# SOM PRAKASH REKHI v. UNION OF INDIA & ANR

- **Citation:** [1981] 2 S.C.R. 111
- **Court:** Supreme Court of India
- **Decided:** 1980-11-13
- **Case number:** Writ Petition No. 1212 of 1977
- **Bench:** V. R. Krishna Iyer, R. S. Pathak, 0. Cl!INNAPPA REDDY
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/som-prakash-rekhi-v-union-of-india-anr-8196
- **Pages:** 44

## Headnote

B
Constitution of India-Burm.ah Shell (Acquisition of Und.ertakings· in India)
Act, 1976-Cpmpany acquired by the Government and vested in a statutory
corporation-Corporation if State-Test for determining whether a body is State
within the 1n(!a11fng of article 12.
Und~r a voluntary retirement scheme in force iri the company the petitioner,
a clerk Ill Burmah Shell Oil Storage Ltd., retired voluntarily after qualifying for
pension. The pension payable to him was regulated by the terms of a tmst deed
of 1950 under which a pension fund was set up and regulations were made for
its administration.
The petitioner was also covered by a scheme
under the
Employees Provident Fund and Miscellaneous Provisions Act,
1952 and to
gratuity under the Payment of Gratuity Act, 1972.
The annual pension to which he was entitled under the trnst deed, without
making !he authorised deductions as provided under regulation 16 of the trnst
deed, worked out t6 a sum of Rs. 165.99 per mensem. He was also paid
supplementary retirement benefit of Rs. 1!6 /- per month for a period o£ 13 months
after his retirement which was stopped thereafter.
The employer informed the petitioner that from out of his pension of
Rs. 165.99 two deductions were made, one of which was on account of employees
provident fund payment made to the pensioner and the other on account of
payment of gratuity with the result the pension payable to him was shown as
Rs. 40.05. The company also cut off the monthly payment of Rs. 86/- Mlich
was paid as supplementary retirement benefit on the score that it was ex gratia,
discretionary and liable to be stopped at any time by the employer.
In the meantime the company was statutorily taken over by force of the
Burmah Shell (Acquisition of Undertakings in India) Act, 19"/6. Thereafter
\the Central Go~ernment took steps to vest the
undertaking in
the second
respondent, the Bharat Petroleum, which then became the statutory successor of
the petitioner's employer.
His pensionary rights
such as he
had, therefore,
became claimable from the second respondent.
A ?reliminary objection was raised on behalf of the COfPoration that no writ
~ould lie against the second respondent since it is neither a government department nor a statutory corporation but just a company._
HELD : By the Court :
The petitioner is entitled to the payment of full pension.
c
D
E
F
G
(per majority Krishna Iyer and Chinnappa Reddy, JJ Pathak, J dissenting).
H
I. The Bharat Petroleum is State within the meaning of Article 12 of the
Constitution and a writ will lie against it under Article 32. [128A]
----
A
B
c
D
E
F
G
H
112
SUPREME COURT REPORTS
[1981] 2 S.C.R.
(a) The settkd position in law is that any authority under the control of
Government of India comes within the definition of State. On the appointed
day the right title and interest in Burmah Shell did vest in the Central Government
and by virtue of section 3 the Central Government was the transferee of the
und~rtaking. While the formal ownership was cast in the corporate mould, the
reality reaches do\vn to State control. The core fact is that the Central Government, through section 7 chose to make over its own property to its own offspring.
Therefore, the Burmah Shell though a government company is but the alter ego
of the Central Government and must, therefore, be treated as definitionally caught
in the net of State since a juristic veil worn for certain legal purposes cannot
obliterate the true character of the entity for purposes of constitutional law.
[121A; G; 124 D-E]
(b) Corporate personality is a reality and not an iJlusion or fictitious construction of the law. It is a legal person. Mer'ely because a company or other legal
person has functional and jural individuality for certain purposes and in certain
areas of law, it does not necessarily follow that for the effective enforcement
of fundamental rights under the constitutional scheme, the Court should
not
scan the real character of that entity. In the instant case se

## Text

_Characters 0–39,170 of 114,660. This is a partial read: ask again with offset=39170 for what follows._

t.
'
111
SOM PRAKASH REKHI
A
v.
UNION OF INDIA & ANR.
November 13, 1980
[V. R. KRISHNA IYER, R. S. PATHAK AND 0. Cl!INNAPPA REDDY, JJ.]
B
Constitution of India-Burm.ah Shell (Acquisition of Und.ertakings· in India)
Act, 1976-Cpmpany acquired by the Government and vested in a statutory
corporation-Corporation if State-Test for determining whether a body is State
within the 1n(!a11fng of article 12.
Und~r a voluntary retirement scheme in force iri the company the petitioner,
a clerk Ill Burmah Shell Oil Storage Ltd., retired voluntarily after qualifying for
pension. The pension payable to him was regulated by the terms of a tmst deed
of 1950 under which a pension fund was set up and regulations were made for
its administration.
The petitioner was also covered by a scheme
under the
Employees Provident Fund and Miscellaneous Provisions Act,
1952 and to
gratuity under the Payment of Gratuity Act, 1972.
The annual pension to which he was entitled under the trnst deed, without
making !he authorised deductions as provided under regulation 16 of the trnst
deed, worked out t6 a sum of Rs. 165.99 per mensem. He was also paid
supplementary retirement benefit of Rs. 1!6 /- per month for a period o£ 13 months
after his retirement which was stopped thereafter.
The employer informed the petitioner that from out of his pension of
Rs. 165.99 two deductions were made, one of which was on account of employees
provident fund payment made to the pensioner and the other on account of
payment of gratuity with the result the pension payable to him was shown as
Rs. 40.05. The company also cut off the monthly payment of Rs. 86/- Mlich
was paid as supplementary retirement benefit on the score that it was ex gratia,
discretionary and liable to be stopped at any time by the employer.
In the meantime the company was statutorily taken over by force of the
Burmah Shell (Acquisition of Undertakings in India) Act, 19"/6. Thereafter
\the Central Go~ernment took steps to vest the
undertaking in
the second
respondent, the Bharat Petroleum, which then became the statutory successor of
the petitioner's employer.
His pensionary rights
such as he
had, therefore,
became claimable from the second respondent.
A ?reliminary objection was raised on behalf of the COfPoration that no writ
~ould lie against the second respondent since it is neither a government department nor a statutory corporation but just a company._
HELD : By the Court :
The petitioner is entitled to the payment of full pension.
c
D
E
F
G
(per majority Krishna Iyer and Chinnappa Reddy, JJ Pathak, J dissenting).
H
I. The Bharat Petroleum is State within the meaning of Article 12 of the
Constitution and a writ will lie against it under Article 32. [128A]
----
A
B
c
D
E
F
G
H
112
SUPREME COURT REPORTS
[1981] 2 S.C.R.
(a) The settkd position in law is that any authority under the control of
Government of India comes within the definition of State. On the appointed
day the right title and interest in Burmah Shell did vest in the Central Government
and by virtue of section 3 the Central Government was the transferee of the
und~rtaking. While the formal ownership was cast in the corporate mould, the
reality reaches do\vn to State control. The core fact is that the Central Government, through section 7 chose to make over its own property to its own offspring.
Therefore, the Burmah Shell though a government company is but the alter ego
of the Central Government and must, therefore, be treated as definitionally caught
in the net of State since a juristic veil worn for certain legal purposes cannot
obliterate the true character of the entity for purposes of constitutional law.
[121A; G; 124 D-E]
(b) Corporate personality is a reality and not an iJlusion or fictitious construction of the law. It is a legal person. Mer'ely because a company or other legal
person has functional and jural individuality for certain purposes and in certain
areas of law, it does not necessarily follow that for the effective enforcement
of fundamental rights under the constitutional scheme, the Court should
not
scan the real character of that entity. In the instant case section 7 gives a
statutory recognition and a status above a mere government company. If the
entity is no more than a company under the Company I.aw or society under
the law relating to registered societies or cooperative societies one cannot call
it an authority. [124F; !25B, E]
(c) An authority in administrative law is a body having jurisdiction in certain
matters of a public nature. Therefore, the ability conferred upon a person by
the law to alter, by his own will directed to that end, the rights, duties, liabilities
or other legal relations, either of himself or of other persons must be present
ab extra to make a person an "authority". When the person is an 'agent or
instrument of the functions of the State' the power is public. [125F-H]
SGmetimes the test is formulated, by asking whether the
corporation i:!
formed by a statute or under a statute. The true test is not how legal person
is born but why it is created. Apart from discharging functions or doing
business as the proxy of the State there must be an element of ability to affect
legal relations by virtne of power vested in it by law. [126A-B]
(d) In the instant case sections 3 and 7 clothe the company with State
functions.
Section 7 contemplates that the company should step· into the shoes fof the executive power of the State. The legislative history of the corporation
shows that it is more than a mere company registered under the Companies Act.
Matters like conditions of service of employees, adjudication of disputes relat ..
ing to employees, superannuation and welfare funds and so on are regulated
statutorily unlike in the case of ordinary companies. Sections 9 and 10 create
rights and duties vis a vis the government company itself apart from the
Companies Act. Section 11 specifically gives the Act primacy vis a vis other
laws. Section 12 clothes the Government company with power to take delivery
of the property of Burmah SheJl from
every
person in whose
possession,
custody or control such property may be.
Whatever its character antecedent
to the Act all the relevant provisions have transformed · it_ into an instrumen ..
tality of the Central Government with a strong indicia of power to make it ab.
11authority". It is a limb of the Govefuritent, an agency of the
State,
a
vicarious creature of statute. [126C-H, 127B-C]
.I
SOM PRAKASH REKlil v. UNION
113
2. Some of the tests laid down by this Court for deciding whether a
A
body is State within the m,.ning of Article 12 are :
(i) If the entire share capital of the corporation is held by Government,
it would go a long way towards indicating that the corporation is an instru·
mentality or agency of the Government;
(ii) A finding of State financial support plus an unusual degree of control
over the management and policies might lead, one to characterise an opera·
B
tion as State action.
(iii) The existence of deep and pervasive State control
may afford an
indication that the Corporation is a State agency or instrumentality.
(iv) Whether the corporation enjoys monopoly status which is State con ..
X
ferred or State protected is a relevant factor.
( v) If the functions of the corporation are important public ~ctions
and related to governmental functions it would be a relevant factor in clrutsi·
tying the corporation as instrumentality or agency of the Government.
c
(vi) If a department of Government is transferred to a corporatioil:,
it
would be a strong factor supportive of the inference that it is an instrumen·
tality of the State.
[137E-H]
D
(vii) Where the chemistry of the corporate body answers the
test of
State it comes within the definition of Article 12. [136Dl
(viii) Whether the legal person is a corporation created by a statute, as
distinguished from under a statute is not an fuiportant criterion although. it
may be an indicium.
[144H]
Airport Authority [1979] 3 S.C.C. 489,
UP
Warehousing
Corporation
case (Managing Dir{!ctor, UJ>. W.arehousing Corpn. v.
V.
N.
Vaipayee)
[1980] 3 S.C.C. 459 & Sukhdev Singh v. Bhagatram [1975]
3 S.C.R.
619
referred to.
Rajasthan Electricity Board v. Mohan Lal [1967] 3 S.C.R. 377, Sukhdev v.
Bhagatram [1975] 3 S.C.R. 619, Praga Tool Corporation v. C. A. Immanuel
[1969] 3 S.C.R. 773; Heavy Engineering Mazdoor Union v. State of Bihar
[1969] 3 S.C.R. 995, S. L. Aggarwal v. General Manager, Hindustan
Steel
Ltd. [1970] 3 S.C.R. 363 & Sabhajit Tewari v. Union of India [1975] 3 S.C.R.
616 distinguished.
3(a) Having regard to the directive in Article 38 and the amplitude.of
the other articles in part IV Government may appropriately embark npon
almost any activity which in a non-socialist republic may fall
within
ihe
private sector. Any person's employment, entertainment,
travel,
rest
and
leisure, hospital facility and funeral service may be controlled by the State
and if all these enterprises are executed
through
government
companies,
bureaus, societies, councils, institutes and homes, the
citizen
may forfeit his
fundamental freedoms vis a _vis these strange beings which are government
in fact but corporate in form. If only fundamental rights were forbidden
access to corporations, companies, bureaus, institutes, councils
a~ kindred
bodies which act as agencies of the administration there may be a breakdown of the nile of law and the constitutional order in a large sector of
governmental activity carried on under the guise of 'jural persons'.
It may
- -
.._....
E
G
II
A
B
c
D
E
F
G
B
114
SUPREME COURT REPORTS
(1981] 2 S.C.R,
pave the way for a new tyranny by arbitrary administrators operated
from
behind by Government but unaccountable to part Ill of the
Constitution.
The Court caunot assent to an interpretation which leads to such a disastrous
conclusion unless the
language of Article 12
offers no other
alternative.
[147C-F]
(b) It is dangerous to exonerate corporations from the
need
to
have
constitutional conscience; and so
that
interpretation,
language
permitting,
which makes governmental agencies,
whatev'er
their
mein,
an1enable
to
constitutional !imitations must be adopted by the court as against the alternative of permitting them to :flourish as an imperium in imperio. [148A-B}
(c) The common-sense signification of the expression "other authorities
under the control of the Government of India"
is plain and there is no
reason to make exclusions on sophisticated grounds such as that the legal person
must be a statutory corporation, must have power to make
laws, must
be
created by and not under a statute and so on. [148C]
4(a) It
is clear from section II} which relates to the provident fund,
pension, welfare fund and the like that the second
respondent
has
made
provision for the 1ights and interests of the beneficiaries of the trust establish·
ed by Burmah Shell tfor the benefit of persons employed by it. Sub-section
(1) puts this matter beyond doubt. This obligation of the second
respondent is a statutory one and having regard to the provisions of section 11, it
cannot be affected
by any instrument or decree or order.
The stautory
continuation of a pre-existing liability tO pay pension,
provident
fund
or
gratuity, cannot ~ avoided having regard to section 10. [1500-E]
(b) Assuming that regulation 16 authorities deduction
and
that
discretionary payments, although enjoyed by the employees are liable to be stopped
section 12 of the Provident Fund Act forbids any such reduction or deduction out of the benefits in the nature of old age pension on the score of the
payment of contribution to the provident fund.
The benignant provision con~
tained in section 12 must receive a benignant construction and even if l~·o
interpretations are permissible, that which furthers the beneficial object should
be preferred. From that perspective the inference is reasonable
that
the
total quantum of benefits in the riature of old age pension, gratuity or provi·
dent fUnd, shall not be reduced by reason only of the liability of the employer
for payment of contribution to the fund.
The section prevails over the
trust deed. The provident fund accrues by statutory force
and
section 12
overrides any agreement authorising deductions. The expression 'instrument'
contained in section 15 covers a trust deed and notwithstanding the deduction
that may be sanctioned by the trust deed, the overriding effect of section 14
preserves the pension and immunises it against any deduction
attributable to
the statutory payment of the provident fund.
The deduction made
by
the
second respondent is in that event illeglll.
[151A-H]
(c) If regulation 16 is a provision which imposes a cut in certain eventualities it is possible to hold that the employee has a
certain pensionary
right. But if he draws provident fund or gratuity that pension will be pared
dowo by a separate rule of deduction from the
pension. It follows
that
there is no straining of the language of
the regulations to meao, firstly, a
right to pension quantified ip: certain: manner and, secondly, a right
in
the
Management to make deduction from out of that pension if other retiral
benefits are drawo by the employee, That appears to be the pension scheme.
SOM PRAKASH REKH! V. UNION
115
If this be correct, there is 110 substance in the argument that t11e pension i1seJt
is automatically reduced into a smaller scale of pension on the drawal of
provjdent fund or gratuity. Pension is one thing, deduction is another. The
latter is independent of pension and operates on the
pension to
amputate it,
as it were. If a law forbids such cut or amputation the pension remains intact.
[152B-D]
(d) The payment of gratuity or provident fund
should not occasion any
deduction from the pension as a "set~off''. Otherwise, the solemn
statutory
provisions ensuring provident fund and
gratuity
become illusory.
Pensions
are paid out of regard for past meritorious services. The root of gratuity
and the foundation of provident fund are different.
Each one is a salutaiy
benefaction statutorily guaranteed independently of the other. Even assuming
y
, that by private treaty parties had otherwise agreed to deductions b<fore
the
coming into force. of these b'eneficial enactments they cannot now be depri·
vatory.
It is precisely to guard against such mischief that the non-obstante· and
overriding provisions are engrafted on these statutes.
[152F-G]
(e) It is not open to the second respondent to deduct from
the
full
pension any sum based upon regulation 16 read with regulation 13. If regulation 16 which now has acquired statutory flavour, having been adapted and con~
tinned by statutory rules, operates contrary to the provisions of the P.F. Act
and the Gratuity Act, it must fail as invalid. [153CJ
(f) What is discretionary depends on the discretion of the employer. But
that power when exercised by an agency of government like the second respondent, must be based upon good faith and due care. If as a measure of
reprisal or provoked by the drawal of gratuity, or by resort to legal authorities, ·
such supplementary benefit is struck off, it will cease to be bona fide or valid.
[153D-EJ
Pathak, J. (dissenting)
On the merits the petitioner should be granted relief as proposed by the
mbjority.
[154 G]
It is difficult to accept the proposition that the Bharat Petroleum Corpora.
lion Limited is a "State" within the meaning of Article 12 of the Constitution, but the matter appears to be concluded
because of the direction taken
by the law since Ramana Dayaram Shetty v. International Airport Authority
[1979] 3 s.C.R. 489 a wider range of debate on the fundamental principles
involved in the issue would have been welcomed in view of the implications
fl.owing from the definition of a "government company" in
the
Companies
Act, 1956. [154 D]
A
B
c
D
E
F
The provisions of the Burmah Shell
(Acquisition of Undertakings
in
India) Ac~ 1976 do not alter the basic nature of a "government company".
G
They are provisions which could well have been applied to a private corporation if the Act had selected one for vesting the undertaking in it. Had that
been done, they would not have made the private corporation a State. [154F]
ORIGINAL JURISDICTION :
Writ Petition No. 1212 of 1977.
(Under Article 32 of the Constitntion).
Petitioner in Person.
H
S. Markendeya and Miss A. Subhashini for Respmdent No. 1.
G. B. Pai, 0. C. Mathur and K. l. John for Respondent No. 2.
116
SUPREME COURT REPORTS
[1981] 2 S.C.R,
A
P. R. Mridul, M. K. Ramamurthi and Jitendra Sharma for the
B
c
D
E
F
Intervener (The Petroleum Workers' Union)
P. N. Tiwari (Secretary of Union) for the Intervener (Petroleum
Employees' Union).
B. B. Sawhney and B. P. Ghosh for the Intervener (C. H. Kewalramani).
The Judgmeut of V. R. Krishna Iyer arid O. C. Reddy, JJ. was
delivered by Krishna Iyer, J. Pathak, J. gave a dissenting Opinion.
KRISHNA IYER, J.-Three seminal issues arise in this little Ii~ har- ""--
bouring larger principles.
We may state them, each with a quotel to
drive home the social stakes, and ihen proceed to the pedestrian
factual-legal narrative and discussion.
"They (corporations) cannot commit treason, nor be outlawed, nor excommunicated, for they have no souls."
(Edward Coke, Sutton's Hospital Case)
A legal power, which projects an awesome portent has been
sprung upon the court by the defending respondent-.
The Bharat
Petroleum Corporation Ltd(') (the Corporation, for short)-as to
whether a writ will issue under Art. 32 of the Constitution against a
government company, belonging, as it does, to an increasing tribe of
soulless ubiquity and claiming,
as it does,
to constitutional immunity.
This is the first issue to which he will address ourselves.
Jawaharlal Nehru warned the Constituent Assembly about the
problem of poverty and social change :
The service of India means the service of the millions
who suffer.
It means the ending of poverty and ignorance
and disease and inequality of opportunity. The ambition
of the greatest man of our generation has been to wipe
every tear from every eye.
That may be beyond us, but
G
as long as there are tears and sufferings, so long our work will
not be over.
The second question which claims our attention turns ori the petitioner's plea of alleged stultification of Art. 41 by the State itself reincarnating as a government company, by defending the paring down
H
the pension of the petitioner to a pathetic pittance thus sterilising a
directive principle to a decorative paper.
(I) Vide Certificate of Incorporation dated 1-8-1977.
SOM PRAKASH REKH! v. UNION (Krishna lyer, J.)
117
Law cannot stand aside from the social changes around
A
it.
(Justice Brennan in Roth v. United States
354 U.S. 476)
The third problem, not humdrum but heuristic, turns on the
construction of the relevant legislations and regulations covered by
the writ petition, remembering the social dynamics of the law of
statutory interpretation. '
This writ petition under Art. 32 relates to a poor employee's small
pension on retirement and the legality of the deductions effected by
the. employer which make the net sum payable traumatically trivial
(Rs. 40/-). A principle of wider application is involved beyond the
individual's pensionary fate.
The petitioner was employed as a clerk in the Burmah Shell Oil
Storage Ltd., (Burmah Shell, for short) and retired betimes (at 50)
after qualifying for a pension, on April 1, 1973. He was also
covered by a scheme under the Employees Provident Funds arid
Family Pension Fund Act, 1952 (for short, the PF Act). The employer undertaking was statutorily taken over by force of The Burmah Shell (Acquisition of Undertakings in India) Act, 1976 (hereinafter called the Act). Thereafter, the Central Government, acting under the statute, took necessary steps for the vesting of the
Undertaking in the second respondent, the Corporation and became
the statutory successor of the petitioner's employer. His pensionary
rights, such as he had, therefore, became claimable from
the
second respondent. What was the quantum? Was any cut illegally
effected by Burmah Shell and continued by respondei;tt 2 ? Could a:
writ be issued against the second respondent in respect of the cut ?
These are the questions argued before us.
The petitioner-pensioner,
~eing too poor, Shri Parekh, assigned by the Legal Aid Society,
appeared promptly and argued passionately. At a re-hearing,
the
petitioner preferred to make a few brief supplementary submissions on
his own.
The pensionary provision for the Burmah Shell employees depended on the terms of a Trust Deed of 1950 under which a Pension
Fund was set up and regulations were made for its administration.
Regulations 13 and .15 entitled the petitioner to pension and containB
c
D
E
F
G
ed the formula for quantification.
Regulation 13 has a significant H
clause : "less the authorised deductions specified in reg. 16, namely
...... ". The bone of contention between the parties is about these
----·~--
118
SUPREME COURT REPORTS
[1981] 2 S.C.R.
A
deductions and we may set out this Regulation (relevant part) even
here:
B
c
16. The authorised deductions to be made in calculating
the amount of a non-contributing member's pension shall
be as follows :
( 1) A sum equal to four per cent of such amount standing to the credit of the member at the relevant date in any
Provident Fund as represents any Company's contributions
to that fund in respect of the period of the member's Accredited Service (including bonuses and interest on such cont,ributions up to that date).
(2) A sum equal to four per cent of any amount which
before the relevant date the member has withdrawn from
a Provident Fund in so far as such withdrawal is under the
Rnles of the Provident Fund charged against the period of
the member's Accredited Service (including bonuses and
D
interest thereon) or has been paid out to him during his
Accredited Service under the Rules of Provident Fund, together with interest thereon from the date of such withdrawal
or receipt to the relevant date.
(3) If the Company so elects, a sum not exceeding six
E
per cent of the amount of any payments which any company
has made or may make or which any company shall be or
have been required by law to make to the member in connection with the termination of his service with that company
together with interest thereon from the date of payments
down to the relevant date.
F
The Pension Fund, on the vesting of Burmah Shell in Respon-
,
dent 2, came to be administered by the latter under the Burmah
}--
Shell (Acquisition of Undertakings in India) (Admjnistration of
Fund) Rules, 1976. The Rules provided for the Government company, viz. Respondent 2 acting in accordance with the provisions of
G
the rules and regulations applicable to or of any law governing the
respective Provident Fund, Welfare Fund or other fund and in force
immediately before the 24th day of January, 1976.
If any legal provision overrode the regulation authorising deductions the:2nd respondent could and should acf according to the legislaH
tion.
Thus, the statutory rules for administering pensionary matters
direct Respondent 2 to conform to 'any law' governing providen~ fund
and like items.
And if, as is contended before us by the petitioner,
SOM PRAKASH REKH! v. UNION (Krish11a Iyer, J.))
119
such law exists, the regulation based deduction ceases to be aJJI
A
'authorised deduction'.
By virtue of reg. 13, the petitioner was entitled to a pension
o~
Rs. 165.99 subject to certain deductions which form the controversy
in this case.
He was also being paid Supplementary Retirement1Benefit of Rs. 86/- per month for a period of 13 months after his retireB
ment which was stopped thereafter.
This stoppage is also assailed
before us.
By letter dated September 25, 1974, the employer (Bunnah Shell)
explained that from out of the pension of Rs. 165.99 two;deduction~
were authorised by reg. 16.
One such deduction was based on: reg,
16 ( 1) because of Employees Provident. Fund payment to th~ pensioner
and the other rested on reg. 16(3) on account of payment of gratuity.
Resultantly, the 'pension payable' was shown as Rs. 40.05. '
The case becomes clear if one more fact is mentioned.
The petitioner claimed and received his Provident Fund amount under the PF
Act and recovered a gratuity amount due under the Payment of
·Gratuity Act, 1972 (for short, the Gratuity Act). It is necessary to
mention that Bunnah Shell was refused exemption, under s. 5, from
the operation of this Act ( vide Annexure F to the Writ Petition). In:
short, two sums, one under the PF Act and the other under the Gratuity
Act, were drawn by the pensioner.
Consequent on this, Bunnah Shell
made 2 deductions from the petitioner's pension, taking its stand oJJi
reg. 16 read with reg. 13 already referred to.
Indeed, the company
went even beyond this, in its letter of May 8, 197 4, by cutting off the
monthly payment of Rs. 86/- paid as
Supplementary
Retirement
Benefit on the score that it was ex gratia, discretionary and liable to
be stopped any time by the employer.
The petitioner was intimated by the Burmah Shell that ctYnsequent
on his drawal of provident fund and gratuity benefits, the quantum of
his pension would suffer a pro tanto shrinkage, leaving a monthly puny
pension of Rs. 40/-.
Since no superannuated soul can survive, inl
Indian indigence and inflationary spiral, on ·Rs. 40/- per month, thei
petitioner has come to this court challenging the deductions from his
original pension as illegal and inhuman and demanding restdration of
the full sum which he was originally drawing.
His right to property
under Art. 19 has . been violated, he claims.
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It may well be, as urged by the Corporation, that if reg. 16 does
govern, the deductions, are warranted.
Likewise, if the Supplementary H
Retiral Benefit is purely a mercy gesture, savouring of no manner ofl
right nor subject to restrictions on discretionary exercise, the Sudden
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stoppage of that sum perhaps not illegal. It may bd heartless, but
not necessarily lawless, for a prosperous undertaking, now in
the
public sector, which pays over-generous salaries to higher officials and
liberal scales even to its lesser employees, to destroy the pensionary
survival of an erstwhile employee who had served 28 long and fruitful
years of his limited span of life for the profit of his employer.
•
Justice according to law being the rule, let us examine the validity
of the rival contentions.
The employer relies on reg. 16 and the pensioner rests his claim on its invalidity.
The mantle of 'Burmah Shell'
has statutorily fallen on 'Bharat Petroleum'(') and it cannot be controverted that if reg. 16, read with reg. 13, be valid the second respondent can insist on its 'pound of flesh' and claim lawfully that the deductions made are 'authorised' and the discretion to stop supplementary
pension is charity which can be choked off at pleasure or anger.
A preliminary objection has been raised by Shri G. B. Pai that no
writ will lie against the second respondent since it is neither a government department nor a statutory corporation but just a company and so
the court should reject out of hand this proceeding under Art. 32.
We
do see the force of this contention, notwithstanding the observations in
the Airport Authority Case( 2 ), that the status of 'State' will attach to
the govermnent companies like the second respondent.
Let us first look at t11e facts emerging from the Act and then
superimpose the law in Art. 12 which conceptualises 'State' for
the.
purposes of Part Ill.
After all, cynicism apart, Mark Twain is good
chewing gum for lawyers : (3 )
Get your facts first, and then you can distort them as
much as you please.
It is common ground that the present writ petition, invoking Art. 32,
is limited to issuing directions or orders or writs for the enforcement
~
of fundamental rights and the question is whether the addressee. is the
'State' within the meaning of Art. 12 of the Constitution. We will
examine this position more closely a little later, but granting that Art.
G
19 is aimed at State action the contours of 'State', conceptually speaking, are largely confined to Art. 12.
We have to study the anatCJ!llly
of the Corporation in the setting of the Act and decide whether it comes
within the scope of that Article.
We have only an inclusive definition,
not a conclusive definition.
One thing is clear.
Any authority under
H
(I) vide Certificate of Incorporation dated 1-8-1977.
(2) Romana Dayaram Shetty v. International Airport Authority of India and Ors
[1979] 3 s.c.c. 489.
(3) Mark Twain : Quoted by Rudyard Kipling, from Sea to Sec.
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SOM PRAKASH REKHI v. UNION (Krishna Iyer,/.)(
121
the collfrol of the Government of India comes within the definition.
Before expanding on this theme, we may scan the statutory scheme, thei
purpose of the legislative project and the nature of the juristic instru·
ment it has created for fulfilment of that purpose.
Where constitu•
tional fundamentals, vital to the survival of human rights, are at stake
functional realism, not facial cosmetics, must be the diagnostic tool.
Law, constitutional law, seeks the substance, not merely the form.
For, one may look like the innocent flower but be tho serpent under it.
The preamble, which ordinarily illumines the object of the statute,
makes it plain that what is' intended and achieved is nationalisation of
an undertaking of strategic importance :
AND WHEREAS it is expedient in the public interest
that the undertakings in India, of Burmah Shell Oil Storage
and Distributing Company of India
Limited,
should
be
acquired in order to ensure that the ownership and control
of the petroleum products distributed and marketed in India
by the said company are vested in the State and thereby so
distributed as best to subserve the common good;
It is true tl1at what is nationalised is a private enterprise motivated,
undoubtedly, by the need for transferring the ownership and control of
the company and its petroleum products distributed and marketed in
India.
Section 3 is important from this angle :
3. On the appointed day, the right, title and interest of
Burmah Shell, in relation to its undertakings in India, shall
stand transferred to, and shall vest in the Central Government.
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This provision lays bare the central object
of making the
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Central Government the proprietor of the
undertaking. It hardly
i needs argument to convince a court that by virtue of s. 3, the Central
'\Government is the transferee of the Undertaking.
Had a writ proceeding been commenced during the period of vesting in the Central
Government, it could not have been resisted on the score . that the
employer is not "the State".
The appointed day did arrive and the
G
right, title and interest in Burmah Shell did vest in the Central Government.
A commercial undertaking although permitted to be run under our
constitutional scheme by Government, may be better managed
with\
professional skills and on business principles, guided, of course,
by H
social goals, if it were administered with commercial flexibility and
celerity free from departmental rigidity, slow motion procedures and
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SUPREME COURT REPORTS
[1981] 2 S.C.R.
A
hierarchy of officers.
That is why a considerable part of the public
undertakings is in the corporate sector.
It is interesting that with the industrial expansion, economics was
assisted by jurisprudence and law invented or at least expanded the
corporate concept to facilitate economic developmen" consistently with
B
the rule of law.
Said Woodrow Wilson, several decades back : (')
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There was a time when corporations played a minor part
in our business affairs, but now they play the chief part, and
most men are the servants of corporations.
And Franklin D. Roosevelt mourned : (2)
Concentration of economic p,ower in all embracing corporations ...... represents private enterprise become a kind
of private government which is a power unto itself-a regimentation of other people's money and other people's lives.
This legal facility of corporate instrument came to be used by the State
in many countries as a measure of immense convenience especially in;
its commercial ventures.
The trappings of personality, liberation from
governmental stiffness and capacity for mammoth growth, together with
administrative elasticity, are the attributes and, advantages of corporations.
A corporation is an artificial being, invisible, intangible,
and existing only in the contemplation of the law.
Being
the mere creature of the law, it possesses only those properties which the charter of its creation confers on it, either
expressly, or as incidental to its very existence.
Those are
such as are supposed best calculated to effect the object for
which it was created.
Among thei most important are immortality, and, if the expression be allowed, individuality;
properties by which a perpetual succession of many persons
are considered the same, and may act as a single individual. (8)
Although corporate personality is not a modern invention, its adaptation to embrace the wide range of industry . and commerce has
a
modern flavour.
Welfare States like ours called upon to execute many
economic projects readily resort to this resourceful legal contrivancei
because of its practical advantages without a wee-bit of diminution ill
ownership and control of the Undertaking.
The true owner is
~he
(1) 1912-13 speeches : The New.Freedom, Doubleday & Co. 1913.
(2) Acceptance Speech, Democratic NationaI:eonvcntion, June 27, 1936.
(3) John Marshal, Dartmouth College v. Woodward, 4 Wheaton 518 (1819).
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SOM PRAKASH REKHI v. UNION (Krishna Iyer, 1.x
123
State, the real operator is the State and the effective controllerate is thtj
A
State and accountabilit~ for its actions to the community and to Parliament is of the State. Nevertheless, a distinct juristic person with
it.
corporate structure conducts the business, with the added facilities
enjoyed by companies and keeping the quasi-autonomy which come~
in handy from the point of view of business management.
Be it
remembered though that while the formal ownership is cast in tho corR
porate mould, the reality reaches down to State control.
Witk
this
background we have to read s. 7 of the Act which runs thus :
7. (1) Notwithstanding anything contained in sections
3, 4 and 5, the Central Government may, if satisfied that a
Govermnent company is willing to comply, or has complied
with such terms and conditions as that Government 'may
think fit to impose, direct by notification that the right, title
and interest and the liabilities of Burmah Shell in relation to
any of its undertakings in India, shall instead of continuing
to vest in the Central Government, ve,rt in the Govermnent
company. . . .
(emphasis added)
The core fact is that the Central Government, through this provision,
chooses to make over, for better management, its awn property to its
own offspring.
A government company is
a
mini-incarnation of
Government itself, made up of its blood and bones and given corporate
shape and status for defined objectives, not beyond.
Nor is this any isolated experiment in government formally transr
ferring ownership to a company. There are a number of statutory
take-overs in India as in other countries, where the initial vesting i~ in
government, followed by a later transfer to another instrumentalitymay be an existing government company or a corporation created by
statute or even a society or other legal person.
In the present case,
a government company was created anteriorly and by virtue of a notification under s. 7 it became the transferee of the right, title and interest
as well as the liabilities of Burmah Shell .
The device is too obviou! for deception that what is done is a
formal transfer from government to a government-company as
the
notification clearly spells out :
lfl exercise of the poweri conferred by sub-section ( 1)
of Section 7 of the Burmah Shell (Acquisition of Undertakings in India) Act, 1976 (2 of 1976), the Central Govemment, being satisfied that Burmah-Shell RefineriCll Ltd., a
6overnment company i1 willing to comply with such terms ·
and conditiO!lll as may be imposed by the Central Go,-emment ·
9-1281 SCI/80
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SUPREME COURT REPORTS
[J98J] 2 S.C.R.
hereby directs that the
right, title
and
intere,,t
and
the
liabilities of Burnwh-Shell Oil Storage and Distributing Co.
of India Ltd. in relation to its undertakings in India, shall,
instead of continuing to vest in the Central Government vest,
with effect from the twenty fourth day of January, 1976, in
Bwmah-Shell Refineries Ltd.
This is the well-worn legal strategy for government to run economic
and like enterprises.
We live in an era of public sector corporations,
the State being the reality behind, Law does not hoodwink itself and
what is but a strategy cannot be used as a strategem :
These are the facts when we come to brass tacks.
Fact& form the
raw matedal out of which the finished product of judicial finding is -,
fabricated after processing through established legaŘ principles. Indeed,
in life as in law "it is as fatal as it is cowardly to blink !acts because
they are not to our taste".
What, then, ar\' the basic facts available
from the Act ?
Constitutional law is not a game of hide and
seek
but prJctical real-life conclusions.
So viewed, we are constrained to
hold that Burmah-Shell, a government company though, is
but the
alter ego of the Central Government and must, therefore, be; treated
as definitionally caught in the net of 'State' since a juristic veil worn
tor certain legal purposes cannot obliterate the true character of, the
entity for the purposes of constitutional law.
If we distil the essence of Art. 12 textually and apprehend
the
expanded meaning of "State" as interpreted precedentially, we may
solve the dilemma as to whether the Bharat Petroleum is but a double
of Bharat Sarkar.
Let us be clear that the jurisprudence bearing on
corporations is not myth but reality.
What we mean is that corporate
personality is a reality and not an illusion or fictitious construction of
the law,
It is a legal person. Indeed, 'a legal person' is any subject
matter other than a human being to which the law attributes personality.
"This extension, for good and sufficient reasons, of the conception of
·r
personality. . . . is one of the most noteworthy feats of
the
lega1
imagination."(')
Corporations are one species of legal persons in
vented by the law and invested with a variety of attributes so as
to
achieve certain purposes sanctioned by the law.
For those purposes,
a corporation or company has a legal existence all its
own.
The
c!JaracteristiCl! of corporations, their rights and liabilities,
functional
autonomy and juristic status, are jurisprudentially recognised as of a
distinct entity even where such corporations are but State agencies or
instrumentalitieř.
For purposes of the Companies
Act,
1956,
a
government company bas a distinct personality which cannot be con-
(!) ӥalmond, Jurisprudence, 10th Bdn. pp. 324-325.
_)
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SOM PRAKASH REKHI V.