Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers Assocn., (SC) BS115120
SUPREME COURT OF INDIA

Before:- G.B. Pattanaik and Doraiswamy Raju, JJ.

Civil Appeals Nos. 5247-5248 of 1998. D/d. 8.1.2002.

Mysore Paper Mills Ltd. - Appellant

Versus

Mysore Paper Mills Officers Association and another - Respondents

For the Appearing parties :- L. Nageswara Rao and Ranjit Kumar, Senior Advocates, K.C. Sudarshan, M.A. Chinnasamy, Jayanth Muthraj, E.M.S. Anam, and Fazlin Anam, Advocates.

A. Constitution of India, Article 12 - State - "other authority" - Mysore paper Mills Ltd. - Contribution of more than 97% share capital by Government - Out of 12 directors 5 are Government Directors and departmental persons, besides other elected directors also are to be with the concurrence and nomination of Government - Company entrusted with important public duties obligations to undertake, permit, sponsor rural development and social and economic welfare of people in rural areas - Deep and pervasive control of appellant-company is nothing but an instrumentality and agency of the State Government - Physical form of companies merely a cloak or cover for the Government.

[Para 12]

B. Constitution of India, Article 12 - State - Other authority - Concept of instrumentality of agency of Government - Is not to be confined to entities created under or which owes its origin to any particular statute or order - But would really depend upon a combination of one or more of relevant factor, depending upon the essentiality an overwhelming nature of such factors in identifying the real source of governing power, if need be, by piercing the corporate veil of entity concerned.

[Para 11]

Cases Referred :-

Praga Tools Corporation v. C.A. Imanual, 1969(1) SCC 585.

Andi Mukta S.S.M.V.S.S.J.M.S. Trust v. V.R. Rudani, 1989(2) SCC 691.

K.L. Basandhi v. Union of India, 1988(1) SCC 236.

Ajay Hasia v. Khalid Mujib Sehravardi, 1981(1) SCC 722.

Ramana Dayaram Shetty v. International Airport Authority of India, 1979(3) SCC 489.

Chander Mohan Khanna v. NCERT, 1991(4) SCC 578.

VST Industries Ltd. v. VST Industries Workers' Union, 2001(1) SCC 298.

Steel Authority of India Ltd. v. National Union Waterfront Workers, 2001(7) SCC 1.

JUDGMENT

Doraiswamy Raju, J. - The above appeals have been filed by the Mysore Paper Mills Ltd. (hereinafter referred to as the "appellant-company," against the judgment of a Full Bench of the High Court of Karnataka dated 12-8-1998 in W.A. Nos. 1242-1243, insofar as it was held therein that the appellant-company is "State" within the meaning of Article 12 of the Constitution of India, though, their appeals against the order of the single Judge came to be allowed on the ground that impugned order of transfer against the 2nd respondent was not shown to be vitiated by mala fides or by any extraneous considerations and that the respondents have no legal right to challenge the said order of transfer made on administrative grounds, when plea of alleged mala fides and vindictiveness has not been substantiated. 1998 Lab IC 3203.

2. The second respondent, said to be a post-graduate in Chemistry joined the services of the appellant-company on 10-8-1991 as Management Trainees and after successive career prospects came to be promoted as senior Superintendent (D.M. Plant) which came to be redesignated as Assistant Manager (D.M. Plant) on 7-9-1991. By a memorandum bearing reference No. FPA/TRF/97/384 dated 27-11-1997 he was transferred to the regional office Calcutta. The said order came to be challenged as vitiated by mala fides and illegality and one made with a view to victimise and prevent him from functioning as an Executive Member of the M.P.M. Officers' Association. Certain allegations to support such a claim were also made, and it is not necessary to advert to all those details, in view of certain subsequent developments and turn of events, in the writ petition filed by the respondents, a learned single Judge of the High Court by an order dated 4-3-1998 granted stay of the order of transfer dated 27-11-1997 confirming thereby the ex parte interim order of stay earlier granted on 24-2-1998 and rejecting the application of the appellant-company for vacating the same. Before the Division Bench, at the time of initial hearing of the appeals the two grounds of challenge urged were :

3. Before the Full Bench, the following questions were taken up for consideration :

4. On a review and consideration of the case law on the subject, the Full Bench, in the judgment under challenge, noticed the various tests laid down by this Court and proceeding to consider the status of the appellant-company in the light of those tests and adverting as well to the memorandum of Association and Articles of Association of the appellant-company and the day-to-day administration of its affairs, held as hereunder :

5. On the basis of the above facts found and several other documents produced reflecting the conditions and terms subject to which the affairs of the company were found actually carried on (noticed in para 12 of the judgment of the High Court) the Full Bench came to the inevitable conclusion that the entire company is run as part or an enterprise of the State Government and that everyone of the scheme of the company are also to be approved by the Government. Total financial control of the company by the Government has also been found. The fact that the State Government has notified the premises of the company at Bhadravathi as "public premises" under the provisions of the Karnataka Public Premises (Eviction of Unauthorised Occupants) Act, 1974 and appointment of five of its officers as competent officers for the purpose of the Act, has been also taken due note and consideration to come to the ultimate conclusion that the company is an authority and instrumentality or agency of the State, so as to attract Article 12 of the Constitution of India.

6. Heard, the learned senior counsel, appearing on either side who tried to reiterate the very stand taken before the High Court relying upon one or the other of the decisions noticed by the High Court and some subsequent decisions, to which a reference will be made hereinafter. We have carefully considered the submissions on either side in the light of the principles laid down by this Court and the factual details found on the basis of the materials placed at the time of hearing before the High Court. Except taking exception to the finding that the company's business in the manufacture of news printing papers no monopoly of State is enjoyed and that the said assumption was wrong, none of the other factual findings were ever shown to be incorrect or unwarranted and without basis. Even this grievance is sought to be made on the basis of national level factual assumption and not by producing any material to disprove the statement recorded in the judgment that no other company than the appellant is allowed to produce newsprint in State of Karnataka, which alone being relevant for the purpose.

7. In Praga Tools Corporation v. C.A. Imanual and others, (1969(1) SCC 585), this Court declared that the person or authority on whom the statutory duty is imposed need not be a public official or an official body and further held that a mandamus can be issued to a society to compel it to carry out the terms of the statute to which it owe its Constitution as well as to companies or Corporations to carry out their duties enjoined by the statutes, authorising their undertakings. In Andi Mukta S.S.M.V.S.S.J.M.S. Trust v. V.R. Rudani (1989(2) SCC 691), this Court held that the words "any person or authority" used in Article 12 of the Constitution of India are not to be confined to only statutory authorities and in strumentalities of the State and that they may cover any other person or body performing public duties and the form of the body concerned is not very much relevant. The nature of duty imposed on the body to be adjudged in the light of positive obligation owed by the person or authority to the affected party, would be determinative of the question of issue of a writ of mandamus to compel its performance. While dealing with the Institute of Constitutional and Parliamentary Studies, registered under the Societies Registration Act, 1860, this Court in Tekraj Vasandi alias K.L. Basandhi v. Union of India and others, (1988(1) SCC 236), observed that there cannot be any strait-jacket formula for adjudging whether any person or authority answers the description of 'State' within the meaning of Article 12, and it would be necessary to look into the Constitution of the body, the purpose for which it has been constituted, the manner of its functioning including the mode of its funding and the broad features which have been found by this Court to be relevant for such purpose though it is not necessary that all those tests should be satisfied in every case to arrive at a conclusion either way.

8. In Ajay Hasia and others v. Khalid Mujib Sehravardi and others, (1981(1) SCC 722), this Court while approving the tests laid down in Ramana Dayaram Shetty v. International Airport Authority of India, (1979(3) SCC 489, as to when a Corporation can be said to be an instrumentality or agency of Government observed as hereunder :

9. In Chander Mohan Khanna v. NCERT, (1991(4) SCC 578), this Court while observing that there are only general principles but not exhaustive tests to determine whether a body is an instrumentality or agency of the Government and those which are not, emphasised that the powers, functions, finances and control of the Government are some of the indicating factors to answer such questions. The combination of State aid coupled with an unusual degree of control over the management and policies of the body and rendering of an important public service were considered vital to point out that the body is "State." Due caution was also administered that the wide enlargement of the meaning must be tempered by wise limitation and mere State control, however vast and pervasive is not by itself determinative and the financial contribution by the State is also not conclusive. In VST Industries Ltd. v. VST Industries Workers' Union and another, (2001(1) SCC 298), this Court was only concerned with the question as to whether, a canteen run in the factory of the company concerned pursuant to an obligation cast under Section 46 of the Industrial Disputes Act, can be said to constitute a person or authority to attract judicial review under Article 226 of the Constitution of India in respect of its action/activities and the answer was that the company concerned therein manufacturing and selling cigarettes or running the canteen for the welfare of workmen was not performing any public activity, function or duty so as to render it amenable to Article 226 of the Constitution of India. This, in our view, does not in any manner help to support the stand of the appellant before us.

10. Instead of multiplying reference to several authorities of decided cases, it would be useful to advert to a latest decision of this Court rendered by a Constitution Bench in Steel Authority of India Ltd. and others v. National Union Waterfront Workers and others, (2001(7) SCC 1), wherein while dealing with a claim, whether all Central Government undertakings which fall within the meaning of "other authorities" in Article 12 of the Constitution of India are agents or instrumentalities of the State functioning under the "authority" of the Central Government to constitute such Government to be the "appropriate Government" for purposes of Section 2(1)(a) of the Contract Labour (Regulation and Abolition) Act, 1970 and Section 2(a) of the Industrial Disputes Act, 1947, this Court adverted to the relevant decisions and after an analytical consideration of the principles therein observed as follows :

11. A careful consideration of the principles of law noticed supra and the factual details not only found illustrated from the memorandum as well as Articles of Association of the appellant but enumerated from the day-to-day running of the business and administration of the company leave no room for any doubt as to the identity of the appellant-company being "other authority" and consequently "the State" within the meaning of Article 12 of the Constitution of India. The said definition has a specific purpose and that is Part III of the Constitution, and not for making it a Government or department of the Government itself. This is the inevitable consequence of the "other authorities" being entities with independent status distinct from the State and this fact alone does not militate against such entities or institutions being agencies or instrumentalities to come under the net of Article 12 of the Constitution. The concept of instrumentality or agency of the Government is not to be confined to entities created under or which owes its origin to any particular statute or order but would really depend upon a combination of one or more of relevant factors, depending upon the essentiality and overwhelming nature of such factors in identifying the real source of governing power, if need be, by piercing the corporate veil of the entity concerned.

12. The indisputable fact that the appellant-company is a Government company as envisaged in Section 617 attracting Section 619 of the Companies Act, that more than 97% of the share capital has been contributed by the State Government and the financial institutions controlled and belonging to the Government of India on the security and undertaking of the State Government, that the amendments introduced to the Memorandum of Association in the year 1994 introducing Articles 5-A and 5 -B, entrusts the appellant-company with important public duties obligating to undertake, permit, sponsor rural development and for social and economic welfare of the people in rural areas by undertaking programmes to assist and promote activities for the growth of national economy which are akin and related to the public duties of the State, that out of 12 directors 5 are Government and departmental persons, besides other elected directors also are to be with the concurrence and nomination of the Government and the various other form of supervision and control, as enumerated supra, will go to show that the State Government has deep and pervasive control of the appellant-company and its day-to-day administration, and consequently confirm the position that the appellant-company is nothing but an instrumentality and agency of the State Government and the physical form of company is merely a cloak or cover for the Government. Despite best and serious efforts made on behalf of the appellant, the decision under challenge has not been shown to suffer any infirmity whatsoever to call for interference in our hands.

13. The appeals, therefore, fail and shall stand dismissed. No costs.

Appeals dismissed.