Patna High Court
Ashok Kumar Singh And Etc. vs Bihar Industrial And Technical ... on 29 April, 1997
Equivalent citations: AIR1998PAT9, AIR 1998 PATNA 9, (1997) 2 PAT LJR 66, (1997) 3 LAB LN 426, (1997) 2 BLJ 346
Author: A. K. Ganguly
Bench: B.N. Agrawal, A.K. Ganguly
JUDGMENT A. K. Ganguly, J.
1. This Letters Patent Appeal and the writ petition were heard together as they involve identical questions which will appear from the discussions below :-
2. Letters Patent Appeal No. 16l4 of 1995 is directed against a judgment dated 3-11-1995 passed in C.W.J.C. No. 6993 of 1995 by a learned single Judge of this Court whereby His Lordship was pleased to hold that the Bihar Industrial and Technical Consultancy Organisation Limited (hereinafter referred to as BITCO) is not a State within the meaning of Article 12 of the Constitution. Consequently His Lordship held that the wril petition filed by the appellant impugning the action of the management of the BITCO which has resulted in his dismissal from service is not maintainable.
3. In C.M.J.C.No. 3468 of 1995 the petitioner challenged the order of his dismissal from the services of BITCO and in that case also a preliminary objection was raised about the maintainability of the writ petition. The learned single Judge before whom this preliminary objection was raised, referred the matter to the Division Bench for hearing on the question of maintainability of the writ application. It is, thus appearent that in both these proceedings, the same question is involved. In that view of the matter, both the mailers are being decided by this common judgmeni.
4. It is, however, made clear that when the matter was argued before this Court, submissions were not made on the merits of the case by the parties and the submissions were confined only to the preliminary objection as pointed out above. Consequently in this judgment the decision is also confined to the preliminary objection.
5. The learned single Judge while delivering the judgment to the effect that BITCO is not a State within the meaning of Article 12 of the Constitution came to the conclusion that in view of the objects enumerated in the Memorandum of Association of BITCO "it is difficult to hold that the respondent Organisation (BITCO) is either an agency or an instrumentality of the Stale so as to come within the purview of the authority under Article 12 of the Constitution." His Lordship also made the following observation :-
"It is true that the respondent organisation is of its own type and typical in many ways like thai the major share is held by Development Bank of India and rest of the shares are also held by different statutory financial institutions. But that by itself in my opinion, may not make it an agency or instrumentality of the State."
6. His Lordship was also pleased to hold that there is no material to show that BITCO is a State within the meaning of Article 12 of the Constitution.
7. Assailing the finding of the learned single Judge, learned counsel for the appellants submitted that the share-holding of BITCO as on 28th February, 1991 would show that the Industrial Development Bank of India (hereinafter referred to as the IDBI) had 49-25 per cent of its shares. Industrial Financial Corporation of India had 11.71 percent, Industrial Credit & Investmcnt Corporation of India had 9.40% of share holding in BITCO. fOUR nationalised Banks, namely, Punjab National Bank, State Bank of India, United Commercial Bank and Central Bank of India had 20-10 percent of the share holding, Bihar State Financial Corporation has 5-03 per cent share holding, Bihar Industrial Development Corporation and Bihar Stale Credit and Investment Corporation Limited between them had 4-51 per cent of share holding.
8. Reliance was also placed on the letter dated 7th June, 1974 given by the Chief Minister, Bihar to the Vice-Chairman, I.D.B.I. In the said letter it was made clear that the setting up of a separate Technical Consultancy Organisation for Bihar, namely, Bihar Industrial & Technical Consultancy Organisation would accelerate Industrial development in this economically backward State and will promote the best utilisation of the rich mineral and other natural resources of the State.
9. Learned counsel for the appellant submitted that this would show that the BITCO was set up in order to carry on activities which are governmental in nature. The attention of the Court was also drawn to the reply of the said letter given by the Vice Chairman of IDBI. From the reply it appears that in the matter of setting up of such organisation certain formalities ought to be fulfilled and till they are fulfilled, BITCO may function as a wing of the IDBI.
10. Reliance was also placed on the letter dated 10th August, 1978 which was written by the IDBI with a copy to the Managing Director of BITCO. From the copy of the said letter it appears that the BITCO functions are subsidiary organisations of the IDBI and it is made clear in the said letter that the appointment was offered to the addressee of the said letter on behalf of the IDBI.
11. Reliance was also placed on a report of the IDBI. In the said report, there is reference of BITCO in Chapter 13 under the head "Technical Consultancy Organisation." Attention of the Court was also drawn to the report of the ITBI submitted to the Central Government in terms of Section 23(5) and 18(5) of the Industrial Development Bank of India Act, 1964. In that report also there is reference to BITCO and various other similar organisations under the category of Technical Consultancy Organisation.
12. From the said report of IDBI, it appears that as long as the IDBI holds not less than 51 per cent of the subscribed capital of the Company, the IDBI shall be entitled to appoint upto one-third of the total number of Directors of the company and shall be entitled to remove any or all of them from the office and to appoint any other person/persons thereto from time to time. The Directors so appointed by the IDBI shall not be liable to retire by rotation. Out of the Directors so appointed, the IDBI may designate one as the Chairman and some other as the Managing Director of the Company. Clause 17 of the said report also shows that such Technical Consultancy Organisation has power to appoint and at their discretion remove or suspend such Managers. Secretaries, Officers, Clerks, Agents, and servants for permanent, temporary or Special Services as they may from time to time think fit and to determine their powers and duties and fix their emoluments and to require security in such instances and to such amount as they think fit. provided that no appointment carrying total emoluments exceeding Rs. 2000/- shall be made without the prior approval of the IDBI.
13. Attention of the Court was also drawn to the amendment of the Memorandum of Articles of Association vide I.D.B.I. Article 104(3)(a)which was amended to the effect that as long as IDBI continues to hold not less than 40 per cent of the subscribed capital of company, IDBI shall be entitled to nominate upto 1/3rd of the total number of Directors of the Company and shall be entitled to remove any or all of the Directors so nominated by it and to nominate any other person/persons thereto from time to time.
14. Further amendment was made under Article 180 to the effect that so long as the IDBI holds not less than 40 per cent of the subscribed capital of the company, IDBI may, from time to time, issue such directives as it may consider necessary in regard to the conduct of the business of the company or of Directors thereof and in like manner may vary and annul any such directive. The Directors shall give immediate effect to the directives so issued.
15. Reliance on the aforesaid documents were placed by the learned counsel for the appellant in order to show that the IDBI has deep and pervasive' control over the functioning of the BITCO.
16. Learned counsel appearing on behalf of the appellant further placed reliance on the Annual Plan lay out of the State for the years 1985-90 and annual Plan 1985-86 issued by the Planning Department, Government of Bihar, and from the said annexure it appears that during seventh five year plan, BITCO was considered an institution towards which during seventh five years plan period rupees fifty lakhs in a year was allotted for developing training for institution programme. The said programme was to be organised at various places with the help of All India Financial Institutions.
17. Ministry of Industry, Department of SSI Agro and Rural Industries, Government of India issued booklets containing list of Technical Consultancy Organisations and in the said list BITCO figured as Item No. 2.
18. Learned counsel for the appellant ultimately relied on the Rules of Executive Business of the Government of Bihar of 1987. From the said rules framed in exercise of powers under Clause (3) of Article 166 of the Constitution, it appears that in Industrial Development Department, BITCO is shown as one of the organisations which has been notified under the Rules of Executive Business as one of the departments of the State Government. Under the said Rules a list has been appended to the First Schedule to show various departments of the Government and Industrial Development Department as one of such departments. In the said Schedule, after the list of departments, there is also a list showing classification and distribution of business between the various units of (he Secretariat and against Item No. 16, of the Industrial Development Department, BITCO has been shown as one of the wings of the said Department. The said position consistently appears from Rules of Executive Business which was subsequently corrected upto the year 1992. Relying on the aloressaid materials learned counsel for the appellants submits that the BITCO is a State or other authority within the meaning of Article 12 of the Constitution.
19. Learned counsel for the respondent BITCO on the other hand contended that BITCO is not a Govenrmcnt Company within the meaning of Section 617 of the Indian Companies Act. It is merely a company registered under the Companies Act and the equity in BITCO is not held either in the name of the Governoror the President of India. In the functioning of the BITCO there is no government grant or government aid. BITCO is merely an institution for tendering advice to private enterpreneours for their guidance about feasibility to their project. It also monitors the project reports received by it in order to receive the attention of the financial institution. Various financial Institutions evaluate the project reports of the BITCO as it has various Chartered Valuers and Engineers to evaluate the Project Reports. Learned counsel further submitted that BITCO has no State funding and it does not carry on any governmental functions. Learned counsel further submitted that BITCO is not assisting the State Government in the discharge of any governmental activities. Learned counsel also stated that no Act or Ordinance was passed to nationalise BITCO or take it over. Therefore, it cannot be construed as a department of the State Government. Learned counsel further submitted that even though BITCO has been mentioned in the Rules of Executive Business as a wing of the department of the State Government but in the absence of any Ordinance or Act nationalising BITCO those Rules of Executive Business have no significance.
20. Learned counsel for both the parties have relied on various decisions of the Apex Court. Learned counsel for the respondent Corporation relied on a judgment of the Division Bench of Patna High Court in the case of K. C. Verma v. Managing Director, Bokaro Steel Limited reported in AIR 1971 Patna 137. In the said judgment, the Division Bench ;of Patna High Court came to the conclusion that Bokaro Steel Limited being incorporated under the Indian Companies Act has to be presumed to be a separate entity from its owner or share holder. Therefore, ordinarily it cannot be held to be a department of Government of India or possessing governmental or quasi governmental powers so as to make it an authority on State within the meaning of Article 12 of the Constitution. The learned Judges of the Division Bench came to the conclusion that the High Court cannot pierce the veil of its corporate entity and find its real nature. Learned counsel for the BITCO has also relied upon a decision of the Supreme Court in the case of Praga Tools Corporation v. C. V. Imanual reported in AIR 1969 SC 1306 in order to contend that the said Corporation was a company registered under the Indian Companies Act and being governed by the provisions of that Act it has a separate entity and could not be treated as either a Government Corporation or an Industry run by the Union Government or the State Government.
21. Reliance was also placed by the learned counsel for the BITCO on the decision of the Supreme Court in the case of Sabhajit Tiwary v. Union of India reported in AIR 1975 SC 1329. In the said Constitution Bench judgment of the Supreme Court it was held that the Council of Scientific and Industrial Research a Society registered under the Societies Registration Act is not an authority within the meaning of Article 12 of the Constitution. It was further held in the said judgment that the society does not have a statutory character like Oil and Natural Gas Corporation or the Life Insurance Corporation of India or the Industrial Finance Corporation. Relying on that judgment, learned counsel for the Corporation states that here also BITCO is merely registered under the Indian Companies Act and, therefore, on the basis of the ratio of the said judgment in the case of Sabhajit Tiwary (supra) it cannot be held to be a State within the meaning of Article 12 of the Constitution of India.
22. Reliance was also placed by the learned counsel for the Corporation on a decision of the Supreme Court in the case of Chander Mohan Khanna v. National Council of Educational Research and Training reported in, AIR 1992 SC 76. In the said judgment the learned Judges of the Supreme Court held that Article 12 of the Constitution of India should not be stretched so as to being every autonomous body which has some nexus with the Government within the sweep of the State. In Chander Mohan Khanna (supra), it has been held by the Hon'ble Supreme Court that the activities of National Educational Research and Training consist of Undertaking of several kinds of programmes and activities connected with the Co-ordination, Research and extension service and training and dissemination of the approved education technique are not wholly related to governmental functions. As such the said organisation, namely, National Council of Educational Research and Training was held not to be a State. Strong reliance was placed by the learned counsel for the respondents on the said decision.
23. Learned counsel for the appellant, however, placed reliance on the Constitution Bench judgment of the Supreme Court in the case of Ajay Hasia v. Khalid Mujib Seharwardi reported in AIR 1981 SC 487, as also on the subsequent Constitution Bench judgment of the Supreme Court in the case of Unni Krishnan J. P. v. State of Andh Pra reported in AIR 1993 SC 2178.
24. Judging the rival contentions of the parties, this Court comes to the conclusion that BITCO is a State within the meaning of Article 12 of the Constitution of India. In coming to the said conclusion the Court has taken into account the Articles of Association of BITCO and the nature of its function and also the fact that BITCO is. under the Rules of Executive Business, included as one of the Units of the State Government under the Industries Department. From the objects of BITCO as incorporated in the Memorandum and Articles of Association it appears that the same was set up to promote industrial growth in the State. Promotion of industrial growth in the State is a matter of governmental concern and any organisation which is set up to promote its growth also carries on the same governmntal functions. It is well settled since the decision in Ajay Hasia (AIR 1981 SC 487 (supra) that the manner of setting up of an organisation does not indicate whether the said organisation is a State or not. The fact that the organisation has a separate entity also does not clinch the issue. The test has to be a functional one and in order to find out whether the organisation is a State within the meaning of Article 12 of the Constitution, the Courts can and the Courts should look into its function and also consider its Memorandum and Articles of Association and for that purpose the Corporate veil has to be lifted. Apart from the decision in Ajay Hasia (AIR 1981 SC 487) (supra) the decision of the Supreme Court in the case of Som Prakash v. Union of India reported in AIR 1981 SC 212 clearly states in paragraph 26 at page 218 as follows:-
"So viewed, we are constrained to hold that Burmah Shell, a Govenment Company though, is not the alter ago of the Central Government and must, therefore, be treated as definitionally caught in the not of 'State' since a juristic veil worn for certain legal purposes cannot obliterate the true character of the entity for the purporses of constitutional law." (Underlined for emphasis.)
25. This point has been further elucidated in the decision of the Supreme Court in the case of Central Inland Water Transport Corporation Limited v. Brojo Nath Ganguly reported in AIR 1986 SC 1571. At page 1601 of the report the following principle has been laid down :-
"For the purposes of Article 12 one must necessarily see through the Corporate Veil to ascertain whether behind that veil is the face of an instrumentality or agency of the State." (underlined for emphasis).
In view of this clear enunciation of the law by the Apex Court, the decision of the Patna High Court Division Bench in Bokaro Steel Limited (AIR 1971 Patna 137) (supra) in which the Court refused to pierce the Corporate Veil is no longer a good law.
26. This Court further holds that from the share holding of BITCO it is clear that the enlire share has been held by statutory organiations which are all States within the meaning of Article 12 of the Constitution of India. Apart from that this court is convinced that the IDBI which is undoubtedly a State has deep and pervasive control over the functions of BITCO. From Article 104 of the Articles of Association of BITCO it appears that the IDBI shall be entitled to appoint 1/3rd of the total number pf Directors of BITCO and shall be entitled to remove any or all of them from the office and appoint any other person thereto from time to time. Its power to remove and appoint l/3rd Director of BITCO shows the control of IDBI on the affairs of BITCO. Apart from that from Articles 180 and 181 of the Articles of Association of BITCO it appears that the IDBI has the authority to issue such directives as it may donsider necessary in regard to the conduct of the business of BITCO and in the like manner may Very or annual any directive and the Directors of BITCO arc to give immediate effect to such directives. It also appears from Art. 181 of the Articles of Association that the Chairman shall reserve for the approval of the IDBI any proposal or decisions of the Board of Directors in respect of any matter which in the opinion of the Chairman arc of such importance as should be reserved for such approval and in respect of such proposals of decisions of the Board of Directors which are reserved for the approval of the IDBI and no action shall be taken by the BITO until the approval has been obtained. Thus from the Memorandum and Articles of Association it is clear that IDBI controls the composition and the management of the Board of Directors of BITCO. Thus BITCO can be said to a subsidiary of IDBI and as asubsidiary of IDBI it is also a Government Company within the meaning of Section 617 of the Companies Act. Therefore, the contention of the learned counsel for the BITCO that it is not a Government Company is not correct. From perusal of the provisions of Section 617 of the Indian Companies Act, it is clear that a company which is subsidiary of a Government Company is also a Government Company within the meaning of Section 617 of the Indian Companies Act.
27. BITCO is a Government Company is also clear from the letter dated 30-6-1996 which has been annexed by the appellant at Annexure 11. The said letter has been written by the Under Secretary of the Ministry of Law, Justice and Company Affairs, Government of India to the Managing Director of BITCO stating therein that the Central Government in exerciseof the powers conferred by Sub-section (2) of Section 619 of the Companies Act, appointed, on the advice of the Controller and Auditor General of India, Auditor for BITCO for the year 1994-95. In the said communication it is also mentioned that a latest copy of the balance sheet duly audited was to be made available and date of its filing with the Registrar of Companies be intimated. Such appointment of Auditor is permissible only in respect of a Government Company u/Section 619(2) of the Companies Act. Therefore, it is clear that BITCO is a Government Company. It has also been established that under the Rules of Executive Business, BITCO is an adjunct of 'the Government in its Dcparlment of Industries. Therefore, on the basis of these clinching materials, this Court is bound to come to the conclusion that BITCO is a State within the meaning of Article 12 of the Constitution of India.
28. The decision in Sabhajit Tiwary (AIR 1975 SC 1329) (supra) on which learned counsel for the BITCO relied upon was considered subsequently by the other Constitution Bench of the Supreme Court in the case of Ajay Hasia (AIR 1981 SC 487) (supra) but the said judgment even though was not overruled but the same was not followed. The Apex Court in Som Prakash (supra) described the discussion in Sabhajit Tiwary (supra) as 'laconic' and its ratio as 'limited' (see page 226 of the report). Thereafter in P. K. Ram Chandra Iyer v. Union of India reported in AIR 1984 SC 541 Supreme Court held at page 548 "Much water has flown down the Jamuna since the dicta in Sabhajit Tiwary's case (supra) and conceding that it is not specifically over ruled in later decision, its ratio is considerably watered down so as to be a decision confined to its own fact."
(Underlined for emphasis).
29. So the law on the point as the Apex Court has noted has undergone a change and on the basis of Indicia later formulated by the Supreme Court in Ajay Basin's case (AIR 1981 SC 487) (supra), this Court is of the view that BITCO is a State within the meaning of Article 12 of the Constitution of India. The judgment of the Supreme Court in the case of Praga Tools Corporation (supra), a two Judges Bench judgment has also been explained in a later decision of the Supreme Court in Ramanna Dayaram Shetty v. International Airport Authority reported in AIR 1979 SC 1628. In paragraph 28 at page 1647 of the report in Ramanna (supra) a three Judge Bench decision, it was held "This was not a case where Praga Tool Corporation claimed to be an instrumentality of the Government or an authority within the meaning of Article 12. The only question was whether the writ of Mandamus could lie and it was held that since there was no duty imposed on Praga Tool Corporation by a statute. no writ of mandamus could issue against it." Therefore, the Supreme Court in its later and larger Bench decision in Ramanna DayaRam's case (AIR 1979 SC 1628) (supra) refused to consider the decision in Praga Tools Corporation (AIR 1969 SC 1306) (supra) as an authority on the question of deciding whether Praga Tools Corporation was a State within the meaning of Article 12 of the Constitulion. So the decision in Praga Tools(supra) is not an authority for deciding the question which falls for consideration in this case, namely, whether BITCO is a State or not.
30. The law relating to mandamus has of course been subsequently developed both in England and in India and the subsequent development of Law of mandamus has been noticed and approved by the Supreme court in the case (of Shri Anadi Mukta Sadguru Shree Muktaji Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani reported in AIR 1989 SC 607. In paragraph 15 of the judgment, the development of the law of mandamus has been traced and after noticing the decision in Praga Tool Corporation (AIR 1969 SC 1306) (supra) in para 20 of Anadi Mukta (supra) the Apex Court laid down the law on Mandamus as developed in paragraph 21 in the following words:
"Here again we may point out that mandamus cannot be denied on the ground that theduty to be enforced is not imposed by the statute. Commenting on the development of this law, Professor De Smith states: To been enforceable by mandamus a public duty does not necessarily have to be one imposed by slalute. It may be sufficient for the duty to have been imposed by charter, common law, custom or even contract." (Judicial) Review of Administrative Act 4th Ed. p. 540). We share this view. The judicial control over the fast expanding maze of bodies affecting the rights of the people should not be put into water-tight compartment. It should remain flexible to meet the requirements of variable circumstances. Mandamus is a very wide remedy which must be easily available to reach injustice wherever it is found'. Technicalities should not come in the way of granting that relief under Art. 226. We, therefore, reject the contention urged for the appellants on the maintainability of the writ petition.
31. The exposition of law of Mandamus in Shri Anadi Mukta (AIR 1989 SC 1607) (supra) has certainly widened the scope of Mandamus and is a development on the law of Mandamus from its previous decision in Praga Tool (AIR 1969 SC 1306) (supra). This ratio in Anadi Mukta (supra) on the law of mandamus has been subsequently affirmed by the Constitution Bench judgment of the Supreme Court in Unni Krishnan J.P.(AIR 1993 SC 2178) (supra).
32. Therefore, on the aforesaid conspectus of judicial opinion, this Court cannot hold that Mandamus cannot be issued against BITCO.
33. For the reasons aforesaid, this Court is of the opinion that the writ petition is maintainable against BITCO. This Court is, therefore, unable to uphold the reasonings given in the judgment of the learned single Judge where by His Lordship held that BITCO is not an authority under Article 12 of the Constitution of India. The impugned judgment is, therefore, set aside and the preliminary objection is overruled.
34. Both the writ petitions are, therefore, remanded for hearing on merits before an appropriate learned single Judge as this Court is of the view that such a writ petition is maintainable under Article 226 of the Constitution of India. The L.P.A. is thus allowed. There will be no order as to cost.
B.N. Agrawal, J.
35. I agree.