Case: State of Punjab and Others Vs. Raja Ram and Others

a Company registered under the Indian Companies Act, 1882 or under the (English) Companies Act, 1862 to 1890 or incorporated by an Act of Parliament of the United Kingdom or by an Indian law or by Royal Charter or Letters Patent and includes a society registered under the societies Registration Act, 1860, and a registered society within the meaning of the Co-operative Societies Act, 1912 or any other law relating to co -operative societies for the time being in force in any State." 6. The section mentions in unmistakable terms that a company incorporated by an Indian law would be a Company for the purposes of the L.A. Act. Now the corporation was admittedly created by section 3 of the Food Corporation Act, 1964 (hereinafter called the F.C. Act). That section states:"3. (1) With effect from such date as the Central Government may, by notification in the Official Gazette, specify in this behalf, the Central Government shall establish for the purposes of this Act a Corporation known as the Food Corporation of India. (2) The Corporation shall be a body corporate with the name, aforesaid, having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and to contract, and may, by that name, sue and be sued." 7. Sub-section (2) which we need hardly say, is an Indian law, clothes the Corporation with the attributes of a company. It cannot, therefore, be contended with any plausibility that the Corporation is not a Company within the meaning of the definition of that term appearing in clause (e) of section 3 of the L.A. Act. 8. Learned counsel for the appellant then urged that the Corporation is a Government department. We are unable to accept this submission also. A Government department has to be an organisation which is not only completely controlled and financed by the Government but has also no identity of its own. The money earned by such a department goes to the exchequer of the Government and losses incurred by the department are losses of the Government. The Corporation, on the other hand, is an autonomous body capable of acquiring, holding and disposing of property and having the power to contract. It may also sue or be sued by its own name and the Government does not figure in any litigation to which it is a party. It is true that its original share capital is provided by the Central Government (section 5 of the F.C. Act) and that 11 out of the 12 members of its Board of Directors are appointed by that Government (section 7 of the F.C. Act) but then these factors may at the most lead to the conclusion (about which we express no final opinion) that the Corporation is an agency or instrumentality of the Central Government. In this connection we may cite with advantage t he following observations of this Court in Ramana Dayaram Shetty v. The International Authority of India and Ors:"A Corporation may be created in one of two ways. It may be either established by statute or incorporated under a law such as the Companies Act, 1956 or the Societies Registration Act, 1860. Where a corporation is wholly controlled by government not only in its policy making but also in carrying out the functions entrusted to it by the law establishing it or by the Charter of its incorporation, there can be no doubt that it would be an instrumentality or agency of Government. But ordinarily where a corporation is established by statute, it is autonomous in its working subject only to a provision, often times made, that it shall be bound by any directions that may be issued from time to time by Government in respect of policy matters. So also a Corporation incorporated under law is managed by a Board of Directors or committee of management in accordance with the provisions of the statute under which it is incorporated. When does such a corporation become an instrumentality or agency of Government ? Is the holding of the entire share capital of the Corporation by Government enough or is it necessary that in addition, there should be a certain amount of direct control exercised by Government and, if so wh at should be the nature of such control? Should the functions which the Corporation is charged to carry out possess any particular characteristic or feature, or is the nature of the functions immaterial ? Now, one thing is clear that if the entire share capital of the Corporation is held by Government it would be a long way towards indicating that the Corporation is an instrumentality or agency of Government. But, as is quite often the case the Corpo ration established by statute may have no share or shareholders in which case it would be a relevant factor to consider whether the administration is in the hands of a Board of Directors appointed by Government though this conside ration also may not be determinative, because even where the directors are appointed by Government, they may be completely free from governmental control in the discharge of their functions." Even the conclusion , however, that the Corporation is an agency or instrumentality of the Central Government does not lead to the further inference that the Corporation is a Government department. The reason is that the F.C. Act has given the Corporation an individuality apart from that of the Government. In any case the Corporation cannot be divested of its character as a Company within the meaning of the definition in clause (e) of section 3 of the L.A. Act, for it completely fulfils the requirements of that clause, as held by us above. 9. The Corporation being a Company, compliance with the provisions of Chapter VII of the L.A. Act had to be made in order to lawfully acquire any land for its purpose. It is not denied that such compliance is completely lacking in the present case.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]n (2) which we need hardly say, is an Indian law, clothes the Corporation with the attributes of a company. It cannot, therefore, be contended with any plausibility that the Corporation is not a Company within the meaning of the definition of that term appearing in clause (e) of section 3 of the L.A. ActWe are unable to accept this submission also. A Government department has to be an organisation which is not only completely controlled and financed by the Government but has also no identity of its own. The money earned by such a department goes to the exchequer of the Government and losses incurred by the department are losses of the Government. The Corporation, on the other hand, is an autonomous body capable of acquiring, holding and disposing of property and having the power to contract. It may also sue or be sued by its own name and the Government does not figure in any litigation to which it is a party. It is true that its original share capital is provided by the Central Government (section 5 of the F.C. Act) and that 11 out of the 12 members of its Board of Directors are appointed by that Government (section 7 of the F.C. Act) but then these factors may at the most lead to the conclusion (about which we express no final opinion) that the Corporation is an agency or instrumentality of the Central Government. In this connection we may cite with advantage t he following observations of this Court in Ramana Dayaram Shetty v. The International Authority of India andA Corporation may be created in one of two ways. It may be either established by statute or incorporated under a law such asthe Companies Act, 1956 or the Societies Registration Act, 1860. Where a corporation is wholly controlled by government not only in its policy making but also in carrying out the functions entrusted to it by the law establishing it or by the Charter of its incorporation, there can be no doubt that it would be an instrumentality or agency of Government. But ordinarily where a corporation is established by statute, it is autonomous in its working subject only to a provision, often times made, that it shall be bound by any directions that may be issued from time to time by Government in respect of policy matters. So also a Corporation incorporated under law is managed by a Board of Directors or committee of management in accordance with the provisions of the statute under which it is incorporated. When does such a corporation become an instrumentality or agency of Government ? Is the holding of the entire share capital of the Corporation by Government enough or is it necessary that in addition, there should be a certain amount of direct control exercised by Government and, if so wh at should be the nature of such control? Should the functions which the Corporation is charged to carry out possess any particular characteristic or feature, or is the nature of the functions immaterial ? Now, one thing is clear that if the entire share capital of the Corporation is held by Government it would be a long way towards indicating that the Corporation is an instrumentality or agency of Government. But, as is quite often the case the Corpo ration established by statute may have no share or shareholders in which case it would be a relevant factor to consider whether the administration is in the hands of a Board of Directors appointed by Government though this conside ration also may not be determinative, because even where the directors are appointed by Government, they may be completely free from governmental control in the discharge of theirn the conclusion , however, that the Corporation is an agency or instrumentality of the Central Government does not lead to the further inference that the Corporation is a Government department. The reason is that the F.C. Act has given the Corporation an individuality apart from that of the Government. In any case the Corporation cannot be divested of its character as a Company within the meaning of the definition in clause (e) of section 3 of the L.A. Act, for it completely fulfils the requirements of that clause, as held by us above9. The Corporation being a Company, compliance with the provisions of Chapter VII of the L.A. Act had to be made in order to lawfully acquire any land for its purpose. It is not denied that such compliance is completely lacking in the present case.