:1: IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELALTE JURISDICTION WRIT PETITION NO.10751 OF 2004 Hindustan Organic Chemicals Ltd. ... Petitioner v/s. Hindustan Organic Chemicals Ltd. Employees' Union ... Respondent Mr. M.M. Verma for i/b Rajesh Gehani for Petitioners Ms.N.D. Buch for Respondent CORAM: SMT.NISHITA MHATRE, J JUDGEMENT RESERVED ON: AUGUST 11, 2008 JUDGMENT PRONOUNCED ON: OCTOBER 10, 2008 JUDGMENT: 1. The question involved in the present petition is whether the Central Government is the appropriate government for the Petitioner or whether it falls within the jurisdiction of the State Government. 2. A few facts which are relevant for the determination of this issue are as follows: The Petitioner is a Public Limited Company registered under the Companies Act,1956. The Petitioner (for short, hereinafter referred to as the `Company') contends that it is a Government of India enterprise, established by the Central Government. According to the Company, all its Directors are :2: appointed by the President of India under Article 76 (1) of its Articles of Association. The Company contends that it is functioning under the authority of the Central Government and, therefore, it is the Central Government which is appropriate government in relation to its establishment. 3. The Respondent Union (for short, hereinafter referred to as the `Union') raised an industrial dispute in respect of the general demands. As these demands were not acceded by the company, the union approached the machinery under the Industrial Disputes Act for obtaining a reference. The Union had approached the State machinery as it was of the opinion that the State Government was the appropriate government in relation to the company. A Reference was made by the State Government for adjudication of the dispute to the Industrial Tribunal, Thane being Reference (IT) No.12 of 1998. The Union filed its statement of claim justifying its demands. The company in its written statement raised a preliminary contention that the Reference was not maintainable as the dispute was referred by the State Government which according to the Company was not the appropriate government in relation to it. The Company relied on two orders of a learned Single Judge of this Court in Writ Petition No.3611 of 1997 and 3037 of 1997. The learned Single Judge (Rebello, J.) in both the cases was prima facie of the opinion that the appropriate government would be the Central Government in relation to the Company. 4. The Industrial Tribunal first heard the parties on the preliminary issue :3: regarding the appropriate government for the Company. The parties led evidence, both oral and documentary before the Tribunal. The Industrial Tribunal by award part I dated 12.10.2004 has held that the appropriate government for the Company was the State Government and not the Central Government. Aggrieved by this decision of the Tribunal, the Company has preferred the present writ petition. 5. Mr.Verma, the learned Counsel for the Company puts forth the following reasons to support his submission that the Central Government is the appropriate government in relation to the Company: (i) 58% of the shareholding is that of the Central Government; (ii) the business is carried on under the authority of the Central Government; (iii) the Memorandum and Articles of Association more particularly Articles 91, 126 and 128 make it abundantly clear that the Company is a Government of India enterprise and that the entire financial control and fiscal policies of the Company are prescribed by the Ministry of Finance, Government of India. All policy decisions of the Company are taken by the Government of India and are routed through the Ministry of Chemicals for implementation by the company. The Directors of the Company are appointed by the President of India and are answerable only to the Government of India. 6. In support of the aforesaid contentions, Mr.Verma has relied on several documents which were produced before the Tribunal. According to him they indicate that the Company is under the direct control of the :4: Government of India. I shall discuss these documents which are produced before me a little later. Mr.Verma further relies on the Memorandum and Articles of Association in support of his submissions. He buttresses his arguments by relying on the judgment of the Supreme Court in the case of Steel Authority of India Ltd. V/s. National Union Water Front Workers & Ors., 2001 III CLR 349:(2001) 7 SCC 1. He points out that the judgment in Steel Authority of India Ltd (supra) considers the judgment of the Supreme Court in Heavy Engineering Mazdoor Union v/s. State of Bihar and Ors., reported in 1969 (2) LLJ 554:1969 (1) SCC 765. He relies further on the judgment in the case of Hindustan Aeronautics Ltd. & Anr. V/s. Hindustan Aero Canteen Karmachari Sangh & Ors., 2002 (95) FLR 1178. He also relies on the judgment of this court in the case of National Building Construction Corporation v/s. Rampal Singh & Anr., 1997 II CLR 1025. The learned counsel points out that the judgment of the Supreme Court in Air India Statutory Corporation etc. v/s. United Labour Union & Ors., 1997 I CLR 292 which dealt with the issue of appropriate government has been overruled by the Constitutional Bench in Steel Authority of India Ltd. (supra). 7. Ms.Buch, appearing for the Union, submits that the State Government is the appropriate government for the establishment. She relies on a notification issued by the Government of India where the State Government is the appropriate government in respect of certain establishments listed in the notification. The Company has been listed in this notification and according to the learned advocate, the appropriate government would be the State :5: Government. She submits that this notification has been issued after the judgment of the Supreme Court in the case of Air India (supra) and therefore the State Tribunal did have jurisdiction to decide the reference made to it by the State Government for adjudication of an industrial dispute. The learned advocate points out that the Memorandum and Articles of Association have been so framed in order to include certain articles like article 91 only because of the provisions of section 617 of the Companies Act. The Company is a Government company as defined u/s 617 of the Companies Act since the paid up share capital held by the Central Government is more than 51%. However, she submits that merely because the share capital of the Company is contributed by the Central Government and the fact that its shares are held by the President and certain officers of the Central Government, it would not make it a Company which is run under or by the authority of the Central Government or under the control of the Central Government. She points out that this is a well settled position of law enunciated in the case of Heavy Engineering (supra). According to her, the articles which provide for submission of the annual report to the Central Government are included in the Memorandum and Articles of Association since the Company is a government Company and there are certain provisions which government Companies must follow under the Companies Act. She submits that these stipulations would not however indicate that the Central Government is the appropriate government in relation to the company. The learned advocate then submits that the term `under the authority of the Central Government' must be considered ejusdem generis with the rest of the provisions of the definition of :6: appropriate government as contained in section 2(a) of the ID Act. She relies on the judgment in the case of Steel Authority of India Limited (supra) to submit that the Constitutional Bench of the Supreme Court has approved of its earlier judgment Supreme Court in Heavy Engineering's case (supra) and, therefore, according to her, unless the Company fulfills the criteria as laid down in Heavy Engineering (supra) as approved in Steel Authority of India Limited (supra), the Central Government would not be the appropriate government in relation to the Company. As regards the documents which have been produced by the Company to indicate that the Central Government is the appropriate government, Ms.Buch submits that these documents have been issued by the Central Government to all public sector enterprises and those documents would not in any manner indicate that the appropriate government is the Central Government in relation to the Company. 8. Before proceeding to deal with the contentions raised on behalf of the rival parties, it would be beneficial to consider the definition of the appropriate government as defined u/s 2(a) of the ID Act. The definition reads thus: (a) “appropriate government” means- (i) in relation to any industrial dispute concerning any industry carried on by or under the authority of the Central Government or by a railway company or concerning any such controlled industry as may be specified in this behalf by the Central Government or in relation to an industrial dispute concerning a Dock Labour Board established under section 5-A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948), or the Industrial Finance Corporation of India Act, 1948, or the Employees' State Insurance Corporation established under section 3 of the Employees' State Insurance Act, 1948, or the Board of Trustees constituted under section 3A of the Coal Mines Provident fund and Miscellaneous Provisions Act, 1948, or the Central Board of Trustees and the State Boards of Trustees constituted under section 5A and section :7: 5B, respectively, of the Employees' Provident Fund and Miscellaneous Provisions Act, 19052, or the “Indian Airlines” and “Air India” Corporations established under section 3of the Air Corporations Act, 1953, or the Life Insurance Corporation of India established under section 3of the Life Insurance Corporation Act, 1956, or the Oil and Natural Gas Commission established under section 3 of the Oil and Natural Gas Commission Act, 1959 or the Deposit Insurance and Credit Guarantee Corporation established under section 3 Deposit Insurance and Credit Guarantee Corporation Act, 1961, or the Central Warehousing Corporation established under section 3 of the Warehousing Corporation Act, 1962, or the Agricultural Refinance and Development Corporation established under section 3 of Agricultural Refinance and Development Corporation Act, 1963, or the Unit Trust of India established under section 3 of the Unit Trust India Act, 1963, or the Food Corporation of India established under section 3, or a Board of Management established for two or more contiguous States under section 16 of the Food Corporations Act, 1964, or the International Airports Authority of India constituted under section 3 of the International Airports Authority of India Act, 1971 or a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976, or the Export Credit and Guarantee Corporation Limited or the Industrial Reconstruction Bank of India, or the Banking Service Commission established under Section 3 of the Banking Service Commission Act, 1975 or Industrial Reconstruction Corporation of India Limited; or a banking or an insurance Company, a mine, an oilfield, a Cantonment Board, or a major port, the Central Government, and (ii) in relation to any other industrial dispute, the State Government.” 9. Thus, for the Central Government to be the appropriate government in relation to any industry, it must be carried on (i) by or (ii) under the authority of the Central Government or (iii) by a railway Company or (iv) by a controlled industry specified by the Central Government or (v) by statutory corporations which have been mentioned in the section. In relation to all other industrial establishments, the State Government is the appropriate government. The learned counsel for the Petitioner has submitted that although the industry is not carried on by the Central Government it is run under the authority of the :8: Central Government and, therefore, the appropriate government is the Central Government. There is no dispute that the industry is not a controlled industry as defined under section 2(ee). It is neither a railway Company nor a statutory corporation listed in section 2(a) of the ID Act. Mr.Verma concedes that the Company is not an industry which is run by the authority of the Central Government. Therefore, it would be necessary to consider whether the company is an industry carried on under the authority of the Central Government. 10. Article 91 of the Memorandum and Articles of Association stipulates that the Chairman may send any proposal or decision taken by the Directors for approval to the Central Government, if according to the Chairman it deserves such importance. Article 91(b) provides the matters which the Directors shall reserve for the decision of the Central Government. These include (i) any programme of which the capital expenditure exceeds the limits stipulated by the Central Government from time to time; (ii) appointment to the posts in the grade of Rs.2500-3000 and above of persons who have attained the age of 58 years. (iii) sale, lease or disposal of the whole or substantially the whole of the undertaking of the Company for formation of a subsidiary Company (iv) division of the capital into different classes of shares. Article 91 (c) provides that the Central Government shall have powers (i) to call for such returns, accounts and other information with respect to the property of the company (ii) to approve of the Company's five year and annual plans of development and the Company's capital wealth and (iii) to approve of the :9: Company's revenue budget which is proposed to be made in case of a deficit and is proposed to be made by obtaining the funds from the Central Government; (iv) to approve of agreements involving foreign collaborations. There is no doubt that the Company is a purely commercial enterprise. The avowed objects for which the Company has been established as contained in Memorandum of Association indicate that it has been set up for commercial considerations. The objects are not altruistic nor has the Company been established for carrying out any sovereign functions of the Government of India. The Board of Directors of the Company is not accountable to the Government of India but to its shareholders. Article 126 provides for auditors to be appointed by the Central Government on the advise of the Comptroller and Auditor General of India. Article 128 invests the Comptroller and Auditor General of India with the power to direct the manner in which the Company's accounts should be audited and to conduct a supplemental or test audit of the Company's accounts by a person deputed by him. The submission of Mr.Verma is that such articles are not contained in the Memorandum and Articles of Association of any pubic limited company other than a Company such as the present one which is run under the authority of the Central Government. It is apparent however that the aforesaid provisions have been included in the Memorandum and Articles of Association to conform with the provisions of the Companies Act i.e. Sections 637, 637A, 638. As noticed earlier, these provisions have been incorporated bearing in mind the stipulations in the Companies Act. Any Company set up by the Government must contain the aforesaid provisions in the Memorandum of Association or :10: Articles of Association, with minor modifications, depending on whether it is set up by the State or the Central Government. 11. The provisions contained in the Memorandum and Articles of Association of the Company with respect to interest out of capital dividend and reserve fund indicate that all decisions regarding these two items are to be taken by the Directors in consonance with the commercial considerations applicable to the Company. Therefore, this would indicate that the Company which is a Government Company has been set up as a commercial venture and is functioning as such and not under the authority of the Central Government. 12. Turning now to the judgment in the case of Heavy Engineering (supra), th e Supreme Court considered what would be the appropriate government in relation to the Heavy Engineering Corporation which is a Government Company within the meaning of section 617 of the Companies Act. The Supreme Court noticed in this case that the share capital of Heavy Engineering Corporation was contributed by the Central Government and all its shares had been registered in the name of the President of India and certain officers of the Central Government. The Memorandum and Articles of Association conferred such power on the Central Government including the power to give directions as regards the functioning of the Company with respect to payment of wages and salaries to the Company's employees. The Standing Orders applicable described the Company as a Government :11: undertaking. The Supreme Court then considered several of its earlier judgments and observed thus: 4. Before considering the authorities cited by counsel before us, we proceed first to examine the meaning of the words used by Parliament in the definition clause of “appropriate government”. It is an undisputed fact that the company was incorporated under the Companies Act and it is the company so incorporated which carried on the undertaking. The undertaking, therefore, is not one carried on directly by the Central Government or by any one of its departments as in the case of posts and telegraphs or the railways. It was, therefore, rightly conceded both in the High Court as also before us that it is not an industry carried on by the Central Government That being the position, the question then is, is the undertaking carried on under the authority of the Central Government? There being nothing in Section 2(a) to the contrary, the word “authority” must be construed according to its ordinary meaning and therefore must mean a legal power given by one person to another to do an act. A person is said to be authorised or to have an authority when he is in such a position that he can act in a certain manner without incurring liability, to which he would be exposed but for the authority, or, so as to produce the same effect as if the person granting the authority had for himself done the act. For instance, if A authorises B to sell certain goods for and on his behalf and B does so, B incurs no liability for so doing in respect of such goods and confers a good title on the purchaser. There clearly arises in such a case the relationship of a principal 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 persons 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. (Cf. Salomon v. Salomon & Co.). 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 the agent of its shareholders. An infringement of its rights does not give a cause of action to its shareholders. Consequently, it has been said that if a man trusts a corporation he trusts that legal persona and must look to its assets for payment; he :12: can call upon the individual shareholders to contribute only if the Act or charter creating the corporation so provides. The liability of an individual member is not increased by the fact that he is the sole person beneficially interested in the property of the corporation and that the other members have become members merely for the purpose of enabling the corporation to become incorporated and possess only a nominal interest in its property or hold it in trust for him. (Cf. Halsbury’s Laws of England, 3rd Edn., Vol. 9, p. 9). Such a company even possesses the nationality of the country under the laws of which it is incorporated, irrespective of the nationality of its members and does not cease to have that nationality even if in times of war it falls under enemy control. (Cf. Janson v. Driefentain Consolidated Mines and Kuenigi v. Donnersmarck). The company so incorporated derives its powers and functions from and by virtue of its memorandum of association and its articles of association. Therefore, the mere fact that the entire share capital of the respondent-company was contributed by the Central Government and the fact that all its shares are held by the President and certain officers of the Central Government does not make any difference. The company and the shareholders being, as aforesaid, distinct entities the fact that the President of India and certain officers hold all its shares does not make the company an agent either of the President or the Central Government. A notice to the President of India and the said officers of the Central Government, who hold between them all the shares of the company, would not be a notice to the company; nor can a suit maintainable by and in the name of the company be sustained by or in the name of the President and the said officers. 5. It is true that besides the Central Government having contributed the entire share capital, extensive powers are conferred on it, including the power to give directions as to how the company should function, the power to appoint directors and even the power to determine the wages and salaries payable by the company to its employees. But these powers are derived from the company’s memorandum of association and the articles of association and not by reason of the company being the agent of the Central Government. The question whether a corporation is an agent of the State must depend on the facts of each case. Where a statute setting up a corporation so provides, such a corporation can easily be identified as the agent of the State as in Graham v. Public Works Commissioners4 where Phillimore J. said that the Crown does in certain cases establish with the consent of Parliament certain officials or bodies who are to be treated as agents of the Crown even though they have the power of contracting as principals. 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 of the State. The fact that a minister appoints the members or directors of a corporation and :13: he is entitled to call for information, to give directions which are binding on the directors and to supervise over the conduct of the business of the corporation does not render the corporation an agent of the Government. (See State Trading Corporation of India Ltd. v. Commercial Tax Officer, Visakhapatnam5 and Tamlin v. Hannaford). Such an inference that the corporation is the agent of the Government may be drawn where it is performing in substance governmental and not commercial functions. (Cf. London County Territorial and Auxiliary Forces Association v. Nichol’s. 6. 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