Source: http://bareactslive.com/LCR/LC145.HTM
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Document:
Forwarded to the Union Minister of Law and Justice, Ministry of Law and Justice, Government of India by Justice K.N. Singh, Chairman, Law Commission of India, on November 25,1992.
I have great pleasure in forwarding herewith the 145th Report of the Law Commission of India on the subject "Article 12 of The Constitution And Public Sector Undertakings".
2. This is the second Report after the constitution of XIIIth Law Commission. This Report is being submitted in pursuance to the formal reference made by the Minister for Law & Justice vide his D.O. No. F.12(1)/87-IC, dated 30th March, 1987 to the XIth Law Commission headed by Justice D.A. Desai. A photo copy of the letter is enclosed.* By that letter the Law Commission was requested to examine the question whether Public Sector Undertakings should be excluded from the operation of Article 12 of the Constitution.
3. The Commission has examined the question in its various aspects in the light of the law declared by the Supreme Court and also in the background of 126th Report of the Commission which dealt with litigation policy of Government and Public Sector Undertakings. The Report further deals with the questions raised by the Bureau of Public Enterprises at whose instance the reference had been made to the Commission.
*. Printed on the last page of this Report.
1. F. No. D.O. F. 12(1)/87-L.C., dated 30-3-1987 of Shri H R. Bhardwaj, Minister of State, Law and Justice, Government of India.
1.2. Decisions of the Supreme Court.—The Supreme Court of India has held in a number of decisions that Public Corporations and Undertakings fall within the inclusive definition of 'State'. Therefore these Corporations and Undertakings are subject to Part III of the Constitution. Consequently, the Supreme Court and the High Courts have power of judicial review under Articles 32 and 226 of the Constitution. The Supreme Court and High Courts have interfered with the orders of Public Corporations and Undertakings in relation to service matters and also with regard to commercial transactions. The interference by the courts caused anxiety to the Bureau of Public enterprises, as, in its opinion, this has created serious difficulties in the functioning of Public Sector Undertakings on commercial and industrial principles. The Bureau has proposed amendment of Article 12 in a manner designed to exclude Public Corporations and Undertakings from the expression "other authorities", to ensure the avoidance of judicial review and interference by courts in the functioning of these Undertakings.
"First, as regards service matters, it is experienced that by reason of application of the provision of Article 14 of the Constitution, to Public Sector Corporations, employees of these Corporations have practically come to acquire a permanent employment status and their services cannot be terminated even if the rules allow such termination on three months' notice.
Secondly, in the sphere of award of contracts, it has been noticed that even where the management of a Public Sector Corporation knows of the bad credentials of a firm, it cannot stop dealing with that firm or refuse to deal with that firm, without following the formalities insisted upon in the judicial decisions on the subject. Further, if a person having dealings with a Public Sector Corporation does not get the required material from the corporation, he files a writ petition and often brings an application to seek an ex parte injunction against the Public Sector Corporation to deliver the material.
Thirdly, instances have come to the notice that the courts have granted interim orders, even for not calling the ordinary meetings of the general body of the corporate bodies.
Finally, a point that has been raised regarding a matter of procedure in the context of documents is, that if a document issued by another agency in the public sector is produced in evidence in court, it is not possible to dispute the same, even if it be incomplete or defective, as the other party takes the plea that the same was issued by another agency of the Government, and as per the doctrine of "instrumentality", the document is supposed to be accepted by all agencies."
1.4. Earlier Report.—It may be mentioned that in 1988, the Law Commission of India forwarded to the Government a Report concerned with litigation policies and strategies pertaining to—(i) the Government, and (ii) public sector undertakings.1 In that Report, the commission examined the reasons for the spurt in litigation in which Public Sector Undertakings are involved and it also stressed the need for evolution of a sound litigation policy. The Report recommended, inter alia, the establishment of an effective Grievance Cell for the settlement of disputes between the employer and the employees in the Public Sector. It further recommended that disputes relating to commercial and business transactions should also be settled through the medium of arbitration. The present Report deals with a different matter, namely, the substantive question relating to the constitutional status of Public Sector Undertakings. The present Report is not confined to procedural aspects, but deals with the basic question whether the rights and remedies available to a person against the Government by virtue of Part III of the Constitution should continue to be available against Public Sector. Undertakings also, and further, whether it is desirable and constitutionally permissible to amend Article 12, so as to exclude the Public Sector Undertakings from the judicial review of the Supreme Court and the High Courts under Article 32 and 226 of the Constitution. Thus, the scope of the present Report is different from that of the earlier 126th Report. However, some data examined in that Report are relevant and valid for dealing with the question under consideration in the present Report also; and reference thereto would be made at the appropriate stage.
1. Law Commission of India, Government and Public Sector Undertakings—Litigation Policy and Strategies (126th Report).
"12. In this Part unless the context otherwise requires, 'the State' includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India."
It will be noticed that Article 12 does not, in so many words, provide that undertakings in the public sector fall within the definition of "State"; but that is virtually the position resulting from judicial pronouncements on the subject. To state the position in brief terms at this stage, such undertakings fall within the words "other authorities within the territory of India or under the control of the Government of India''.
1. Rajasthan State Electricity Board, Jaipur v. Mohan Lal, MR 1967 SC 1857.
2. Sukhdev Singh v. Bhagat Ram, AIR 1975 SC 1331.
2.3. Agency or instrumentality of the State.—In order to analyse the link between the State and the undertaking in question, it was necessary to evolve some formula; and that is the principal approach adopted by the Supreme Court in its well-known judgment relating to the International Airports Authority.1 The International Airports Authority is a body corporate constituted under the International Airports Authority Act, 1971. The Director of the Authority had issued a notice, inviting tenders for putting up and running a second class restaurant and two snack bars at the International Airport at Bombay. Tenders were received in response to the notice. Shri R.D. Shetty, the appellant, who was not a tenderer, filed a writ petition which was rejected by the Bombay High Court. He applied for and obtained special leave to Appeal to the Supreme Court. He urged that the notice inviting tenders by the Airports Authority had stipulated a condition of eligibility, but subsequently the same was changed without any rational justification, as a result of which he could not submit his tender. It was further urged before the Supreme court that the International Airport Authority, being a "State" within the meaning of Article 12 of the Constitution, was bound to give effect to the condition of eligibility set up by it was and not entitled to depart from it at its own sweet will without rational justification.
(v) Whether, what belonged to a Government Department formerly was transferred to the Corporation.
After laying down the aforesaid tests, the Supreme Court observed that the list is not exhaustive and by its very nature, it cannot be, because, with increasing assumption of new tasks, growing complexities of management and administration and the necessity of continuing adjustment in relations between the Corporation and Government, calling for flexibility, adaptability and innovative skills, it is not possible to make an exhaustive enumeration of the tests which would invariably and in all cases provide an unfailing answer to the question whether a Corporation is a governmental instrumentality or agency. The court observed that no one single factor will yield a satisfactory answer to the question and the court will have to consider the cumulative effect of these factors, in arriving at its decision on the basis of facts and circumstances of each case. The court emphasised that since the Corporation is an instrumentality or agency of Government, it would be subject to the same constitutional or public law limitation as the Government. Referring to the principle of equality before law under Article 14 of the Constitution, the court declared that the rule inhibiting arbitrary action by Government must apply equally where such Corporation is dealing with the public, whether by way of giving jobs or entering into contracts or otherwise, and it cannot act arbitrarily and enter into a relationship with any person it likes at its sweet will. Its action must be in conformity with some principle which meets the test of reason and relevance.
1. R.D. Shetty v. International Airport Authority of India, AIR 1979 SC 1626.
2.4. Public Character.—For our purpose, it is relevant to point out that the public character of the undertaking is one of the ingredients emphasised by the court in coming to a positive conclusion. The test of "agency or instrumentality" had, in fact, been suggested by Mr. Justice Mathew in 1975.1 Incidentally, Mr. Justice Mathew had also stressed the element of public character of the functions of the corporation, apart from other factors.
1. Sukhdev Singh v. Bhagat Ram, AIR 1975 SC 1331.
2.5. Government companies.—One consequence of the broader test of "agency or instrumentality" that came to be laid down (as stated above) was that Government companies, as defined in section 617 of the Companies Act, 1956 came to be included within the concept of "State", for the purposes of Article 12 of the Constitution. Thus, the Bharat Petroleum Corporation was held to fall within its ambit.1 Comparatively recently, the Indian Oil Corporation has also been held to fall within the ambit of Article 12.2 Accordingly, the sudden stoppage of supply of lubricants to the petitioner firm by the Indian Oil Corporation, without notice, was held to be violative of Article 14 of the Constitution as arbitrary, against natural justice and fair play and unreasonable and practically amounting to blacklisting of the petitioner firm. It may be mentioned that Government companies are not created directly by statute, but (like other companies) are incorporated under statute. Nevertheless, the test of "agency or instrumentality" became relevant for coming to this positive conclusion.
1. Som Prakash Rekhi v. Union of India, AIR 1981 SC 212: (1981) 1 SCC 499.
2. Mahabir Auto Stores v. Indian Oil Corporation, (1990) 3 SCC 752.
(i) The composition of the society is dominated by the representatives of the Government.
(ii) The expenses of the society are entirely provided by the Central Government.
(iii) The rules made by the society require prior approval of the Government.
(iv) The society is required to comply with all directions of the Government.
(v) Government can appoint and remove members from the society.
(vi) Thus, an overall control is exercised by the Government.
1. Ajay Hasia v. Khalid Mujib, AIR 1981 SC 487.
1. B.S. Minhas v. Indian Statistical Institute, (1983) 4 SCC 582.
2. P.K. Ramachandra lyer v. Union of India, (1984) 2 SCC 141.
3. Chairman, School of Buddhist Philosophy v. Makhanlal Mattoo, (1990) 4 SCC 6.
4. Sheela Barse v. Secretary, Children's Aid Society, (1987) 3 SCC 59.
1. Tek Raj Vasandi v. Union of India, (19S8) 1 SCC 236.
1. Hyderabad Commercials v. Indian Bank, (1991) 2 SCALE 825.
2. Chakradhar v. Sama Singha Service Co-operative Society, AIR 1982 Ori 38.
3. Pritam Singh v. State of Punjab, AIR 1982 P&H 228.
4. Satish Kumar v. Punjab State Co-operative Bank, AIR 1981 P&H 382.
5. Konaseema Co-operative Central Bank Ltd. v. N. Seetharama Raju, AIR 1990 AP 171.
1. Chander Mohan v. N.C.E.R.T., (1991) 3 SCJ 613.
2. K.M. Thomas v. Cochin Refineries Ltd., AIR 1982 Ker 248.
3. Baroda Cotton Co. v. Andhra Pradesh State Federation of Co-operative Spinning Mills Ltd., AIR 1991 AIR 320.
4. P.B. Ghayalod v. Maruti Udyog Ltd., C.W. No. 3182/90, Delhi High Court, decided on 11-9-1991.
5. Swapan K. Das v. Secretary, Lalit Kala Academy, AIR 1990 Notes of Cases 129 (Cal).
6. Ram Prasad v. Indian Institute of Bankers, AIR 1992 P&H 1 (FB).
1. Praga Tools Corporation v. C.A. Imanual, (1969) 1 SCC 585.
2. Sabhajit Tewary v. Union of India, AIR 1975 SC 1329.
2.12. Legal Position.—Now the legal position is clearly established by the decision of the Supreme Court that a Corporation, a Government Company or any other instrumentality of the State or agency constituted under the statutory provision or under the Companies Act or under the Societies Registration Act would fall within the definition of 'State' under Article 12 of the Constitution for the purposes of Part III of the Constitution, provided such undertakings fulfil the tests as discussed earlier. Sometimes, difficulties do arise in determining the character of an instrumentality of the State—even on the application of the tests laid down by the Supreme Court. Some of the High Courts have taken divergent views in this regard. But if one bears in mind the fact that no particular factor is conclusive, one can understand the decisions which are sometimes cited as deviating from the principles laid down by the Supreme Court. It has to be remembered that if a company, besides being a non-statutory body, does not perform any statutory or public duty, it may not fall within "State". Similarly, the mere fact that the name of a particular society appears in the Allocation of Business Rules would not be conclusive, as held in the case of Council of Scientific and Industrial Research, a registered society and non-statutory body. [The view taken by the Supreme Court in that case has been watered down by subsequent decisions; and, at present, the view taken in the case of International Airport Authority holds the field.] In Ajay Hasia's case, the Supreme Court held that society registered under the Jammu and Kashmir Registration of Societies Act, 1898 was an instrumentality or agency of the State and the Central Government; consequently, it was an authority within the meaning of Article 12.1 The declaration of law laid down in the International Airport Authority decision is.the law of the land. Any different view taken by High Courts contrary to the Supreme Court's decision is incorrect.
3.1. Difficulties experienced.—It has been stated to us, that the wide scope for judicial review of acts and omissions of public sector undertakings, resulting from the interpretation placed on Article 12 of the Constitution, clogs the functioning of public sector undertakings, in matters of contract, service conditions and other matters.
3.2. Major objections.—We will deal with the problems seriatim, as stated in the reference material, to consider whether the judicial decisions holding the public sector undertakings to be "Authority" within the meaning of Article 12 have affected the efficiency of these undertakings or created serious hurdles in carrying on the activities of these undertakings in a business-like manner. Before doing so, we consider it necessary to examine the major objectives of public undertakings. In order to ascertain the main objectives of public undertakings, it is necessary to bear in mind the Directive Principles of State Policy enunciated in Part IV of the Constitution. Article 38 enjoins the State to promote the welfare of the people by securing and protecting effectively a social order in which justice, social, economic and political, shall inform all the institutions of the national life. The State is further directed to strive to minimise inequalities in income, and endeavour to eliminate inequalities in status, facilities and opportunities, not only among individuals, but also amongst groups of people residing in different areas or engaged in different vocations. This Article, and other Articles, e.g. 39, 39A, 41, 42 and 46, lay down fundamental policies, which the State is required to follow in making laws with a view to securing a welfare State. Though Directive Principles are not justiciable and the Courts cannot enforce them, still those are binding on the various organs of the State. The Union Government, with a view to securing a welfare State, prepared Five Year Plans for the transformation of society. It took steps for growth and increase in the sphere of industrial development, as stated in the Industrial Policy Resolutions of 1948 and 1956. The Industrial Policy Resolution of 1956 clearly stated that for the adoption of the socialistic pattern of society as a national objective, and also for planned and rapid development, it was required that all sectors which are of basic and strategic importance, or which are in the nature of public utility services, should be in the public sector. In furtherance of this Industrial Policy, a number of public sector undertakings were constituted. The legislative history leading to the establishment of the public sector undertakings is discussed in detail in Chapter 1 of the 126th Report of the Law Commission. The public sector undertakings function under the control and direction of the Government; and, as such, they have to function in a manner expected from "State", even in its commercial sphere. No doubt, the primary purpose of public sector undertaking is to promote economic growth by increased production and to secure adequate return which would help the State in providing social, economic, educational and medical facilities to the people. Nonetheless, unlike private undertakings, the public sector undertakings are not required to be profit-oriented only. Since some of the undertakings deal with public utility services, they have to frame and mould their policies to serve the people even though there is no profit. The Supreme Court in the case of Oil and Natural Gas Commission1 held that "the notion that the cost plus basis can be the only criterion for fixation of prices in the case of public enterprises stems basically from a concept that such enterprises should function either on a no profit-no loss basis or on a minimum profit basis. This is not a correct approach. In the case of vital commodities or services, while private concerns must be allowed a minimal return on capital invested, public undertakings or utilities may even have to run at losses, if need be and even a minimal return may not be assured. In the case of less vital, but still basic, commodities, they may be required to cater to needs with a minimal profit margin for themselves. But, given a favourable area of operation, commercial profits need not be either anathema or forbidden fruit, even to public sector enterprises."
1. O.N.G.C. v. Association of Natural Gas Consuming Industries of Gujarat, 1993 (1) SCALE 900, para. 31.
3.3. The aspect of efficiency.—Efficiency in running a public sector undertaking is not related to the High Courts and Supreme Courts interference under Articles 226 and 32 of the Constitution. On the other hand, the efficiency depends upon the efficiency of the officers and workers connected with the undertaking. The efficiency is related to planning, hard work, devotion to duty, honesty and integrity of all those who are working with the undertaking. Court's interference is called for, when there is infraction of law or of constitutional provisions. High Courts and Supreme Court would interfere with the orders or functions of public sector undertakings, only when there is violation of fundamental rights under Part III of the Constitution. Such limited interference cannot, and should not, affect the efficiency of the undertakings. The fundamental rights as contained in Part HI of the Constitution are sacrosanct and every authority in the country is bound to act in accordance with the constitutional provisions and to mould its policies and orders consistently with the fundamental rights. It is no valid argument to say, that judicial interference in a case of complaint of violation of fundamental rights leads to inefficiency or clogs progress and development of public sector undertaking. A public sector undertaking, like any other State organ or authority, has to respect the law of the land and the Constitution.
3.4. The statistical picture: Commercial matters.—We have stated above, in an abstract form, the difficulties stated to be felt by the public sector undertakings in the context of Article 12. We should now say a few words about the statistics that we have been able to get from the Bureau of Public Enterprises.1 We should mention here, that these statistics relate to 21 public sector undertakings. The total number of public sector undertakings as on 31st March, 1991 was 244. Against these 21 public sector undertakings, 268 writ petitions were filed during the period in question (9 years) (broadly 1981 to 1989). Out of the total 268 writ petitions, 183 related to commercial transactions.
About one third of the public sector undertakings covered in the sample data had no cases at all. Three public sector undertakings had 1 case each. 7 public sector undertakings had less than 10 cases, 2 public sector undertakings, namely, the Mines and Minerals Trading Corporation and the Food Corporation of India, had 81 and 45 cases respectively, relating to commercial transactions.
1. Director, Bureau of Public Enterprises, Letter dated 5th February, 1991.
3.5. Statistics as to service matters.—Coming to the writ petitions relating to service matters (85 as per sample data) the figures supplied by the Bureau of Public Enterprises relate to recruitment, promotion, dismissal, seniority etc. The break up of the service matters is: (i) recruitment-11 cases, (ii) dismissals-22 cases, and (iii) seniority/promotion etc.-52 cases.1 However, 16 public sector undertakings had no pending case pertaining to requirement, 13 public sector undertakings had no case relating to dismissal and 12 public sector undertakings had no cases in the category of seniority/promotion etc. Thus, on an average, 14 public sector to undertakings out of 21 had no case in the field of service matters. Only 7 public sector undertakings accounted for 85 writ petitions, which comes to about 30 pet cent. of the total litigation.
3.6. Overall picture.—Taking the overall picture, on the whole, three Public Sector Undertakings, namely, Neyveli Lignite Corporation, Mines and Minerals Trading Corporation and Food Corporation of India, account for nearly two-third of the total litigation against the public sector undertakings. In terms of percentage, about 7 per cent. of the public sector undertakings are responsible for more than 65 per cent. of litigation against the public sector undertakings in the sample survey.
(iii) eccentric approach of officers in service matters.
In the same Report,5 several specific instances of litigation have been narrated, with detailed comments as to how the suits or proceedings could have been avoided by the public sector undertakings concerned.
1. Law Commission of India, 126th Report (Government and Public Sector Undertaking Litigation Policy and Strategies), Annexure V.
2. 126th Report, para. 7.3.
3. 126th Report, para. 2.261.
4. 126th Report, para. 7.1.
5. 126th Report, Chapter 4.
3.8. Committee on Public Undertakings: 9th Report (10th Lok Sabha).—It is also necessary to refer to the recent report1 of the Committee on Public Undertakings, relating to litigations pending for settlement in public sector undertakings.
"2.3. On a random study of information received from public undertakings the Committee is perturbed to find a large number of litigations pending for settlement involving expenditure on fees etc. and wastage of public time notwithstanding repeated Government instructions to the contrary from time to time. What further agitates the Committee is the number of pending litigations relating to trivial matters or petty claims, some of which have been hanging fire for more than fifteen years. It hardly needs mention that in many such cases money spent on litigation is far in excess of the stakes involved, besides wasting valuable time and energy of the concerned parties as well as the court."
These reports clearly indicate that Public Sector Undertakings have not acted reasonably to settle trivial disputes. Instead, they have indulged in litigation over trivial matters. How, then, can Courts be blamed for inefficiency in running the public sector undertakings? The plea raised on behalf public sector undertakings is without force.
1. Committee on Public Undertakings (Tenth Lok Sabha 9th Report) 20 August, 1992—Litigations Pending for Settlement in Public Undertakings.
4.1. Scope of the Chapter.—Before we deal with the major issue whether an amendment of Article 12 of the Constitution, as suggested, is desirable, it would be convenient if certain matters are clarified, because, in our view, the problems said to have been created by the interpretation of Article 12 do not have a material bearing on those points. We proceed to deal with them, one by one.
"While we were referring to the cases in an earlier part of our judgment, we have noticed the caution indicated by this court that even if some institution becomes 'State' within the meaning of Article 12, its employees do not become holders of civil posts so as to become entitled to the cover of Article 311. They would, however, be entitled to the benefits of Part III of the Constitution."
It has been pointed out that employees of the public sector undertakings do not enjoy the protection of Article 311, for the simple reason that undertakings are legal entities, separate from the Government3. Even a statutory undertaking is not regarded as "State" for the purposes4 of Article 311.
(d) A.R. Kalra v. P.&E. Corporation of India, AIR 1984 SC 1361, para 20.
2. Tekhraj v. Union of India, AIR 1988 SC 469, para. 21.
3. Guru Gobinda v. Shankari Prasad, AIR 1964 SC 254 (258); Mafatlal v. Divisional Controller, AIR 1966 SC 1364.
4. State of Bihar v. Union of India, (1970) 1 SCC 67 (75).
(iii) of public officers, legislative, judicial and executive of any part of India or of the Commonwealth or of a foreign country.
(2) Public records kept in any State of private documents.
75. Private documents.—All other documents are private."
It will be seen that the definition of "public documents" in section 74 would not cover public sector undertakings and their officers. They cannot be regarded as "official bodies and tribunals." As regards the expression "public officers" which occurs in section 74 (and is not denned in the Evidence Act) one can at best, consult section 2(17) of the Code of Civil Procedure, 1908. The enumeration of various persons to be. regarded as "public officers" in that clause does not cover employees of public sector undertakings.
(b) In the service or pay of a local authority, a corporation established by or under a Central, Provincial or State Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956).
It should be pointed out that even the definition in the Penal Code defines the expression "public servant" and not the expression "public officer". Its main object is to—(i) deal effectively with the offence of bribery which (under the Code as enacted) is defined in terms of public servants; (ii) make effective provisions for certain offences against public servants, including contempt of the lawful authority of the public servants; (iii) deal with conduct which becomes aggravated when committed by or against a public servant; and (iv) make provisions for the connected sections of the Code of Criminal Procedure, 1973, particularly section 197, under which, certain public servants cannot be prosecuted for any offence alleged to have been committed by them while acting or purporting to act in the discharge of their official duties, except with the previous sanction of the appropriate Government. The definition of public servant in the Penal Code has no relevance for construing the expression "public officer" as occurring in the Evidence Act.
1. See para. 1.3, last sub-paragraph, supra.
2. Renuka Batra v. Grindlays Bank Ltd., Amritsar, AIR 1980 P&H 146.
3. Kanta Prasad Singh v. Food Corporation of India, AIR 1974 Pat 376.
4. Coal Mines Provident Fund Commissioner v. Ramesh Chander Jha, AIR 1990 SC 648.
5. V. Padmanabhan Nair v. Kerala State Electricity Board, AIR 1989 Ker 86.
"2.(1) In any suit for restraining the defendant from committing a breach of contract or other injury of any kind, whether compensation is claimed in the suit or not, the plaintiff may, at any time after the commencement of the suit, and either before or after judgment, apply to the Court for a temporary injunction to restrain the defendant from committing the breach of contract or injury complained of, or any breach of contract or injury of like kind arising out of the same contract or relating to the same property or right."
1. Para. 1.3. Second and third sub-paragraphs, supra.
(1) Whether the person seeking temporary injunction has made out a prima facie case. This is a sine qua non.
(2) Whether the balance of convenience is in his favour, i.e. whether it could cause greater inconvenience to him if the injunction is not granted, than the inconvenience which the other side would be put to, if the injunction is granted. As to that, the governing principle is, whether the party seeking injunction could be adequately compensated by awarding damages and the defendant would be in a financial position to pay them.
(3) Whether the person seeking temporary injunction would suffer irreparable injury, if the injunction is not granted. With the first condition as sine qua non, at least two conditions should be satisfied by the petitioner and a mere proof of one of the three conditions does not entitle a person to obtain temporary injunction.
2. Dorab Cawasji Warden v. Comi Scrub Warden, AIR 1990 SC 867, paras. 14-15.
3. Mulla Code of Civil Procedure (abridged edition, 1990), p. 1006.
"A court of appeal against the judgment of granting of refusing to grant injunction can interfere when the order passed is arbitrary or is passed by not taking into account the relevant considerations. The court below gave a go by to all the principles of law and, most arbitrarily and without applying its mind to the requirements, granted the injunction restraining the defendants from realising the unpaid instalments. The judgment shows that the learned Judge thought that the interlocutory injunction could be given as a matter of course. Its granting rests in the sound discretion of the court, to be exercised in accordance with well-settled equitable principles and in the light of all the facts and circumstances of the case. The discretion of the court does not include a misapplication of the law or an obvious error in the application of the principles of equity. The character of injunction being extraordinary, it should be exercised sparingly and cautiously. After thoughtful deliberation injunction should be given or awarded only in clear cases."
On the facts, the order of the trial court, restraining the defendant Vikas Parishad from realising from the plaintiff unpaid instalments claimed towards the hire purchase agreement of flats, was set aside.
(b) to compel the undoing of those acts that have been illegally done or the restoration of those which were wrongfully taken from the party complaining.
2. V.S. Vishwavidyalaya v. Raj Kislore Tripathi, AIR 1977 SC 615.
3. S. Krishnaswamy v. South India Film Chamber of Commerce, AIR 1969 Mad 42.
4. U.P. Awas Evam Vikas Parishad v. N.V. Rajagopalan Acharya, AIR 1989 All 125 (127, 128, 129), paras. 11 to 15 (K.C. Agarwal & B.L. Yadav, JJ.).
5. American Cyanamde Co. v. Ethicon Ltd., (1975) 1 All ER 504 (HL).
6. Dorab Cawasji Warden v. Coomi Sorab Warden, AIR 1990 SC 867 (873), para. 14.
4.7. Bank guarantees.—A few words also appear to be necessary on the subject of bank guarantees. Notwithstanding the belief in certain quarters to the contrary, the correct law is, that where there is a bank guarantee and no prima facie case of fraud, courts should not restrain the enforcement of the bank guarantees.1 If there is any irrevocable commitment or obligation of the bank, either in the form of a confirmed bank guarantee or letters of credit, the guarantee must ordinarily be honoured free from interference by the courts, unless there is a prima facie case of fraud or a special equity.2 Courts should seldom restrict the holder of the guarantee from enforcing it3.
1. United Commercial Bank v. Bank of India, AIR 1981 SC 1426.
2. Ashim Ganguly v. Indian Oxygen Ltd., AIR 1989 Cal 150 (153, 154).
3. U.P. Co-operative Federation Ltd. v. Singh Consultants, (1988) 1 SCC 174.
4.8. Article 12 and injunctions.—Finally, we would like to point out that the applicability or non-applicability of Article 12 to public sector undertakings is not relevant on the subject of injunctions. Everything depends on the grounds on which the temporary injunction is prayed for. If it is a ground which owes its justifiability only to fundamental rights, then the exclusion of public sector undertakings from Article 12 may make a difference. But if it is a ground available to every person and against every person under the ordinary law, say, wrongful interference with property or possession or commission of a breach of contract or other injury, then it matters little whether Article 12 is attracted or not. For the violation of a right, even if it is not a fundamental right, relief by way of injunction in an otherwise appropriate case is available under Order 39, rules 1 and 2 of the Code of Civil procedure, 1908,1 whether the opposite party is a public sector undertaking or a private party.
5.1. Introduction.—In this Chapter, we propose to examine the arguments that might support the need for amendment of Article 12 of the Constitution, as also the arguments that might be advanced against such an amendment. In doing so, it will be necessary for us to examine the constitutional validity also, of such an amendment, if at all an amendment is to be proposed. However, we intend to reserve our examination of that aspect to a somewhat later stage and proceed first to examine the need for amendment on the merits.
"With the growing participation of the State in industry and trade, the manner in which these activities should be conducted and managed assumes considerable importance. Speedy decisions and a willingness to assume responsibility are essential if these enterprises are to succeed. For this, wherever possible, there should be decentralisation of authority and their management should be along business lines Public enterprises have to be judged by their total results and in their working they should have the largest possible measure of freedom."
"As mentioned earlier, the characterisation of public enterprises as "State" is essentially in relation of fundamental rights and the provisions for writs. Who invokes these vis-a-vis public enterprises? Not the general public, but mainly the employees of public enterprises and others who are in a contractual or potentially contractual relationship with public enterprise. An aggrieved employee of a private sector company can go to court on the basis of his contract of appointment; similarly, an aggrieved contractor of a private sector firm can go to court on the basis of the terms of his contract, and a bidder for pre-qualification for tendering for a major contract can go to court if the conditions laid down in the notice inviting bids for pre-qualification have not been adhered to. None of them can invoke fundamental rights or the provisions for writs; but an aggrieved employee or tenderer or supplier in the case of public enterprise can file a writ petition. This is the precise implication regarding public enterprises as 'State' and leads to a crucial differentiation between public enterprises and private sector.
In the practice of management the selection of good personnel and their advancement or non-advancement on the basis of merit are among the most crucial elements. Similarly, the selection of good agents or suppliers or consultants or contractors is crucial to the success of a business. In Government, all these become acts of State patronage, and consequently, issues of fairness, non-discrimination, natural justice, and so on, become far more important than suitability and efficiency. Strangely enough, an essentially managerial act such as the framing of job specifications becomes in Government virtually a legislative act; all 'recruitment rules' are considered to be acts of subordinate legislation. Government employees can go to court on matters such as being called for interviews for appointments, the actual selection for appointment or promotion, seniority, the determination of pay, disciplinary matters, and so on. The excessive protection given to Government servants and the extensive legal recourse to them are among the major factors affecting the efficiency of Governmental functioning. Whatever the merits of such protection in the case of Government employees, the consequences of the ruling that public enterprises are 'State' is that this entire approach and attitude gets extended to them. In their case, as in Government, the framing of job specifications and 'recruitment rules' become virtually acts of subordinate legislation; and questions of fairness and discrimination tend to over-shadow considerations of merit and efficiency. Questions of uniformity and non-discrimination also loom large in the context of contracts and purchases. The managements of public enterprises are thus obliged to worry more about procedural correctness and defensibility in a court of law than about making the most expeditious, efficient and economic choice. This weakens the managements of public enterprises and renders commercial and enterprises like behaviour extraordinarily difficult. In effect, this alters their nature as business ventures and handicaps them in the practice of management."
"Industrial workers are covered by elaborate legislation relating to industrial disputes, payment of wages, workmen's compensation, etc. which applies to public and private enterprises alike; they also have the power of industrial action. Workers therefore do not necessarily derive any specific advantage from the treatment of public enterprises as 'State'. The white-collar workers and managers do; but is this a desirable protection? We had noted earlier that one of the judges in a dissenting judgment had expressed doubts about the creation of a vast class of neo-Government servants. Is it necessary to extend to the employees of public enterprises the kind of protection which is available to civil servants (the desirability of which in itself is open to question)? Should the top-level management of a public enterprise which is a commercial organisation set up for business purposes be prevented from exercising the kind of judgment and selectivity, whether in regard to personnel matters or in regard to contractual matters, that private sector chief executives exercise as a matter of course?"
(b) the principal beneficiaries of the present position are employees of the higher level or middle level, prospective contractors and actual contractors with these undertakings, on whom a special benefit is conferred which is not enjoyed by those who are employed under, or have commercial dealings with, undertakings in the private sector or private individuals.
As regards the public character of the public sector undertakings, the Supreme Court has observed that it must be kept in mind that the employment under the public undertakings is a public employment and a public property. It is not only the undertakings, but also the society, which has a stake in them for their proper and efficient working.2 This connection has many facts, several of which have been stressed or highlighted in the Judicial decisions on the subject dealing with the concept of "State" as embracing public sector undertakings. But the golden thread that binds them all together, is the broad proposition that there is a public element. This public element is occasionally traced to the fact that the undertaking in question owed its existence to a statute. At times, it is the nature of the functions which they perform that receives emphasis from the courts. The financial support given by the State may also be regarded as relevant, along with other factors. The concept of "instrumentality or agency of State", often relied on in this contexts, is another way of saying that these undertakings are projections of the State or emanations of the personality of the State. The degree of control or the intensity of the inter-link between the State and the undertaking will naturally differ from undertaking to undertaking; but the essential idea is the connection between the State (in the conventional sense) and the particular undertaking. No particular test is sufficient or conclusive in itself; so many criteria may be kept in mind. The result reached, is not on the exclusive application of one or two criteria, but on an evaluation, in toto, of the nature and character of the undertaking. One particular undertaking may be nothing but the "alter ego" of the State because the bond between that undertaking and the Government is very strong and fully visible—which is why the expression "deep and pervasive control" is often employed in judicial pronouncements. Such undertakings will be easily regarded as falling within the ambit of the "State". At the other extreme, may be a undertaking whose link with the State is thin and fragile; in such a case, it may be difficult to call it "State". Take, again, the financial aspect. An undertaking may be substantially dependent on the resources of the Government and the court may find it easy to hold it as "State". At the opposite extreme, there might stand an undertaking in which the financial stakes of the Government are minor or negligible; the court may be justified in adopting a cautious approach before declaring such an undertaking to be a "State". But all these apparently heterogeneous criteria essentially pay homage to the central criterion, which assesses the link between the State and the undertaking in order to find out the existence, nature and extent of the "public" character of the undertaking.
1. Central Inland Water Transport Corporation Ltd. v. Broia Nath, AIR 1986 SC 1571 (1588-89).
2. D.T.C. v. Workers, 1990 Suppl (2) SCALE 1 (P.B. Sawant, J.).
5.8. Relevance of "public" character.—At the risk of some repetition, let us emphasise the proposition that it is the public character of the undertaking that supplies the rationale for equating it with "State", for the purposes of certain provisions of the Constitution. If the dealings of the undertaking are of a public character, certain norms can be justifiably applied and made binding on the undertaking, while conducting those dealings. The community has a legitimate interest in ensuring fairness in such dealings. Again, leaving aside the aspect of dealings, if the funds of the undertaking come substantially from the Government, the community can be regarded as having an interest in the manner in which the business is conducted with the aid of those funds. Similarly, if the broad range of functions performed by the undertaking (even where it is not entering into contract, as such, on frequent occasions) partakes of the character of public welfare, no one can deny that certain principles must be observed.
5.9. Dichotomy of business principles and availability of writ jurisdiction.—It would appear that those who argue for amending Article 12, assume that there is a conflict between good business principles or sound management and the applicability of constitutional provisions regarding fundamental rights and the like, in regard to such undertakings. But we believe that the conflict is more apparent than real. The fallacy lies in assuming that every action of the undertaking can be set aside by the court. The truth is, that only illegal, arbitrary or unreasonable action, is open to judicial review. No doubt, an application (by writ or otherwise) for judicial review-can be initiated by a citizen against any order or action, because one cannot prevent the citizen from approaching the court. But this does not mean that the citizen will necessarily succeed in every case. A citizen so minded can initiate proceedings even against a private sector undertaking; but he will not necessarily succeed, if there is no cause of action. The courts are open; but success after entering idle portals of the court does not necessarily go with the right to enter the court.
5.10. The aspect of autonomy.—Much of what we have said above should suffice to constitute a satisfactory answer, in so far as the aspect of autonomy is sought to be emphasized. Undoubtedly, there must be speedy disposal of business and willingness to accept responsibility on the part of the public sector. But it must be pointed out that this applies as much to organs of the Government in the narrow sense, as it applies to undertakings in the public sector. Governmental authorities also have to function with a sense of responsibility and with reasonable speed; and yet they are subject to fundamental rights.
15.11. The aspect of management.—One of the aspect on which emphasis has been placed while arguing for amendment of Article 112, is that of maintaining a quality of management on public sector undertakings. It has been particularly emphasised that these undertakings, when dealing with contracts or the relationship of employment, should be allowed to be conducted with efficiency and speed and these objectives often come to be thwarted by reason of the present interpretation of Article 12, which makes them subject to judicial scrutiny and throws open the possibility of litigation and subject to judicial scrutiny which obstructs the smooth conduct of their business. On a careful consideration of the matter, it appears to us that there are several answers to this objection. In the first place, we are not certain if the fact that writ jurisdiction can be invoked necessarily obstructs smooth functioning in every case. It is undisputed that such jurisdiction has been exercisable ever since the commencement of the Constitution against acts of the Central Government and the State Government and its officers and authorities. There has not been any serious grievance made that the jurisdiction has come in the way of expeditious disposal of governmental business in dealing with commercial transactions.
Railways and Posts and Telegraphs are noteworthy; examples of commercial or semi-commercial activities directly carried on by the Government, and we are not aware of any serious complaints made by the concerned Departments in this regard. Secondly, if the grant of stay orders in writ petitions against public sector undertakings (on the bass of the alleged violation of a fundamental right) does occasionally suspend completion of the particular transaction, one has to balance against it the higher values sought to be protected by insistence on compliance with certain constitutional norms. We shall revert to this aspect later. Thirdly, public sector undertakings may themselves have to invoke writ jurisdiction, say, against another public sector undertaking and then some of the benefits of the right to equality and other fundamental rights would be realized. Finally, so far as the element of reasonableness is concerned, it is possible that the courts may spell out such a requirement, not merely on the basis or constitutional rights (as they have done so far, because the provisions were there), but also in the light of the implications of statutory interpretation. In this connection, attention may be drawn to the fact that even in countries like England where, as yet, no fundamental rights have been written in the Constitution, courts are, as a matter of administrative law, slowly taking the view that statutory action, particularly action which affects the rights of citizens, should be marked by a reasonable approach. Even if Article 12 is amended so as to confine it to Government authority, courts can still take the same view in regard to public undertakings as a matter of statutory interpretation.
1. L.I.C. v. Manubhai D. Shah, JT 1992 (4) SC 181.
2. Law Commission of India, 126th Report, paras. 4.7 to 4.11. See also 112th Report on section 45 of the Insurance Act, 1938.
5.13. The fundamental issue: Equality.—What has been stated in the preceding few paragraphs is by way of dealing with the main grievances made against the present position by those concerned. Much more important is the basic question of constitutional objections. Leaving aside specific provisions in Part III of the Constitution, one has still to take note of the philosophy of equality, enunciated in the Preamble to the Constitution. Consistent with this philosophy, it will be difficult to take the stand that public authorities and public undertakings should be allowed to operate in manner which will not take notice of equality. It would be found that much of the case law that has emanated in this sphere, where it insists on the absence of arbitrariness in State action, expressly or impliedly derives its lineage from the paramount consideration of equality, which demands that arbitrariness, or a reasonable suspicion of arbitrariness, should be avoided in State action. To give a goby to the doctrine of equality is to wipe off from the print of the Constitution the ideals which are the inspiring forces underlying the Preamble to the Constitution.
5.14. The statistical picture.—The Law Commission has been able to obtain certain statistical information (through the Bureau of Public Enterprises), as to cases filed against certain public sector undertakings on the basis of Article 12. The first observation that the Commission would like to make is that the statistical picture is not so forbidding as to cause alarm or justify a major constitutional amendment. The second observation which needs to be made is that at least in the case of certain undertakings,1 no occasion has arisen when the lowest tenderer has challenged action of the undertaking by way of writ petition. Thirdly, on a study of some of the sample cases, it appears that at times, there are plausible grounds of objection on the part of the contractor to the action taken or proposed to be taken by the public sailor undertaking. It will not be convenient in this Report to go into details. But, by way of example, we may mention that occasionally (in the case of contractors) there is a bona fide dispute about the acceleration of price by the undertaking. There are also cases where the award of a contract has been refused on the ground that the contractor had not paid dues to the labour and the dispute in this regard was made the subject-matter of a writ petition by the contractor. Such disputes cannot be said to be totally groundless.
1. Letter dated 6th February, 1989.
5.15. Situation regarding lowest tender.—It will appear from some of the letters on the Law Commission file (as received from the public sector undertakings through the Bureau of Public Enterprises) that an impression seems to prevail that the person who has given the lowest tender must be awarded the contract, whatever be the credentials or background of the tenderer. It is because of this impression that the suggestion has been made1, that if the public sector undertakings are excluded from the applicability of Article 12, it would help the functioning of the undertakings. "This would provide flexibility to the undertakings to reject the lowest tender in case the performance of the tenderer is regarded as unsatisfactory or his credentials are considered to be questionable." It is further stated that similarly, the requirement of a show cause notice before stopping dealings with a contractor or debarring him from preferring tenders "is always onerous and open to challenge in courts of law and in case this requirement is removed, it would strengthen the hands of the undertakings because their action will not be subjected to judicial scrutiny".
While we appreciate the desire for quick and efficient functioning of undertakings in the matter of award of contracts, we would like to point out that it is not the law that the lowest tender can never be rejected. What the law insists upon, is that the action of this nature, if taken in regard to a tenderer should be based on some reasons and should be taken after giving the tenderer an opportunity of hearing. The law does not even require that the reason given by a department or undertaking for not accepting the lowest tender should be one which is necessarily acceptable to the court. All that the courts demand is that there should exist on the file some plausible justification for the State action and that the opportunity to be given should be reasonable. NO elaborate or lengthy inquiry is contemplated and it is believed that the court will pay attention to the substance of the matter rather than to the form. At the same time we would like to point out that the law regarding the duty of public authorities to avoid arbitrariness in the matter of acceptance or rejection of tenders is a part of the much wider concept of the rule of law. In a fairly recent Case2, the Supreme Court, while dealing with the question of acceptance of tenders by a Government company, held that it was too late in the day to contend that an institution like a Government company should be exempt from judicial review where it was carrying on a commercial activity. "An instrumentality of the State has to act within the ambit of Rule of Law and would not be allowed to conduct it self arbitrarily and, in its dealings with the public, would be liable to judicial review." It was on this reasoning that the court expressed itself to be in agreement with the submission of the counsel for the petitioner (namely) "that when highest offers of the type in question are rejected, reasons sufficient to indicate the stand of the appropriate authority should be made available and ordinarily, the same should be communicated to the concerned parties unless there be any specific justification not to do so."
1. Letter dated 13th February, 1989.
2. Star Enterprises v. City and Industrial Development Corporation of Maharashtra Ltd., 1990 (1) SCC 280.
"In a Government of responsibility like ours, where all the agents of the public must be responsible for their conduct, there can be but few secrets. The people of this country have a right to know every public act, everything that is done in a public way, by their public functionaries. They are entitled to know the particulars of every public transaction in all its bearing. The right to know, which is derived from the concept of freedom of speech, though not absolute, is a factor which should make one wary, when secrecy is claimed for transactions which can, at any rate, have no repercussion on public security. To cover with veil of secrecy, the common routine business, is in the interest of public."
These observations were, no doubt, made in the context of Governmental activity. But the reasoning is substantially applicable to the public sector also.
2. Cf. L.I.C. v. Manubhai D. Shah, JT 1992 (4) SC 181.
3. State of Uttar Pradesh v. Raj Narain, (1975) 4 SCC 428.
5.17. Inadvisability of amendment.—There are, in fact, certain issues going beyond the narrow topic of tenders and contracts. State action is subjected to judicial review, because it is action in which the public have an interest. The ground of judicial review known as arbitrariness has come on the scene because it is the public which is affected as a whole. The individual whose interests are prejudiced by arbitrary action may appear to be pursuing his own interest, and may look like a very small character in the drama. But, in reality, he is only a vehicle through which a much bigger message is sought to be conveyed. Philosophically (though not legally) he is a minuscule reflection of the great and majestic concept of the Rule of Law. Through each individual that invokes the law for his own cause, what speaks is the voice of the public. From whichever angle one looks at public sector undertakings it is, ultimately their public character that brings them in the same category as the Government proper.
"........it is not a sufficient answer to say that judicial review of the action of officers or departments of Central Government is unnecessary because they are accountable to Parliament for the way in which they carry out their functions. They are accountable to Parliament for what they do so far as regards efficiency and policy, and, of that, Parliament is the only judge; they are accountable to a court of justice for the lawfulness of what they do, and, of that, the court is the only judge."
1. Inland Revenue Commissioners v. National Federation of Self-Employed and Small Businesses Ltd, (1981) 2 WLR 722 (HL) (Lord Diplock).
"The mantle of a corporation may be adopted in order to free the Government from the inevitable constraints of red tapism and slow motion but by doing so, the government cannot be allowed to play truant with the basic human rights. Otherwise it would be the easiest thing for the government to assign to a plurality of corporations almost every State business such as Post & Telegraph, TV and Radio, Rail Road and Telephone—in short, every economic activity—and thereby cheat the people of India out of the Fundamental Rights guaranteed to them. That would be a mockery of the Constitution and nothing short of treachery and breach of faith with the people of India, because though apparently the corporation will be carrying out these functions. It will in truth and reality be the Government which will be controlling the corporation and carrying out these functions through the instrumentality or agency of the corporation. We cannot by a process of judicial construction allow the fundamental Rights to be rendered futile and meaningless and thereby wipe out Chapter III from the Constitution. That would be contrary to the constitutional faith of the post-Maneka Gandhi era. [Maneka Gandhi v. Union of India, (1978) 1 SCC 248: (1978) 2 SCR 621]."
"It is a limb of Government, agency of the State, a vicarious creature of statute working on the wheels of the Acquisition Act. We do not mean to say that for purposes of Art. 309 or otherwise, this Government Company is State but limit our holding to Art. 12 and Part III."
We may mention that the public element has been relied upon in a few other decisions3.
"A State is an abstract entity. It can only act through the instrumentality or agency of natural or juridical persons. Therefore, there is nothing strange in the notion of the State acting through a corporation and making it an agency or instrumentality of the State."
1. Ajay Hasia v. Khalid Mujib, (1981) 1 SCC 722 (733), para. 7.
2. Somprakash Rekhi v, Union of India, (1981) 1 SCC 449 (463), para. 29.
3. (a) G.B. Mahajan v. Jalgaon Municipal Council, (1991) 3 SCC 91: 1991 SC 1153; (b) N. Parthasarathy v. Controller of Capital Issues, (1991) 3 SCJ 325.
4. Sukhdev Singh v. Bhagat Rain, AIR 1975 SC 1331.
"A statutory corporation, a company formed and registered under the Companies Act, 1936 or a society registered under the Societies Registration Act shall not be considered as 'State' for the purpose of this Part."
We are not dealing with the question of drafting. But we have to point out that the exclusion of statutory undertakings, Government companies and Government aided registered societies from the benefit of Part III of the Constitution is bound to raise the important constitutional issue whether such an amendment does not impair a basic feature of the Constitution. There are at least two decisions of the Supreme Court which are relevant for answering this question. Applying the test of basic features laid down in Kesavanand Bharati v. State of Kerala, AIR 1973 SC 1461, the Supreme Court, in Minerva Mills Ltd., AIR 1980 SC 1789, observed (in paragraph 31 of the judgment) that Article 14 of the Constitution (right to equality)) is the very foundation of a republican form of Government and is by itself a basic feature of the Constitution." The second judgment is Vamanarao's case, AIR 1980 SC 271, which reiterates the theory of basic structure. It must also be pointed out that the proposed amendment will affect not merely Article 14, but possibly all fundamental rights in their application to public sector undertakings. Obviously, such an amendment would be regarded as of very far-reaching character and it may be very difficult to defend a challenge to such an amendment, which would take away a large slice of activities, conducted practically under the control of the State, from the ambit of fundamental rights.
5.21. Role of civil court.—It must also be pointed out that even if writ jurisdiction is rendered inapplicable against public sector undertakings as contemplated by the proposed amendment, there can still remain some scope for judicial interference, if the issue raised by the contractor or employee is such that the same can be litigated in an ordinary court. No doubt, the grounds of judicial remedy in a writ case and in an ordinary civil suit may not necessarily be identical. But we are mentioning this aspect in order to emphasise that the possibility of stay orders or injunctions issued by ordinary civil courts would still be there. A temporary injunction can be granted under Order 39, rule 1 of the Code of Civil Procedure, 1908 if an injury is apprehended by the applicant. In this context, "injury" is generally understood as meaning the violation of a legal right. If it is the plea of the contractor that the action taken or proposed to be taken by the undertaking is in breach of contract, obviously there is a possibility of an injunction being issued, provided the case is otherwise fit for injunction. We are referring to this aspect, because we find from the material on the file, that there are several instances of writ petitions where the dispute is about alleged breach of contractual stipulations by a public sector undertaking. Sometimes, the dispute is about increasing the price1. Occasionally, the contractor petitions for delivery of specified commodities as per contract, where the commodity is under the control of a public sector undertaking2. At times, the dispute is about the interpretation of a rate running contract3. In a few other cases, the encasement of bank guarantee was at issue.4 We need not multiply examples; but we must point out that such matters will continue to be the subject-matter of litigation, even after public sector undertakings are removed from the ambit of Article 12. Their prima facie justiciability depends on a variety of arguments, whose source lies in legal principles derived from the ordinary law. The relevant principles are not derived only from the Constitution.
It is also worth mentioning that in several judicial decisions, it has been pointed out that the word "authority" in Article 226 of the Constitution may have a wider ambit than the agencies mentioned in Article 12. Removal of public sector undertakings from the scope of Article 12 may not, therefore, totally remove them from writ jurisdiction.
"In fact, there is a recent movement by public sector undertakings to be freed from the yoke of the Constitution. At any rate, the object purpose and underlying philosophy towards setting up of public sector undertakings must mould its approach towards its employees, the consumers of its products and even other public sector undertakings. At any rate, it cannot afford to develop a litigious culture exhibited by private sector employers. And yet, numerous cases can be quoted where the public sector undertakings not only brought entirely frivolous disputes right up to the Supreme Court, but delayed the resolution of disputes by raising absolutely unsustainable, frivolous, preliminary objections. [(1983) 4 SCC 214; S.K. Verma v. Mahesh, Chandra v. Goa Sampling Employees Associations. General Superintendence Co. of India, (1985) 2 SC 353; D.P. Maheshwari v. Delhi Administration, (1983) 4 SCC 293; Workmen Employed by Hindustan Lever Ltd., v. Hindustan Lever Ltd., (1984) 4 SCC 392]."
1. Letter dated 13th February, 1989 and Letter dated 7th February, 1989.
2. Letter dated 6th February, 1989.
3. Letter dated 9th March, 1989 and enclosures thereto.
4. Letter dated 13th February, 1989.
(i) Such an amendment would not be a proper or necessary measure to be adopted for dealing with the difficulties that may be experienced by Public Sector Undertakings in the matter of award of contracts, rejection of tenders, service matters and the like, arising out of the present applicability of Article 12 to such Undertakings.
(ii) Having regard to the Preamble and total philosophy of the Constitution, even if such an amendment is made, some of the problems experienced by the public sector undertakings would still survive under the ordinary law.
(iii) In particular, judicial intervention in the form of injunctions issued under the ordinary law cannot be ruled out, even after the suggested amendment.
(iv) It is highly doubtful whether, in the light of the theory of non-amendability of the basic features of the Constitution as at present recognised, such an amendment will pass muster on the Constitutional level.
Mohd. Sardar Ali Khan, Member.
As you are aware, the Supreme Court has of late interpreted Article 12 of the Constitution holding that any agency or instrumentality of the Government will be covered by the expression "other authorities" occurring in that Article. The latest judgment of the Supreme Court is that of Central Inland Water Transport Corporation Limited v. Brojo Nath, reported in AIR 1986 SC 1571.
2. The matter was considered in a meeting of Committee of Secretaries on 19-1-1987, when it was decided that a formal reference to the Law Commission should now be immediately made for which purpose the Department of Public Enterprises would draw the necessary reference stating all the issues involved and send it to the Law Ministry for making a reference to the Law Commission. The Law Commission would be requested to treat this on an urgent basis and give their recommendations as early as possible.
3. Accordingly, the Bureau of Public Enterprises have sent to us the material for reference to the Law Commission and the same is enclosed.
4. I shall be grateful if the Law Commission could examine the issues raised by the Bureau of Public Enterprises and favour us with their recommendations on the subject as early as possible.

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