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TMI Blog1998 (3) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... nd they had been serving as such 'workmen' of the corporation. In the year 1986, both were deputed to Bellary town in the State of Kamataka as cotton purchaser and junior cotton purchaser, respectively. While they were so serving under the corporation at Bellary, a domestic enquiry was held against them on the charge of misconduct of accepting the bribe of Rs. 5,000 each from one V.B. Patil in connection with the discharge of their official duties. The enquiry officer was appointed by the corporation. After enquiry into the alleged misconduct of the workmen, he submitted an enquiry report to the management holding both workmen guilty of the said charge. The report was accepted by the corporation management and the workmen were dismissed from service by its respective orders both dated 2-6-1987. The said orders of dismissal were challenged by the workmen before the appellate authority. The same were confirmed by the latter under his order dated 9-11-1987. Thereupon, writ petition No. 79 of 1988 was filed by R2-workman before this court challenging the said order of his dismissal. That writ petition came to be dismissed by this court on the preliminary ground that workman was require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon by it holding that the domestic enquiry held by the management against both workmen was not fair and proper. Aggrieved by the said order, Writ Petition Nos. 17698 of 1995 and 17709 of 1995 were filed by the appellant-corporation challenging the same. These two writ petitions are dismissed by the learned Judge, of course rightly in our opinion, on the ground that it is open for the corporation to challenge the said interim order dated 21-1-1995, when the final award is passed by the Labour Court and if the corporation chooses to challenge it. This portion of the impugned common order of the learned Judge is, therefore, justifiable and the same is also not seriously chal- lenged and agitated in these appeals before us. Hence, we confirm the same. 7. However, Mr. Gururajan seriously challenges the legality of the impugned order passed upholding and affirming the respondent-Labour Court's finding that in relation to appellant-corporation, it is the State Government and not the Central Government which is the 'appropriate Government' for the purpose of making the said references, viz., Reference Nos. 377 of 1988 and 388 of 1988 and, therefore, it has the jurisdiction to adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the company's capital are all made subject to the approval and directions of President of India. The Chairman and directors of the corporation are appointed and are liable to be removed by him. Their pay and allowances are as determined by him. He is the authority to fill any vacancy in the office of the director on its Board of diectors. Acquisition of properties, capital asset and borrowing should be subject to his approval. Matters relating to provident fund, gratuity, commission on profits require his approval. He appoints the auditors for the company on the advise of the Comptroller and Auditor General of India who in turn has the power to direct the manner in which the accounts of the company are to be audited. Thus, there cannot be and there is no dispute that by virtue of various relevant provisions in the Memorandum and Articles of Association of the corpo-ration, the Central Government has deep and pervasive control over it in the matter of carrying on its said business for which it is established. 13. Mr. Gururajan, therefore, advanced his argument before us that the aforementioned structural composition and functional aspects of the appellant-corporation clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 329 ; Hindustan Steel Works Construction Ltd v. State of Kerala AIR 1997 SC 2275; and Steel Authority of India Ltd v. Shri Ambica Mills Ltd AIR 1997 SCW 4408. 15. Certain material provisions of the Act, in the light of which the legality and correctness of the impugned order has to be examined, must be borne in view. Section 7 of the Act deals with creation of labour courts. It states that 'appropriate Government' may, by notification in the official Gazette, constitute one or more labour courts for adjudication of industrial disputes relating to any matter specified in the Second Schedule and for performing such other functions as may be assigned to them under this Act. Clause (a) of section 2 defines the 'appropriate Government' for which it is either the Central Government or the State Government depending upon the industry concerning which industrial dispute has arisen as envisaged in sub-clauses (i) and (ii) of section 2(a) . The labour courts envisaged under section 7 are constituted by the Government of Karnataka and the Central Government as well as in the State of Karnataka. Section 10 deals with reference of industrial disputes to the competent authorities under the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of coming into effect of section 10(4A). 17. The term 'employer' in relation to an industrial dispute stipulated under section 10 is defined by section 2(g) as : '(g) 'employer' means- (i)in relation to any industry carried on by or under the authority of any department of (the Central Government or a State Government), the authority prescribed in this behalf, or where no authority is prescribed, the head of the department; (ii)in relation to an industry carried on by or on behalf of a local authority, the chief executive officer of that authority;' 18. There is no dispute that the appellant-corporation is an 'industry' within the meaning of the term defined by section 2(j) and that the disputes in question raised by the workmen are the 'industrial disputes' within the meaning of its definition contained in section 2(k) . But, as indicated, the corporation had raised a serious objection before the Labour Court as to its competence and jurisdiction to entertain the said claim petitions of the workmen and adjudicate upon the disputes. The grounds on which this objection was raised were that the references were not made to the respondent-Labour Court by the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay Telephone Canteen Employees' Association v. MTNL 1989 (58) FLR 161 (Bom.), (6) India Airport Employees' Union v. International Airports Authority of India [1995] Lab. IC 1890 (Bom.) and (7) An unreported judgment of a learned Single Judge of Andhra Pradesh High Court in WP Nos. 6480 and 7535 of 1989 decided on 21-12-1994 (a copy whereof is produced in these appeals). 22. No doubt, the definition of 'appropriate Government' in section 2(a)( i) states that if an industry is run under the authority of the Central Government, then in relation to any industrial dispute concerning it, the Central Government is the appropriate Government for the purpose of making a reference of dispute to the Labour Court under the Act. 23. The case of Padam Bahadur Khanka (supra) is clearly distinguishable. The legal proposition stated therein by the Bombay High Court is that the National Institute for Training, established and run by the Government of India with the assistance of the United Nations through International Labour Organisation for the purpose of imparting education, is an industry concerning which the appropriate Government is the Central Government in relation to any industrial di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder its common seal." Section 49 envisages, inter alia, that subject to the exceptions stated therein "all investments made by a company on its own behalf shall be made and held by it in its own name". 27. These and other provisions of the Companies Act maintain a clear distinction between a company's legal entity and its actions, assets, rights and liabilities on the one hand, and the individual shareholders and their actions, assets, rights and liabilities on the other (see EBM Co. Ltd. v. Dominion Bank AIR 1937 PC 279. So, it legally follows that lifting of the corporate veil of a company as a rule is not permissible in law unless otherwise provided by clear words of the statute or by very compelling reasons such as where fraud is intended to be prevented or trading with enemy company is sought to be defeated. 28. While construing the term 'appropriate Government' respecting a company or corporation in relation to an industrial dispute between 'employer' and 'workman', the definition of 'employer' in section 2(g) needs be taken note of. In this regard the ruling of the Division Bench of Calcutta High Court in Carlsbad Mineral Water Mfg. Co. v. P.K. Sarkar AIR 1952 Cal. 6 may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first ground alone is relevant for our purpose and it was : "... that the appropriate Government to make the said reference under section 10 of the Industrial Disputes Act, 1947 was the Central Government and not the State Government...." (p. 84) Before the High Court it was conceded that the said company was not an industry carried on by the Central Government, but it was seriously contended for the petitioner-Mazdoor Union that it was in fact and in law the industry run under the authority of the Central Government in view of the extensive powers wielded by it in the affairs of the company. This contention of the company was rejected by the High Court which held that the State Government was the appropriate Government and not the Central Government for making the said reference to the Labour Court and, therefore, it was a valid reference. The Supreme Court, in appeal, while dealing with this question in the light of the relevant provisions of the Act, observed : "Under section 2(a) 'appropriate Government' (leaving aside the words which are not relevant for our purposes) means (i) in relation to any industrial dispute concerning an industry carried on by or under the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal and an agent. The words 'under the authority of mean pursuant to the authority, such as where an agent or a servant acts under or pursuant to the authority of his principal or master. Can the respondent-company, therefore, be said to be carrying on its business pursuant to the authority of the Central Government ? That obviously cannot be said of a company incorporated under the Companies Act whose constitution, powers and functions are provided for and regulated by its Memorandum of Association and the Articles of Association. 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 personality emerges from the moment of its incorporation and from that date the person 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. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision, 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...." (p. 86) Further, at para 6 of the judgment, the Supreme Court considered the definition of 'appropriate Government' as given in section 2(a)( i) with reference to the meaning of 'employer' given in section 2(g) and held : 'In this connection the meaning of the word 'employer' as given in section 2(g) of the Act may be looked at with some profit as the Legislature there has used identical words while defining 'an employer'. An employer under clause (g) means, in relation to an industry carried on by or under the authority of any department of the Central Government or a State Government, the authority prescribed in that behalf or where no such authority is prescribed, the head of the department. No such authority has been prescribed in regard to the business carried on by the respondent-company. But that does not mean that the head of the department which gives the directions as aforesaid or which supervises over the functioning of the company is the employer with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. Imannual AIR 1969 SC 1306., Heavy Engg. Mazdoor Union v. State of Bihar AIR 1970 SC 82 and in S.L. Agarwal v . General Manager, Hindustan Steel Ltd AIR 1970 SC 1150 that the Praga Tools Corpn., Heavy Engineering Corpn. Ltd. and Hindustan Steel Ltd. are all companies incorporated under the Companies Act and the employees of these companies do not enjoy the protection available to Government servants as contemplated in article 311. The companies were held in those cases to have existence independent of the Government and by the law relating to corporations. These could not be held to be departments of the Government...." (p. 1331) In its another Constitution Bench decision in Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi AIR 1975 SC 1331, dealing with similar question, referring to the exposition of the law made in Heavy Engg. Mazdoor Union's case (supra) approvingly, the Supreme Court at para 127 of its judgment affirmed the ruling : ". . . 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (supra) and Western Coal Fields case AIR 1992 SC 697 (sic) , the Supreme Court held : "In view of the above decisions of this court, we have no hesitation to hold that the High Court erred in thinking that SAIL was a department of Union of India and most of the reasons given in judgment are based on this wrong premise." The following is legal proposition enunciated in the Western Coal Fields case (supra) , on which reliance was placed by their Lordships in the case of Steel Authority of India ( supra) : "It is contended by the Attorney General that since the appellant-companies are wholly owned by the Government of India, the lands and buildings owned by the companies cannot be subject to property tax. The short answer to this contention is that even though the entire share capital of the appellant-companies has been subscribed by the Government of India, it cannot be predicated that the companies themselves are owned by the Government of India. The companies which are incorporated under the Companies Act have a corporate personality of their own, distinct from that of Government of India. The lands and buildings are vested in and owned by the companies, the Government of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Abolition) Act, 1970 ('the Contract Labour Act') was dealt and considered by the Supreme Court for the purpose of judging the validity of the Central Government's notification issued under section 10 of the Contract Labour Act prohibiting the contract labour for sweeping, cleaning and watching of buildings owned or occupied by the establishments in respect of which the 'appropriate Government' under the said Act was the Central Govern-ment. The contention raised before the Supreme Court questioning the validity of the said notification was that it was the State Government and not the Central Government which was the appropriate Government within the meaning of section 2(1)(a) of the Contract Labour Act to issue notification under section 10 thereof abolishing the contract labour prior to its amendment by Amending Act 14 of 1986, according to unamended section 2(1)(a) thereof, the 'appropriate Government' in relation to any establishment pertaining to any industry 'carried on by or under the authority of the Central Government' or pertaining to any such 'controlled industry as may be specified in this behalf by the Central Government' was the Central Government. By the Amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) to the effect that irrespective of the deep and pervasive control of the Central Government over a corporation registered under the Companies Act, i.e., industry, the company retains its separate existence as a juristic entity independent of the Central Government and, therefore, the Central Government cannot be the 'appropriate Government' concerning such corporation for the purpose of making a reference of an industrial dispute to the Labour Court under section 10 of the Act, is wrong and, therefore, it was overruled. Hence, the law laid down by Supreme Court in Heavy Engg. Mazdoor Union's case (supra) holds the field for the said purpose as it operates in altogether a different field than the one which is obtainable in Air India Statutory Corpn.'s case (supra). 38. So the unreported decision of the learned Single Judge of the Andhra Pradesh High Court in Writ Petition Nos. 6480 and 7535 of 1989, decided on21-12-1994 (the copy of which is produced for the appellant) cannot be treated as a good law as it runs against the weight of the law laid down by Supreme Court. The case of India Airport Employees' Union ( supra), cited by Mr. Gururajan, is also of little avail to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the question thus : 'Institutions engaged in matters of such high public interest or performing such high public functions, as observed by Mathew, J, in Sukhdev Singh v. Bhagatrarn AIR 1975SC 1331, by virtue of their very nature performed Governmental functions. They are truly the agents of the Government and they function under the authority of the Government as provided in the statute. We have no doubt that the business of the Provident Fund Organisation is governmental in character and does not pertain to any industry to which the Provident Funds Act applies. The management and workmen of industries to which the Provident Funds Act applies contribute to the funds established under that Act. The business of the statutory bodies functioning under that Act is not the business of industries whose managements and workmen make contributions to the said funds. In addition to the above feature, the provisions of section 5-B(2) of the Provident Funds Act which reads : "A State Board shall exercise such powers and perform such duties as the Central Government may assign to it from time to time" clearly envisage that the State Board is an agent of the Central Government. In the absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exclusive monopoly. Indisputably, other traders are also carrying on the said business. In that view of the matter, we find that merely because the Central Government is shown to be having extensive power and control over the corporation in the matter of its functioning and business by virtue of its articles, it cannot be stated that the corpora- tion 'carries on its business under the authority of the Central Govern- ment' and, therefore, it is the 'appropriate Government' to make a reference of an industrial dispute to the Labour Court under section 10. Hence, we are in respectful agreement with the view so taken by the learned Single Judge and we hold that the 'appropriate Government' within the meaning of section 2(a)( i), for the purpose of making a reference of an industrial dispute concerning the corporation to a Labour Court under section 10, is the 'State Government' and not the 'Central Government'. 42. As a result, we hold that the references in question pending before the respondent-labour court are valid references in law and it has the jurisdiction to try and adjudicate upon them. Therefore, we do not find any good ground to interfere with the impugned judgment. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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