francis Tellis (supra), the  dismissal  was held to be contrary to rule  143  framed under section 46 of the Bombay District Municipalities  Act. This  Court held that in regard to the master-servant  cases in  the employment of the State or of other public or  local authorities or bodies created under statute, the courts have decided in appropriate cases the dismissal to be invalid  if the  dismissal is contrary to rule of natural justice or  if the  dismissal  is  in violation of the  provisions  of  the statute.   Where a State or a public authority dismisses  an employee   in   violation  of   the   mandatory   procedural requirements  on  grounds which are not sanctioned  or  sup- ported  by statute the courts may exercise  jurisdiction  to declare the act, of dismissal to be a nullity.  The ratio is that  the  rules  or  the regulations  are  binding  on  the authority. There  is  no substantial difference between a  rule  and  a regulation  inasmuch  as both  are  subordinate  legislation under powers conferred by the statute.  A regulation  framed under a statute applies uniform treatment to every one or to all members of some group or class.  The Oil and Natural Gas Commission,  the Life Insurance Corporation  and  Industrial Finance Corporation are all required by the statute to frame regulations  inter  alia for the purpose of the  duties  and conduct  and  conditions of service of  officers  and  other employees.   These  regulations  impose  obligation  on  the statutory  authorities.   The statutory  authorities  cannot deviate from the conditions of service.  Any deviation  will be enforced by legal sanction of declaration by courts to 634 invalidate  actions in violation of rules  and  regulations. The  existence of rules and regulations under statute is  to ensure  regular conduct with a distinctive attitude to  that conduct  as  a standard.  The statutory regulations  in  the cases  under  consideration give the employees  a  statutory status  and  impose  restriction on  the  employer  and  the employee with no option to vary the conditions.  An ordinary individual  in  a  case of master  and  servant  contractual relationship  enforces  breach of  contractual  terms.   The remedy  in  such  contractual  relationship  of  master  and servant  is damages because personal service is not  capable of  enforcement.  In cases of statutory bodies, there is  no personal  element  whatsoever  because  of  the   impersonal character  of  statutory bodies.  In the case  of  statutory bodies  it  has  been  said  that  the  element  of   public employment  or  service and the support of  statute  require observance  of  rules and regulations.  Failure  to  observe requirements  by statutory bodies is enforced by  courts  by declaring dismissal in violation of rules and regulations be void.   This Court has repeatedly observed that  whenever  a mans  rights are affected by decision taken under  statutory

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powers,  the Court would presume the existence of a duty  to observe  the  rules of natural justice and  compliance  with rules and regulations imposed by statute. On   behalf  of  the  State  it  is  contended  that   these Corporations   cannot  be  said  to  be  "other   authority" contemplated  in  Article  12  for  two  principal  reasons. First,  one  of the, attributes of a State is  making  laws. The State exercises governmental functions and the executive power  of  the State is co-extensive  with  the  legislative power  of the State.  Second, authority as  contemplated  in Article  12 means a body of persons established  by  statute who  are  entitled  as such body to  command  obedience  and enforce  directions  issued by them on pain of  penalty  for violation.   On these grounds it was said that these  corpo- rations  cannot  make laws like a State and  cannot  enforce directions. The  State  undertakes commercial functions  in  combination with   Governmental   functions   in   a   welfare    State. Governmental  function  must be 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. This  Court in Rajasthan State Eeletricity Board, Jaipur  v. Mohan & Ors. (1967) 3 S.C.A. 377) said that an "authority is a public administrative agency or corporation having  quasi- governmental powers and authorised to administer a  revenue- producing   public   enterprise.   The   expression   "other authorities"  in Article 12 has been held by this  Court  in the  Rajasthan Electricity Board case 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 will 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 635 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  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  us  a criminal  offence.   The power to issue  directions  and  to enforce compliance is an important aspect. The  concurring Judgment in the Rajasthan Electricity  Board case  said  that  the Board was  invested  by  statute  with extensive  powers of control over electricity  undertakings. The power of the Board to make rules and regulations and  to administer the Act was said to be in substance the sovereign power of the State delegated to the Board. In the British Boardcasting 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

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province   of   government.    The   British    Boardcasting Corporation  was  held  not to be  within  the  province  of government  because  broadcasting was not  asserted  by  the government  to  be within the province of  government.   The Wireless Telegraphy Act provided for regulation of  wireless telegraphy  by  a system of licences.  The  Court  gave  two reasons  as  to  why the Broadcasting  Corporation  was  not within the province of the government.  If the  Broadcasting Corporation  was exercising functions required  and  created for the purpose of government. it is difficult to see why  a licence  was  required  to be issued to it.   Again,  it  is difficult  to  understand why in the event of  an  emergency powers  should be given to the Postmaster-General to  direct that the broadcasting stations of the Corporation should  be deemed to be in possession of Her Majesty if it be the  fact that  such  stations  are  already  used  for  purposes   of exercising  functions required and created for  purposes  of the 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.  Such  an  authority  is  not precluded from making a profit for the public benefit.  (See Halsbury’s Laws of England 3rd.  Ed.  Vol. 30 paragraph 1317 -at p.682). The  oil-fields  (Regulation  and  Development)  Act,   1948 defines  oilfield" as any area where any operation  for  the purpose  of obtaining natural gas and petroleum, crude  oil, refined  oil, partially refined oil and any of the  products of  petroleum  in a liquid or solid state, is to  be  or  is being  carried  on.  Section 4 of the said 1948  Act  states that no mining lease shall be granted after the commencement of the Act otherwise than in accordance with the rules  made under the Act.  Section 5 of the said 1948 Act confers power on the Central 636 Government  to  make rules for regulating  grant  of  mining leases  of  prohibiting grant of leases.  Section 6  of  the said 1948 Act wafers power on the Central Government to make rules for the conservation and development of mineral  oils. Mining gas includes natural gas and petroleum.  Section 9 of the said 1948 Act states that any rule made under any of the provisions  of  the Act may provide that  any  contravention thereof shall be punishable with the imprisonment which  may extend  to six months or with fine which may extend  to  one thousand  rupees  or with both.   The  Petroleum  Concession Rule, 1949 says that the Central Government grants  approval for searching, drilling and producing petroleum and licences for  exploring  and prospecting.  The Oil  and  Natural  Gas Commission is given merely the duty to perform the leases. The  1959 Act speaks in section 14 of the functions  of  the Commission   and  in  section  15  of  the  powers  of   the Commission.   The functions of the Commission are  to  plan, promote,   organise   and  implement  programmes   for   the development  of petroleum resources and the  production  and sale of petroleum and petroleum products produced by it  and to  perform  such functions as the Central  Government  may, from  time to time assign to the Commission.  The powers  of the  Commission are such as may be necessary  and  expedient for the purpose of carrying out the functions under the Act. The  Government  acquires  land  for  the  Commission.   The acquisition is for public purpose.  The Commission  extracts petroleum  from  the land.  Entry No. 53 in List  1  of  the Seventh  Schedule  speaks of regulation and  development  of oilfields and mineral oil resources; petroleum and petroleum

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products;   other   liquids  and  substances   declared   by Parliament by law to be dangerously inflammable.  Entry  No. 54  in  List  I speaks of regulation of  mines  and  mineral development  to  the  extent to which  such  regulation  and development  under the control of the Union is  declared  by Parliament by law to be expedient in the public interest. Section 23 of the 1959 Act says that the Oil and Natural Gas Commission  shall furnish to the Central Government  returns and  statements  and particulars in regard  to  proposed  or existing   programme  for  the  development   of   petroleum resources  and  the  production and sale  of  petroleum  and petroleum products produced by the Commission as the Central Government  may require.  Section 24 of the 1959 Act  speaks of  compulsory  acquisition  of  land  by  the   Commission. Section 25 of the 1959 Act confers power on any employee  of the  Commission authorised by it to eater upon any  land  or premises  and  there  do such things as  may  be  reasonably necessary  for the purpose of lawfully carrying out  any  of its  works or to make survey, examination  or  investigation preliminary  or incidental to the exercise of powers or  the performance  of functions by the Commission under  the  Act. The employees of the Commission are deemed by section 27  of the  1959 Act to be public servantsunder section 21  of  the Indian Penal Code. The  Oil. and Natural Gas Commission Act, 1959 is an Act  to provide  for  the.  establishment of a  Commission  for  the development  of petroleum resources and the  production  and sale of  petroleum and 637 petroleum products produced by it and for matters  connected there ,with. Article 298 states that the ,executive power of the Union and of each State shall extend to the carrying  on of any trade or business and to the acquisition holding  and disposal  of  property and  the making of  contracts.  Under Article  73 subject to the provisions of  the  Constitution, the executive power of the Union shall extend to the matters with respect to which Parliament has power to make  laws;and to  the exercise of such rights, authority and  jurisdiction as  are exercisable by the Government of India by virtue  of any treaty or agreement. The Union is competent to carry  on trade and business in mines and mineral resources. The power of  the Union is co-extensive with the legislative power  of the  Parliament.  The  Oil and  Natural  Gas  Commission  is established  for the development of petroleum resources  and the production and sale of petroleum and petroleum products. The  exploitation of the resources is by the  Union  through the  agency of the statutory commission. The members of  the Commission are appointed by the Central Government. If  they want  to resign, resignation has to be sent to  the  Central Government. Termination of appointment of members is by  the Central   Government.  The  powers  and  functions  of   the Commission  are  those  assigned by  the  statute  and  such functions as the Central Government may assign. No  industry which  will use any of the gases produced by the  Commission as a raw material shall be set up by the Commission  without the previous approval of the Central Government. The capital of  the Commission is what has already been incurred by  the Central Government as nonrecurring expenditure in connection with  the existing Organisation. The Central Government  may also provide to the Commission any further capital which may be required by the Commission for carrying on its  business. The  Commission    may, with the previous  approval  of  the Central Government borrow money. The budget is to be in such form as the Central Government may prescribe. The Commission may not re-appropriate without the previous approval of  the

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Central Government. The reports, accounts are to be  audited by  the Comptroller and Auditor-General of India  and  these are  not only to be forwarded to the Central Government  but are also to be laid before the Parliament. The, audit report is  also to be before the Parliament. Any land  required  by the Commission is to be acquired under the Land  Acquisition Act  as if it were required by a company. The Commission  is empowered   to  enter  upon  any  land  or   premises.   The dissolution of the. Commission is by the Central Government. All  these  provisions  indicate  at  each  stage  that  the creation,  composition  of  membership,  the  functions  and powers,  the  financial powers, the audit of  accounts,  the returns, the capital, the borrowing powers, the  dissolution of the Commission and acquisition of and for the purpose  of the  company and the powers of entry are all  authority  and agency of the Central Government. The  Life  Insurance  Act  is  an Act  to  provide  for  the nationalisation  of  life  insurance business  in  India  by transferring   all   such  business   to   the   Corporation established   for  the  purpose  and  to  provide  for   the regulation  and control of the business of  the  Corporation and  for matters connected therewith or incidental  thereto. On the appointed day viz. 638 1 July, 1956, all assets and liabilities appertaining to the controlled business of all insurersrs became transferred  to and  vested  in the Corporation.  The  service  of  existing employees of insurers was transferred to the Corporation. It became  the  duty of very person in possession,  custody  or control of property appertaining to the controlled  business of  an  insurer  to  deliver the  same  to  the  Corporation forthwith.   The  Corporation was empowered  to  reduce  the amounts  of insurance under contracts of life  insurance  in such  manner  and subject to such conditions as  it  thought fit.   In  the  discharge of functions under  the  Act,  the Corporation  is  guided by directions in matters  of  policy involving public interest as the Central Government may give to  it.  If any question arises whether a direction  relates to  a  matter  or  policy  involving  public  interest,  the decision of the Central Government shall be final. The  Corporation is to submit to the Central  Government  an account  of  activities  during  the  financial  year.   The Corporation has the exclusive privilege of carrying on  life insurance business in India.  On and from the appointed day, none  but  the  Corporation  can  carry  on  life  insurance business  in India.  The sums assured by policies issued  by the Corporation including bonuses shall be guaranteed as  to payment  in  cash  by  the  Central  Government.   No  suit, prosecution or other legal proceedings shall lie against any member or employee of the Corporation for anything which  is in good faith done or intended to be done under the Act. The  provisions of the life Insurance Corporation Act  amply establish  that the Corporation has the exclusive  privilege of  carrying on life insurance business.  The  policies  are guaranteed  by  the Central Government.  If  profits  accrue from  any business other than life insurance  business  then after  making provision for reserves and other matters,  the balance  of profit shall be paid to the Central  Government. The  report  of the activities of the Corporation is  to  be submitted to the Central Government. The  original capital of the Corporation is five  crores  of rupees  provided  by the Central  Government.   The  Central Government  May reduce the capital of the Corporation.   The Corporation  may  ask  for  relief  in  respect  of  certain transactions  of the insurer whose controlled  business  has

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been transferred to the Corporation.  The relief is  granted by the Tribunal.  The Tribunal is constituted by the Central Government.  The Central office of the Corporation shall  be at such place as the Central Government may specify.  In the discharge of functions under the Act, the Corporation  shall be guided by such directions in matters of policy  involving public  interest as the Central Government may  direct.   If any question arises relating to a matter of policy involving public  interest,  the decision of  the  Central  Government shall  be final.  The accounts of the Corporation  shall  be audited by auditors who will be appointed with the  previous approval  of  the Central Government.   The  auditors  shall submit the report to the Corporation and shall also  forward a copy of the report to the Central Government. If  as  a  result of any  investigation  undertaken  by  the Corporation  any surplus emerge,&, ninety-five per  cent  of such surplus or such higher 639 percentage  thereof  as the Central Government  may  approve shall  be  allocated to or reserved for the  life  insurance policy holders Corporation and after meeting the liabilities of  the Corporation remainder shall be paid to  the  Central Government or if that Government  so directs be utilised for such  purposes  and in such manner as  that  Government  may determine.  if  profits accrue after  making  provision  for reserves and other matters, the balance shall be paid to the Central Government.  The Central Government shall cause  the report of the auditors, the report of the actuaries and  the report   giving  an  account  of  the  activities   of   the Corporation   to  be  laid  before  the   Parliament.    The provisions  of  the Companies Act do not apply to  the  Cor- poration with regard to winding up.  The Corporation  cannot be placed. in liquidation except by an order of the  Central Government. 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  very provision shows in no uncertain terms that the voice is that of  the  Central Government and the hands are  also  of  the Central Government. The Industrial Finance Corporation is a body corporate.  The authorised capital of the Corporation shall be ten crores of rupees divided into twenty thousand fully paid up shares  of five thousand rupees each.  Ten thousand shares of the total value of five crores of rupees shall be issued in the  first instance.   The  remaining  shares may be  issued  with  the sanction of the Central Government of the capital issued  in the  first instance, the Central Government and the  Reserve Bank of India shall each subscribe for two thousand  shares. Scheduled banks may subscribe for two thousand five  hundred shares,  Insurance  companies, investment trusts  and  other like  financial institutions for two thousand  five  hundred shares and co-operative banks for one thousand shares of the Corporation.   It  is  significant  that  ordinary  citizens cannot be shareholders.  All shares of the Corporation  held by  the  Central Government and the Reserve  Bank  of  India shall stand transferred to and vest in the Development Bank. As compensation therefore, the Development Bank shall pay to the Central Government and to the Reserve Bank  respectively the face value of the shares held by that Government and  by that   Bank.   The  shares  of  the  Corporation  shall   be guaranteed by the Central Government as to the re-payment of the principal and the payment of the annual dividend at such minimum  rate as may be fixed by the Central  Government  by notification.   The  Development Bank means  the  Industrial

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Development  Bank of India established under the  Industrial Development Bank of India Act, 1964. The  Chairman of the Corporation shall be appointed  by  the Central  Government.   Four Directors are nominated  by  the Development Bank; two directors are nominated by the Central Government;  two directors are elected by  Scheduled  Banks; two directors are elected by shareholders of the Corporation other than the Development Bank, Scheduled Banks and the co- operative  banks; two directors are elected by  co-operative banks.  The Central Government may remove the Chairman. 640 Where any industrial concernt which is under a liability  to the corPoration makes any default in re-payment or otherwise fails  to comply with the terms of the a agreement with  the Corporation,  the Corporation shall have the right  to  take over the management or possession or both of the concern  as well  as the right to transfer by way of lease ’or sale  and realise  the property, pledged, mortgaged,  hypothecated  or assigned to the Corporation. The  Corporation  shall furnish to  the  Central  Government statement of assets and liabilities at the close of the year together  with profit and loss account and a report  of  the working  of  the,  Corporation  and  the  report  shall   be published in the, official Gazette and shall be laid before, Parliament.  No provision of law relating to the winding  up of companies or corporations shall apply to the Corporation. The  Corporation shall not be placed in liquidation save  by order of the, Central Government. The superintendence and the affairs of the Corporation shall be entrusted to a Board.  In the discharge of functions, the Board  shall  be  guided by the Development  Bank.   If  any dispute  arises between the Development Bank and the  Board, the  dispute  shall be referred to  the  Central  Government whose decision shall be final.  The Central Government shall have  the  power to supersede the Board and  appoint  a  new Board in its place to function until a properly  constituted Board is set up. The  Corporation may invest its funds in the  securities  of the  Central Government or of any State Government  and  may with  the approval of the Central Government  contribute  to the  initial  capital  of  the Unit  Trust  of  India.   The Corporation may also subscribe to or purchase the shares  of any  financial institution which the Central  Government  in consultation  with the Development Bank may notify  in  this behalf.   The  Corporation  may issue  and  sell  bonds  and debentures.   Bonds and debentures of the Corporation  shall be guaranteed by the Central Government as to the re-payment of the principal and the payment of interest. The  Central  Government may issue  directions  to  auditors requiring them to report to it upon the adequacy of measures taken   by  the  Corporation  for  the  protection  of   its shareholders  and  creditors.  The  Central  Government  may appoint  the  Comptroller and Auditor General  of  India  to examine and report upon the accounts of the Corporation  and expenditure.   Every audit report shall be forwarded to  the Central  Government and the Government shall cause the  same to be laid before both Houses of Parliament. The Central Government may decide to acquire the shares held by  the shareholders other than the Development  Bank.   The shareholders  shall  be paid for the shares so  acquired  an amount  equal  to the paid up value of the  shares  together with a premium calculated at the rate of one per cent of the paid  up value for every year from the date of issue to  the date  of acquisition subject to a maximum of ten  per  cent. After the acquisition of the shares, the Central  Government

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shall transfer the shares to the Development Bank, that Bank paying an amount 641 equal to the  amount paid by the Central Government for such acquisition  After such acquisition, the Central  Government may  direct that the entire undertaking of  the  Corporation shall stand transferred to and vest in the Development Bank. These  provisions of the Industrial Finance Corporation  Act show   that  the  Corporation  is  in  effect  managed   and controlled by the Central Government. The  Oil and Natural Gas Commission is owned by the  Govern- ment.   It  is  a statutory body and  not  a  company.   The Commission   has  the  exclusive  privilege  of   extracting petroleum.  The management is by the Government.  It can  be dissolved only by the Government. The  Life Insurance Corporation is owned by  the  Government The  life insurance business is nationalised and  vested  in the  Corporation.   No  other  insurer  can  carry  on  life insurance  business.  The management is by  the  Government. The dissolution can be only by the Government. The  Industrial  Finance Corporation is under  the  complete control and management of the Central Government.   Citizens cannot be shareholders.  Certain specified institutions like Scheduled Banks, Insurance Companies, Investment Trusts  and Co-operative  Banks may apply for the shares.   The  Central Government  may  acquire shares held by  shareholders  other than  the  Development Bank.  After  such  acquisition,  the Government  may  direct that the entire undertaking  of  the Corporation  shall be vested in the Development  Bank.   The Corporation cannot be dissolved except by the Government. In the, background of the provisions of the three Acts under consideration,  the  question  arises as  to  whether  these corporations  can  be described to be authorities  with  the meaning of Article 12 of the Constitution.  In the Rajasthan Electricity  Board case it was said that the power  to  give directions, the disobedience of which must be punishable  as a  criminal  offence would furnish one of  the  reasons  for characterising  the body as an authority within the  meaning of Article, 12.  The power to make rules or regulations  and to  administer or enforce them would be one of the  elements of  authorities  contemplated in  Article  12.   Authorities envisaged  in Article 12 are described as  instrumentalities of  State  action. on behalf of the State it  was  contended that  the  Oil  and  Natural  Gas  Commission  as  well   as Industrial Finance Corporation was not granted immunity from taxation  and  therefore  the liability to  be  taxed  would indicate  that  the Corporation was not a  State  authority. Reference  is made to Article 289 which speaks of  exemption of property and income of a State from Union taxation.   The liability to taxation will not detract from the  Corporation being  an  authority  within  the  meaning  of  Article  12. Article 289 empowers Union to impose tax in respect of trade or business carried on by or on behalf of a State. The  Oil  and Natural Gas Commission Act  confers  power  of entry  on  employees  of the Commission  upon  any  land  or premises  for the purpose of lawfully carrying out works  by the Commission.  The mem- 642 bers  and  employees of the Commission are  public  servants within  the meaning of section 21 of the Indian Penal  Code. The  Commission enjoys protection of action taken under  the Act. The Life Insurance Act provides that if any person  lawfully withholds  or  fails  to  deliver  to  the  Corporation  any property  which  has been transferred to and vested  in  the

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Corporation or wilfully applies them to purposes other  than those  expressed or authorised by the Act, he shall, on  the complaint   of  the  Corporation  be  punishable  with   the imprisonment which may extend to one year or with fine which may  extend  to one thousand of rupees or  with  both.   The Corporation also enjoys protection of action taken under the Act. The  Industrial Finance Corporation Act states that  whoever in any bill of lading, warehouse receipt or other instrument given  to the Corporation whereby security is given  to  the Corporation  for accommodation granted by it wilfully  makes any false statement or knowingly permits any false statement to be made shall be punishable with imprisonment for a  term which may extend to two years or with fine which may  extend to  two  thousand  rupees or  with  both.   Further  whoever without  the consent in writing of the Corporation uses  the name  of  the Corporation in any prospect  or  advertisement shall  be punishable with imprisonment for a term which  may extend  to six months or with fine which may extend  to  one thousand  rupees  or  with  both.   The  Corporation  enjoys protection  of  action  taken under  the  Act.   A  ,company incorporated  under the Indian Companies Act does not  enjoy these privileges. For   the  foregoing  reasons,  we  hold  that   rules   and regulations  framed by the Oil and Natural  Gas  Commission, Life  Insurance  Corporation  and  the  Industrial   Finance Corporation  have the force of law.  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 way of abundant caution we state that  these employees are not servants of the Union or the State.  These statutory  bodies are "authorities&" within the  meaning  of Article 12 of the Constitution. In Civil Appeal No. 2137 of 1972, the declaration granted by the High Court that the order removing Bhagatram  Sardarsing Raghuvansi  from  service  is  null and  void  and  that  he continues in service is upheld.  The writ of mandamus issued by the High Court is also upheld. In  Civil  Appeal  No. 1655 of 1973, the  writ  of  mandamus granted by the High Court is upheld. In Civil Appeal No. 1879 of 1972, our conclusion is that the Corporation is an authority within the meaning of Article 12 of  the Constitution for the reasons Oven in this  judgment. The  conclusion of the High Court that the regulations  have not  the force of law is set aside.  The conclusion  of  the High  Court  that  Corporation should not  be  permitted  to enforce the regulations mentioned in clauses (1) and (4)  of Regulation 25 is upheld. 643 In  Civil Appeal No. 115 of 1974, the judgment of  the  High Court is set aside.  The Finance Corporation is an authority within  the meaning of Article 12.  The regulations  of  the Corporation  have the force of law.  The conclusion  of  the High  Court that the Association is not entitled to raise  a plea  of  discrimination on the basis of Article 16  is  set aside. The appeals are disposed of accordingly. The  parties will pay and bear their own costs in all  these appeals. MATHEW, J.-The question whether a public corporation of  the nature  of  Oil and Natural Gas Commission,  Life  Insurance Corporation  or Industrial Finance Corporation is a  ’state’ within the meaning of Article 12 of the Constitution is  one of far reaching im  portance.

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The   relevant  provisions  of  the  Oil  and  Natural   Gas Commission Act, 1939, have been analysed in the judgment  of my  Lord the Chief Justice and I do not think, it  necessary to set them out here. In  Rajasthan Electricity Board v. Mohan Lai(1)  this  Court had occasion to consider the question whether the  Rajasthan Electricity Board was an authority within the meaning of the expression   "other  authorities"  in  Article  12  of   the Constitution.  Bhargava, J. delivering the judgment for  the majority pointed out that the expression "other authorities" in Article 12 would include all constitutional and statutory authorities  on  whom  powers are  conferred  by  law.   The learned  judge  also said that if any body  of  persons  has authority  to  issue directions, the disobedience  of  which would be punishable as a criminal offence, that would be  an indication-  that that authority is ’state’.   Justice  Shah who  delivered  a separate judgment agreeing with  the  con- clusion  reached  by  the  majority  preferred  to  adopt  a slightly different meaning to the words "other authorities". He said that authorities, constitutional or statutory, would fall within the expression ’state’ as defined in Article  12 only if they are invested with sovereign power of the State, namely,  the power to make rules or regulations  which  have the force of law. The  test propounded by the majority is satisfied so far  as the Oil and Natural Gas Commission (hereinafter referred  to as  ’the  Commission) is concerned as s. 25 of the  Off  and Natural Gas Commission Act (hereinafter referred to as  ’the Act’) provides for issuing binding issue binding  directions to  third  parties  not  to prevent  the  employees  of  the Commission from entering upon their property if the  Commis- sion  so directs.  In other words, as s. 25  authorises  the Commission to issue binding directions to third parties  not to  prevent  the employees of the Commission  from  entering into  their land and as disobedience of such  directions  is punishable under the relevant provision of the Indian  Penal Code since those employees are deemed to be public  servants under  s. 21 of the Indian Penal Code by virtue of s. 27  of the Act, the Commission is an ’authority’ within the meaning of the expression "other authorities" in Article 12. (1) [1967] 3 S.C.R. 377. 644 Though  this  would be sufficient to make the  Commission  a ’state’  according  to  the decision of this  Court  in  the Rajasthan Electricity Board Case (supra), there is a  larger question which has a direct bearing so far as the other  two Corporations  are concerned viz., whether, despite the  fact that there are no provisions for issuing binding  directions to  third  parties the disobedience of  which  would  entail penal consequence, the corporations set up under statutes to carry   on  business  of  public  importance  or  which   is fundamental  to the life of the people can be considered  as ’state within the, meaning of Article 12 ’That Article reads.               "In  this Part, unless the  context  otherwise               requires, ’the State’ includes the  Government               and Parliament of India and the Government and               the Legislature of each of the States and  all               local   or   other  authorities   within   the               territory of India or under the control of the               Government of India." It is relevant to note that the Article does not define  the word  ’state’.  It only provides that ’state’  includes  the authorities  specified  therein.   The  question  whether  a corporation set up under a statute to carry on a business of

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public importance is a ’state’ despite the fact that it  has no  power to issue binding directions has to be  decided  on other considerations. One   of   the   greatest  sources  of   our   strength   in constitutional  law is that we adjudge only  concrete  cases and do not pronounce principles in the abstract.  But  there comes  a  moment when the process of  ,empiric  adjudication calls for more rational and realistic disposition than  that the immediate case is not different from preceding cases. 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). To  some people state is essentially a  class-structure,  an organization   of  one  class  dominating  over  the   other classes’;   others  regard  it  as  an   Organisation   that transcends  all classes and stands for the whole  community. They regard it as a power-system.  Some view it entirely  as a  legal structure, either in the old Austinian sense  which made it a relationship of governors and governed, or, in the language of modern jurisprudence, as a community  ’organized for  action under legal rules’.  Some regard it as  no  more than a mutual insurance society, others as the very  texture of  all  our  life.   Some  class  the  state  as  a   great ’corporation   and others consider it  as  indistinguishable from society itself(1). (1) see Mac.  Iyer, "The Modern State’, pp. 3-4. 645 Part IV of the Constitution gives a picture of the  services which the state is expected to undertake and render for  the welfare  of  the  people.  Article  298  provides  that  the executive  power  of  the Union and  State  extends  to  the carrying  on  of  any business or trade.   As  I  said,  the question  for consideration is whether a public  corporation set  up  under a special statute to carry on a  business  or service  which Parliament thinks necessary to be carried  on in   the   interest   of  the  nation  is   an   agency   or instrumentality  of  the State and would be subject  to  the limitations expressed in Article 13(2) of the  Constitution. A state is an abstract entity.  It can only act through  the instrumentality  or agency of natural or juridical  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 State. The  chartered  corporations  of the  17th,  18th  and  19th centuries were expected, perhaps required, to perform stated duties  to  the community like running a ferry,  founding  a colony  or establishing East Indian trade.   Performance  of these functions and securing whatever revenue the enterprise made to the Crown were the primary reasons why a charter was granted.  Corporation in early English Law were in fact, and in  legal cognizance, a device by which the political  state got  something  done.  They were far more  like  the  bodies corporate  we call ’public authorities’ today.  Few  in  the 17th  or  18th  century  would have  disputed  that  such  a corporation was an agency of the state(1). The Supreme Court of the United States in McCullough v. Mary "(2)   held   that  the  Congress  has  power   to   charter

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corporations  as  incidental to or in  aid  of  governmental functions.   So far as federal corporations  are  concerned, they are, by hypothesis, agencies of government.  With  this premise it would follow that action of a federally chartered corporation  would be governed by the  constitutional  limi- tation imposed on an agency of the Federal Government(3). 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  distrust  of  gov- ernment  by civil service, justified or not, was a  powerful factor   in   the  development  of  a   policy   of   public administration  through  separate corporations  which  would operate  largely  according to business priniciples  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. (1)  see  generally  "The  Modern  Corporation  and  Private Property", Berle & Means, pp. 119-128. (2)  4 Wheat. 315 (US 1819). (3)  see  Adolf  A. Berle,  "Constitutional  Limitations  on Corporate-Activity,  Protection  of  Personal  Rights   from invasion  through Economic Power", 100 Univ.of  Pennsylvania Law Rev. 933. 646 A public corporation is a legal entity established  normally by  Parliament and always under legal authority, usually  in the  form  of a special statute, charged with  the  duty  of carrying   out  specified  governmental  functions  in   the national  interest,  those  functions being  confined  to  a comparatively restricted field, and subjected to control  by the executive, while the corporation remains juristically an independent    entity    not   directly    responsible    to Parliament(1).   A  public corporation is  not  generally  a multi-purpose   authority  but  a  functional   Organisation created for a specific purpose.  It has generally no  shares or shareholders.  Its responsibility generally is to Govern- ment.   Its  administration  is  in the  hands  of  a  Board appointed  by  the competent Minister.   The  employees  of. public corporation are not civil servants.  It is, in  fact, likely  that  in due course a special type of  training  for specialized form of public service will be developed and the status  of the personnel of public corporation may more  and more  closely approximate to that of civil  service  without forming part of it.  In so far as public corporations fulfil public  tasks  on  behalf of  government,  they  are  public authorities and as such subject to control by government. In  France,  "An enterprise publique is  an  enterprise  the whole or the majority of whose capital belongs to the  State or  other public agencies.  By reason of its  industrial  or commercial activities it is basically subject to private law (and   particularly  to  commercial  law)  as  are   private enterprises,  but,  because of its public nature,  it  finds itself  subjected to a certain degree of dependence  on  and control by public authorities" (2). The  motivation  for  the  creation  of  public  corporation naturally plays much larger part in under-developed and poor countries  than  in industrially advanced  countries.   This accounts  for the emergence of public corporations  and  the present  significance  of public enterprise  carried  on  by them.   The  Government of India  resolution  on  industrial

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policy dated April 6, 1948 stated, among other things,  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.   The  Government  of  India Resolution on Industrial Policy dated April 30, 1956  stated :(6)               "Accordingly,  the  State  will  progressively               assume a predominant and direct responsibility               for setting up new industrial undertakings and               for developing transport facilities.  It  will               also undertake State trading on an  increasing               scale." The  Constitution was framed on the theory  that  limitation should  exist  on the exercise of power by the  State.   The assumption was (1) see Garner :"Public Corporations in the United  Kingdom" in "Government Enterprise’ ed.  W. Freidmann & J. F. Garner, p. 4. (2)  Sao "Government Enterprise", ed.  W. Friedmann & J.  F. Garner, pp. 107-108. (3)  see "Government in Business", S S. Khera, p. 368  &  p. 373. 647 that  the State alone was competent to wield power. But  the essential problem of liberty and equality is one of  freedom from  arbitrary restriction and discrimination whenever  and however  imposed.   The  Constitution,  therefore,   should, wherever possible, be so construed as to apply to  arbitrary application  of  power  against individuals  by  centres  of power.   The emerging principle appears to be that a  public corporation being a creation of the State is subject to  the constitutional  limitation  as the State itself.   The  pre- conditions of this are two, namely, that the corporation  is created  by  State,  and,  the existence  of  power  in  the corporation   to   invade  the   constitutional   right   of individual. The advocates of pluralism like Laski and Dr. Figgis pleaded for  recognition  of  social  groups  within  the  state  in mitigation of the legal and ideological, deification of  the State.   Today, probably the giant corporations, the  labour unions, trade associations and other powerful or ganisations have taken the substance of sovereignty from the state.   We are witnessing another dialectic process in history  namely, that  the  sovereign state having taken over  all  effective legal and political power from groups surrendered its  power to  the new massive social groups(1).  The growing power  of the  industrial giants, of the labour unions and of  certain other  organized  groups,  compels  a  reassessment  of  the relation  between  group power and the modern state  on  the hand  and the freedom of the individual on the  other.   The corporate  organisations  of business and tabour  have  long ceased to be private phenomena.  That they have a direct and decisive impact ,on the social, economic and political  life of  the nation is no longer a matter of argument.  It is  an undeniable  fact of daffy experience.  The challenge to  the contemporary    lawyer   is   to   translate   the    social transformation   of   these   organisations   from   private associations  to  public  organisms into  legal  terms.   In attempting to do so, we have to recognize that both business and tabour currently exercise vast powers.  First, they have power  over the Millions of men and women whose  lives  they largely  control as employees or as members.   Second,  they exercise power more indirectly, though not less  powerfully, over  the  unorganized  citizens whose  lives  they  largely

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control  through  standardized terms  of  contract,  through price policy, through the tempo of production and the  terms and conditions of labour.  Last, they exercise control  over the organized community, represented by the organs of State, in a multitude of ways; direct lobby pressures, control over election and policies of the elected representatives of  the peoples  and  far-reaching control over the  mass  media  of communication, In this sense ’government, or ’law-maldng’ by private groups is today an irreversible fact(2). Generally  speaking, large corporations have power and  this power does not merely come from the statutes creating  them. They  acquire power because they produce goods  or  services upon  which  the community comes to rely.   The  methods  by which  these corporations produce and the distribution  made in the course of their production by (1) see W. Friedmann, "Law in a Changing Society", p. 298. (2)  see "Corporate Power, Government by Private Groups  and the Law’ 57 Columbia Law Rev .156, at 156, 176-177). 648 way  of  wages, dividends and interest, as also  the  profit withheld  and  used  for further capital  progress  and  the manner  in which and the conditions under which they  employ their workmen and staff are vital both to the lives of  many people  and  to the continued supply line  of  the  country. Certain impertives follow from this.  Both big business  and big labour unions exercise much quasi-public authority.  The problems  posed by the big corporation is the protection  of the  individual  rights of the employees.   Suggestions  are being made that the corporate organisations of big  business and  labour are no longer private phenomena; that they’  are public-  organisims and that constitutional and  common  law restrictions  imposed  upon State agencies must  be  imposed upon them. The governing power wherever located must be subject to  the fundamental constitutional limitations.  The need to subject the power centres to the control of constitution require  an expansion  of the concept of State action.   The  historical trend  in  America of judicial decisions has  been  that  of bringing  more  and more activity within the  reach  of  the limitations of the Constitution.  "The next step would be to draw  private  governments into the tent  of  state  action. This  is  not a particularly startling  proposition,  for  a number  of  recent  cases have shown  that  the  concept  of private  action must yield to a conception of  state  action where public functions are being performed"(1). In Marsh v. Alabama(2), a corporation owned a ’company town. Marsh,  a Jehovah’s witness offered his  pamphlets  preached his doctrine on one of the town comers.  He was arrested for trespassing  by  one of the company guards, was  fined  five dollars  and  the case went all the way up  to  the  Supreme Court.   On  straight property logic, Marsh, of  course  was trespassing;  he was an unwanted visitor on  company’s  real estate.   But, Court said, operation of a town is  a  public function.   Although private in the property sense,  it  was public  in  the  functional sense.   The  substance  of  the doctrine  there  laid down is that where  a  corporation  is privately  performing a ’public function’ it is held to  the constitutional  standards  regarding civil right  and  equal protection of the laws that apply to the state itself.   The Court  held that administration of private property  such  a town, though privately carried on, was, nevertheless, in the nature  of a ’public function’, that the private  rights  of the   corporation   must  therefore  be   exercised   within constitutional limitations, and the conviction for  trespass was reversed.

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But  how  far  can this expansion go?  Except  in  very  few cases, our Constitution does not, through its own force, set any limitation upon private action.  Article 13 (2) provides that  no  State  shall  make any law  which  takes  away  or abridges the right guaranteed by Part III.  It is the  State action  of a particular character that is prohibited.  indi- vidual  invasion  of  individual  right  is  not,  generally speaking,  covered by Article 13(2).  In other words, it  is against State action that fundamental rights are guaranteed. Wrongful individual acts unsupported (1)  see Arthur S. Miller : "The Constitutional Law  of  the ’Security State,,", 10 Stanford Law Rev. 620 at 664. (2) 326 U.S. 501 (1946). 649 by  State  authority  in  the shape  of  laws,  customs,  or judicial   or  executive  proceeding  are  not   prohibited. Articles 17, 23 and 24 postulate that fundamental rights can be violated by private individuals and that the remedy under Article  32  may  be available against them.   But,  by  and large, unless an act is sanctioned in some way by the State, the action would not be State action.  In other words, until some law is passed or some action is taken through  officers or agents of the State, there is Do action by the State.  In the  Civil  Rights  Cases(1) Bradley, J.  speaking  for  the majority,  took  this  view of  the  14th  Amendment.   That Amendment provides : "No State shall make or enforce any law which shall  abridge the  privileges  or  immunities of citizens  of  the  United States;  nor  shall any State deprive any  person  of  life, liberty or property without due process of law; nor deny  to any  person within its jurisdiction the equal protection  of the laws." On  the  other  hand, Justice Harlan tried  to  justify  the imposition  of  civil liability for  racial  discrimination, effected  not only by the normal officers of the State,  but also  by private individuals.  He perceived State action  in rules and practices of hotels, inns, taverns, rail roads and places   of  amusement.   He  said  that   inn-keepers   are exercising a quasi-public employment and that law gives them special privileges and they are charged with certain  duties and   responsibilities   to  the  public.   As   to   public conveyances,  he read the law of common carriers to  require the performance of public duties, and that no matter who  is the  agent  or  what  is the  agency,  the  function  to  be performed is that of ’State’.  The investiture of rail  road with  power of eminent domain made the function of the  rail road  corporation  a  public function.  I  think  the  later decisions of courts in +.he U.S.A. follow the lead given  by Justice  Harlen in his dissenting Judgement.  Several  tests have  been  propounded  to find out  whether  an  action  is private or state action.  These decision do not rest on  the basis  that the entity or organization must wield  authority in  the  sense it must have power to issue commands  in  the Austinian sense, or that it must have the sovereign power to pass laws or regulations having the force of law. Does  any  amount of..state help,  however  inconsequential, make an act something more than an individual act ? Suppose, a  privately  owned and managed  operation  receives  direct financial aid from the State, is an act of such an agency an act  of State ? It would be difficult to give a  categorical answer to this question.  Any operation or purpose of  value to  the public may be encouraged by appropriation of  public money and the resulting publicly supported operation can  be characterized  as a state operation.  But such a rule  would seem  to  go to the extreme.  There seems to be  no  formula

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which  would provide the correct division of cases  of  this type  into  neat  categories of  State  action  and  private action.   Some  clue however, to  the  considerations  which might impel the court in one direction or the other may   be obtained from an examination of the cases in this area.  The decisions  of the State courts in U.S.A. seem  to  establish that a private agency, if supported by public money for  its operation would be ’state’. (1) 109 U. S. 3. 650 But in all these cases, it has been found that there was  an element  of ,control exercised by the State.  Therefore,  it may be stated generally that State, financial aid alone does not  render  the  institution receiving ,such  aid  a  state agency.   Financial  aid plus some additional  factor  might lead  to  a different conclusion.  A mere finding  of  state control  also is not determinative of the question, since  a state  has considerable measure of control under its  police power  over  all types of business operations.   It  is  not possible to assume that the, panoply of law and authority of a  state under which people carry on ordinary  business,  or their  private  affairs  or  own  property,  each   enjoying equaility   ’   in  terms  of  legal   capacity   would   be extraordinary  assistance  A  finding  of  state   financial support   plus  an  unusual  degree  of  control  over   the management  and policies might lead one to  characterize  an operation as state action. 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  government 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. The state may aid a private operation in various ways  other than  by  direct  financial assistance.   It  may  give  the organization  the power of eminent domain, it may grant  tax exemptions,  or  it may give it a  monopolistic  status  for certain  purposes.   All  these are relevant  in  making  an assessment  whether the operation is private or  savours  of state action(1). An important case on the subject is Kerr v. Enoch Pratt Free Library(2).  The library system in question was established. by private donation in 1882, but by 1944, 99 per cent of the system’s  budget  was  supplied by the city;  title  to  the library  property was held by the city; employees were  paid by  the city pay-roll officer; and a high degree, of  budget control  was exercised or available to the city  government. On  these facts the Court of Appeals required  the  trustees managing  the system to abandon a discriminatory  admissions policy for its library training courses(3). Dorsev  v.  Stuvvesant Town Corporation(4)  related  to  the problem raised by discriminatory action by a private  agency receiving  state  financial  aid.  Pursuant  to  New  York’s redevelopment laws, the Metropolitan Life Insurance  Company organized  a redevelopment cornoration to participate  in  a plan to construct housing.  By an investment (1)  see  generally  "The  Meaning  of  State  Action",   LX Columbia Law Rev. 1083. (2)  149  F. 2d 212 (4th cir.) cert. denied, 326 U.  S.  721

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(1945). (3)  see LX Columbia Law Review 1083, at 1103. (4)  299 N. Y. 512. 651 of  some $ 90,000,000, the company constructed a complex  of apartments  capable of housing 25,000 people.  The power  of eminent  domain was used to acquire the necessary  land  and partial tax exemption was granted for the completed project. As  a  part of the cooperative effort by the  city  and  the private  company, the plans for the project were subject  to approval  of the city and the company’s profits,  dividends, and  power  to dispose of the property  ’were  subjected  to regulation  by  state law.  When prospective  Negro  tenants were   rejected  by  the  company,  they  sued   to   enjoin discrimination  as a violation of the Fourteenth  Amendment. The  majority  of  the New York Court of  Appeals  found  no exertion  of state power directly in aid  of  discrimination and  decided that the private company wag not engaged  in  a governmental  function.  Fuld, J. dissented.  He  said  that even the conduct of private individuals would offend against the  equal  protection clause if the conduct appears  in  an activity of public importance and if the state has  accorded to the activity, either the panoply of its authority or  the weight of its power, interest and support(1). In   America,  corporations  or  associations,  private   in character, but dealing with public rights, have already been held   subject  to  constitutional   standards.    Political parties,  for  example, even though they are  not  statutory organisations,  and  are in form private clubs,  are  within this category.  So also are labour unions on which  statutes confer  the right of collective bargaining.  Thus, in  Steel v. LOuisville & Nashville R R (2) it was observed :               "If .... the (Railway Labour) Act confers this               power  on the bargaining representative  of  a               craft . . . without any commensurate statutory               duty   towards  its  members,   constitutional               questions  arise.  For the  representative  is               clothed  with  power  not  unlike  that  of  a               legislature which is subject to constitutional               limitations  on its power to  deny,  restrict,               destroy,  discriminate against the  rights  of               those for whom it legislates and which is also               under   an  affirmative  constitutional   duty               equally to protect those rights." Institutions  engaged in matters of high public interest  or performing  public functions are by virtue of the nature  of the  function performed government agencies(3).   Activities which  are too fundamental to the society are by  definition too  important  not to be  considered  government  function. This  demands  the delineation of a  theory  which  requires government  to provide all persons with all fundamentals  of life  and the determinations of aspects which are  fundamen- tal.  The state today has an affirmative duty of seeing that all  essentials of life are made available to  all  persons. The  task  of  the  state today  is  to  make  possible  the achievement of a Good life both by removing obstacles in the path  of  such achievements and in assisting  individual  in realizing  his  ideal of self-perfection Assuming  that  in- dispensable functions are government functions, the  problem remains (1)  see the Note in XXXV Cornell Law Quarterly, 399. (2)  323 U. S. 192, 198. (3)  gee  the decisions in Terry v. Adams, 273 U. S.  536  & Nixon v. Condon, 286 U. S. 73. 652

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or   defining  the  line  between  fundamentals   and   non- fundamentals.   The analogy of the doctrine  of  "businesses affected  with a public interest"immediately comes to  mind. The  difficulty  here is well stated by  Justice  Holmes  in Tyson   and   Brother   v.  Banton(1)   dealing   with   the constitutionality  of a New York statute which  limited  the fees charged by theatre ticket brokers :               "But  if  we  are  to  yield  to   fashionable               conventions, it seems to me that theatres  are               as much devoted to public use as anything well               can  be . . (T) o many people the  superfluous               is  the  necessary, and it seems  to  me  that               government  does not go beyond its  sphere  in               attempting to make life livable for them." The difficulty of separating vital government functions from nongovernment  functions has created  further  difficulties. Is the distinction between governmental and non-governmental functions  which  plagued the courts a rational  one  ?  The contrast  is  between  governmental  activities  which   are private  and  private  activities  which  are  governmental. Without  the adoption of a radical laissez  fare  philosophy and  the definition of state functions as they were  current in the days of Herbert Spencer it is impossible to sort  out proper  from  improper  functions.   Besides  the  so-called traditional functions, the modern state operates a multitude of  public  enterprises.   Mr.  Justice  Holmes  said,   the Constitution   does  not  enact  Herbert  Spencer’s   social statics.   This applies equally to the definition  of  state function for legal purposes. In  New York v. United States(2), the question  was  whether the  state  of  New York was liable to the  federal  tax  on mineral waters from state-owned and state-operated  Saratoga Springs.   The  judgments  of  both  the  majority  and  the minority  agree on the uselessness of the test laid down  in Ohio  v.  Helvering(3) that liability to  taxation  depended upon  the distinction between state as government and  state as trader.  Frankfurter, J. said :               "When  this Court came to sustain the  federal               taxing  power  upon  a  transportation  system               operated  by  a  State,  it  did  so  in  ways               familiar in developing the law from  precedent               to precedent.  It edged away from reliance  on               a sharp distinction between the ’governmental’               and  the ’trading’ activities of a  State,  by               denying  immunity from federal taxation  to  a               State  when  it  "is  undertaking  a  business               enterprise  of a sort that is normally  within               the  reach of the federal taxing power and  is               distinct from the usual governmental functions               that are immune from federal taxation in order               to  safe-guard the necessary  independence  of               the State". Helvering v. Powers, 293 U.S.  214               at 227.  But this likewise does not furnish  a               satisfactory  guide  for dealing with  such  a               practical problem as the constitutional  power               of the United States (1)  272 U.S. 418. 447. (2)  326 U. S. 572. (3)  292 U. S. 360, 366. 653               over  State activities.  To rest  the  federal               taxing  power on what is ’normally’  conducted               by private, enterprise in Contradiction to the               usual’ governmental functions is too  shifting               a  basis for determining constitutional  power

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             and  too entanged in expediency to serve as  a               dependable  legal  criterion.   The  essential               nature  of the problem cannot be hidden by  an               attempt   to   separate   manifestations    of               indivisible governmental powers."               Douglas, J. (1)               "A  State’s  project is as much  a  legitimate               governmental    activity   whether    it    is               traditional, or akin to private enterprise, or               conducted  for  profit.   Cf.   Helvering   v.               Gerhardt,  304 US 405, 426, 427.  A state  may               deem  it as essential to its economy  that  it               own  and  operate a railroad, a  mill,  or  an               irrigation  system  as  it  does  to  own  and               operate  bridges, street lights, or  a  sewage               disposal  plant.  What hight have been  viewed               in  an earlier day as an, improvident or  even               dangerous  extension of state  activities  may               today  be  deemed indispensable.  But  as  Mr.               Justice  White  said in his dissent  in  South               Caroling  v.  United States, any  activity  in               which a State engages within the limits of its               police  power  is  a  legitimate  governmental               activity." In  Pfizer  v. Ministry of Health(2), Willmer L. J.  in  the Court  of Appeal has recognized that in mid-Victorian  times the  treatment  of  patients in hospitals  would  have  been regarded  as  ’something quite foreign to the  functions  of government’  but  added that since then there  had  been  ’a revolution  in  political thought, and a  totally  different conception  prevails  today as to what is and what  is,  not within the functions of government’. It  has  taken  English and American Courts  many  years  to concede  that  the exercise of an industrial  or  commercial activity  on  behalf  of the state  does  not  deprive  such activity of its ’governmental’ character.  But a great  many anomalies in common law remain, in particular as regards the immunities  and  privileges of the Crown  in  such  matters, community from the binding force of statute, debt  priority, freedom  from  axes and other public  charges.   The  recent English  cases,  appear, it long last, to move  towards  the abandonment  of the totally antiquated notions  of  ’proper’ functions of government. In the light of this discussion let us see whether the  Life Insurance   Corporation   and   the   Industrial’    Finance Corporation would come with in the ambit of ’state’. The  relevant provisions of the Life  Insurance  Corporation Act  have been very clearly analysed in the judgment  of  my Lord the Chief Justice and it is unnecessary to repeat them. 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, (1)  326 V. S. 572 , at 591. (25) [1964] 1 Ch. 614, at p. 641 (affirmed 1965 A. C. 512). 654 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 enjoy a monopoly in the business.   I would draw the same conclusions from the relevant provisions of  the, Industrial Finance Corporation Act which have  also been  referred  to  in the  aforesaid  judgment.   In  these circumstances.  I think, these corporations are agencies  or instrumentalities of the ’state’ and are, therefore,  ’state within  the  meaning  of Article 12.  The  fact  that  these

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corporations  have independent personalities in the  eye  of 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  be  actions  of  these corporations be not state actions? The Additional Solicitor General submitted that since  these corporations  have  separate personalities, they  cannot  be regarded  as  agents or instrumentalities of the  state  and referred  to  the  decision in  Andhra  Pradesh  State  Road Transport   Corporation  v.  The  Income  Tax  Officer   and Another(1).  The question in that case was whether the  Road Transport  Corporation constituted under the Road  Transport Corporations  Act, 1950, was carrying on business on  behalf of  the State of Andhra Pradesh and that the income  of  the Corporation  was  exempt from liability to pay  income  tax. This Court took the view that the Road Transport Corporation was  a  corporate body and has a separate  personality  and, therefore,   the   business  carried  on  by  it   was   its own  .business  and the State Government had  no  beneficial interest in the income. The  ultimate question which is relevant for our purpose  is whether  such a corporation is an agency or  instrumentality of the government for carrying on a business for the benefit of  the public.  In other words, the question is, for  whose benefit was the corporation carrying on the. business ? When it  is  seen  from  the  provisions  of  that  Act  that  on liquidation of the Corporation, its assets should be divided among  the  shareholders,  namely,  the  Central  and  State governments  and  others, if any, the implication  is  clear that  the benefit of the accumulated income would go to  the Central  and  State governments.  Nobody will deny  that  an agent  has  a legal personality different from that  of  the principal.   The  fact  that the agent  is  subject  to  the direction  of  the principal does not mean that  he  has  no legal  personality of his own.  Likewise, 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 (1) [1964] 7 S.C. R. 17. 655 matter  is  that  public  corporation  is  a  new  type   of 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.   In  stead  of forcing  it  into them, the later should be adapted  to  the needs of changing times and conditions. I  do  not  think there is any basis  for  the  apprehension expressed that by holding that these public corporations are ’state’  within the meaning of Article 12, the employees  of these corporations would become government servants.  I also wish  to  make  it clear that I express no  opinion  on  the question   whether  private  corporations  or   other   like organisations,  though  they exercise power over  their  em- ployees which might violate their fundamental rights,  would

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be ’state’ within the meaning of Article 12. The second question for consideration is whether an order of removal   or   dismissal  from  service  contrary   to   the regulations framed by these corporations in the exercise  of power conferred in that behalf would enable an employee to a declaration against them for continuance in service or would give rise only to a claim for damages. This  will depend upon the question whether the  regulations framed by these corporations would have the force of law and even  if  they  have  not the  force  of  law,  whether  the employment  is public employment and, for that  reason,  the employee  would  obtain a status which would enable  him  to obtain the declaration. The learned Chief Justice has dealt with the question in his judgment whether the regulations framed by the corporations. have  the force of law and he has arrived at the  conclusion that the regulations being framed under statutory provisions would have the force of law. Even  assuming that the regulations have no force of law,  I think  since  the  employment under  these  corporations  is public  employment,  an employee would get  a  status  which would  enable him to obtain declaration for  continuance  in service  if he was dismissed or discharged contrary  to  the regulations. The  original concept of employment was that of  master  and servant.   It  was  therefore held that  a  court  will  not specifically enforce a contract of employment.  The law  has adhered to the age-old rule that an employer may dismiss the employee  at will.  Certainly, an employee can never  expect to  be  completely free to do what he likes to do.  He  must face the prospect of discharge for failing or refusing to do his work in accordance with his employer’s directions.  Such control by the employer over the employee is fundamental  to the  employment  relationship.  But  there  are  innumerable facets  of  the  employee’s  life that  have  little  or  no relevance to the employment relationship and over which  the employer  should not be allowed to exercise control.  It  is no doubt difficult to draw a line between reasonable demands of an employer and those which are unreasonable as having no relation  to  the  employment  itself.   The  rule  that  an employer can arbitrarily 656 discharge  an  employee  with  or  without  regard  to   the actuating motive, is a rule, settled beyond doubt.  But  the rule  became settled at a time when the words  ’master’  and ’servant’  were taken more literally than they are, now  and when, as in early Roman Law, the rights of the servant, like the  rights of any other member of the household,  were  not his own, but those of his later families.  The overtones  of this  ancient  doctrine  are, discernible  in  the  judicial opinion which rationalised the employer’s absolute right  to discharge the employee.  Such a philosophy of the employer’s dominion  over his employee may have been in tune  with  the rustic  simplicity of by gone days.  But that philosophy  is incompatible with these days of large, impersonal, corporate employers.  The conditions have now vastly changed and it is difficult  to regard the contract of employment  with  large scale  industries  and government enterprises  conducted  by bodies  which  are created under special  statutes  as  mere contract of personal service.  Where large number of  people are  unemployed  and  it  is  extremely  difficult  to  find employment,  an  employee who is  discharged  from  service, might  have  to remain without means of  subsistence  for  a considerably long time and damages in the shape of wages for a certain period may not be an adequate compensation to  the

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employee for non employment.  In other words, damages  would be  a  poor substitute for reinstatement.   The  traditional rule has survived because of the sustenance it received from the  law  of contracts.  From the contractual  principle  of mutuality  of  obligation,  it  was  reasoned  that  if  the employee  can  quit his job at will, then so  too  must  the employer  have the right to terminate the  relationship  for any or no reason.  And there are a number of cases in  which even contracts for permanent employment, i.e. for indefinite terms, have been held unenforceable on the ground that  they lack  mutuality of obligation.  But these cases  demonstrate that mutuality is a high sounding phrase of little use as an analytical  tool and it would seem clear that  mutuality  of obligation is not an inexorable requirement and that lack of mutuality is simply, as many courts have come to  recognize, an  imperfect  way  of referring to  the  real  obstacle  to enforcing   any  kind  of  contractual  limitation  on   the employer’s  right of discharge, i.e. lack of  consideration. If  there is anything in contract law which seems likely  to advance  the present inquiry, it is the growing tendency  to protect  individuals from contracts of adhesion, from  over- reaching  terms  often found in standard forms  of  contract used by large commercial establishments.  Judicial disfavour of  contracts  of  adhesion has been  said  to  reflect  the assumed need to protect the weaker contracting party against the harshness of the common law and the abuses of freedom of contract.    The  same  philosophy  seems  to   provide   an appropriate  answer  to the argument, which still  seems  to have some vitality, that "the servant cannot complain, as he takes  the  employment  on the terms which  are  offered  to him"(1). In Malloch v. Aberdeen Corporation(2).  Lord Wilberforce, in speaking  about the anomaly created by judicial decision  in the area of contractual and statutory employments, has said (1)  see Justice, Holem nolin Mc Auliffe v. new Bedford, 155 Mass. 216 (2) (1971) 1 W. L.R. 1578. 657               "A  comparative  list of situations  in  which               persons   have  been  held  entitled  or   not               entitled  to  a hearing or to  observation  of               rules  of  natural justice, according  to  the               master  and servant test looks  illogical  and               even bizarre.  A specialist surgeon wag denied               protection  which  is  given  to  a   hospital               doctor;  a University professor, as a  servant               has been denied the right to be heard- a  dock               Labourer  and  an,  undergraduate  have   been               granted  it; examples can be multiplied.   One               may accept that if there are relationships  in               which  all requirements of the  observance  of               ruler,, of natural justice are excluded (and I               do not wish to assume that this is  inevitably               so), these must be confined to what have  been               called "pure master and servant cases",  which               I  take  to mean cases in which  there  is  no               element  of public employment or  service,  no               support  by statute, nothing in the nature  of               an  office  or a status which is,  capable  of               protection.   If any of these elements  exist,               then, in my opinion, whatever the  terminology               used,  and  even though in some  inter  partes               aspects the relationship may be called that of               master  and  servant, there may  be  essential               precedural  requirements to be  observed,  and

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             faliure  to  observe  them  may  result  in  a               dismissal being declared to be void."(1) I  think  that employment under public corporations  of  the nature  under  consideration here is public  employment  and therefore  the  employee should have  the  protection  which appertains to public employment. In McClelland v. Northern Ireland Health Board(2) the  House of  Lords,  by a majority,, decided that  the  express  term which  provided  for  dismissal in case  of  misconduct  and inefficiency was exhaustive of the grounds of dismissal and, therefore,  no further terms as to notice could be  implied. Lord Evershed pointed out               "Much   may   turn  on  the   premise   to   a               consideration of the meaning of the conditions               whether  in a contract of service made in  the               twentieth century with a statutory board  such               as  the  respondent board  (whose  established               officers  participate  in the  pension  scheme               contained  in regulations promulgated  by  the               Ministry  of  Health and Local  Government  of               Northern Ireland), it is correct to regard the               common law right of  a master to determine his               servant’s engagement as of so well-established               and  paramount  character  that  the  contract               should  be interpreted as necessarily  subject               to that right (and to a corresponding right on               the  part  of the servant) so  that  only  the               clearest express terms will exclude it." And  he also pointed out that the position of  the  employer board and one of its servants is very different : ’The  loss or damage to the board occasioned by the departure of one of its servants would, save in very (1) at pp. 1595-1596.  Emphasis added. (2) [1957] 2 All E.R. 129. 658 exceptional  circumstances,  be negligible.  To  a  servant, certainly  a servant in the position of the  appellant,  the security  of  employment with the board for  the  period  of working  life is of immense value." This approach to  public employment goes some way towards the reversal of the  common law  position.   In  public employment  where  there  is  an appointment to a permanent post, there should be presumption that the employee cannot be given notice and the servant can only be dismissed for misconduct or specified reasons.  Lord Evershed  in interpreting the word ’permanent’ in that  case said  :  "it  seems to me  of  considerable  importance,  in interpreting  its use in a contract of service, that such  a contract  cannot  be  specifically  enforced."  This  is  an orthodox statement of legal principle but it is nevertheless paradoxical  to  find it in a judgment which  supported  the majority   view  that  a  declaration  should  be   granted. Declaration is not specific performance but it has the  same effect  in  practice where a public authority  is  concerned which will invariably act in accordance with the law as  de- clared.  Declarations that notices of dismissal were invalid have also been granted in the school teacher cases.(1) In Hanson v. Radclifie U.D.C.(2), Lord Sterndale M. R.  Said "The  power of the court to make declarations, when it is  a question  of  determining  the rights of two  parties  to  a contract,  is now almost unlimited, or limited only  by  the discretion of the court." The discretion which should  guide the court must be in tune with the modern conditions of life and should result in reversal of present-day attitude.  If a job  is  regarded as analogous to property, it ought  to  be recognized  that a man is entitled to a particular job  just

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as  the  courts  of  Equity  acknowledged  his  right  to  a particular  piece of property.  Where a public authority  is concerned, this can be implemented by a declaration.  In the case  of  private  employment English  law  has  devised  no suitable  remedy.   That this is possible is  shown  by  the example  of other countries(3).  The Court must,  therefore, adopt the attitude that declaration is the normal remedy for a wrongful dismissal in case, of public employees which will only be refused in exceptional circumstances.  The remedy of declaration  should  be a ready-made instrument  to  provide reinstatement in public sector.  Once it is accepted that  a man’s  job is like his property of which he can be  deprived of for specific reasons, this remedy becomes the primary one though   it  will  need  to  be  reinforced  where   private individuals  are being sued.  The law of master and  servant has not kept pace with the modern conditions and the mandate of  equality  embodied in the Constitution.  The  law  still attaches  to  the  servant  a  status  of  inferiority   and subjection  to his master.  Though fundamental  reforms  can only emanate from the legislature. the principles  fashioned by  public law if applied to masterservant relationship  can bring  about  a  change in law to  accord  with  the  social conditions of the 20th Century(4). (1)  see Sadler v. Sheffield Corporation, (1924) 1 Ch.  483; Martin v. Eccles Corporation, (1919) 1 Ch. 387; & Hanson  v. Radcliffe U.D.C., (1922) 2 Ch. 490. (2)  (1922) 2 Ch. 490. (3)  see  Wedderburn  :  "The Worker and  the  Law",  p.  89 onwards. (4)  see  generally  "Public Law  Principles  Applicable  to Dismissal  from  Employment" by G. Gan, 30 Modern  Law  Rev. 288. 659 That  apart,  the regulations framed by  these  corporations were intended to be binding upon them and were the bases  on which  the employments were made.  As the  employments  were under  corporations  created  by statutes  for  carrying  on businesses   of   public  importance,   they   were   public employment.   And even if the regulations have not  got  the force  of  law, I think the principle laid down  by  Justice Frankfurther  in  Viterelli v. Seaton(1) should  govern  the situation.  He said               "An  executive agency must be rigorously  held               to  the  standards by which it  professes  its               action   to   be  judged....   According,   if               dismissal  from  employment  is  based  on   a               defined procedure, even though generous beyond               the  requirements that bind such agency,  that               procedure      must      be       scrupulously               observed.. . . . This judicially evolved  rule               of,   administrative   law   is   now   firmly               established and, if I may add, rightly so.  He               that  takes the procedural sword shall  perish                             with that sword." I agree with the conclusions of my  Lord the Chief Justice. ALAGIRISWAMI, J. In his judgment in Writ Petition No. 43  of 1972 as Lord the Chief Justice has quoted with approval  the decision of this Court in Praga Tools Corp. v. Imannal (1969 (3) SCR 773), Heavy Engin.  Mazdoor Union v. Bihar (1969 (3) SCR 995), and S. L. Agarwal v. Hindustan Steel (1970 (3) SCR 363).  I  may also refer to the decision of  this  Court  in Hindustan  Antibiotics v. Workmen (1967 (1) SCR  652).   The last one.was a Government undertaking incorporated under the Indian  Companies  Act.  The entire equity  capital  of  the company was held by the President of India and his  nominees

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and  the  entire  Board of Directors was  nominated  by  Mm. Service  conditions  of the workmen and other  matters  were subject  to the approval of the President of India.  It  was pointed  out  by the Constitution Bench of this  Court  that though  the  company was a limited one and therefore  had  a distinct corporate existence, it was in effect financed  and controlled  by the Central Government.  The conduct  of  the business of the company was subject to the directives issued from time to time by the President of India and its accounts were  audited  by  the auditors  appointed  by  the  Central Government  on  the advice of the  Comptroller  and  Auditor General  of India.  The annual report of the working of  the company  and its affairs along with the Audit Report had  to be placed before the Parliament.  Dividends declared by  the company entirely went to the coffers of the State.  All  the same this Court treated that company like any other  company registered ’under the Indian Companies Act. In  Gurushantappa  v. Abdul Khaddus (1969 (3) SCR  425)  the question   whether  an  employee  in  a  company  owned   by Government  was holding an office of profit was  considered. It  was a private limited company registered under the  name of  Mysore Iron & Steel Limited, Bhadravati.  The shares  of the company were held cent per cent (1) 359 U. S. 536, at 546-547. 660 by the Mysore Government.  Under the Articles of Association of  the  company  the first Directors of  the  company  were Minister-in Charge of the Industries Portfolio in the Mysore Government, the Secretaries to the Mysore Government in  the Finance  Department,  and  in the  Commerce  and  Industries Department, the Managing Director of the Mysore Iron & Steel Ltd.,  and the Chief Conservator of Forest,; of  the  Mysore Government.  The Governor of Mysore was entitled to  appoint all  or a majority of the members of the Board of  Directors so  long as the Government of Mysore held not less  than  51 per  cent of the total paid-up capital of the company or  so long  as  the  Governor continued to be  interested  in  any fiduciary   capacity.    Thus  the  State   Government   had considerable  control  in appointment of  Directors  of  the company  as  well  as in the  appointment  of  the  Managing Director  who  was  to be appointed  by  the  Governor  from amongst  the Directors nominated by him.  The  Governor  was also   entitled  to  appoint  from  amongst  the   nominated Directors  a  Chairman  And Vice-Chairman of  the  Board  of Directors.   Even  the Secretary of the company  had  to  be appointed by the Board of Directors after obtaining approval of  the  Governor.   In respect of other  employees  of  the company,  recruitment  and service conditions had to  be  in accordance  with  the rules which may be prescribed  by  the Government  from  time to time.  This Court  held  that  the employee was not holding an office of profit under the State Government. In  Parga Tools Corporation’s case (supra) the  company  was incorporated  under  the Indian Companies  Act.   The  Union Government and the Government of Andhra Pradesh between them held 56 per cent and 32 per cent of its shares respectively. The Union Government had the power to nominate the company’s directors.   This Court held that even so, being  registered under  the Companies Act and governed by the  provisions  of that Act, 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. In  the Heavy Engineering case (supra) the company  was  one incorporated  under  the Companies Act.   Its  entire  share

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capital  was contributed by the Central Government  and  all its  shares were registered in the name of the President  of India  and  certain officers of the Central  Government.  it was,  therefore,  a Government company.  The  Memorandum  of Association  and the Articles of Association of the  company conferred large powers on the Central Government  in-eluding the, power to give directions as regards the functioning  of the ’Company.  The wages and salaries of its employees  were also determined in accordance with the said directions.  The Directors  of the company were appointed by  the  President. In  its  standing  orders, the company was  described  as  a Government  undertaking.   In  dealing  with  the   question whether  the  company could be said to be  carrying  on  its business pursuant to the authority of the Central Government this Court observed :               "An  incorporated company, as is  well  known,               has   a   separate  existence  and   the   law               recognises  it as a juristic person,  separate               and  distinct  from  its  members.   This  new               person- 661               ality   emerges   from  the  moment   of   its               incorporation  and from that date the  persons               subscribing  to its memorandum of  association               and others joining it as members are  regarded               as   a  body  incorporate  or  a   corporation               aggregate   and  the  new  person  begins   to               function  as  an  entity.  (cf.   Salomon   v.               Solomon  & Co.(1). Its rights and  obligations               are different from those of its  shareholders.               Action  taken  against it  does  not  directly               affect  its  shareholders.   The  company   in               holding  its  property  and  carrying  on  its               business is not the agent of its shareholders.               An infringement ’of its rights does not give a               cause  of  action to its  shareholders.   Con-               sequently,  it  has been said that  if  a  man               trusts  a  corporation he  trusts  that  legal               persons  and  must  look  to  its  assets  for               payment;  he  can  call  upon  the  individual               shareholders to contribute only if the Act  or               charter creating the corporation so  provides.               The  liability of an individual member is  not               increased  by  the fact that he  is  the  sole               person beneficially interested in the property               of the corporation and that the other  members               have become members merely for the purpose  of               enabling    the    corporation    to    become               incorporated   and  possess  only  a   nominal               interest  in its property or hold it in  trust               for  him. (of Halbury’s Laws of  England,  3rd               Ed.  Vol.  9,  p. 9).   Such  a  company  even               possesses the nationality of the country under               the   laws  of  which  it   is   incorporated,               irrespective of the nationality of its members               and  does not cease to have  that  nationality               even  if in times of war it falls under  enemy               control    (cf.    Janson    v.    Driefontain               Consolidated    Mines(2)   and   Kuenigi    v.               Donnersmarck(3).  The company so  incorporated               derives  its powers and functions from and  by               virtue  of its memorandum of  association  and               its  articles of association.  Therefore,  the               mere fact that the entire share capital of the               respondent-company  was  contributed  by   the

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             Central  Government and the fact that all  its               shares  are held by the President and  certain               officers  of the Central Government  does  not               make  any  difference.  The  company  and  the               shareholders  being,  as  aforesaid,  distinct               entities the fact that the President of  India               and certain officers hold all its shares  does               not  make the company an agent either  of  the               President or the Central Government.  A notice               to  the  President  of  India  and  the   said               officers  of the Central Government, who  hold               between  them all the shares of  the  company,               would not be a notice to the company; nor  can               a suit maintainable by and in the name of  the               company be sustained by or in the name of  the               President and the said officers.               It is true that besides the Central Government               having  contributed the entire share  capital,               extensive   powers   are  conferred   on   it,               including  the power to give directions as  to               how the company should function, the power  to               appoint (1) [1897] A. C. 22. (3) [1955] 1 Q. D. 516. (2) [1902] A. C. 484. 662               directors and even the power to determine  the               wages  and salaries payable by the company  to               its  employees.  But these powers are  derived               from  the company’s memorandum of  association               and  the  articles of association  and  not  by               reason  of the company being the agent of  the               Central  Government.  The question  whether  a               corporation  is  an agent of  the  State  must               depend  on  the facts of each case.   Where  a               statute setting up a corporation so  provides,               such a corporation can easily be identified as               the agent of the State as in Graham v.  Public               Works  Commissioners(1) where  Phillimore,  J.               said  that  the Crown does  in  certain  cases               establish  with  the  consent  of   Parliament               certain  officials  or bodies who  are  to  be               treated  as  agents of the Crown  even  though               they   have  the  power  of   contracting   as               principals.  in  the absence  of  a  statutory               provision,  however, a commercial  corporation               acting  on its own behalf, even though  it  is               controlled wholly or partially by a Government               department, will be ordinarily presumed not to               be a servant or agent of the State.  The  fact               that  a  minister  appoints  the  members   or               directors of a corporation and he is  entitled               to  call for information, to  give  directions               which  are  binding on the  directors  and  to               supervise over the conduct of the business  of               the   corporation   does   not   render    the               corporation  an agent of the Government,  (see               The State Trading Corporation of India Ltd. v.               The  Commercial Tax Officer,  Visakhapatnam(2)               and Tamlin v. Hannaford(3).  Such an inference               that  the  corporation  is the  agent  of  the               Government may be drawn where it is performing               in  substance governmental and not  commercial               functions (cf.  London County Territorial  and               Auxiliary forces Association v. Nichols(4).

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In  Hindustan  Steel case (supra) it was argued  before  the Constitution  Bench that since it was entirely  financed  by the   Government  and  its  management  was   directly   the responsibility  of  the President, the  post  was  virtually under  the  Government  of India.   Hindustan  Steel  was  a Government  company  and  a private  limited  company.   Its Articles  of  Association as also the Indian  Companies  Act rendered  the ordinary company law inapplicable  in  certain respects and conferred unlimited powers of management on the President of India and his nominees.  It was entirely  owned by  the Union of India.  This Court held that the  Hindustan Steel had its independent existence and by the law  relating to  corporations  it  was distinct even  from  its  members, though the question for decision therein was whether Article 311 of the Constitution applied to the employee in question. I  shall now compare these cases with those relating to  the Oil   and  Natural  Gas  Commission,  the   Life   Insurance Corporation of India and the Industrial Finance  Corporation with which these four appeals are concerned. (1) [1901] 2 K.B. 781. 2) [1964] 4 S.C.R.99,188 per Shah, J. (3) [1950] 1 K. B. 18, 25-26. (4) [1948] 2 All E. R. 432. 663 The Oil and Natural Gas Commission consists of the Chairman. and  not  less  than two, and not  more  than  eight,  other ’members  appointed by the Central Government.  The  Central Government may, if it thinks fit, appoint one of the members as Vice-Chairman of the Commission.  The Commission may, for the  purpose of performing its functions or  exercising  its powers, appoint such number of employees as it may  consider necessary.   The functions and the terms and  conditions  of service  of such employees shall be such as may be  provided by regulations made under the 1959 Act.  The Commission may, with  the  previous approval of the Central  Government,  by notification  in the Official Gazette, make regulations  not inconsistent with the Act and the rules made thereunder, for enabling  it to discharge its functions under the Act.   The regulations provide inter alia for the terms and  conditions of  appointment  and  service  and  the  scales  of  pay  of employees  of the Commission; the time and place of  meeting of the Commission, the procedure to be followed in regard to the   transaction   of  business  at  such   meetings;   the maintenance of minutes of meetings of the Commission and the transmission  of copies thereof to the  Central  Government; the  persons  by  whom, and the manner  in  which  payments, deposits  and  investments,  may be made on  behalf  of  the Commission;   the  custody  of  moneys  required   and   the maintenance of accounts.  The Central Government may  amend, vary  or rescind any regulation which it has  approved;  and thereupon  the regulation shall have effect accordingly  but without  prejudice  to  the exercise of the  powers  of  the Commission under sub-section (1) of section 32. The  Life Insurance Corporation was established by the  Life Insurance Corporation Act, 1956.  Under s.49 of the Act  the Corporation  may, with the previous approval of the  Central Government,  by notification in the Gazette of  India,  make regulations not inconsistent with the Act and the rules made thereunder to provide for all matters for which provision is expedient for the purpose of giving effect to the provisions of this Act.  The regulations may provide inter alia for the powers  and  functions  of  the  Corporation  which  may  be delegated  to the Zonal Managers; the method of  recruitment of employees and agents of the Corporation and the terms and conditions of service of such employees or agents; the terms and  condition  of  service  of  persons  who  have   become employees  of the Corporation under section 11 of  the  Act;

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the  number,  term of office and conditions ,of  service  of members  of boards constituted under section 22 of the  Act; the  manner  in which the Fund of the Corporation  shall  be maintained  the  form and manner in which  policies  may  be issued  and  contracts  binding on the  Corporation  may  be executed. The  Industrial  Finance  Corporation  was  set  up  by  the Industrial    Finance    Corporation   Act,    1948.     The superintendence  of  the  business  of  the  Corporation  is entrusted  to a Board of Directors.  The Central  Government may make rules in consultation with the Development Bank not inconsistent with the provisions of the 1948 Act and to give effect to the provisions of the Act.  Section 43 of the  Act enacts that the Board may with the previous approval of  the Development  Bank regulations not inconsistent with the  Act and the 664 rules  made thereunder to provide for all matters for  which provision  is  necessary  or expedient for  the  purpose  of giving   effect  to  the  provisions  of  this   Act.    The Development  Bank  means  the  Industrial  Development  Bank established under the Industrial Development Act, 1964.  The shares  of the Central Government in the  Corporation  shall stand  transferred to the Development Bank when the  Central Government  shall so notify.  The regulations provide  inter alia for the holding and conduct of elections under this Act including the final decision of doubts or disputes regarding the  validity of the election; the manner in which  and  the conditions  subject to which the shares of  the  Corporation may  be, held and transferred; the manner in  which  general meetings  shall  be convened, the procedure to  be  followed thereat;  the duties and conduct, salaries,  allowances  and conditions of service of officers and other employees and of advisers and agents of the Corp-oration. All  these  Acts  confer rule making power  on  the  central Government  and  it is not necessary to refer them  for  the purpose  of these cases.  It is necessary only to  refer  to the   regulation  making  power  conferred  on   the   three organisations  under  consideration,.  On  behalf  of  these organisations   the   contention  advanced  was   that   the regulations  relate to internal management, that  the  terms and  conditions of service of employees as laid down in  the regulations are not law but merely rules for the purposes of internal  management.  In so far as the appointments of  the various employees of these three organisations are concerned they are appointed by contract and these regulations  merely form.  part of those contracts.  On behalf of the  employees the  contention was that as the source of the power to  make regulations  is the statute the regulations  are  themselves law. Under cl. (51) of section 3 of the General Clauses Act, 1897 "rule" means a rule made in exercise of a power conferred by any enactment, and shall include a regulation made as a rule under any enactment. Section 20 of the General Clauses Act reads as follows               "20.  Where, by any Central Act or Regulation,               a  power  to issue  any  notification,  order,               scheme,  rule, form, or bye-law is  conferred,               then  expressions  used in  the  notification,               order scheme, rule, form, or bye-law, if it is               made  after  the  commencement  of  this  Act,               shall,  unless there is anything repugnant  in               the   subject  or  context,  have   the   same               respective   meanings   as  in  the   Act   or               Regulation conferring the power."

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The  compendious  term "Subordinate Legislation"  refers  to notifications, orders, schemes, rules and bye-laws  referred to in ss. 20 and 21 of the General Clauses Act.  It would be noticed  that the word "order" used in the  General  Clauses Act  is  not  used in the same sense that word  is  used  in England  where  orders  are  excluded  from  the   statutory definition of statutory rules as being administrative.   The Committee  on Ministers’ Powers suggested  that  regulations should be used for substantive law and rules for  procedural law,  while  orders  should  be  reserved  to  describe  the exercise of executive power or the taking of 665 a judicial or-quasi-judicial decision.  It would be  noticed that  this  scheme is completely different from  the  Indian legislative practice. The word"order" very often is used  in lndia  for  certain  types  of  subordinatelegislation   for various  control orders like the "Rationing  Order".   There are a number of statutes on the Statute Book in India  where the  word "regulation" is used to refer to  the  regulations made  by  bodies other than the State.  The word  "rule"  is always  used to refer to the subordinate regulation made  by virtue of powers conferred. The regulations framed under the regulation making were con- ferred by the three Acts in question am not the  regulations defined in the General Clauses Act.’ In interpreting  Indian statutes it is unnecessary and might sometimes be misleading to refer to the provisions of English law in connection with subordinate  legislation.   We  have to refer  only  to  the General  Clauses  Act and the Indian  Legislative  practice. Though "rule" is defined as including a regulation made as a rule,  it cannot be said that regulation making  power  con- ferred  on  the three organisations in question  is  a  rule making  power.  Under the legislative practice in India  the rule making power is conferred on the State and the power to make  regulations  is conferred on bodies  or  organisations created by the statute’. The  Air  Corporations  Act, 1953 which  deals  with  Indian Airlines  and Air India International confers power  on  the Central Government to make rule under section 44 with regard to-  terms and conditions of service of the General  Manners and  such  categories of officers as may be  specified  from time to time under sub-section (1) of section 8. Under- sub- section  (2) of section. 8 every person employed by each  of the  Corporations  shall be subject to  such  conditions  of service  and  shall  be entitled to  such  remuneration  and privileges  as may be determined by regulations made by  the Corporation  by which he is employed.  Under section 45  the Corporations have the power to make regulations among  other things regarding terms and conditions of service of officers and  other  employees  of the  Corporation  other  than  the General  Manager  and  officers  of  any  other   categories referred to in section 44. Under the All-India Institute of Medical Sciences Act,  1956 the  Central  Government has the power to  make  rule  under section 28, including the power to make rules regarding  the conditions  of  service  of members of  the  Institute,  the allowances  to be paid to the President and members  of  the Institute and the number of officers and employees that  may be  appointed  by  the  Institute and  the  manner  of  such appointment.   Under section 29 the Institute has the  power to make regulations regarding the allowances, if any, to  be paid  to the Chairman and the members of the Governing  Body and  of  standing and ad hoc committees and  the  tenure  of office,  salaries  and allowances and  other  conditions  of service of the Director and other officers and employees  of

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the Institute including teachers appointed by the Institute. On the other hand, under the Central Silk Board Act 1948  it is  the Central Government that has the power to make  rules regarding 666 the staff which may be employed by the Board and the pay and allowances,  leave  and  other  conditions  of  service   of officers and other employees of the Board.  The Board has no power to make regulation Under the Chartered Accountants Act, 1949 it is the  Council that  has,  ’the  power to make  regulations  about  various matters.  The  Central Government has, however, the power to direct  the Council, to make any regulations or to amend  or revoke any regulations already made within such period as it May  specify  in,  this behalf.  There is  however  no  rule making power conferred on the Central Government. Under  the  Indian Coconut Committee Act, 1944  the  Central Government  has  the  power to make  rules,  including  many others,  the power for regulating grant of pay and leave  to officers  and  servants  of  the  Committee  ’as  also   the pensions,    gratuities,   compassionate   allowances    and travelling  allowances.  The power of the Committee to  make regulations  is, however, very limited and relates  only  to demandIng  security  from  officers  and  servants  of   the Committee and the Provident Fund. Under the Coir Industry Act, 1953 the Central Government has power  to  make rules and the Coffee Board has no  power  to make any regulations. Under the Coir Industry Act, 1953 the Central Government has the power to make regulations and the Board to make bye-laws regarding  the appointment, promotion and dismissal  of  its officers  and other employees other than the  Secretary  and the  creation and abolition of their posts, as well  as  the conditions  of service of its officers and  other  employees other  than the Secretary including their pay, leave,  leave allowances,  pensions, gratuities, compassionate  allowances and   travelling  allowances  and  the   establishment   and maintenance of a provident fund for them. Under  the  Cost and Works Accountants Act,  1959  only  the Council has the power to make regulations and the Government has no power to make rules. Under  the Damodar Valley Corporation Act, 1948 the  Central Government  has the power to make rules and the  Corporation to  make regulations among other things regarding making  of appointments and promotion of its officers and servants, and specifying  other conditions of service of its  officers  an servants. Under  the  Dentists Act, 1948 the State  Governments  alone have  the power to make rules including rules regarding  the term  of office and the powers and duties of  the  Registrar and other officers and servants of the State Dental Council. The State Councils have no powers to make any regulations. The  Deposit  Insurance Corporation Act,  1961  enables  the Corporation to make regulations but confers no power on  the Government to make rules. 667 Under   the  Electricity  (Supply)  Act,  1948   the   State Governments have the power to make rules and the Board makes regulations Under  the Employees’ State Insurance Act, 1948 the  Central Government has the power to make rules in respect of certain matters  and  the State Governments in  respect  of  certain other  matters,  but the Corporation has the power  to  make regulations  regarding  the method of recruitment,  pay  and allowances,  discipline, superannuation benefits  and  other

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conditions  of service of officers and servants of the  Cor- poration  other  than  the principal  officers.   The  State Governments  have  the  power to make  rules  regarding  the conditions  of service of staff employed in the hospitals  , dispensaries  and institutions mansions of this Act is  that the regulations made by the Corporation- shall be  published in  the Gazette of India and thereupon shall have effect  as if  enacted in the Act.  It shows that where the  Parliament intended  that a regulation should have statutory effect  it said  so specifically.  This also illustrates the  provision of  Cl. (51) of section 3 of the General Clauses  Act  which defines ’rule’ as including a regulation intended to be made as a rule. The Faridabad Development Corporation Act, 1956 confers  the power  to make rules on the Central Government but no  power is given to the Corporation to make any regulations. The  Indian Medicine Central Council Act, 1970  confers  the power to make rules on the Central Government and the ’power to  make  regulations  on  the  Central  Council  of  Indian Medicine  including the power to make regulations  regarding the  tenure  of  office, and the powers and  duties  of  the Registrar and other officers and servants of the Council and the appointment, powers, duties and procedure of  inspectors and visitors. The  Industrial Development Bank of India Act, 1964  confers powers  on  the  Board  of Directors of  the  Bank  to  make regulations but no rule making power on the Government. The International Airports Authority Act, 1971 confers power on the Central Government to make rules and on the Authority to  make  regulations including  regulations  regarding  the conditions  of service and the remuneration of officers  and other employees appointed by it. The  Khadi  and  Village  Industries  Commission  Act,  1956 confers  the power to make rules on the  Central  Government and  the  power  to  make  regulations  on  the   Commission including regulations regarding the terms and conditions  of appointment  and service and the scales of pay  of  officers and servants of the Commission other than the Secretary  and the Financial Adviser to the Commission which are to be  re- gulated by rules made by the Government. Under the Life Insurance Corporation Act, 1956 the power  to make  rules is with the Central Government and the power  to make regulations with the Corporation. 668 Under the Major Port Trusts Act, 1963 the Central Government has  the power to make rules and the Board of  Trustees  for the  port the power to make regulations including the  power regarding  the appointment, promotion,  suspension,  removal and   dismissal  of  its  employees,  their   leave,   leave allowances,  pensions, gratuities, compassionate  allowances and   travelling  allowances  and  the   establishment   and maintenance of a Provident Fund or any other fund for  their welfare, and the terms and conditions of service of  persons who become employees of the Board. The  Marine Products Export Development Authority Act,  1972 enables the Central Government to make rules and the  Marine Products Export Development Authority to make regulations. The  Indian Medical Council Act, 1956 confers power  on  the Central Government to make rules and on the Council to  make regulations  including the tenure of office and  the  powers and duties of the, Registrar and other officers and servants of   the  Council,  the  appointment,  powers,  duties   and procedure of medical inspectors and visitors. The  Monopolies  and Restrictive Trade Practices  Act,  1969 confers  the power to make rules on the  Central  Government

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and  the  power to make regulations on  the  Monopolies  and Restrictive Trade Practices Commission. The National Co-operative Development Corporation Act,  1962 confers  the power to make rules on the  Central  Government and the power to make regulations on the Corporation. I  have gone through the various statutes only to point  out that  under the Indian Legislative practice rules  are  what the Central Government or the State Governments make and the regulations  are  made by any  institution  or  Organisation established  by a statute and where it is intended that  the regulation should have effect as law the statute itself says so.  It is, therefore, I stated earlier, unnecessary and may be  even  misleading  to refer to the  English  practice  in interpreting the word ’regulation’. My learned brothers say that the ’regulations’ under the Oil &  Natural  Gas  Commission Act provide for  the  terms  and conditions  of appointment and service and scales of pay  of the employees of the Commission, regulations are  imperative and  the  administrative instruction is  the  entering  into contract  with  the  particular person,  but  the  form  and content of the contract is prescriptive and not  statutory,. Administrative instructions are not. necessarily in relation to  particular person, they may relate to a whole  class  of persons  even  as rules and regulations may.   To  say  that because  the regulations contained the terms and  conditions of appointment they are statutory is to beg the question.  I have  extracted the power to make regulations found  in  the various  statutes  merely  to show that the  power  to  make regulations may be of different kinds.  An institution  like the  Life  Insurance Corporation which has its  offices  and employees all over. the country has necessarily got to  have a  standard  set of conditions of service  for  its  various classes of employees.  That is why they are made subject. 669 of regulations.  But the mere fact that regulations are made in respect of the conditions of service of the employees  of a  certain  institution or Organisation does not  mean  that those  conditions  are statutory.  No doubt  these  are  the conditions  of service applying to their employees.  But  if there  is breach of those conditions it cannot be said  that there is a breach of any statutory provision. While  rules  are  generally  made  by  the  Government  the regulations  are made by a body which is a creature  of  the statute  itself  with  its powers limited  by  the  statute. While rules apply to all matters covered by the statute, the scope of the regulations is narrower being usually  confined to internal matters of the statutory body such as the condi- tions  of  service  of  its  employees.   When   regulations standardise  the conditions of service of the  employees  or purport  to  formulate  them,  their  character  is  further diluted  by the nature of the subject-matter.  For,  service or employment is basically a contract which is deeply rooted in  private law.  A mere standardisation or  enumeration  of the   terms  of  a  service  contract  is  not,   therefore, ordinarily sufficient to convert it into a statutory status. For,  the statute itself is silent and does not  confer  any security  of tenure on the employee.  The Corporation has  a complete  discretion in framing the regulations  and  giving such  protection  thereunder to its employees as  it  thinks fit.  The amount of the protection thus depends on their own discretion,  It  is  not  given  by  a  mandatory  statutory obligation imposed on the corporation from above.  For,  the corporation  can  vary the terms of the regulations  at  any time thus depriving its employees of the security of  tenure of service.  The matter is thus one between the employee and

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the  employer  which  is precisely the  case  of  a  service contract.  A breach of such conditions is therefore a breach of the service contract remediable by damages rather than an ultra  vires  action  to be set aside by  a  declaration  or mandamus. As   argued  on  behalf  of  the  three  organisations   the regulations  are about the conditions of service  which  are offered  to  its employees in the form of a  contract.   The result  of  accepting  the argument that  these  powers  are statutory would be to hold that the employees of the various organisations  and  institutions which are governed  by  the various statutes I have enumerated above would be deemed  to have  their  service  conditions fixed  by  statutes.   Even assuming  that  their  conditions of service  are  fixed  by staute  it  does not mean that the removal  of  an  employee contrary to those conditions would necessarily result in the removal having to be declared void.  That was the  position, for instance, under section 96-B of the Government of  India Act, 1919 till section 240 was introduced in the  Government of India Act, 1935. (See Venkat Rao’s case, A.I.R. 1937 P.C. 31, and Rangachari’s case, AIR 1937 P.C. 27). It does not seem correct to say that these statutory  bodies have  no  free hand in framing the conditions and  terms  of service  of their employees.  It is true that they  have  to offer terms and conditions as laid down in the  regulations. But  it is incorrect to say that they are not free to  frame such  terms and conditions as they think proper.   They  are the  authorities to make. the regulations and therefore  can make  any regulations regarding the conditions and terms  of service of their 670 employees  and also change them as they please.   It  cannot therefore  be  said that they are bound by these  terms  and conditions  of  service.  Indeed there is no  obligation  on them to make regulations regarding the terms and  conditions of  service  of their employees.  It has been held  by  this Court  that in the case of public servants though  the  Gov- ernments have power to make rules under the proviso to  Art. 309 or undertake legislation regarding terms and  conditions of  service  of  Government servants,  they  can  either  by administrative   instructions  or  executive   orders   also regulate   the  terms  and  conditions  of  their   service. Corporations   also  can  do  so  and  even  if  they   make regulations  those regulations cannot be said to be  law  in relation to them.  While regulations made by one body  which another  body  is bound to observe can be said to  have  the effect  of law, the regulations which a body makes  and  can change  and  which it need not even make cannot be  said  to have the effect of law in relation to that body. The  learned  Additional Solicitor  General  submitted  that regulations  could not have the force of law  because  these regulations  are similar to regulations framed by a  company incorporated  under the Companies Act.  My learned  brothers say that the fallacy lies in equating rules and  regulations of  a  company  with  rules  and  regulations  framed  by  A statutory  body.   I do not see where the fallacy  lies.   A company  makes rules and regulations in accordance with  the provisions  of  the Companies Act.  A statutory  body  makes regulations  under  the  powers  conferred  by  the  statute creating that body.  Both stand on the same footing as  both derive  their authority one from the Companies Act  and  the other from the Act which creates that body, for instance  in the  case  of the Life Insurance Corporation from  the  Life Insurance   Corporation   Act,  1956.   The  fact   that   a Corporation  like the Life Insurance Corporation is  created

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by  the statute itself and a company come,-, into  existence in accordance with the provisions of the Companies Act  does not make any difference to this situation.  Merely because a body  happens to be a statutory body it does not become  any the less entitled to frame regulations which could be of the same  kind as the regulations made by a company.  Whether  a corporation or a company is created by a statute or under  a statute does not make any difference to this principle. The  logic of the three decisions, the validity of which  my learned brothers have accepted in their decision in W.P. No. 43  of  1972,  requires that it should  be  applied  to  the employees of these three organisations.  There is no  reason in  principle  why  a different result  should  follow  just because a corporation happens to be established by a statute whereas  it is different in the case of a company.   Whether an  institution or Organisation is established by a  statute or  under  a  statute in principle there  is  no  difference between  their powers.  Ultimately unless it should be  held that  the  institution  or Organisation in  question  is  an ’authority’ within the meaning of the term in Article 12  of the Constitution there can be no question of the regulations framed by those organisations being deemed to be law. In  order  that  an institution must be  an  ’authority’  it should exercise part of the sovereign power or authority  of the State.  See in this 671 connection the definition of the word in the General Clauses Act, which reads is follows               "Local  authority"  shall  mean  a   municipal               committee,   district  board,  body  of   port               commissioners   or  other  authority   legally               entitled  to, or entrusted by  the  Government               with, the control or management of a municipal               or local fund." They are all concerned with exercising part of the powers of the State. that is why a Port Trust is given even the  power to  make  regulations  to  provide  that  a  breach  of  its regulations  would  be  punishable.  In inch a  case  it  is undoubtedly exercising part of the power of the State.   The whole  purpose  of  the  provisions  of  Part  III  of   the Constitution is to confer fundamental rights on the  citizen as  against the power of the State or those  exercising  the power of the State.  None of these corporations do so and so they cannot be the ’State’ or ’authority’. The  case in British Broadcasting Corpn. v. Johns [1965  (1) Ch. 32.1  is  very  much in point.  It is not  necessary  to burden this judgment     by  quoting extensively  from  that decision.  It was held there that  the  B.B.C.  was  not  an instrument  of Government.  It was argued in that case  that the  Crown  was entitled to a monopoly of  broadcasting  and therefore   the  Government  purposes  also   include   non- traditional  provinces  of  Government  if  the  Crown   has constitutionally  asserted  that they are to be  within  the province of Government.  Willmer.  L.J. quoted with approval the  remarks of Wilberforce, J., against whose judgment  the Court of Appeal was being heard, to the effect               "So  I  come to  the conclusion  that  however               widely  one  may  be inclined  to  extend  the               conception of an act or function of government               the Crown has not taken the path of  engagaing               itself   in  a  broadcasting  service  or   of               entrusting   it   to  any   agent.    It   has               deliberately  chosen  the  alternative  of  an               independent instrument." There  can be no doubt that that is the position in  respect

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of the three corporations we are dealing with. The   distinction   between   governmental   functions   and commercial  functions is, therefore, clear enough.  Even  in the  United States of American this distinction  is  clearly kept  in mind.  In New York v.United States (90 L. ed.  326) it was remarked               "That  there Ls a Constitutional line  between               the  State  as  government and  the  State  as               trader, was still more recently made the basis               of a decision sustaining a liquor tax  against               Ohio.   "If  a state chooses to  go  into  the               business  of buying and  selling  commodities,               its  right to do so may be conceded so far  as               the Federal Constitution is concerned; but the               exercise  of the right is not the  performance               of a government rat function .... When a state               enters the market place. seeking customers  it               divests itself of its quasi sovereignty pro 672               tanto, and takes on the character of a  trader               so  far, at least, as the taxing power of  the               federal  government  is  concerned."  Ohio  v.               Helvering,  supra  (292 US at 369,  78  L.  ed               1310,  54 S Ct ’125).  When the Ohio Case  was               decided  it  was too late in the  day  not  to               recognize the vast extension of the sphere  of               government, both State and national,  compared               with   that  with  which  the   Fathers   were               familiar.    It   could   hardly   remain    a               satisfactory constitutional doctrine that only               such State activities are immune from  federal               taxation  as were engaged in by the States  in               1787.   Such  a static concept  of  government               denies its essential nature.  "The science  of               government   is  the  most  abstruse  of   all               sciences;  if,  indeed, that can be  called  a               science  which has but few  fixed  principles,               and  practically consists in little more  than               the exercise of a sound discretion, applied to               the exegencies of the state as they arise.  It               is  the  science of experiment."  Anderson  v.               Dunn. 6 Wheat. (U.S.) 204, 226, 5 L. ed.  242,               247.               When  this Court came to  sustain the  federal               taxing  power  upon  a  transportation  system               operated  by  a  State,  it  did  so  in  ways               familiar in developing the law from  precedent               To precedent.  It edged away from reliance  on               a sharp distinction between the "governmental"               and  the "trading" activities of a  State,  by               denying  immunity from federal taxation  to  a               State  when  it  "is  undertaking  a  business               enterprise   of  a  sort  that   is   normally               within  the reach of the federal taxing  power               and  is distinct from the  usual  governmental               functions   that  are  immune   from   federal               taxation  in order to safeguard the  necessary               independence  of  the  State."  Halvering   v.               Powers,  supra (293 US at 227, 79 L. ed.  296,               55 S Ct 117). It is, therefore, clear that Article 298 of the Constitution cannot  be resorted to for supporting the  proposition  that when the State enters into non-governmental activities  that should also be considered to be a governmental function.  In this  connection  the  history of Article 298 as  it  is  at

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present may be noted. In Ranjit Kumar Chatterjee v. Union India (AIR 1969 cal. 95) Basu,  J. dealing with similar contention  advanced’  before him, observed as follows :               "(iii)  Mr.  Dutt, for the  petitioner  relied               strongly upon the provision in Article 298, as               amended    by   the   Constitution    (Seventh               Amendment)  Act,  1956,  to  argue  that  when               Government takes up a business, it does so  in               the  exercise  of its ’executive  power’  and,               therefore,  whatever  be  the  agency  through               which Government may carry on a business, that               is identified with the Government.               This argument, however, overlooks the ’ object               and  scope  of the Amendment of  the  Article.               Prior  to this amendment, it was held in  some               cases   that  since  there  was   no   express               provision empowering the Government to enter 673               into  a trade, this could not be done  without               legislative sanction-Moli Lal v. State of U.P.               (AIR  1951  All.  257  FB).   This  view   was               overruled by the Supreme Court in the case  of               Ram Jawaya v. State of Punjab (1955 2 SCR 225:               AIR  1955  SC 549) and the Amendment  of  1956               simply codifies the effect of the decision  in               Ram Jawaya’s case (1955 2 SCR 225: AIR 1955 SC               549) namely, that legislation is not  required               to   empower  a  Government  to  carry  on   a               business, it can do so in the exercise of  its               executive  power, except, of course,  where  a               law is required by some other provision of the               Constitution,  say,  Article 19(6).   But  the               effect  of the amendment is not to  convert  a               commercial  function of the Government into  a               governmental function.  It is to be noted that               even  where  a State Government carries  on  a               business,   it   cannot  be   treated   as   a               governmental  function to claim immunity  from               Union  taxation,  without  a  declaration’  by               Parliament  by law under  Article  289(3)-vide               AIR  1964 SC 1486 at p. 1492.  If the  Central               Government carries on a business, it can never               be treated as a governmental function to claim               immunity  from State taxation because  Article               285(1)  simply speaks of ’the property of  the               union and no business.               It  has  been held by the Supreme  Court  that               even when the Government carries on a business               departmentally  as in the case of Railway,  it               cannot  be treated as a  ’sovereign  function’               for  the  purpose of  ’suability’.   But  that               principle  would not apply for the purpose  of               determining the status of its employees  under               Article 311.  When the business is carried  on               by  a Department of the Government, as in  the               case  of  Railways. obviously,  the  employees               hold  under the Government and not  under  any               separate  juristic entity, and so it has  been               held in numerous cases of Parshotam  v.  Union               of India (AIR 1958 SC 36), Moti Ram v.  N.E.F.               Rly.  (AIR  1964  SC  600).   The  reason   is               obvious,  namely,  where  the  employer  is  a               Department of the Government, no question of a               separate legal entity arises,

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             The  question,  however,  becomes   different,               where  the  business is carried on  through  a               separate   legal  person,  e.g.  a   statutory               corporation  or  a company (vide AIR  1966  SC               1364) because in such a case, the employee  is               a  servant  of a legal entity other  than  the               Government." The reference to Article 297 of the Constitution in relation to  the  Oil  & Natural Gas Commission’s  case  is  not  apt either.  That Article does not declare that all oil wherever found is the property of the Government.  It is only the oil found  under  the  land in the territorial  waters  and  the continental  shelf that is the property of  the  Government. This  would  be also clear if one looks at  the  Oil  Fields (Regulation & Development) Act, 1948. The  decision in Tamlin v. Hannaford (1950 1 KB 18) is  very much  in point in deciding the questions that arise  in  the present case. 674 That  case  was  concerned with  the  question  whether  the British  Transport Commission was a servant or an  agent  of the  Crown.   It  was brought into existence  by  a  special statute  which had many of the qualities which  belonged  to corporations of other kinds.  It had defined powers which it could  not exceed.  There were no shareholders to  subscribe the  capital.   The money which the Corporation  needed  was raised by borrowing and was guaranteed by the Treasury.   If it could not repay the loss fell on the Consolidated Fund of the  United Kingdom.  All those who used the services  which it  provided  and  all whose supplies depended  on  it  were concerned   in  seeing  that  it  was  properly  run.    The protection of the interests of the taxpayer, user and  bene- ficiary  was  intrusted  by Parliament to  the  Minister  of Transport.  He was given powers over this corporation  which were  as great as those possessed by a man who held all  the shares in a private company, subject, however, to a duty  to account  to  Parliament  for his stewardship.   It  was  the Minister  who  appointed the directors, the members  of  the Commission,  and fixed their remuneration.  They  must  give him  any information he wanted.  He was given power to  give them  directions of of a general nature and they were  bound to   obey.  The Court Appeal said :               "These  are great powers but still  we  cannot               regard the corporation as being his agent, any               more  than  a  company is  the  agent  of  the               shareholders,  or even of a sole  shareholder.                             In  the eye of the law, the corporatio n is  its               own  master and is answerable as fully as  any               other  person or corporation.  It is  not  the               Crown  and  has  none  of  the  immunities  or               privileges of the Crown.  Its servants are not               civil servants, and its property is not  crown               property."               Further on they remarked               "But the carriage of passengers and goods is a               commercial  concern which hag never  been  the               monopoly  of anyone and we do not  think  that               its  unification  under state control  is  any               ground  for conferring Crown  privileges  upon               it.               The  only fact in this case which can be  said               to  make the British Transport’  Commission  a               servant  or agent of the Crown is the  control               over it which is exercised by the Minister  of

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             Transport;  but there is ample authority  both               in  this Court and in the House of  Lords  for               saying  that such control as he  exercises  is               insufficient  for  the  purpose......’In   the               absence  of  any such express  provision,  the               proper inference. in the case, at any rate, of               a  commercial corporation, Is that it acts  on               its own behalf, even through it is  controlled               by a government department." The  ease for considering any one of the three  corporations under  consideration  as a public authority is  much  weaker than that either of the British Broadcasting Corporation  or the British Transport Commission. In  Kruse v. fohnson (1898 2 OB 91) In regard to by-laws  it was said : 675               "But first it seems necessary to consider what               is  a  bylaw.  A by-law, of the class  we  are               here  considering, I take to be  an  ordinance               affecting  the public, or some portion of  the               public, imposed by some authority clothed with               statutory powers ordering something to be done               or  not  to be done, and accompanied  by  some               sanction  or penalty for  its  non-observance.               It necessarily involves restriction of liberty               of  action  by  persons  who  come  under  its               operation  as to acts which, but for the  bye-               law,  they  would be free to do or not  do  as               they   pleased.  Further,  it  involves   this               consequence  that if validly made, it has  the               force  of  law  within  the  sphere   of   its               legitimate operation." Contrast  these with the effect of the regulations which  we are  considering.   These  regulations  apply  only  to  the employees of the corporation.  They do not affect the public or any portion of the public, they do not order something to be  done or not to be done accompanied by some  sanction  or penalty for its non-observance.  Indeed it is this test that was applied in the Rajasthan Electricity Board’s case (19673 SCR 377). In  Halsbury’s Laws of England (3rd ed., Vol. 9, p. 40)  the law is set out thus :               "All  regulations  made by a  corporation  and               intended  to  bind  not only  itself  and  its               officers  and  servants, but  members  of  the               public  who  come within the sphere  of  their               operation, may properly be called  "bye-laws."               whether they are valid or invalid in point  of               law;  but  the term may also  be.  applied  to               regulations  binding only on the  corporation,               its officers and servants." The  distinction here is brought out between what  we  would call rules and regulations in our country. Allen in his work ’Law and Orders’ (3rd ed., p. 324)  refers to  the  question  raised in Tamlin  v.  Hannaford  (supra). After noting that it was undoubtedly a public authority with large  powers,  and a considerable measure  of  control  was exercised  over  it, under the Transport Act, 1947,  by  the Minister   of   Transport;  but  in  its   activities,   its liabilities,   the   status  of  its  employees,   and   its subordination  to  statute, it was  essentially  a  separate corporate  body,  in  no  way  comparable  to  a  Government department, goes on to observe :               "It  is  interesting  to  note  that  bad  the               decision been otherwise everyone of the  half-

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             million   (approximately)  employees  of   the               railways  alone would have become a  ;’servant               or  agent"  of  the Crown,  entitled.  to  the               privileges of that status." That  unfortunately would be the effect of what  my  learned brothers have chosen to do in their judgment. It  is  now  time to refer to the decisions  of  this  Court relevant to, the subject. 676 In the State Trading Corporation of India Ltd. & Ors. v. The Commercial  Tax Officer, Visakhapatnam & Ors. [1964 (4)  SCR 99] Justice Shah pointed out that :               The question whether a corporation is an agent               or servant of the State must be decided on the               facts  of each ,case.  In the absence  of  any               statutory provision, a commercial  corporation               acting   on   its  behalf,  even  if   it   is               con.trolled   wholly   or   partially   by   a               Government department, will be presumed not to               be a servant or an agent of the State.  Where,               however,  the  corporation  is  performing  in               substance  governmental.. and not  commercial,               functions,  an interence will readily be  made               that it is an agent of the Government." The  case  in Tamlin v. Hannaford was relied upon  for  this proposition. In  Life  Insurance  Corporation of  India  v.  Sunil  Kumar Mukherjee  Ors.  [1964  (5).   SCR  528]  the  order   under consideration  was  one issued by the  Central.   Government under  section  11(2) of the Act in exercise of  its  powers under  that  section.  By that section it  was  the  Central Government that was given the power to alter (whether by way of reduction or otherwise) the remuneration and other  terms and  ,conditions  of service to such an extent and  in  such manner as it thought fit, That power so conferred was to  be exercised notwithstanding any thing contained in sub-section (1),  or  in the Industrial Disputes Act, 1947,  or  In  any other  law  for the time being in force, or  in  any  award, settlement  or agreement for the time being in  force.   The order  therefore  had  statutory effect  and  the  order  of termination  of  services of the employee was  therefore  in contravention  of the ’statutory provision.   That  decision cannot therefore support any argument that regulations  made under a statute have statutory effect. In  Andhra Pradesh State Road Transport Corporation  v.  The Income  Tax Officer & Anr. [1964 (7) SCR 17] a  Constitution Bench  ,of  this  Court  held  that  State  Road   Transport Corporation is not the State.  In that judgment the decision in  Tamlin  v. Hannaford was also referred to and  after  an exhaustive  analysis of the various sections of the  Act  it was pointed out that               "... all the relevant provisions  emphatically               bring  out  the separate  personality  of  the               corporation and proceed on the basis that  the               trading activity is run by the corporation and               the  profit and loss that would be made  as  a               result  of the trading activity would  be  the               profit and loss of the corporation.  There  is               no provision in the Act which has attempted to               lift the veil from the face of the corporation               and thereby enable ,the shareholders to  claim               that  despite the form which the  Organisation               has taken, it is the shareholders who run  the               trade and who can claim the income coming from               it as their own.

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The  decision in K. S. Ramamurthi Reddiar v. The Chief  Com- missioner, Pondicherry [1964 (1) SCR 656] is not helpful  in deciding what an authority is because the appellate in  that case was a quasiJudicial authority, 677 In  Kasturilal v. Stale [1966 (1)  SCR 375]  a  Constitution Bench of this Court after an exhaustive reference to all the earlier decisions. pointed out :               It   is   not   difficult   to   realise   the               significance  and importance of making such  a               distinction  particularly at the present  time               when,  in the pursuit of their welfare  ideal,               the  Governments of the States as well as  the               Government of India naturally and legitimately               enter   into   many   commercial   and   other               undertakings  and  activities  which  have  no                             relation   with  the  traditional  con cept   of               governmental activities in which the  exercise               of   sovereign  power  is  involved.   It   is               necessary  to limit the area of these  affairs               of  the State in. relation to the exercise  of               sovereign power, so that if acts are committed               by  Government employees in relation to  other               activities.   which   may   be    conveniently               described as nongovernmental or non-sovereign,               citizens  who  have  a  cause  of  action  for               damages  should not be precluded  from  making               their  claim against the State.  That  is  the               basis on which the area of the State  immunity               against such claims must be limited." It would, therefore, be wrong to consider the, words  "other authorities"  in  Article 12 as  including  any  corporation which  does not exercise par, of the governmental  functions of the State. The Rajasthan State Electricity Board v. Mohan Lal (1967 (3) SCR  377)  is a very important decision.  After  noting  the meaning  of  the word "authority" given in  Webster’s  Third New- International. Dictionary the majority Went on to point out that the dictionary meaning of the word " authority" was wide  enough to include all bodies created by a  statute  on which  powers  are conferred to carry  out  governmental  or quasi-governmental  functions.  The first point to be  noted is  that-  none  of  the  functions  with  which  the  three corporations   under   consideration  are   concerned,   are governmental or quasi-governmental functions.  The work done by  the Oil & Natural Gas Commission always used to be  done by  the various oil companies like Burmah  Shelf.   Standard Vacuum etc.  The work done by the Life Insurance Corporation was  done by various insurance companies and the  Industrial Finance  Corporation is merely carrying out functions  which any bank can carry on.  When the majority further went on to observe               "The  expression "other authorities"  is  wide               enough  to include within it  every  authority               created  by a statute anti functioning  within               the  territory of India, or under the  control               of the Government of India." It   can  only  be  with  regard  to  authority   exercising governmental  or quasi-governmental functions.  The clue  to the decision is given really in the following passage               "The  circumstance  that the Board  under  the               Electricity Supply Act is required to carry on               some activities of the na- 678

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             ture 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.  On the other hand, there are               provisions in the Electricity Supply Act which               clearly show that the powers conferred on  the               Board  include power to give  directions,  the               disobedience  of  which is  punishable,  as  a               criminal offence........ The Board was clearly                             an  authority to which the provisions  of  Part               III of the Constitution were applicable." This makes it clear. that the fact that the Board carried on activities  in  the nature of trade or commerce could  be  a ground  for excluding it from the scope of word "State"  but for the fact that it was given powers to give directions the disobedience of which was punishable as a criminal offence. We  need  not-now  pause to consider whether  where  a  body carries out functions both with regard to trade and commerce and  also exercises powers, which only a State can  exercise like   giving  directions  the  disobedience  of  which   is punishable  as  a  criminal  offence,  the  obligations  and restrictions  which are imposed by the Constitution  on  the exercise of those powers by the State should not be confined to those powers and with regard to the carrying on the trade and commerce it should not be treated as any other  ordinary commercial concern. Justice Shab’s concurring judgment bring out in sharp  focus the ration of the decision by the majority.  He said               "The Board is an authority invested by statute               with   certain   sovereign   powers   of               the State...... and to issue directions  under               certain  provisions of the Act and to  enforce               compliance with those directions.  The.  Board               is  also  invested by statute  with  extensive               powers    of    control    over    electricity               undertakings.   The  power to make  rules  and               regulation  and  to administer the Act  is  in               substance  the sovereign power ,of  the  State               delegated  to the Board.  The Board is, in  my               judgment, "other authority" within the meaning               of Art. 12 of the Constitution.               The expression "authority in its  etymological               sense,  :means a body invested with  power  to               command  or  give  an  ultimate  decision,  or               enforce obedience, or having a legal ,right to               command and be obeyed.". ..... In  considering               whether a statutory or constitutional body  is               an  authority, within the meaning of Art.  12,               it would be necessary to bear in mind not only               whether  against  the  authority,  fundamental               rights  in terms absolute arc intended  to  be               enforced, but also ’whether it was intended by               the Constitution-makers that the authority was               invested  with the sovereign power  to  impose               restrictions  on  very  important  and   basic               fundamental free. loms. 679               In my judgement, authorities constitutional or               statutary  invested with power by law but  not               sharing the sovereign power do not fall within               the expression "State" as defined in Art.  12.               Those  authorities  which  are  invested  with               sovereign power, i.e., power to make rules  or               regulations and to administer or enforce  them

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             to  the detriment of citizens and others  fall               within  the definition of "State" in Art.  12,                             and constitutional or statutory bodies  which do               not  share that sovereign power of  the  State               are  not, in my judgment, "State"  within  the               meaning of Art. 12 of the Constitution." This is not in any way contrary to what majority decided but only  explains and brings out in bold relief what  has  been laid down by the majority. In  Co-op.  Bank v. Indust.  Tribunal (1970 (1)SCR  205)  it was held               "The  principle  that  rules  framed  under  a               statute  have  the force of statute  does  not               apply  to bye-laws of a  cooperative  society.               They  merely  govern the  internal  management               business  or administration of a  society  and               may be binding between the persons effected by               them but are neither law nor do they have  the               force  of law.  They are just like  conditions               of  service laid down by contract between  the               parties,  or like bye-laws under the  Articles               of   Association  of  a  company   under   the               Companies  Act, or Standing  Orders  certified               under  the  Industrial  Employment   (Standing               Orders)    Act,    1946.     Therefore,    the               circumstances  that  in granting  relief,  the               Tribunal may have to vary the special bye-laws               framed by the, Cooperative Banks does not lead               to  the inference that the Tribunal  would  be               making orders contrary to law and therefore is               incompetent to grant the reliefs claimed.  The               Jurisdiction  granted to the Tribunal  by  the               Industrial    Disputes   Act   is   not    the               jurisdiction of merely administering  existing               laws  and enforcing existing  contracts.   The               Tribunal  has  the jurisdiction even  to  vary               contracts  of  service  between  employer  and               employees.  Further in the Andhra Act there is               no prohibition that the conditions of  service               prescribed  are not to be altered.   Therefore               the  reliefs  could  only be  granted  by  the               Industrial Tribunal and could not fall  within               the Scope of the Registrar’s powers under  the               Cooperative Societies Act." 680 The main contention on behalf of the three organisations put forward by the learned Addl.  Solicitor General was that  if we   hold  that  these  corporations  are  State   and   the regulations  as  having the force of law there would  be  no room for any reference to the Industrial Tribunal under  the Industrial   Disputes  Act,  and  that  would  be  a   great disadvantage from which the labour would suffer.               In  Warehousing Core. v. Tyagi (1970  (2)  SCR               250) it was held               "A  declaration  to  enforce  a  contract   of               personal service will not normally be granted.               The exceptions are : (i) appropriate cases of.               public  servants who have been dismissed  from                             service  in  contravention of  Art.  3 11;  (ii)               dismissed workers under industrial and  labour               law; and (iii) when a statutory body has acted               in breach of a mandatory obligation imposed by               a statute."

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On the facts of this case it was held that a breach had been committed by the appellant of regulation 16(3), but such  an order  made  in  breach of the  regulations  would  only  be contrary to the terms and conditions of relationship between the  appellant  and the respondent and it would  not  be  in breach of any statutory obligation because the Act does  not guarantee  any statutory status to the respondent, nor  does it  impose any obligation on the appellant in such  matters. Therefore,  the violation of the regulation could  not  have the  effect of treating the employee as still in service  or entitling  him  to  reinstatement.  This  case  was  rightly relied  upon  by  the learned Addl.   Solicitor  General  as supporting his point. The decision in I.A.C. v. Sukhdeo Rai (1971 (Supp) SCR  510) had to consider the case of the Indian Airlines which is one of the parties in the cases before us.  This Court  referred to  its earlier decisions in Tewari’s case (1964(3) SCR  55) and  Rajasthan  State  Electricity Board  case  (supra)  and distinguished  the  case in Life Insurance  Corporation.  of India  v.  Mukherjee (supra). it  also  explained  Naraindas Barot’s case (1966 (3) SCR 40).. It then held that               "Though  made  under the  power  conferred  by               statute,  the  regulations merely  embody  the               terms   and  conditions  of  service  in   the               Corporation but do not constitute a  statutory               restriction as to the kind of contracts  which               the Corporation can make with its servants  or               the  grounds con which it can terminate  therm               That  being  so, and  the  Corporation  having               undoubtedly  power to dismiss  its  employees,               the  dismissal  of  the  respondent  was  with               jurisdiction and although 681               it  was wrongful in the sense of its being  in               breach  of  the  terms  and  conditions  which               governed   the   relationship   between    the               Corporation   and  the  respondent,   it   did               subsist.               The  present  case, therefore,  did  not  fall               under   any  of  the   three   well-recognised               exceptions laid down by this Court; hence  the               respondent  was only entitled to  damages  and               not to the declaration that his dismissal  was               null and void." My learned brothers have referred to Naraindas Barot’s  case (1966  (3) SCR 40) and state that as it was decided  by  the Constitution Bench, the U.P. Warehousing Corporation’s  case [1970  (2) SCR 250] and the Indian Airlines’ case (1971  (2) SCR  192 : 1971 (Supp) SCR 510) are in direct conflict  with former  decision  in Naraindas Barot’s case.   The  question whether  the Road Transport Corporation was a  State  within the  meaning of that term under Art. 12 of the  Constitution was neither raised nor decided there.  Nor was the  question whether  the  regulations under consideration in  that  case were, of a statutory character raised or decided.  That case is  not  an  authority for the  proposition  that  the  Road Transport  Corporation was a State or that  its  regulations had  the effect of law.  The discussion in this  case  would therefore have to proceed on the basis that it lays down  no ratio  and the U. P. Warehousing Corporation and the  Indian Airlines  cases are still good law.  The Sirsi  Municipality case (1973 (1) SCC 409) and Tewari’s case (1964 (3) SCR  55) stand,  however,  on  a different footing.   They  are  both concerned  with bodies which were undoubtedly  local  bodies and therefore a State and they could provide no support  for

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the view which my learned brothers have taken. It  only  remains to deal with the two points  made  by  the learned Add].  Solicitor General for the Corporations.   One was  that if the regulations are held to be law  the  remedy under the Industrial Disputes Act would not be available  to the  employees  of  these  Corporations  because  under  the Industrial Disputes Act the Tribunals have the right to form a new contract for the parties if the employment is a matter of  contract  but  it cannot do, so if it  is  a  matter  of statute and the decision that the regulations are law  would have the result of causing detriment to the interest of  the employees.   I  do not think that  that  consideration  need deter  us  from holding that the regulations are law  if  it could be so held on other grounds. Another  argument  of his was that these employments  are  a matter  of personal service and therefore the  test  whether the contract could 682 be specifically enforced should be taken into  consideration in  deciding  whether a declaration that a dismissal  of  an employee in any case is void and he should be reinstated.  I do  not think that in the modern commercial  and  industrial world  the idea of personal service has much relevance.   It might  have  had its-place in the context of  19th  Century. There  is  no  question  of  personal  service  in  a  large commercial or industrial Organisation and this consideration need  not  therefore stand in the way of our  accepting  the employees’ contention if it is otherwise acceptable. The  various provisions contained in respect of the  various organisations  like the State Road Transport Corporation  or the  British  Transport Commission in  Tamlin  v.  Hannaford would  show that the power of control or even the  financial interest of the State in these Corporations was as high  as, if not higher than, that of the State in these  corporations under   consideration.   So  none  of   the   considerations mentioned  by my learned brothers would help them  to  reach the  conclusion that these corporations are the State.   The power of the owner in hire-purchase agreement and the  power of the mortgages under S. 69 of the Transfer of Property Act to  sell the mortgaged property by exercising his  right  of private sale can be usefully compared in connection with the powers conferred on the Industrial Finance Corporation.  Nor do  I  think  that  section 25 of  the  Oil  &  Natural  Gas Commission  Act, 1959 would make.it a State.  The test  laid down  for  deciding  what  is  a  State  in  the   Rajasthan Electricity  Board case, that is of commanding other  people to  do  or not to do a thing on pain of punishment,  is  not there.  I do not see how, as long as that decision holds the field,  it is open to this Bench to take a  different  view. All  the  other decisions of this Court have  followed  only that   view.   The  decision  of  my  learned  brothers   is unsupportable  in principle against the weight of  authority and  frought with serious consequences.  Suddenly  overnight by  the  fiat  of this Court all  these  bodies  which  till yesterday  were  not  considered  to be  a  State  or  other authority  would  be considered to be  other  authority  and their  employees entitled to provisions of Part III  of  the Constitution.   We  would be opening a  veritable  Pandora’s box.  The protection given to Government servants india have no  parallels anywhere in the world.  They were  getting  on well  enough till the Government of India Act,  1935.   Till then  there was no statutory protection given to  them  [See Venkata  Rao’s case (supra) and Rangachari’s case  (supra)]. It  is a well known fact that it was the lack of  confidence of the British Government in the capacity of the Indians  to

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manage  their own affairs that-led to section  240  becoming part of the Government of India Act, 1935.  This section  is a forerunner of the present Article 683 311  of  the  Constitution.  It is to be  wondered  why  the framers   of  the  Constitution  should  have   copied   the provisions of the- Government of India Act 1935 with  regard to  Government servants.  Be that as it may, there at  least we  have  got  the  saving  grace  of  Article  310.   One’s experience  in  the various High Courts as well as  in  this Court  would have made it amply clear that not  merely  Art. 311  but  Articles  14 and 16 are  resorted  to  by  various Government servants to take up matters till the Court of the last  resort even in petty matters like seniority, scale  of pay  and  even  minor punishments.  Many  a  time  have  the learned Judges of this Court felt unhappy about the time  of the  Court  being taken for days together by  petty  matters relating to Government servants and wished that there were a separate Court for dealing with these matters.  By  deciding that  organisations  like the ones  under  consideration  in these  cases are ’other authority’ and the regulations  they make  is  law we would at once at one stroke be  creating  a large mass of neo-Government servants and Articles 14 and 16 would  provide amply opportunities for  endless  litigation. One  would  readily agree that labour  whether  employed  by private industry or industry run by the Government should be treated  equally.   But that one class of  labour,  that  is labour employed in industry run by the Government, should be more equal than others is a proposition which no  reasonable minded  person  can agree to.  The employees of  the  public sector  industries would get even more advantages than  even the  Government servants to whom Articles 309, 310  and  311 apply.   In  the  name of industrial  action  life  will  be paralysed.    They  are  not  subject  to  same  rules   and regulations  or discipline to which the Government  servants are  subject,.  They would be different from the  days  when they  were treated like employees of private firms and  were subject to the ordinary law of master and servant and become entitled  to  be  treated even better  than  the  Government employees.   One  has only to refer to one’s  experience  of what  has happened to the Life Insurance Corporation or  the various  nationalised  banks since they  were  nationalised. Misplaced sympathy is sometimes responsible for our attitude to  labour.  These days labour is not the weak and  helpless force  that  it was in the 19th Century.  They  are  strong, well  organised,  rich and powerful.  In England  the  Trade Union Congress is able to dictate to successive  Governments on all sorts of matters.  In America it is said that indust- rial  in  managers  have  to  wait  hat-in-hand  before  the officers  of  the trade union bosses.  George Meany  of  the A.F.L. and C.I.O. is able to dictate to the Government.  one has only to refer to Jimmy Hoffa of the Teamsters’ Union  in America  to  know  how powerful trade unions  are.   To  the legitimate  armoury of labour like strike and picketing  and industrial negotiations this country has dubious distinction of hav- 684 ing  added  ’gherao’, a most uncivilised  form  of  wrongful confinement  in order to force concessions from  managements and   even   heads   of   institutions,   even   educational institutions.    There   is  no  question   there   of   any negotiations.  The management or the head of the institution has to either surrender or be prevented from eating or  even answering calls of nature and to be kept incommunicado  with the  outside world.  These are not dire forebodings of  what

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will  happen but merely an enumeration of what  is  actually happening.   With the trade unions coming up to  this  Court even in matters of minor punishment of a single workman  and sometimes   even  against  interim  orders   of   industrial tribunals it would be litigants paradise. I  have read the judgment of my learned brother  Mathew,  J. with  great  interest  and respect for the  vast  amount  of learning   and  philosophical  consideration  that  he   has bestowed on the subject.  It is obvious therefrom,  however, that he realises that the earlier decisions of this Court do not  support  the  view taken by him  or  my  other  learned brethren.  What he says about labour and the public  service corporations, at best establish that they should be  subject to  control.  But it does not establish that public  service corporations  owned  by  the Government  should  be  treated differently from other public service corporations.  That is why I said it is reasonable that labour in both cases should be  treated  alike.  It does not establish  that  labour  in public  service corporations owned by Government  should  be treated like Government servants engaged in administering or enforcing  functions and duties connected with  governmental functions. I  would  hold  that  Oil &  Natural  Gas  Commission,  Life Insurance Corporation and the Industrial Finance Corporation are not authorities within the meaning of Article 12 of  the Constitution and regulations framed by them have no force of law.   The  employees  of these  statutory  bodies  have  no statutory status and they are not entitled to declaration of being  in employment when their dismissal or removal  is  in contravention of statutory provisions.                            ORDER By order of the Court. Rules and Regulations of the Oil and Natural Gas Commission, Life  Insurance Corporation, Industrial Finance  Corporation have the force of law. The  employees  of these statutory bodies have  a  statutory status  and they are entitled to a declaration of  being  in employment   when   their  dismissal  or   removal   is   in contravention of statutory provisions. 685 These statutory bodies are authorities within the meaning of Art.12 of the Constitution. in Civil Appeal No. 2137 of 1972, the declaration granted by the High Court that the order removing Bhagatram Sardarsingh Raghuvansi  from  service  is  null and  void  and  that  he continues in service is upheld.  The writ of mandamus issued by the High Court is also upheld. In  Civil  Appeal  No. 1655 of 1973, the  writ  of  mandamus granted by the High Court is upheld. In  Civil  Appeal  No. 1655 of 1973, the  writ  of  mandamus granted  Corporation is an authority within the  meaning  of Art.  12 of the Constitution for the reasons given  in  this judgment.   The  conclusion  of  the  High  Court  that  the regulations  have  not the force of law is set  aside.   The conclusion of the High Court that Corporation should not  be permitted  to enforce the regulations mentioned  in  clauses (1) and (4) of Regulation 25 is upheld. In  Civil Appeal No. 115 of 1974, the Judgment of  the  High Court is set aside.  The Finance Corporation is an authority within  the  meaning  of Art. 12.  The  Regulations  of  the Corporation  have the force of law.  The conclusion  of  the High  Court that the Association is not entitled to raise  a plea of discrimination on the basis of Art. 16 is set aside. The appeals are disposed of accordingly. The  parties will pay and bear their own costs in all  these

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appeals. P. H. P. 686