Case: Hindustan Steelworks Constrn Vs. State Of Kerala

3. The appellant company entered into an agreement for construction of a stadium at Kaloor, Ernakulam, Kerala with Respondent No. 2 Greater Cochin Development Authority. The terms of the contract inter alia stipulated that the sub contractors to be employed by the appellant for execution of the contract were to be approved by Respondent No. 2. The appellant commenced the work of construction of the stadium and from time to time engaged different contractors on a turnkey basis4. The Respondent No. 2 started making deduction from the part payment of the bills raised by the appellant at the rate of 1% of the billed amount for the works executed by the appellant on account of contribution under the Welfare Funds Act and the schemes framed thereunder. The appellant company protested against such deduction by Respondent No. 2 by contending that the appellant being a company wholly owned and controlled by the Central Government did not come within the purview of the Welfare Funds Act6. The appellant companys case is that the appellant company is wholly owned and controlled by the Government of India. The President of India is vested with the absolute power to appoint and remove the Directors. Each activity of the company is controlled by the Central Government. For such deep and pervasive control of the appellant company by the Central Government, the appellant is essentially an establishment or an institution of the Government of India7. It may be stated here that several writ petitions were filed in the Kerala High Court challenging the validity of the Welfare Funds Act and by a common judgment dated April 7, 1993 passed by the Single Bench of the Kerala High Court the said writ petitions were disposed of inter alia holding that (i) Section2(g) and Section8(2) of the Welfare Funds Act and clauses 25 and 26 of the scheme framed under the Act are valid; (ii) Section 9 is ultra vires and void; (iii) contributions are payable under Section8 of the Welfare Funds Act only in respect of works awarded and commenced after August 7, 19908. The decision was given in the said judgment disposing of writ petitions directing that the Board shall adjust contributions received from any of the said petitioners towards construction for works awarded and commenced after August 7, 1990 and refund the excess if any to the writ petitioners9. According to the appellant company, the said writ petitioners were contractors registered with the Public Works Department of the State of Kerala and none of the said writ petitioners was a company wholly owned and controlled by the Government of India like the appellant company. Hence, the appellant companys claim for exemption was not available to the other writ petitioners. When the claim for exemption of the appellant company was not acceded to, the appellant company moved a writ petition before the Kerala High Court. Since the decision of the Single Bench of the Kerala High Court was assailed in letters patent appeals before the Division Bench of the Kerala High Court by the aggrieved writ petitioners, the writ petition filed by the appellant company was heard and disposed of along with other writ appeals challenging the validity of the Welfare Funds Act and by a common judgment, the writ petition of the appellant company was disposed of by considering the question of vires of the Act without considering the claim of exemption by the appellant company being a wholly owned and managed company of the Central Government. The appellant company then filed a special leave petition being SLP (Civil) No. 26450 of 1995. By order dated December 8, 1995 this Court disposed of the said special leave petition by giving liberty to the appellant company to approach the Kerala High Court by filing a review petition. Such review petition being R.P. No. 9 of 1996 in O.P. No. 11626 of 1994 has been dismissed by the Kerala High Court by order dated January 15, 1996 and this appeal is directed against such decision of the Kerala High Court.

Court's reasoning:
19. After giving our careful consideration to the facts of the case and the respective contentions made by the learned counsel for the parties, it appears to us that the appellant company cannot be held to be a department of the Government. There may be deep and pervasive control of the Government over the appellant company and the appellant company, on such account may be an instrumentality or agency of the Central Government and as such a State within the meaning of Article 12 of the Constitution. Even though the appellant company is an agency or instrumentality of the Central Government, it cannot be held to be a department or establishment of the Government in all cases. Such instrumentality or agency has been held to be a third arm of the Government in Ajay Hasias case (supra) but it should not be lost sight of that it was only in the context of enforcement of fundamental rights against the action of the Government and its instrumentalities or agencies it was held that such agencies were the third arm of the Government and they cannot avoid Constitutional obligation. There is no question of enforcing any fundamental right in the instant case. On the contrary, the question of protecting the welfare of the employees vis-a-vis the instrumentality or agency of the Central Government under the Welfare Funds Act is to be kept in mind for the purpose of deciding the rival contentions of the parties.If Section2(c) and (e) of the Welfare Funds Act are taken into consideration, it will be quite apparent that the legislature has not intended to exclude the Government company or the statutory Corporations from the purview of the Welfare Funds Act. The decision in C. V. Ramans case (supra), in our view, is not an authority for the proposition that an instrumentality or agency of the Government is essentially a Government department for all purposes and such instrumentality or agency will enjoy the same privilege and protection which any Government or its establishment or department enjoys in relation to a statue. The establishment of a Government only connotes in its plain meaning, an establishment directly run by the Government and not through the agency or instrumentality of the Government. The Welfare Funds Act is essentially an Act to protect the interest of and Welfare of the labourers. Unless expressly the instrumentality or agency of the Government is kept outside the purview of the said Act, it would not be proper to interpret the said Act in a wide amplitude by removing the corporate veil so as to exclude such instrumentality or agency from the purview of the said Act.