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1958 (1) TMI 37

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..... nomination of the petitioner C. Krishnamurthi on the ground that the latter held an office of profit under the Government of India in that he was a salaried employee--a Junior Inspector under--the Life Insurance Corporation of India, and was therefore disqualified to stand for election under Article 191(1) of the Constitution. The Article runs: 191 (1).--A person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly or Legislative Council of a State-- (a) if he holds any office of profit under the Government of India or the Government of any State specified in the First Schedule, other than an office declared by the Legislature of the State by law not to disqualify its holder ; (a) if he is so disqualified by or under any law made by Parliament. This objection was upheld and the Returning Officer rejected the nomination of the petitioner. As stated earlier, the other candidates went to the poll and Narayanaswami Naidu and Jayaraj were declared duly elected. C. Krishnamurthi filed the election petition for declaring the election of Narayanaswami Naidu and Jayaraj to be void on the ground that his own nomination had been improper .....

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..... anding for election within Article 191(1)(e). 5. The words in Article 19(1)(a) if he holds any office of profit under the Government of India or the Government of any State trace their origin to the words office of profit under the Grown used in Sections 24 and 25 of the Succession to the Crown Act, 1707, of the United Kingdom. But there are no decisions of the English Courts interpreting the expression. The meaning of these words was the subject of critical examination by a Select Committee appointed by the House of Commons which submitted its report in October, 1941. Dealing with the phrase office or place of profit under the Crown this Select Committee stated: There is no comprehensive statement of the law on this subject which can be regarded as authoritative. The standard constitutional works of reference are mainly concerned with the statutory portion of the law, which of itself is too voluminous to be treated by any one of them exhaustively But there is another portion consisting of ancient resolutions of the House of Commons which, though mostly reinforced or superseded by later legislation, still determine the law in some particulars. Another part of the law i .....

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..... s conclusion the Tribunal followed the decision of the Allahabad High Court in Madan Mohan Lal v. Om Prakash , in which it was held that an employee of the Life Insurance Corporation was not an employee of the Central Government for the purposes of the United Provinces Municipalities Act, which carried a disqualification worded similar to Article 191(1)(a) of the Constitution. The learned Advocate-General submitted that the reasoning of the Court below failed to notice recent trends in Government administration, particularly, in the case of post-war modern welfare states, and that it attached too much importance to form ignoring the substance. It would be convenient to refer even at this stage to the decision of the Supreme Court in Maulana Abdul Shukoor v. Rikhab Chand Since (not yet reported but the text of which judgment was made available to us by the Advocate-General) in which almost the same line of approach as that of the Tribunal in this case was adopted. The question that arose was as regards the election of the appellant Maulana Abdul Shukoor to the Council of States by the Electoral College of Ajmer. The appellant was declared elected and an unsuccessful candidate file .....

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..... the Committee, holders of offices under the Government of India, his Lordship said: The appellant is neither appointed by the Government of India nor is removable by the Government of India nor is he paid out of revenues of India. The power of the Government to appoint a person to an office of profit or to continue him in that office or revoke his appointment at their discretion and payment from out of Government revenues are important factors in determining whether that person is holding an office of profit under the Government, though payment from a source other than Government revenue is not always a decisive factor. But the appointment of the appellant does not come within this test. The test of the power of dismissal by the Government or by an officer to whom such power has been delegated which was pressed in support of his case by the respondent is equally inapplicable to the facts of the present case because the appellant cannot be dismissed by the Government or by a person so authorised by the Government. He is a servant of a statutory body which in the matter of its servants acts within the powers conferred upon it by the statute....the appellant has not been employed b .....

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..... or the regulation and control of the business of the Corporation and for matters connected therewith or incidental thereto. 13. Section 3 provided for the establishment of a corporation called the Life Insurance Corporation of India: a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of property and which can by its name sue or be sued; and Section 4 for the appointment by the Government of India of persons who shall constitute the Corporation and lays down the qualifications or disqualifications of the persons to be appointed as members. The original capital of the Corporation was to be five crores of rupees to be provided by the Central Government after due appropriation made by Parliament by law for the purpose (vide Section 5). Section 6 was concerned with the functions of the Corporation, and the section laid on the Corporation the duty of coordinating the business of life insurance in or outside India, and the Corporation was directed so to exercise its powers as to secure that this business was developed to the best advantage of the community. Section 18 provided for the Central and Zonal officers of the Corporatio .....

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..... particular the terms of office and the conditions of service of members who found the Corporation, were subject to this rule-making power. Similarly rules made by the Central Government might provide for conditions subject to which the Corporation might appoint employees. The rules so made by the Central Government were directed to be laid before Parliament under Section 48(3). Section 49 was concerned with the grant of power to the Corporation to make regulations not inconsistent with the Act and the rules, with the previous approval of the Central Government, and the subjects which, inter alia, these regulations might cover were enumerated in Section 49(2)(b), and these included the method of recruitment of employees and agents of the Corporation and terms and conditions of service of such employees or agents . 15. The learned Advocate-General urged that as the carrying on the business of insurance involved commercial operations, the department had to be conducted on business and commercial lines, making the concern subserve the economic needs of the people of the State, and with a policy co-ordinated to the economic purpose and the social objectives which the Government h .....

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..... lled on to decide whether any public bodies set up by statute in the last hundred years arc agents of the Crown have found the statutes themselves singularly unhelpful, and have refused to lay down definite criteria. The Court of Appeal has decided in Tomlin v. Hannaford L.R. (1950) 1 K.B. 18, (to which we shall refer in due course) that the Transport Commission is not the agent of the Crown, and, therefore it may be assumed that none of the nationalised industries is an agent of the Crown. It is still uncertain whether the social service corporations such as the National Hospital Boards, the Central Land Board and the New Towns Development Corporations are Crown agents. It may be said that there are several criteria which from time to time the Judges have thought relevant. These include : Is the body performing tasks formerly carried on by private enterprise? (Mersey Docks and Harbour Board Trustees v. Gibbs (1866) L.R. 1 H.L. 93 at 107). To what extent is it subject to ministerial control, for example, has it independent discretionary powers (Metropolitan Meat Industry Board v. Shady L.R. (1927) A.C. 899 at 905, Per Viscount Haldane). Must it consult a Minister before it acts, ca .....

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..... Councilmay be contrasted with these bodies. These two corporations are, it is suggested, Crown servants. They perform functions which are part of a larger scheme for which a Minister is responsible and their powers are limited. Financially they are utterly dependant on the Ministers and on Parliament. The ministerial power to issue general directions is not restricted to matters affecting the national interest. In Tomlin v. Hannaford L.R. (1950) 1 K.B. 18, Denning, L.J., clearly thought that the Central Land Board exercising its functions ' on behalf of the Minister ' was a Crown servant and in Earl Fitzwilliams Wentworth Estates Co. v. Minister of Town and Country Planning L.R. (1951) 1 K.B. 203 at 211, Birkett, J., said that it might ' from most points of view ' be regarded as a new Government department. Thirdly Regional Health Boards seem to have been created Crown servants. These bodies also act on behalf of the Minister, performing functions primarily entrusted to him. Financially they are dependent and much controversy has followed some economies which the Minister has required; their functions are part of the national health service for which the Minister is .....

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..... There is a practical limit to the size of any undertaking ; if efficiency is not to be sacrificed to elaboration of structure, an excessive number of tasks cannot be placed on the shoulders of a single Minister and his department....With one exception, the Central Land Board, they are not Crown Corporations. Their legal liabilities do not differ from those of any other corporate bodies save that for some unexplained reason three or four of them enjoy modified exemption from the Limitation Act, 1939. They have not even the protection of the Public Authorities Protection Act as amended by the last-named enactment. It is true, however, that some of their principal statutory duties are expressed in terms so general that they cannot be enforced by any known legal machinery ; though expressed as legal duties they are really no more than declarations of what is the task allotted. It must be noted that there are broadly two types of public corporations. Of the social service type I shall say nothing because where public corporations are the executive agents they are under the direct control of the Minister. This is not, of course, the case with the industrial and commercial corporatio .....

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..... se of some corporations a three-year period of limitation applies. (2) Powers of compulsory acquisition of land are conferred upon certain of these bodies. (3) Transitory power to disclaim certain contracts and leases is conferred upon some of these bodies. Pausing here, we might summarise the position and analyse the tests for determining the constitutional position of Public Corporation as either a department of Government or as a servant of the State. If the statute in terms answered the question, as it did in the case of the Central Land Board under the County and Town Planning Act, 1947, the need for any further enquiry is obviated. But in the absence of such statutory declaration or provision, the intention of Parliament has to be gathered from the provisions of the statute constituting the Corporation. These provisions have to be judged in the light of the following: First the incorporation of the body though not determinative is of some significance, as an indication by Parliament of its intention to create a legal entity with a personality of its own, distinct from the State, secondly, the degree of control exercised by the Minister over the functioning of the Corpor .....

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..... emphasis appears to be equally unsafe for identifying a public corporation as a part of the mechanism of the State. To start with, it may be mentioned, that for this purpose, corporations created for Municipal or Local Administrations are not treated as part of the State so as to render the corporators or those employed by the Corporation either as part of Government or as Government servants. Notwithstanding that if function were the sole test, no sensible distinction can be drawn between an activity confined to an area or to a locality and that which extends to the entire territory of the State. Here again there is substance in the learned Advocate-General's argument, that this is traceable to historical reasons and should not therefore be treated as detracting from the soundness of his general argument. As Professor Jenks puts it English Local Government : .the great outlines of local government in England were drawn ages before Central Government (as we understand it) came into existence. Central administration as distinct from mere political overlordship, dates from the twelfth century, and is the work of French officials. Local administration is at least five-hundre .....

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..... since the experiment of removing a specialised service from full Parliamentary control is not so new as has been claimed and has in the past proved both short-lived and unsuccessful it is important to consider whether any new conditions have arisen to make the lessons of the past lose any of their validity. The forces motivating this type of administrative experiment are curiously opposite, as are the reasons--largely of mutal suspicion--which engendered it. It has been promoted both by business interests suspicious of state departments and by labour anxious to end competitive disorder without producing capitalist monopoly. There is thus embodied in it a compromise between the notion that the hope of personal profit alone ensures efficiency and the belief that efficiency can be secured by full responsibility to the representatives of the public in Parliament on the part of the Controllers of a socially owned service. In the inter-war period the strongest force was the dislike by businessmen, and, of course, by their spokesman in both Houses of Parliament, of government 'interference' in industry. They were convinced and war-time experience had lent them evidence deri .....

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..... as delegated some of his functions to others, must remain responsible for what they are doing. The fourth objection to government administration is that it may introduce political considerations in the conduct of undertakings which ought to be administered on non-political lines. It was the recognition that direct Government management of the nationalised undertakings might lead to red-tape, to placing an undue burden on the Minister, to over-centralization of the industry, and to possible political bias in management which led to the creation of the modern Public Corporations in the hope that they could avoid these handicaps.... 28. Before we consider the three other matters we have set out earlier, and indeed as facilitating their discussion, it would be convenient if we refer to two decisions, one of the Court of Appeal and the other of Devlin, J., which deal exhaustively with the questions now in debate, Denning, L.J., in Bank Voor Handel v. Statford (1952) 1 All E.R. 314, and we make no apology for making somewhat long extracts from these judgments since they contain in addition references to and a discussion of all the important earlier decisions. 29. The appellan .....

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..... e British Transport Commission which is a statutory corporation of a kind comparatively new to English Law. It has many of the qualities which belong to corporations of other kinds to which we have been accustomed. It has, for instance, defined powers which it cannot exceed, and it is directed by a group of men whose duty it is to see that those powers are properly used. It may own property, carry on business, borrow and lend money, just as any other corporation may do, so long as it keeps within the bounds which Parliament has set, but the significant difference in this corporation is that there are no shareholders to subscribe the capital or to have any voice in its affairs. The money which the Corporation needs is not raised by the issues of shares, but by borrowing, and its borrowing is not secured by debentures, but is guaranteed by the Treasury. If it cannot repay the loss falls on the Consolidated Fund of the United Kingdom, that is to say, on the tax-payer. There are no shareholders to elect the directors or to fix their remuneration. If it should make losses and be unable to pay its debts, its property is liable to execution, but it is not liable to be wound up at the suit .....

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..... however, an anomaly due to its history. The carriage of mail was a Crown monopoly long before the Postmaster-General was incorporated. But the carriage of passengers and goods is a commercial concern which has never been the monopoly of anyone and we do not think that its unification under State control is any ground for conferring Crown privileges on it. The only fact in this case which can be said to make the British Transport Commission a servant or agent of the Crown is the control over it which is exercised by the Minister of Transport, but there is ample authority both in this Court, and in the House of Lords for saying that such control as he exercises is insufficient for the purpose. When Parliament intends that a new corporation, should act on behalf of the Crown, it, as a rule, says so expressly, as it did in the case of the Central Local Board by the Town and County Planning Act, 1947, which was passed on the very same day as the Transport Act, 1947. In the absence of any such express provision, the proper inference in the case, at any rate, of a commercial corporation is that it acts on its own behalf, even though it is controlled by a Government department. In our .....

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..... etary of State has to do what the King tells him to do. Meticulous devotion to theory might have kept the relationship alive as a legal fiction, but even as a fiction it has been largely ignored and overlaid. When the powers and duties of the executive had in the nineteenth century to be extended to match the increasing complexity of Government, the process was not performed by adding to the powers and duties of the Sovereign which he would be presumed to instruct a Minister to exercise for him, but by bestowing the power or imposing the duty directly on the appropriate Minister. Instead of expressly extending the limits of the prerogative to cover such matters as, for example, education and health, it was simpler to provide for the appointment first of Boards and then of Ministers and to give to them necessary powers. Similarly, since Parliament could not, without openly disregarding the theory of the King's supremacy and making him answerable to Parliament, require him to discharge specific duties, it was necessary to lay the task on the Minister or servant. This has produced some uncertainty about what exactly a lawyer means when he talks of ' the Crown '. There a .....

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..... t functions of Government' and had said that' by the constitution of this country these functions do, by common right, belong to the Crown.' In Tunnicliffe v. Brikdale Overseers (1888) 20 Q.B. 455., Lord Esher, M.R., refers to. .persons who must be considered as servants of the Crown, because entrusted with the performance of duties forming part of the functions of the Sovereign. These citations and the consideration which I have earlier set out, satisfy me that the expression ' servants or agents of the Crown ' when used in Tamlin v. Hannaford (1949) 2 All. E.R. 328 and other authorities is used notionally or descriptively and not definitely. The description 'servant of the Crown' has a meaning of course that as 'public servant' has a meaning, but it has no longer a precise legal meaning. It appears at first sight to afford an exact criterion for determining Crown privilege, but on inspection the apparition fades into the same insubstantiality that has dissolved the. ' emanation ' and other metaphors which have merged from the nebula. I respectfully think that the best and most accurate descriptive phrases are those used by Scott, .....

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..... dged by some historical test or otherwise, fall peculiarly within the functions of the Sovereign? There are authorities which point either way and some of the dicta which I have cited above may be said to support either contention. If the custodian is an officer of the executive at all, I think he must have Crown status, for his duties bring him within the sphere of two of the most ancient and peculiar prerogatives of the Crown--the power to make war, including the power to take for itself the property of an enemy found within the realm, and the power to make peace. In the case of a commercial corporation control may be unimportant. In the case of an official who has functions of a Governmental character, it is, I think, a matter to be given considerable weight. If Parliament intended the Custodian to act, as it were, in opposition to the prerogative, it is hardly likely he would have been subordinated in so many matters to the Board of Trade. The law as stated by Devlin, J., has to be understood subject to the comment made on it by House of Lords affirming his decision (Bank Voor Handel En Scheepvarrt v. Administrator of Hungarian Property L.R. 1954 A.C. 584, comment whic .....

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..... the Minister to affect the national interest, and the Board shall give effect to any such directions. 30. Corresponding to Section 21 of the Life Insurance Corporation Act the same provisions occurred in the Transport Act which was the subject of consideration at the hands of Denning, L.J., and was held not sufficient to render the Corporation a department of State. 31. The only distinguishing feature on which some stress was laid was insurance was a nationalised business. 32. In this connection the learned Advocate-General urged that the Union and the States had under the Constitution a right to carry on business as part of their governmental functions and that this indeed was implied or inherent in the social objectives envisaged as the ideal which the Constitution holds up. He pointed out that if, without any attendant legislation, a business activity was set up by the Government, there could be no doubt that the activity would be governmental in its essence notwithstanding its being also commercial. The next step in the argument was that the existence of legislation would or ought to, make no difference. Legislation he said became necessary for the creation of a body f .....

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..... st a servant or agent of the Government, it would logically follow that persons employed by these Corporations would be persons holding posts in a public service in connection with the affairs of the Union or of the State, dependant upon whether the Corporation was created by the Union or the State Legislature. If so the Common law rule that service under the Crown was held at pleasure embodied in Article 311 of the Constitution as well as the constitutional safeguards which the article provides for Government servants, would be attracted to determine the conditions of service under such bodies. This question has come up before the Courts on several occasions and has been uniformly answered against the applicability of Article 311 to such employees. These decisions dealt with two types of cases ; (1) those in relation to Municipal employees or employees of local authorities as defined by the General Clauses Act including in this category employees of State Regional authorities such as Port Trusts, (2) Public Corporations created for carrying on state undertakings. The decisions, however, drew no essential distinction as regards the principles applicable as between the two categorie .....

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..... ns of the Damodar Valley Corporation Act, 1948, indicate that the Corporation has a separate and independent existence and is a different entity from the Union or State Government. This Corporation has properties vested in it under the Act. It has its own fund and its functions and duties are defined in the Act. It may be that this Corporation has been set up by the Government for the purpose of discharging certain functions of the Union or the State Government, but there can be no doubt that it has a separate existence and cannot be considered as a part of the Union or State Government. Just as the Corporation of Calcutta discharges certain duties and functions which are to be performed by the State Government so also certain functions and duties of the Union and the State Governments have been allocated to the Damodar Valley Corporation but the Corporation performs these duties and functions as a separate entity. 35. The status of the Managing Director of the Patiala State Bank who was also the economic adviser to the Government of the Patiala State was the question decided by S. Mohany v. P. E. P. States Union A.I.R. 1954 Pepsu 136, which in its essential facts really fell .....

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..... the State Government exercises control over statutory bodies or local authorities constituted by statute. That does not, however, mean that persons who serve under those statutory bodies or local authorities hold civil posts under the State of Bihar within the meaning of Article 311 of the Constitution of India. 37. The High Court of Patna had to consider the position of an employee of the Sindri Fertilisers in Subodh Benjan v. Sindri Fertilisers and Chemicals, Ltd. . This was a public corporation created by the statute. The petitioner complained that he was discharged from service without notice and without opportunity to show cause and without consultation with the Union Public Service Commission, these being alleged as violations of Articles 311 and 320 of the Constitution. How this company came to be formed was briefly this. The Government of India had a fertiliser project at Sindri. This company was formed to take over its assets. The petitioner had originally been in the service of the Government of India but with the consent of the petitioner his services were terminated and he accepted service under the Company from the same date. The question, however, raised was whethe .....

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..... l public. Their servants performed merely a municipal as distinguished from a State function. 40. The learned Advocate-General pointed out that these decisions would not affect his main thesis and that they could be explained on the basis of the historical background of Article 311. In addition it might be urged that the expression public services and posts in connection with the affairs of the Union and of any State occurring in Article 309 ought to receive a limited construction so as to exclude service under a local authority or other body corporate constituted by law in the light of the provisions in Article 321. Besides it is obvious that though a person employed in the public service holds an office of profit, the converse that every person who holds an office of profit is a person falling within Article 311 does not follow. We are, therefore, not inclined to hold that notwithstanding the logic of it, the inapplicability of Article 311 by itself and without anything more takes a service outside Article 191(1)(a). 41. The question whether debts of the statutory public Corporations, such as we have on hand, would have priority in payment in bankruptcy or in a winding .....

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..... form part of a legitimate activity of the Government of the State or Union. In line with this we have the provisions of the Civil Procedure Code, Order 29. This again cannot apply to any person other than the Government strictly so called. Lastly reference may be made to Article 285 of the Constitution which refers to the property of the Union and provides for its exemption from all state taxation. Could it for a moment be contended that this would include the property 'of Corporations created by the Union Government ? The net result of this discussion therefore is that a public Corporation of the type before us cannot be identified with the State or be treated as the servant or agent of the State. 43. The learned Advocate-General referred us to Section 2(a)(1) of the Industrial Disputes Act where a reference is made to the Central Government as being the appropriate Government in relation to disputes concerning an industry carried on by or under the authority of the Central Government . Phrases of the same type occur in the definition of employer in Section 2(g) of that Act but these do not advance the position. We are unable to hold that the mere fact that the provisio .....

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..... fit as not entailing a disqualification for being a member of the Legislature. Viewed in conjunction with this, it might very well be that when Parliament set up semi-autonomous bodies of the type we have in the present case, its intention was not to disqualify such officeholders from sitting in Parliament. In other words, by the very form, imparted to the body set up, Parliament might be taken to have evinced its intention not to disqualify such office-holders. But this apart, we feel that this approach is far too much involved in political considerations as to be capable of being taken into account in a mere interpretation of the Constitution. 46. In this connection we cannot omit from considerations the provisions contained in Sections 7 and 8 of the Representation of the People Act, 1951, as a parliamentary exposition or commentary on the meaning of the expression 'office of profit' under the Union or State in Article 191 and which are designed to supplement the disqualifications contained in the Constitution. The provisions in Section 7 which we have in mind is Sub-clause (e): 7. A person shall be disqualified for being chosen as, and for being, a member of eithe .....

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..... has any share or financial control. Further the provision regarding Directors (as distinguished from Managing Directors and employees) of such bodies contained in Section 8(1)(e) and (f) appears to us to militate against the appellant's submission, in that parliamentary legislation positively disqualifying the incumbent is rendered necessary before the disqualification could operate and even then subject to the qualifications set out in Sub-section (f). 48. In our opinion, these provisions are a pointer that Parliament was not unmindful of the political considerations adverted to by the Advocate-General in regard to the ensuring of the purity of administration and the avoidance of the evil of graft and these therefore afford us a further indication that the phrase 'office of profit under the Government' in Article 191(1)(a) cannot be construed in the wide sense urged before us by the learned Advocate-General. 49. We, therefore, hold that the Tribunal was right in treating Krishnamurthi as not disqualified by Article 191(1)(a) from standing for election to the State Assembly. 50. The second point urged by the learned Advocate-General was that C. Krishnamurth .....

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..... ns and which in terms incorporate those bodies. The Life Insurance Corporation created under the Life Insurance Act, 1956, is an illustration of such a method of incorporation. So are Municipal Corporations, Cantonment Boards, which are incorporated by the State and Central Legislation. As contrasted with this, we have companies and co-operative societies which attain incorporation by registration under the Companies Act and the Cooperative Societies Act respectively. This latter category is properly designated as incorporated under a statute. It is this idea which is expressed in the following passage in Stroud's Judicial Dictionary dealing with the word by ; A Company 'incorporated by Act of Parliament' means one which 'by' an act is brought into existence, and does not include a company incorporated 'under' an Act; therefore, a power to invest in the shares, etc., of a company incorporated 'by' an Act does -not include the shares, etc., of a company registered under The Companies Act, 1862, (Re Smith L.R. (1896) 2 Ch. 590. This distinction is too well known to need any further elaboration. 52. Learned Counsel for the respondent urged .....

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