1980 INSC 0449
                                                 Som Prakash Rekhi

                                                           Vs

                                            Union of India and Another

                                          Writ Petition No. 1212 of 1977

                          (V. R. krishna Iyer, O. Chinnappa Reddy, R. S. Pathak JJ)

                                                      13.11.1980

                                                     JUDGMENT

V. R. KRISHNA IYER, J.

1. (for himself and Chinnappa Reddy, J.) - Three seminal issues arise in this little lis harbouring
larger principles. We may state them, each with a quote to drive home the social stakes, and then
proceed to the pedestrian factual-legal narrative and discussion.

They (corporations) cannot commit treason, nor be outlawed, nor excommunicated, for they have no
souls. (Edward Coke, Sutton's Hospital Case)

2. A legal power, which projects an awesome portent has been sprung upon the court by the
defending respondent - The Bharat Petroleum Corporation Ltd. (Vide : Certificate of Incorporation
dated August 1, 1977) (the Corporation, for short) - as to whether a writ will issue under Article 32
of the Constitution against a Government company, belonging, as it does, to an increasing tribe of
soulless ubiquity and claiming, as it does, to constitutional immunity. This is the first issue to which
we will address ourselves.

3. Jawaharlal Nehru warned the Constituent Assembly about the problem of poverty and social
change :

                  The service of India means the service of the millions who suffer. It means the
                  ending of poverty and ignorance and disease and inequality of opportunity. The
                  ambition of the greatest man of our generation has been to wipe every tear from
                  every eye. That may be beyond us, but as long as there are tears and suffering, so
                  long our work will not be over.

4. The second question which claims our attention turns on the petitioner's plea of alleged
stultification of Article 41 by the State itself reincarnating as a Government company, by defending
the paring down the pension of the petitioner to a pathetic pittance thus sterilising a directive
principle to a decorative paper.

5. Law cannot stand aside from the social changes around it. (Roth v. United States, 354 US 476
(per Justice Brennan))

6. The third problem, not humdrum but heuristic, turns on the construction of the relevant
legislations and regulations covered by the writ petition, remembering the social dynamics of the
law of statutory interpretation.

7. This writ petition under Article 32 relates to a poor employee's small pension on retirement and
the legality of the deductions effected by the employer which make the net sum payable
traumatically trivial (Rs. 40). A principle of wider application is involved beyond the individual's
pensionary fate.

8. The petitioner was employed as a clerk in the Burmah Shell Oil Storage Ltd., (Burmah Shell, for
short) and retired betimes (at 50) after qualifying for a pension, on April 1, 1973. He was also
covered by a scheme under the Employees' Provident Funds and Family Pension Fund Act, 1952
(Ed. : Now called the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 vide
Act 99 of 1976, S. 17) (for short, the PF Act). The employer undertaking was statutorily taken over
by force of the Burmah Shell (Acquisition of Undertakings in India) Act, 1976 (hereinafter called
'the Act'). Thereafter, the Central Government, acting under the statute, took necessary steps for the
vesting of the Undertaking in the second respondent, and the Corporation became the statutory
successor of the petitioner's employer. His pensionary rights, such as he had, therefore, became
claimable from the second respondent. What was the quantum ? Was any cut illegally effected by
Burmah Shell and continued by respondent 2 ? Could a writ be issued against the second respondent
in respect of the cut ? These are the questions argued before us. The petitioner-pensioner, being too
poor, Shri Parekh, assigned by the Legal Aid Society, appeared promptly and argued passionately.
At a rehearing, the petitioner preferred to make a few brief supplementary submissions on his own.

9. The pensionary provision for the Burmah Shell employees depended on the terms of a Trust Deed
of 1950 under which a Pension Fund was set up and regulations were made for its administration.
Regulations 13 and 15 entitled the petitioner to pension and contained the formula for
quantification. Regulation 13 has a significant clause : "less the authorised deductions specified in
Regulation 16, namely...". The bone of contention between the parties is about these deductions and
we may set out this Regulation (relevant part) even here :

                  16. The authorised deductions to be made in calculating the amount of a non-
                  contributing member's pension shall be as follows :

                  (1) A sum equal to four per cent of such amount standing to the credit of the member
                  at the relevant date in any Provident Fund as represents any Company's contributions
                  to that fund in respect of the period of the member's Accredited Service (including
                  bonuses and interest on such contributions up to that date).

                  (2) A sum equal to four per cent of any amount which before the relevant date the
                  member has withdrawn from a Provident Fund insofar as such withdrawal is under
                  the Rules of the Provident Fund charged against the period of the member's
                  Accredited Service (including bonuses and interest thereon) or has been paid out to
                  him during his Accredited Service under the Rules of Provident Fund, together with
                  interest thereon from the date of such withdrawal or receipt to the relevant date.

                  (3) If the Company so elects, a sum not exceeding six per cent of the amount of any
                  payments which any company has made or may make or which any company shall
                  be or have been required by law to make to the member in connection with the
                  termination of his service with that company together with interest thereon from the
                  date of payments down to the relevant date.
10. The Pension Fund, on the vesting of Burmah Shell in respondent 2, came to be administered by
the latter under the Burmah Shell (Acquisition of Undertakings in India) (Administration of Fund)
Rules, 1976. The Rules provided for the Government company, viz. respondent 2 acting 'in
accordance with the provisions of the rules and regulations applicable to or of any law governing
the respective Provident Fund. Welfare Fund or other fund and in force immediately before the 24th
day of January, 1976'.

11. If any legal provision overrode the regulation authorising deductions respondent 2 could and
should act according to the legislation. Thus, the statutory rules for administering pensionary
matters direct respondent 2 to conform to 'any law' governing provident fund and like items. And if,
as is contended before us by the petitioner, such law exists, the regulation based deduction ceases to
be an 'authorised deduction'.

12. By virtue of Regulation 13, the petitioner was entitled to a pension of Rs. 165.99 subject to
certain deductions which form the controversy in this case. He was also being paid Supplementary
Retirement Benefit of Rs. 86 per month for a period of 13 months after his retirement which was
stopped thereafter. This stoppage is also assailed before us.

13. By letter dated September 25, 1974, the employer (Burmah Shell) explained that from out of the
pension of Rs. 165.99 two deductions were authorised by Regulation 16. One such deduction was
based on Regulation 16(1) because of Employees' Provident Fund payment to the pensioner and the
other rested on Regulation 16(3) on account of payment of gratuity. Resultantly, the 'pension
payable' was shown as Rs. 40.05.

14. The case becomes clear if one more fact is mentioned. The petitioner claimed and received his
Provident Fund amount under the PF Act and recovered a gratuity amount due under the Payment
of Gratuity Act, 1972 (for short, the Gratuity Act). It is necessary to mention that Burmah Shell was
refused exemption, under Section 5, from the operation of this Act (vide : Annexure 'F' to the Writ
Petition). In short, two sums, one under the PF Act and the other under the Gratuity Act, were
drawn by the pensioner. Consequent on this, Burmah Shell made 2 deductions from the petitioner's
pension, taking its stand on Regulation 16 read with Regulation 13 already referred to. Indeed, the
Company went even beyond this, in its letter of May 8, 1974, by cutting off the monthly payment of
Rs. 86 paid as Supplementary Retirement Benefit on the score that it was ex gratia discretionary and
liable to be stopped any time by the employer.

15. The petitioner was intimated by the Burmah Shell that consequent on his drawal of provident
fund and gratuity benefits, the quantum of his pension would suffer a pro tanto shrinkage, leaving a
monthly puny pension of Rs. 40. Since no superannuated soul can survive, in Indian indigence and
inflationary spiral, on Rs. 40 per month, the petitioner has come to this Court challenging the
deductions from his original pension as illegal and inhuman and demanding restoration of the full
sum which he was originally drawing. His right to property under Article 19 has been violated, he
claims.

16. It may well be, as urged by the Corporation, that if Regulation 16 does govern, the deductions
are warranted. Likewise, if the Supplementary Retiral Benefit is purely a mercy gesture, savouring
of no manner of right nor subject to restrictions on discretionary exercise, the sudden stoppage of
that sum perhaps is not illegal. It may be heartless, but not necessarily lawless, for a prosperous
undertaking, now in the public sector, which pays over-generous salaries to higher officials and
liberal scales even to its lesser employees, to destroy the pensionary survival of an erstwhile
employee who had served 28 long and fruitful years of his limited span of life for the profit of his
employer.

17. Justice according to law being the rule, let us examine the validity of the rival contentions. The
employer relies on Regulation 16 and the pensioner rests his claim on its invalidity. The mantle of
'Burmah Shell' has statutorily fallen on 'Bharat Petroleum' (Vide Certificate of Incorporation dated
August 1, 1977) and it cannot be controverted that if Regulation 16, read with Regulation 13, be
valid the second respondent can insist on its 'pound of flesh' and claim lawfully that the deductions
made are 'authorised' and the discretion to stop supplementary pension is charity which can be
choked off at pleasure or anger.

18. A preliminary objection has been raised by Shri G. B. Pai that no writ will lie against the second
respondent since it is neither a Government department nor a statutory corporation but just a
company and so the court should reject out of hand this proceeding under Article 32. We do see the
force of this contention, notwithstanding the observations in the Airport Authority case (Ramana
Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489) that the status of
'State' will attach to the Government companies like the second respondent.

19. Let us first look at the facts emerging from the Act and then superimpose the law in Article 12
which conceptualises 'State' for the purposes of Part III. After all, cynicism apart, Mark Twain is
good chewinggum for lawyers : (Mark Twain : Quoted by Rudyard Kipling, from SEA TO SEA)
"Get your facts first, and then you can distort them as much as you please." It is common ground
that the present writ petition, invoking Article 32, is limited to issuing directions or orders or writs
for the enforcement of fundamental rights and the question is whether the addressee is the 'State'
within the meaning of Article 12 of the Constitution. We will examine this position more closely a
little later, but granting that Article 19 is aimed at State action the contours of 'State', conceptually
speaking, are largely confined to Article 12. We have to study the anatomy of the Corporation in the
setting of the Act and decide whether it comes within the scope of that Article. We have only and
inclusive definition, not a conclusive definition. One thing is clear. Any authority under the control
of the Government of India comes within the definition. Before expanding on this theme, we may
scan the statutory scheme, the purpose of the legislative project and the nature of the juristic
instrument it has created for fulfillment of that purpose. Where constitutional fundamentals, vital to
the survival of human rights, are at stake functional realism, not facial cosmetics, must be the
diagnostic tool. Law, constitutional law, seeks the substance, not merely the form. For, one may
look like the innocent flower but be the serpent under it. The preamble, which ordinarily illumines
the object of the statute, makes it plain that what is intended and achieved is nationalisation of an
undertaking of strategic importance :

                  And whereas it is expedient in the public interest that the undertakings in India, of
                  Burmah Shell Oil Storage and Distributing Company of India Limited, should be
                  acquired in order to ensure that the ownership and control of the petroleum products
                  distributed and marketed in India by the said Company are vested in the State and
                  thereby so distributed as best to subserve the common good;

It is true that what is nationalised is a private enterprise motivated, undoubtedly, by the need for
transferring the ownership and control of the company and its petroleum products distributed and
marketed in India. Section 3 is important from this angle :

                  On the appointed day, the right, title and interest of Burmah Shell, in relation to its
                  undertakings in India, shall stand transferred to, and shall vest in, the Central
                  Government.

20. This provision lays bare the central object of making the Central Government the proprietor of
the Undertaking. It hardly need argument to convince a court that by virtue of Section 3, the Central
Government is the transferee of the Undertaking. Had a writ proceeding been commenced during
the period of vesting in the Central Government, it could not have been resisted on the score that the
employer is not "the State". The appointed day did arrive and the right, title and interest in Burmah
Shell did vest in the Central Government.

21. A commercial undertaking although permitted to be run under our constitutional scheme by
government, may be better managed with professional skills and on business principles, guided, of
course, by social goals, if it were administered with commercial flexibility and celerity free from
departmental rigidity, slow motion procedures and hierarchy of officers. That is why a considerable
part of the public undertakings is in the corporate sector.

22. It is interesting that with the industrial expansion, economics was assisted by jurisprudence and
law invented or at least expanded the corporate concept to facilitate economic development
consistently with the rule of law. Said Woodrow Wilson, several decades back : (1912-13
SPEECHES : THE NEW FREEDOM, DOUBLEDAY & CO. 1913)

There was a time when corporations played a minor part in our business affairs, but now they play
the chief part, and most men are the servants of corporations.

And Franklin D. Roosevelt mourned : (Acceptance Speech, Democratic National Convention, June
27, 1936)

Concentration of economic power in all embracing corporations. . . represents private enterprise
become a kind of private government which is a power unto itself - a regimentation of other
people's money and other people's lives.

This legal facility of corporate instrument came to be used by the State in many countries as a
measure of immense convenience especially in its commercial ventures. The trappings of
personality, liberation from governmental stiffness and capacity for mammoth growth, together with
administrative elasticity, are the attributes and advantages of corporations.

A corporation is an artificial being, invisible, intangible, and existing only in the contemplation of
the law. Being the mere creature of the law, it possesses only those properties which the charter of
its creation confers on it, either expressly, or as incidental to its very existence. Those are such as are
supposed best calculated to effect the object for which it was created. Among the most important are
immortality, and, if the expression be allowed. individuality; properties by which a perpetual
succession of many persons are considered the same, and may act as a single individual. (John
Marshall, Dartmouth College v. Woodward, 4 Wheaton 518 (1819))

Although corporate personality is not a modern invention, its adaptation to embrace the wide range
of industry and commerce has a modern flavour. Welfare States like ours called upon to execute
many economic projects readily resort to this resourceful legal contrivance because of its practical
advantages without a wee bit of diminution in ownership and control of the Undertaking. The true
owner is the State, the real operator is the State and the effective controllerate is the State and
accountability for its actions to the community and to Parliament is of the State. Nevertheless, a
distinct juristic person with a corporate structure conducts the business, with the added facilities
enjoyed by companies and keeping the quasi-autonomy which comes in handy from the point of
view of business management. Be it remembered though that while the formal ownership is cast in
the corporate mould, the reality reaches down to State control. With this background we have to
read Section 7 of the Act which runs thus :

                  7. (1) Notwithstanding anything contained in Sections 3, 4 and 5, the Central
                  Government may, if satisfied that a Government company is willing to comply, or
                  has complied with such terms and conditions as that government may think fit to
                  impose, direct by notification that the right, title and interest and the liabilities of
                  Burmah Shell in relation to any of its undertakings in India, shall instead of
                  continuing to vest in the Central Government, vest in the Government company....

                  The core fact is that the Central Government, through this provision, chooses to
                  make over, for better management, its own property to its own offspring. A
                  Government company is a mini-incarnation of government itself, made up of its
                  blood and bones and given corporate shape and status for defined objectives, not
                  beyond.

23. Nor is this any isolated experiment in government formally transferring ownership to a
company. There are a number of statutory takeovers in India as in other countries, where the initial
vesting is in government, followed by a later transfer to another instrumentality - maybe an existing
government company or a corporation created by statute or even a society or other legal person. In
the present case, a Government company was created anteriorly and by virtue of a notification under
Section 7 it became the transferee of the right, title and interest as well as the liabilities of Burmah
Shell.

24. The device is too obvious for deception that what is done is a formal transfer from government
to a Government company as the notification clearly spells out :

In exercise of the powers conferred by sub-section (1) of Section 7 of the Burmah Shell
(Acquisition of Undertakings in India) Act, 1976 (2 of 1976), the Central Government, being
satisfied that Burmah Shell Refineries Ltd., a Government company is willing to comply with such
terms and conditions as may be imposed by the Central Government, hereby directs that the right,
title and interest and the liabilities of Burmah Shell Oil Storage and Distribution Co. of India Ltd. in
relation to its undertakings in India, shall, instead of continuing to vest in the Central Government
vest with effect from the twenty-fourth day of January 1976, in Burmah Shell Refineries Ltd.

This is the well-worn legal strategy for government to run economic and like enterprises. We live in
an era of public sector corporations, the State being the reality behind. Law does not hoodwink itself
and what is but a strategy cannot be used as a stratagem.

25. These are the facts when we come to brass tacks. Facts form the raw material out of which the
finished product of judicial finding is fabricated after processing through established legal
principles. Indeed, in life as in law "it is as fatal as it is cowardly to blink facts because they are not
to our taste". What, then, are the basic facts available from the Act ? Constitutional law is not a
game of hide and seek but practical real-life conclusions. So viewed, we are constrained to hold that
Burmah Shell, a Government company though, is but the alter ego of the Central Government and
must, therefore, be treated as definitionally caught in the net of 'State' since a juristic veil worn for
certain legal purposes cannot obliterate the true character of the entity for the purposes of
constitutional law.

26. If we distill the essence of Article 12 textually and apprehend the expanded meaning of "State"
as interpreted precedentially, we may solve the dilemma as to whether the Bharat Petroleum is but a
double of Bharat Sarkar. Let us be clear that the jurisprudence bearing on corporations is not myth
but reality. What we mean is that corporate personality is a reality and not an illusion or fictitious
construction of the law. It is a legal person. Indeed, 'a legal person' is any subject-matter other than a
human being to which the law attributes personality. "This extension, for good and sufficient
reasons, of the conception of personality... is one of the most noteworthy feats of the legal
imagination." (Salmond : JRISPRUDENCE, 10th Edn., pp. 324-25) Corporations are one species of
legal persons invented by the law and invested with a variety of attributes so as to achieve certain
purposes sanctioned by the law. For those purposes, a corporation or company has a legal existence
all its own. The characteristics of corporations, their rights and liabilities, functional autonomy and
juristic status, are jurisprudentially recognised as of a distinct entity even where such corporations
are but State agencies or instrumentalities. For purposes of the Companies Act, 1956, a Government
company has a distinct personality which cannot be confused with the State. Likewise, a statutory
corporation constituted to carry on a commercial or other activity is for many purpose a distinct
juristic entity not drowned in the sea of State, although, in substance, its existence may be but a
projection of the State. What we wish to emphasise is that merely because a company or other legal
person has functional and jural individuality for certain purposes and in certain areas of law, it does
not necessarily follow that for the effective enforcement of fundamental right under our
constitutional scheme, we should not scan the real character of that entity; and if it is found to be a
mere agent or surrogate of the State, in fact owned by the State, in truth controlled by the State and
in effect an incarnation of the State, constitutional lawyers must not blink at these facts and frustrate
the enforcement of fundamental rights despite the inclusive definition of Article 12 that any
authority controlled by the Government of India is itself State. Law has many dimensions and
fundamental facts must govern the applicability of fundamental rights in a given situation.

27. Control by government of the corporation is writ large in the Act and in the factum of being a
Government company. Moreover, here Section 7 gives to the Government company mentioned in it
a statutory recognition, a legislative sanction and status above a mere Government company. If the
entity is no more than a company under the company law or society under the law relating to
registered societies or cooperative societies you cannot call it an authority. A ration shop run by a
cooperative store financed by government is not an authority, being a mere merchant, not a sharer of
State power. 'Authority' in law belongs to the province of power : "Authority (in Administrative
Law) is a body having jurisdiction in certain matters of a public nature." (P. Ramanatha Aiyar : THE
LAW LEXICON OF BRITISH INDIA (1940), p. 101) Therefore, the "ability conferred upon a
person by the law to alter, by his own will directed to that end, the right, duties, liabilities or other
legal relations, either of himself or of other persons" (Salmond : JURISPRUDENCE, 10th Edn., p.
243) must be present ab extra to make a person an 'authority'. When the person is an 'agent or
instrument of the functions of the State' the power is public. So the search here must be to see
whether the Act vests authority, as agent or instrument of the State, to affect the legal relations of
oneself or others.

28. Sometimes the test is formulate, over-simplified fashion, by asking whether the corporation is
formed by a statute or under as statute. The true test is functional. Not how the legal person is born
but why it is created. Nay more. Apart from discharging functions or doing business as the proxy of
the State, wearing the corporate mask there must be an element of ability to affect legal relations by
virtue of power vested in it by law.

29. In the present instance, the source of both, read in the light of Sections 3 and 7, is saturated with
State functions. Avowedly, the statutory contemplation, as disclosed by Section 7, is that the
company should step into the shoes of the executive power of the State. The legislative milieu in
which the second respondent came to be the successor of Burmah Shell suggests that the former is
more than a mere company registered under the Companies Act. It has a statutory flavour acquired
under Section 7. Moreover, everything about the second respondent in the matter of employees,
their provident, superannuation and welfare funds, is regulated statutorily unlike in the case of
ordinary companies. Section 9 and 10 deal with these aspects. These two provisions which regulate
the conditions of service and even provide for adjudication of disputes relating to employees
indicate that some of the features of a statutory corporation attach to this Government company.
Section 9 and 10, in terms, create rights and duties vis-a-vis the Government company itself apart
from the Companies Act. An ordinary company, even a Government company simpliciter has not
the obligations cast on the second respondent by Sections 9 and 10. And, Section 11 specifically
gives the Act primacy vis-a-vis other laws. Section 12, although it has no bearin g on the specific
dispute we are concerned with in this case, is a clear pointer to the statutory character of the
Government company and the vesting of an authority therein. This provision clothes the
Government company with power to take delivery of the property of Burmah Shell from every
person in whose possession, custody or control such property may be. There are other powers akin
to this one in Section 12. The provision for penalties if any person meddles with the property of the
second respondent emphasises the special character of this Government company. Equally unique is
the protection conferred by Section 16 on the the Government company and its officers and
employees "for anything which is, in good faith, done or intended to be done under this". Such an
immunity does not attach to employees of companies simpliciter, even if they happen to be
Government companies. In the same strain is the indemnity conferred by Section 18. This review,
though skeletal, is sufficient strikingly to bring home the point that the corporation we are
concerned with is more than a mere Government company. Whatever its character antecedent to the
Act, the provisions we have adverted to have transformed it into an instrumentality of the Central
Government with a strong statutory flavour superadded and clear indicia of power to make it an
"authority". Although registered as a company under the Indian Companies Act, the second
respondent is clearly a creature of the statute, the Undertaking having vested in it by force of
Section 7 of the Act. The various provisions to which our attention was drawn, an elaboration of
which is not called for, emphasise the fact that the second respondent is not a mere company but
much more than that and has a statutory flavour in its operations and functions, in its powers and
duties, and in its personality itself, apart from being functionally and administratively under the
thumb of government. It is a limb of government, an 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
Article 309 or otherwise this Government company is State but limit our holding to Article 12 and
Part III.

30. We may now proceed to examine the authorities cited before us by both sides on this point with
special reference to Article 12 of the Constitution vis-a-vis Government companies and like bodies.
Shri G. B. Pai concedes that the recent trend of rulings of this Court has broadened the concept of
"authorities... under the control of the Government of India". For instance, the Airport Authority
case (Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489) and
the U.P. Warehousing Corporation case (Managing Director, U.P. Warehousing Corporation v.
Vijaya Narayan Vajpayee, (1980) 3 SCC 459 : 1980 SCC (L&S) 453). His submission is that the
core question which called for decision in those cases did not demand pronouncement on the larger
issue of what is "State" under Article 12 and also ran counter to the earlier rulings by larger
Benches. True, a tour of the case-law runs zigzag, but guided by principle and jurisprudential
discernment, it is possible to reach the same destination to which the two rulings referred to above
take us. Shri G. B. Pai pressed us to reconsider the latest decisions in view of their error when read
in the perspective of prior rulings by referring the issue to a larger Bench. We will presently explain
by examining the earlier cases why we hold the recent decisions to be right and reconcilable with
the broad approach in the older authorities. Moreover, rulings of this Court are calculated to settle
the law and not to unsettle it by reconsideration in season and out merely because it hurts one party
or the other or tastes sour for one judge or the other. If incompatibility between the ratios stares us
in the face we must clear the confusion by the process suggested by Shri Pai. But we are satisfied
that the Airport Authority (Ramana Dayaram Shetty v. International Airport Authority of India,
(1979) 3 SCC 489) has been consistently and correctly decided and, being bound by it, hold that a
writ will lie against the second respondent under Article 32. An explanatory journey is necessary to
make good this assertion.

31. The U.P. Warehousing Corporation case (Managing Director, U.P. Warehousing Corporation v.
Vijaya Narayan Vajpayee, (1980) 3 SCC 459 : 1980 SCC (L&S) 453) - the latest on the point -
related to a statutory corporation and the litigation was by an employee for wrongful dismissal. One
of the questions considered there was the maintainability of a writ petition against a statutory
corporation at the instance of an employee. The court reviewed many decisions, Indian and English,
and upheld the employee's contention that the writ could and should issue to such a body if illegality
were established. It is significant that pointed reference has been made to Sukhdev Singh (Sukhdev
Singh v. Bhagatram, (1975) 1 SCC 421 : 1975 SCC (L&S) 101), Airport Authority (Ramana
Dayaram Shetty v. International Airport Authority od India, (1979) 3 SCC 489), and the judgment
of the House of Lords in Malloch v. Aberdeen Corpn. ((1971) 1 WKR 1578). Sarkaria, J. adverted
to the observations of Lord Wilberforce that in cases there is an element of public employment or
service, or support by statute or something in the nature of public office or status, the court would
correct illegal acts. Of course, the specific question as to whether such a body could be regarded as
`State' did not and could not arise in the English case. But it did arise in the Airport Authority
(Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489) where
Bhagwati, J. launched on an international forensic focus was turned sharply by one of us
(Chinnappa Reddy, J. who was party to that decision) on the target issue of what is "the State" for
purposes of Part III. The crucial observations which have pertinence to the point argued before us
deserve excerption and enjoy our affirmation. ((1980) 3 SCC 459, 468-69 : 1980 SCC (L&S) 453,
462-63) [SCC pp. 468-69 : SCC (L&S) pp. 462-63, para 22]

I find it very hard indeed to discover any distinction on principle between a person directly under
the employment of the government and a person under the employment of an agency or
instrumentality of the government or a corporation, set up under a statute or incorporated but wholly
owned by the government. It is self-evident and trite to say that the function of the State has long
since ceased to be confined to the preservation of the public peace, the exaction of taxes and the
defence of its frontiers. It is now the function of the State to secure 'social, economic and political
justice', to preserve 'liberty of thought, expression, belief, faith and worship', and to ensure 'equality
of status and of opportunity'. That is the proclamation of the people in the preamble to the
Constitution. The desire to attain these objectives has necessarily resulted in intense governmental
activity in manifold ways. Legislative and executive activity have reached very far and have touched
very many aspects of a citizen's life. The government, directly or through the corporations, set up by
it or owned by it, now owns or manages, a large number of industries and institutions. It is the
biggest builder in the country. Mammoth and minor irrigation projects, heavy and light engineering
projects, projects of various kinds are undertaken by the government. The government is also the
biggest trader in the country. The State an d the multitudinous agencies and corporations set up by it
are the principal purchasers of the produce and the products of our country and they control a vast
and complex machinery of distribution. The government, its agencies and instrumentalities,
corporations set up by the government under the statutes and corporations incorporated under the
Companies Act but owned by the government have thus become the biggest employers in the
country. There is no good reason why, if government is bound to observe the equality clauses of the
Constitution in the matter of employment and in its dealings with the employees, the corporations
set up or owned by the government should not be equally bound and why, instead, such corporations
could become citadels of patronage and arbitrary action. In a country like ours which teems with
population, where the State, is agencies, its instrumentalities and its corporations are the biggest
employers and where millions seek employment and security, to confine the applicability of the
equality clauses of the Constitution, in relation to matters of employment, strictly to direct
employment under the government is perhaps to mock at the Constitution and the people. Some
element of public employment is all that is necessary to take the employee beyond the reach of the
rule which denies him access to a court to enforce a contract of employment and denies him the
protection of Articles 14 and 16 of the Constitution. After all employment in the public sector has
grown to vast dimensions and employees in the public sector often discharge as onerous duties as
civil servants and participate in activities vital to our country's economy. In growing realisation of
the importance of employment in the public sector, Parliament and the Legislatures of the States
have declared persons in the service of local authorities, Government companies and statutory
corporations as public servants and, extended to them by express enactment the protection usually
extended to civil servants from suits and prosecution. It is, therefore, but right that the independence
and integrity of those employed in the public sector should be secured as much as the independence
and integrity of servants.

The compelling force of this reasoning in the Indian setting and constitutional matrix cannot be
missed.

32. Let us dilate a little on the living essence of constitutional fundamentals if we are not to reduce
fundamental rights to paper hopes and people's dupes ! The judicial branch shall not commit breach
of faith with the bill of rights by interpretative exoneration of the State from observance of these
founding faiths. The higher values enacted into Part III of the Constitution certainly bind the State
in its executive and legislative branches. They are constitutional guarantees to the Indian people, not
fleeting promise in common enactments. So long as they last in the National Charter they should not
be truncated in their application unless a contra-indication is clearly written into the prescription, a
la Articles 31-A, 31-B and 31-C. Article 12 is a special definition with a broader goal. Far from
restricting the concept of State it enlarges the scope to embrace all authorities under the control of
government. The constitutional philosophy of a democratic, socialist republic mandated to
undertake a multitude of socio-economic operations inspires Part IV and so we must envision the
State entering the vast territory of industrial and commercial activity, competitively or
monopolistically, for ensuring the welfare of the people. This expansive role of the State under Part
IV is not played at the expense of the cherished right of the people entrenched in Part III since both
the sets of imperatives are complementary and coexist harmoniously. Wherever the Constitution has
felt the need to subordinate Part III to Part IV it has specificated it and, absent such express
provision, both the Parts must and can flourish happily together given benign judicial
comprehension a la Kerala v. Thomas (State of Kerala v. N. M. Thomas, (1976) 2 SCC 310 : 1976
SCC (L&S) 227). There is no inherent conflict between the two parts if orchestrated humanely. We
are at pains to emphasise this perspective because the substance of Part III, save where the
Constitution says so, shall not be sacrificed at the altar of Part IV by the stratagem of incorporation.
It is well known, and surely within the erudite and experienced ken of our 'founding fathers', that
government embarks on myriad modern commercial activities by resort to the jurisprudential gift of
personification through incorporation. This contrivace of carrying on business activities by the State
through statutory corporations, government companies and other bodies with legal personality,
simplifies and facilitates transactions and operations beyond the traditional and tardy processes of
governmental desks and cells noted for their red tape exercise and drowsy dharma. But to use the
corporate methodology is not to liberate the State from its basic obligation to obey Part III. To don
the mantle of company is to free the State from the inevitable constraints of governmental slow
motion, not to play truant with the great rights. Otherwise, a cunning plurality of corporations
taking over almost every State business - the post and the rail-road, the T.V. and the radio, every
economic ministry's activity, why, even social welfare work - will cheat the people of Part III rights
by the easy plea : "No admission for the bill of rights; no State here". From Indian Posts and
Telegraphs Limited to Indian Defence Manufacturers Limited, from Social Welfare Board to
Backward Classes Corporation, the nation will be told that 'the State has ceased to be, save for the
non-negotiable sovereign functions'; and fundamental rights may suffer eclipse only to be viewed in
museum glass cases. Such a situation will be a treachery on the founding fathers, a mockery of the
Constitution and a government by puppetry because the crowd of corporations which have carved
out all functions will still be controlled completely by the switchboards of bureaucrats and political
bosses from remote control rooms in Government Secretariats. The extended definition of "the
State" in Article 12 is not to deadened but quickened by judicial construction. Before our eyes the
corporate phenomenon is becoming ubiquitous. What was archaically done yesterday by
Government departments is alertly executed today by Government companies, statutory
corporations and like bodies and this tribe may legitimately increase tomorrow. This efficiency is
not to be purchased at the price of fundamental rights. As Mathew, J., stated in v. Punnen Thomas v.
State of Kerala (AIR 1969 Ker 81 (FB) : ILR (1968) 2 Ker 1 : 1968 Ker LT 800 : 1968 Ker LT 619)
:

The government is not and should not be as free as an individual in selecting the recipients for
largess. Whatever its activity, the government is still the government and will be subject to restraints
inherent in its position in a democratic society. A democratic government cannot lay down arbitrary
and capricious standards for the choice of persons with whom alone it will deal.

                  "What's in a name ? That which we call a rose by any other name would smell as
                  sweet." (ROMEO AND JULIET, II. ii. 43) And the State is fragrant with
                  fundamental rights whatever the legal hue or jural cloak of its surrogate. And, to alter
                  the imagery, Maricha is Ravana, the misleading golden deer mask notwithstanding !

33. This Court in Airport Authority ((1979) 3 SCC 489, 503-04) pointed its unanimous finger on
these events and portents : (SCC pp. 503-04, paras 10 & 11)

Today with tremendous expansion of welfare and social service functions, increasing control of
material and economic resources and large scale assumption of industrial and commercial activities
by the State. the power of the executive Government to affect the lives of the people is steadily
growing. The attainment of socio-economic justice being a conscious end of State policy, there is a
vast and inevitable increase in the frequency with which ordinary citizens came into relationship of
direct encounter with State power-holders. This renders it necessary to structure and restrict the
power of the executive Government so as to prevent its arbitrary application or exercise ...
Today the Government in a welfare State, is the regulator and dispenser of special services and
provider of a large number of benefits, including jobs, contracts, licences, quotas, mineral rights etc.
The government purs forth wealth, money, benefits, services, contracts, quotas and licences. The
valuables dispensed by government take many forms, but they all share on characteristic. They are
steadily taking the place of traditional forms of wealth. These valuables which derive from
relationships to government are of many kinds. They comprise social security benefits, cash grants
for political sufferers and the whole scheme of State and local welfare. Then again, thousands of
people are employed in the State and the Central Governments and local authorities. Licences are
required before one can engage in many kinds of businesses or work. The power of giving licences
means power to withhold them and this gives control to the government or to the agents of
government on the lives of many people. Many individuals and many more businesses enjoy
largesse in the form of Government contracts ... All these mean growth in the governmental
functions as we move closer to a welfare State, more and more of our wealth consists of these new
forms.

We do not suggest that there is any vice at all in government undertaking commercial or other
activities through the facile device of companies or other bodies. But to scuttle Part III through the
alibi of 'company, not State' - 'ay, there's the rub !' The rationale of this proposition is well brought
out by Bhagwati, J: (Ibid., pp. 506-07) (SCC pp. 506-07, para 13)

So far as India is concerned, the genesis of the emergence of corporations as instrumentalities or
agencies of government is to be found in the Government of India Resolution on Industrial Policy
dated April 6, 1948 where it was stated inter alia that "management of State enterprise will as a rule
be through the medium of public corporation under the statutory control of the Central Government
who will assume such powers as may be necessary to ensure this". It was in pursuance of the policy
envisaged in this and subsequent resolutions on industrial policy that corporations were created by
government for setting up and management of public enterprises and carrying out other public
functions. Ordinarily these functions could have been carried out by government departmentally
through its service personnel, but the instrumentality or agency of the corporations was resorted to
in these cases having regard to the nature of the task to be performed. The corporations acting as
instrumentality or agency of government would obviously be subject to the same limitations in the
field of constitutional and administrative law as government itself, though in the eye of the law, they
would be distinct and independent legal entities. If government acting through its officers is subject
to certain constitutional and public law limitations, it must follow a fortiori that government acting
through the instrumentality or agency of corporations should equally be subject to the same
limitations.

34. Article 12 gives the cue to forbid this plea. "Other authorities ... under the control of the
Government of India" are comprehensive enough to take care of Part III without unduly stretching
the meaning of "the State" to rope in whatever any autonomous body which has some nexus with
government. A wide expansion coupled with a wise limitation may and must readily and rightly be
read into the last words of Article 12.

35. Addressing itself to the question of identifying those bodies which are agencies of
instrumentalities of government, the court, in Airport Authority (Ramana Dayaram Shetty v.
International Airport Authority of India, (1979) 3 SCC 489), observed : (Ibid., p. 507) (SCC p. 507,
para 14)

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...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, what should be the nature of such control ? Should the functions which he 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 go a long way towards indicating that the corporation is an instrumentality or
agency of government...What than are the tests to determine whether a corporation established by
statute or incorporated under law is an instrumentality or agency of government ? It is not possible
to formulate an all-inclusive or exhaustive test which would adequately answer this question. There
is no cut and dried formula which would provide the correct division of corporations into those
which are instrumentalities or agencies of government and those which are not.

36. The court proceeded to crystallise the tests to determine the 'State' complexion of corporate
bodies, beyond furnishing the full share capital : (Ibid. pp. 508-09) (SCC pp. 508-09, paras 15 &
16)

But "a finding of State financial support plus an unusual degree of control over the management and
policies might lead one to characterise an operation as State action". Vide Sukhdev v. Bhagatram
((1975) 3 SCR 619, 650 : (1975) 1 SCC 421, 454 : 1975 SCC (L&S) 101, 134 (Para 96)). So also
the existence of deep and pervasive State control may afford an indication that the Corporation is a
State agency or instrumentality. It may also be a relevant factor to consider whether the corporation
enjoys monopoly status which is State conferred or State protected. There can be little doubt that
State conferred or State protected monopoly status would be highly relevant in assessing the
aggregate weight of the corporations' ties to the State.

There is also another factor which may be regarded as having a bearing on this issue and it is
whether the operation of the corporation is an important public function. it has been held in the
United States in a number of cases that the concept of private action must yield to a conception of
State action where public functions are being performed. Vide Arthur S. Millers : The Constitutional
Law of the "Security State" : (10 Stanford Law Review 620, 664) ....If the functions of the
corporation are of public importance and closely related to governmental functions, it would be a
relevant factor in classifying the corporation as an instrumentality or agency of Government. This is
precisely what was pointed out by Mathew, J., in Sukhdev v. Bhagatram (Sukhdev Singh v.
Bhagatram, (1975) 1 SCC 421 : 1975 SCC (L&S) 101) where the learned Judge said that
"institutions engaged in matters of high public interest or performing public functions are by virtue
of the nature of the functions performed government agencies. Activities which are too fundamental
to the society are by definition too important not to be considered government functions".

BHAGWATI, J.

dwelt on the functional formula and reasoned : ((1979) 3 SCC 489, 510) (SCC p.510, para 18)

But the decisions show that even this test of public or governmental character of the function is not
easy of application and does not invariably lead to the correct inference because the range of
governmental activity is broad and varied and merely because an activity may be such as may
legitimately be carried on by government, it does not mean that a corporation, which is otherwise a
private entity, would be an instrumentality or agency of government by reason of carrying on such
activity. In fact, it is difficult to distinguish between governmental functions and non-governmental
functions. Perhaps the distinction between governmental and non-governmental functions is not
valid any more in a social welfare State where the laissez faire is an outmoded concept and Herbert
Spencer's social statics has no place....But the public nature of the function, if impregnated with
governmental character or "tied or entwined with government" or fortified by some other additional
factor, may render the corporation an instrumentality or agency of government. Specifically, if a
department of government is transferred to a corporation, it would be a strong factor supportive of
this inference.

37. The conclusion is impeccable that if the corporate body is but an 'instrumentality or agency' of
government, then Part III will trammel its operations. It is a case of quasi-governmental beings, not
of non-State entities. We have no hesitation to hold that where the chemistry of the corporate body
answers the test of 'State' above outlined it comes within the definition in Article 12. In our
constitutional scheme where the commanding heights belong to the public sector of the national
economy, to grant absolution to government companies and their ilk from Part III may be perilous.
The court cannot connive at a process which eventually makes fundamental rights as rare as "roses
in December, ice in June". (As Lord Byron lamented in English Bards and Scottish Reviewers)
Article 12 uses the expression "other authorities" and its connotation has to be clarified. On this
facet also, the Airport Authority case (Ramana Dayaram Shetty v. International Airport Authority of
India, (1979) 3 SCC 489) supplies a solution : ((1979) 3 SCC 489, 517) (SCC p. 517, para 27)

If a statutory corporation, body or other authority is an instrumentality or agency of the government,
it would be an 'authority' and therefore 'State' within the meaning of that expression in Article 12.

38. The decisions are not uniform as to whether being an instrumentality or agency of government
ipso jure renders the company or other similar body 'State'. This again involves a navigation through
precedents and Bhagwati, J. in Airport Authority (Ramana Dayaram Shetty v. International Airport
Authority of India, (1979) 3 SCC 489) has spoken for the court, after referring to Rajasthan
Electricity Board v. Mohan Lal ((1967) 3 SCR 377 : AIR 1967 SC 1857 : (1968) 1 Lab LJ 257),
Sukhdev v. Bhagatram (Sukhdev Singh v. Bhagatram, (1975) 1 SCC 421 : 1975 SCC (L&S) 101),
Praga Tool Corporation v. C. A. Immanuel ((1969) 3 SCR 773 : (1969) 1 SCC 585 : AIR 1969
1306), Heavy Engineering Mazdoor Union v. State of Bihar ((1969) 3 SCR 995 : (1969) 1 SCC 765
: AIR 1970 sc 82), S. L. Agarwal v. General Manager, Hindustan Steel Ltd. ((1970) 3 SCR 363 :
(1970) 1 SCC 177 : AIR 1970 SC 1150) and Sabhajit Tewary v. Union of India ((1975) 3 SCR 616 :
(1975) 1 SCC 485 : 1975 SCC (L&S) 99) : (SCC p. 518, para 29)

We may point out here that when we speak of a corporation being an instrumentality or agency of
government, we do not mean to suggest that the corporation should be an agent of the government
in the sense that whatever it does should binding on the Government. It is not the relationship of
principal and agent which is relevant and material but whether the corporation is an instrumentality
of the government in the sense that a part of the governing power of the State is located in the
corporation and though the corporation is acting on its own behalf and not on behalf of the
government, its action is really in the nature of State action. ((1979) 3 SCC 489, 518)

39. Let us cull out from Airport Authority (Ramana Dayaram Shetty v. International Airport
Authority of India, (1979) 3 SCC 489) the indicia of "other authorities...under the control of the
Government of India" bringing a corporation within the definition of "the State". The following
factors have been emphasised in that ruling as telling, though not clinching. These characteristics
convert a statutory corporation, a Government company, a cooperative society and other registered
society or body into a State and they are not confined to statutory corporations alone. We may
decoct the tests for ready reference : (SCC pp. 507, 508, 509 & 510)

                  1. "One thing is clear that if the entire share capital of the corporation is held by
                  government, it would go a long way towards indicating that the corporation is an
                  instrumentality or agency of government." (Para 14)

                  2. Existence of "deep and pervasive State control may afford an indication that the
                  Corporation is a State agency or instrumentality". (Para 15)

                  3. "It may also be a relevant factor....whether the corporation enjoys monopoly status
                  which is State conferred or State protected." (Para 15)

                  4. "If the functions of the corporation are of public importance and closely related to
                  governmental functions, it would be a relevant factor in classifying the corporation as
                  an instrumentality or agency of government." (Para 16)

                  5. "Specifically, if a department of government is transferred to a corporation, it
                  would be a strong factor supportive of this inference" of the corporation being an
                  instrumentality or agency of government. (Para 18)

40. The finale is reached when the cumulative effect of all the relevant factors above set out is
assessed and once the body is found to be an instrumentality or agency of government, the further
conclusion emerges that it is 'State' and is subject to the same constitutional limitations as
government.

41. This divagation explains the ratio of the Airport Authority (Ramana Dayaram Shetty v.
International Airport Authority of India, (1979) 3 SCC 489) in its full spectrum. There the main
contention was that the said authority, a statutory corporation, was not State and enforcement of
fundamental rights against such a body was impermissible. As is apparent from the extensive
discussion above, the identical issue confronting us as to what are the "other authorities"
contemplated by Article 12 fell for consideration there. Most of the rulings relied on by either side
received critical attention there and the guide-lines and parameters spelt out there must ordinarily
govern our decision. A careful study of the features of the Airport Authority and a Government
company covered by Sections 7, 9, 10 and 12 of the Act before us discloses a close parallel except
that the Airport Authority is created by a statute while Bharat Petroleum (notified under Section 7
of the Act) is recognised by and clothed with rights and duties by the statute.

42. There is no doubt that Bhagwati, J. broadened the scope of State under Article 12 and according
to Shri G. B. Pai the observations spill over beyond the requirements of the case and must be
dismissed as obiter. His submission is that having regard to the fact that the International Airport
Authority is a corporation created by statute there was no occasion to go beyond the narrow needs
of the situation and expand upon the theme of State in Article 12 vis-a-vis Government companies,
registered societies and what not. He assails the decision also on another ground, namely, the
contradiction between Sukhdev (Sukhevd Singh v. Bhagatram, (1975) 1 SCC 421 1975 SCC (L&S)
101) and Airport Authority (Ramana Dayaram Shetty v. International Airport Authority of India,
(1979) 3 SCC 489). We will examine both these contentions and, incidentally, consider what the law
laid down in the other rulings is. We are free to confess that the propositions have not been neatly
chiselled and presented in any of the rulings and further, some measure of incongruity may be
noticed if we search for the same; but our approach is not to detect contradictions but to discover a
broad consensus if there by any and distill the law in accordance therewith.

43. We may first deal with Tewary ((1975) 3 SCR 616 : (1975) 1 SCC 485 : 1975 SCC (L&S) 99)
where the question mooted was as to whether the C.S.I.R. (Council of Scientific and Industrial
Research) was 'State' under Article 12. The C.S.I.R. is a registered society with official and non-
official members appointed by government and subject to some measure of control by government
in the Minsitry of Science and Technology. The court held it was not 'State' as defined in Article 12.
It is significant that the court implicitly assented to the proposition that if the society were really an
agency of the government it would be 'State'. But on the facts and features present there the
character of agency of government was negatived. The rulings relied on are, unfortunately, in the
province of Article 31 and it is clear that a body may be 'State' under Part III but not under Part
XIV. Ray, C.J., rejected the argument that merely because the Prime Minister was the President or
that the other members were appointed and removed by government did not make the Society a
'State'. With great respect, we agree that in the absence of the other features elaborated in Airport
Authority case (Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC
489) the composition of the governing body alone may not be decisive. The laconic discussion and
the limited ratio in Tewary ((1975) 3 SCR 616 : (1975) 1 SCC 485 : 1975 SCC (L&S) 99) hardly
help either side here.

44. Shri G. B. Pai hopefully took us through Sukhdev case (Sukhdev Singh v. Bhagatram, (1975) 1
SCC 421 : 1975 SCC (L&S) 101) at length to demolish the ratio in Airport Authority (Ramana
Dayaram Shetty v. International of India, (1979) 3 SCC 489). A majority of three judges spoke
through Ray, C.J., while Mathew, J. ratiocinated differently to reach the same conclusion.
Alagiriswamy, J. struck a dissenting note. Whether certain statutory corporations were 'State' under
Article 12 was the question mooted there at the instance of the employees who invoked Articles 14
and 16. The judgment of the learned Chief Justice sufficiently clinches the issue in favour of the
petitioner here. The problem was posed thus : ((1975) 3 SCR 619, 624 : (1975) 1 SCC 421, 429 :
1975 SCC (L&S) 101) [SCC p. 427 : SCC (L&S) p. 109, para 1]

In short the question is whether these statutory corporations are authorities within the meaning of
Article 12.

The answer was phrased thus : (Ibid., p. 642 : SCC p. 447 : SCC (L&S) p. 127) [SCC p. 447 : SCC
(L&S) p. 127, para 67]

The employees of these statutory bodies have a statutory status and they are entitled to declaration
of being in employment when their dismissal or removal is in contravention of statutory provisions.
By way of abundant caution we state that these employees are not servants of the Union or the State.
These statutory bodies are "authorities" within the meaning of Article 12 of the Constitution.

Thus, the holding was that the legal persons involved there (three corporations, viz., the Oil and
Natural Gas Commission, the Industrial Finance Corporation and the Life Insurance Corporation)
were 'State' under Article 12. The reasoning adopted by Ray, C.J. fortifies the argumentation in
Airport Authority (Ramana Dayaram Shetty v. International Airport Airport of India, (1979) 3 SCC
489).
45. Repelling the State's plea that these bodies were not 'other authorities' under Article 12, Ray,
C.J. observed : (Ibid., pp. 634-635 : SCC p. 439 : SCC (L&S) p. 119) [SCC p. 439 : SCC (L&S) p.
119, paras 35 and 36]

The State undertakes commercial functions in combination with governmental functions in a
welfare State. Governmental function must be authoritative. It must be able to impose decision by
or under law with authority. The element of authority is of a binding character. The rules and
regulations are authoritative because these rules and regulations direct and control not only the
exercise of powers by the corporations but also all persons who deal with these corporations ....

The expression "other authorities" in Article 12 has been held by this Court in the Rajasthan
Electricity Board case ((1967) 3 SCR 377 : AIR 1967 SC 1857 : (1968) 1 Lab LJ 257) to be wide
enough to include within it every authority created by a statute and functioning within the territory
of India, or under the control of the Government of India. This Court further said referring to earlier
decisions that the expression "other authorities" in Article 12 will include all constitutional or
statutory authorities on whom powers are conferred by law. The State itself is envisaged under
Article 298 as having the right to carry on trade and business. The State as defined in Article 12 is
comprehended to include bodies created for the purpose of promoting economic interests of the
people. The circumstance that the statutory body is required to carry on some activities of the nature
of trade or commerce does not indicate that the Board must be excluded from the scope of the word
'State'. The Electricity Supply Act showed that the Board had power to give directions, the
disobedience of which is punishable as a criminal offence. The power to issue directions and to
enforce compliance is an important aspect.

Dealing with governmental purposes and public authorities, the court clarified : (Ibid., p. 635 : SCC
pp. 339-340 : SCC (L&S) pp. 119-20) [SCC pp. 339-40 : SCC (L&S) pp. 119-20, paras 38 and 39]

In the British Broadcasting Corporation v. Johns (Inspector of Taxes) ((1965) 1 Ch 32), it was said
that persons who are created to carry out governmental purposes enjoy immunity like Crown
servants. Government purposes include the traditional provinces of government as well as non-
traditional provinces of government if the Crown has constitutionally asserted that they are to be
within the province of government ...

A public authority is a body which has public or statutory duties to perform and which performs
those duties and carries out its transactions for the benefit of the public and not for private profit.

46. Taking up each statute and analysing its provisions the learned Chief Justice concluded : (Ibid.,
pp. 639, 641 : SCC pp. 444, 445 : SCC (L&S) pp. 124, 125) [SCC pp. 444 & 445 : SCC (L & S) pp.
124 & 125, paras 50 & 59]

The structure of the Life Insurance Corporation indicates that the Corporation is an agency of the
government carrying on the exclusive business of life insurance. Each and every provision shows in
no uncertain terms that the voice is that of the Central Government and the hands are also of the
Central Government.

                  #* * * *##

These provisions of the Industrial Finance Corporation Act show that the Corporation is in effect
managed and controlled by the Central Government.
The italicised portion pithily sums up the meat of the matter. If the voice is of the government and
so also the hands, the face will not hide the soul. There is nothing in this judgment which goes
against a Government company being regarded as 'State'. On the contrary, the thrust of the logic and
the generality of the law are far from restrictive and apply to all bodies which fill the bill.

47. Mathew, J. is more positive in his conception of 'State' under Article 12 : (Inid., pp. 644-45 :
SCC pp. 449, 450 : SCC (L&S) pp. 129, 130) [SCC pp. 449 & 450 : SCC (L&S) pp. 129 & 130,
paras 80, 82 & 84-85]

The concept of State has undergone drastic changes in recent years. Today State cannot be
conceived of simply as a coercive machinery wielding the thunderbolt of authority. It has to be
viewed mainly as a service corporation :

                  If we clearly grasp the character of the state as a social agent, understanding it
                  rationally as a form of service and not mystically as an ultimate power, we shall
                  differ only in respect of the limits of its ability to render service. (See Mac Iver, THE
                  MODERN STATE 183)

                  #* * * *##

A state is an abstract entity. It can only act through the instrumentality or agency of natural or
judicial 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.

                  #* * * *##

The tasks of government multiplied with the advent of the welfare State and consequently, the
framework of civil service administration became increasingly insufficient for handling the new
tasks which were often of a specialised and highly technical character. At the same time,
'bureaucracy' came under a cloud. The distrust of government by civil service, justified or not, was a
powerful factor in the development of a policy of public administration through separate
corporations which would operate largely according to business principles and be separately
accountable.

The public corporation, therefore, became a third arm of the government. In Great Britain, the
conduct of basic industries through giant corporation is now a permanent feature of public life.

The Indian situation is an a fortiori case, what with Part IV of the Constitution and the Government
of India Resolution on Industrial Policy of 1956 ? : [SCC p. 451 : SCC (L&S) p. 131, para 89]

Accordingly, the State will progressively assume a predominant and direct responsibility for setting
up new industrial undertakings and for developing transport facilities. It will also undertake State
trading on an increasing scale.

48. Of course, mere State aid to a company will not make its actions State actions. Mathew, J.
leaned to the view that : (Ibid., p. 650 : SCC p. 454 : SCC (L&S) p. 134) [SCC p. 454 : SCC (L&S)
p. 134, para 96]

.....State financial support plus an unusual degree of control over the management and policies
might lead one to characteristics an operation as state action.
Indeed, the learned Judge went much further : (Ibid., p. 650 : SCC p. 454 : SCC (L&S) p. 134)
[SCC p. 454 : SCC (L & S) p. 136, para 97]

Another factor which might be considered is whether the operation is an important public function.
The combination of State aid and the furnishing of an important public service may result in a
conclusion that the operation should be classified as a State agency. If a given function is of such
public importance and so closely related to governmental functions as to be classified as a
governmental agency, then even the presence or absence of state financial aid might be irrelevant in
making a finding of state action. If the function does not fall within such description, then mere
addition of State money would not influence the conclusion.

It must be noticed that the emphasis is on functionality plus State control rather than on the statutory
character of the Corporation : [SCC p. 456 : SCC (L&S) p. 136, para 102]

Institutions engaged in matters of high public interests or performing public functions are by virtue
of the nature of the function performed government agencies. Activities which are too fundamental
to the society are by definition too important not to be considered government functions.

49. We may read the ratio from the judgment of Mathew, J. where he says : (Ibid., p. 651 SCC p.
456 : SCC (L&S) p. 136) 137-38, 138-39) [SCC pp. 457-58 & 458-59 : SCC (L&S) pp. 137-38 &
138-39, paras 109 & 111]

It is clear from those provisions that the Central Government has contributed the original capital of
the corporation, that part of the profit of the corporation goes to that Government, that the Central
Government exercises control over the policy of the Corporation, that the Corporation carries on a
business having great public importance and that it enjoys a monopoly in the business. I would draw
the same conclusions from the relevant provisions of the Industrial Finance Corporation Act which
have also been referred to in the aforesaid judgment. In these circumstances, I think, these
corporations are agencies or instrumentalities of the 'State' and are, therefore, 'State' within the
meaning of Article 12. The fact that these corporations have independent personalities in the eye of
law does not mean that they are not subject to the control of government or that they are not
instrumentalities of the government. These corporations are instrumentalities or agencies of the
State for carrying on businesses which otherwise would have been run by the State departmentally.
If the State had chosen to carry on these businesses through the medium of Government
Departments, there would have been no question that actions of these departments would be 'State
actions'. Why then should the actions be not State actions ?

                  #* * * *##

...merely because a corporation has legal personality of its own, it does not follow that the
corporation cannot be an agent or instrumentality of the State, if it is subject to control of
government in all important matters of policy. No doubt, there might be some distinction between
the nature of control exercised by principal over agent and the control exercised by government over
public corporation. That, I think is only a distinction in degree. The crux of the matter is that public
corporation is a new type of institution which has sprung from the new social and economic
functions of government and that it therefore does not neatly fit into old legal categories. Instead of
forcing it into them, the later should be adapted to the needs of changing times and conditions.

50. There is nothing in these observations to confine the concept of State to statutory corporations.
Nay, the tests are common to any agency or instrumentality, the key factor being the brooding
presence of the State behind the operations of the body, statutory or other.

51. A study of Sukhdev case (Sukhev Singh v. Bhagatram, (1975) 1 SCC 421 : 1975 SCC (L&S)
101) (a Constitution Bench decision of this Court) yields the clear result that the preponderant
considerations for pronouncing an entity as State agency or instrumentality are financial resources
of the State being the chief finding source, functional character being governmental in essence,
plenary control residing in government, prior history of the same activity having been carried on by
government and made over to the new body and some element of authority or command. Whether
the legal person is a corporation created by a statute, as distinguished from under a statute, is not an
important criterion although it may be an indicium. Applying the constellation of criteria collected
by us from Airport Authority (Ramana Dayaram Shetty v. International Airport Authority of India,
(1979)3 SCC 489), on a cumulative basis, to the given case, there is enough material to hold that the
Bharat Petroleum Corporation is 'State' within the enlarged meaning of Article 12.

52. The Rajasthan Electricity Board case ((1967) 3 SCR 377 : AIR 1967 SC 1957 : (1968) 1 Lab LJ
257) (the majority judgment of Bhargava, J) is perfectly compatible with the view we take of
Article 12 or has been expressed in Sukhdev (Sukhev Singh v. Bhagatram, (1975) 1 SCC 421 :
1975) SCC (L&S) 101) and the Airport Authority (Ramana Dayaram Shetty v. International Airport
A unthority of India, (1979) 3 SCC 489). The short question that fell for decision was as to whether
the Electricity Board was 'State'. There was no debate, no discussion and no decision on the issue of
excluding from the area of 'State', under Article 12, units incorporated under a statute as against
those created by a statute. On the other hand, the controversy was over the exclusion from the
definition of State in Article 12 corporations engaged in commercial activities. This plea for a
narrow meaning was negatived by Bhargava, J. and in that context the learned Judge explained the
signification of "other authorities" in Article 12 : ((1967) 3 SCR 377, 385-86)

The meaning of the word "authority" given in WEBSTER'S THIRD NEW INTERNATIONAL
DICTIONARY, which can be applicable, is "a public administrative agency or corporation having
quasi-governmental powers authorised to administer a revenue-producing public enterprise". This
dictionary meaning of the word "authority" is clearly wide enough to include all bodies created by a
statute on which powers are conferred to carry out governmental or quasi-governmental functions.
The expression "other authorities" is wide enough to include within it every authority created by a
statute and functioning within the territory of India, or under the control of the Government of
India; and we do not see any reason to narrow down this meaning in the context in which the words
"other authorities" are used in Article 12 of the Constitution.

                  #* * * *##

These decisions of the court support our view that the expression "other authorities" in Article 12
will include all constitutional or statutory authorities on whom powers conferred may be for the
purpose of carrying on commercial activities. Under the Constitution, the State is itself envisaged as
having the right to carry on trade or business as mentioned in Article 19(1)(g). In Part IV, the State
has been given the same meaning as in Article 12 and one of the directive principles laid down in
Article 46 is that the State shall promote with special care the educational and economic interests of
the weaker sections of the people. The State, as defined in Article 12, is thus comprehended to
include bodies created for the purpose of promoting the educational and economic interests of the
people. The State, as constituted by our Constitution, is further specifically empowered under
Article 298 to carry on any trade or business. The circumstance that the Board under the Electricity
Supply Act, is required to carry on some activities of the nature of trade or commerce does not,
therefore, give any indication that the Board must be excluded from the scope of the word "State" is
used in Article 12.

The meaning of the learned Judge is unmistakable that "the State" in Article 12 comprehends bodies
created for the purpose of promoting economic activities. These bodies may be statutory
corporations, registered societies, Government companies or other like entities. The court was not
called upon to consider this latter aspect, but to the extent to which the holding goes, it supports the
stand of the petitioners.

53. We are not disposed to discuss more cases because two Constitution Benches have already
pronounced on the amplitude of "other authorities" in Article 12. Even so, a passing reference may
be made to a few more cases. In Praga Tools Corporation v. Immanuel ((1969) 3 SCR 773 : (1969)
1 SCC 585 : AIR 1969 1306) this Court was called upon to consider the enforceability of two
industrial settlements against the management which was a company with substantial shareholding
for the Union Government and the Gove rnment of Andhra Pradesh. There was no specific
reference to Article 12 as such although it was mentioned early in the judgment that the company
was a separate legal entity and could not be said to be "either a Government corporation or an
industry run by or under the authority of the Union Government". It must be noticed that 12 per cent
shares in the company were held by private individuals and other features we have referred to
earlier in this judgment. On the other hand, the short passage, part of which we have extracted,
almost suggests that a Government corporation may stand on a different footing from Praga Tools
Corporation ((1979) 3 SCR 773 : (1969) 1 SCC 545 : AIR 1969 1306). If so, it supports the view
we have taken. The Hindustan Steel case ((1970) 3 SCR 363 : (1970) 1 SCC 177 : AIR 1970 SC
1150) which was cited at the Bar, considered the question as to whether an employee of that
company was holding a post under the Union or a State so as to claim the protection of Article 311.
This claim was negatived, if we may say so, rightly. In the present case, Article 12 is in issue and
not Article 311 and, therefore, that citation is an act of super erogation. The Vaish College case
(Vaish College v. Lakhmi Narain, (1976) 2 SCR 1006 : (1976) 2 SCC 58 : 1976 SCC (L&S) 176)
which too was referred, related to the status of the managing committee of a college and the
enforceability of the contractual rights of a teacher by a writ under Article 226. That problem is
extraneous to our case and need not detain us.

54. Imagine the possible result of holding that a Government company, being just an entity created
under a stature, not by a stature, it is not 'State'. Having regard to the directive in Article 38 and the
amplitude of the other Articles in Part IV government may appropriately embark upon almost any
activity which in a non-socialist republic may fall within the private sector. Any person's
employment, travel, rest and leisure, hospital facility and funeral service may be controlled by the
State. And if all these enterprises are executed through Government companies, bureaus, societies,
councils, institutes and homes, the citizen may forfeit his fundamental freedoms vis-a-vis these
strange beings which are government in fact but corporate in form. If only fundamental rights were
forbidden access to corporations, companies, bureaus institutes, councils and kindred bodies which
act as agencies of the Administration, there may be a breakdown of the rule of law and the
constitutional order in a large sector of governmental activity carried on under the guise of 'jural
persons'. It may pave the way for a new tyranny by arbitrary administrators operated from behind by
government but unaccountable to Part III of the Constitution. we cannot assent to an interpretation
which leads to such a disastrous conclusion. We cannot assent to an interpretation which leads to
such a disastrous conclusion unless the language of Article 12 offers no other alternative.
55. It is well known that "corporations have neither bodies to be kicked, nor souls to be damned"
and Government corporations are mammoth organisations. If Part III of the Constitution is halted at
the gates of corporations Justice Louis D. Brandeis's observation wi ll be proved true :

                  The main objection to the very large corporation is that it makes possible - and in
                  many cases makes inevitable - the exercise of industrial absolutism.

It is dangerous to exonerate corporations from the need to have constitutional conscience; and so,
that interpretation, language permitting, which makes governmental agencies, whatever their mien,
amenable to constitutional limitations must be adopted by the court as against the alternative of
permitting them to flourish as an imperium in imperio.

56.The common sense signification of the expression "other authorities under the control of the
Government of India"is plain a and there is no reason to make exclusions on sophisticated grounds
such as that the legal person must be a statutory corporation, must have power to make laws, must
be created by and not under a stature and so on. The jurisprudence of Third World countries cannot
afford the luxury against which Salmond cavilled : (Salmand : JURISPRUDENCE, 1th Edn., p.51)

Partly through the methods of its historical development, and partly through the influence of that
love of subtlety which has always been the besetting sin of the legal mind, our law is filled with
needless distinctions, which add enormously to its bulk and nothing to its value, while they render a
great part of it unintelligible to any but the expert.

57. Having concluded the discussion on the amenability of the respondent-Company to Part III we
proceed to consider the merits of the case on the footing that a writ will issue to correct the illegality
if there be violation of Articles 14 and 19 in the order deducting from the pension of the petitioner
two sums of money mentioned right at the beginning.

58. We may now proceed to consider the substantial questions raised by the petitioner to invalidate
the deductions from his original pen sion on the ground of his drawal of provident fund and gratuity.
The justification for such deduction is claimed to be Regulation 16 and its antidote is urged to be a
provision in the two respective enactments relating to provident fund and payment of gratuity,
namely, sections 12 and 14.

59. The petitioner retired voluntarily under an extant voluntary retirement scheme. The quantum of
pension was regulated by that scheme. The petitioner was also a member of the statutory scheme
framed within the scope of the Employees' Provident Funds and Miscel laneous Provisions Act,
1952 and was entitled to Provident Fund payment on retirement. Likewise, he was entitled to
payment under the Gratuity Act, 1972. These were the statutory rights which he enjoyed. Being a
non-contributory member of the Pension Fund of Burmah Shell under the Trust Deed contained
many regulations. The no rmal annual pension under the regulations worked out to sum of Rs.
165.99 per month for the petitioner. Regulation 16 provided for cert ain "authorised deductions"
from the amount of pension of non-contributing members. The quantification of these deductions
was provided for in the said regulation. If these deductions were not to be made, the petitioner
would be eligible for his pension of Rs. 165.99 and Rs. 86 per month by way of Supplementary
Retirement Bene fits which, he asserted was a part of the pensionary benefits. This was being paid
by the Burmah Shell to its employees and naturally this obligation devolved on the successor second
respondent under the statutory rules framed in this behalf [Burmah Shell (Acquisition of
Undertakings of India) (Administration of Fund) Rules,1976]. But, by letter dated August 10,1973,
the petitioner was informed that a sum of Rs.56.12 would be deducted as an 'authorised deduction'
pursuant to Regulation 16 mentioned above. The cause for this was the drawal of the provident fund
amount. Likewise, when the gratuity was drawn by the petitioner, another letter dated October 24,
1973 was issued to him that there would be a further reduction of the pension. When the petitioner
complained to the appropriate authority that Burmah Shell was declining to pay the gratuity, a
direction was issued to the management to pay the sum of gratuity due. Thereupon, a further
deduction of Rs.68.81 from the monthly pension of the petitioner was effected as an 'authorised
deduction' under Regulation 16(3). The discretionary pa yment by way of retirement benefits,
namely, Rs. 86 per month was also stopped, may be because the petitioner litigatively withdrew
gratuity and provident fund. The pitiable position was that the petitioner found himself with a
miserable amount of Rs.40.06 per mo nth, a consequence directly attributable to his receiving
provident fund and gratuity amounts. Of course, legality cannot be tested on the size of the sum and
the court must examine the merits de hors any sympathy.

60. The petitioner's attempt to recover his full pension under Section 33-C(2) of the Industrial
Disputes Act failed since that jurisdiction was more than that of an executing court and there should
be a substantive order creating the obligation before enforce ment could follow.

61. The liability for the payment of full pension was that of Burmah Shell, but, by virtue of Section
3 and 4 of the Act, all the assets and liabilities vested in the Central Government and thereafter, in
the second respondent. Section 10 of the Act relates to provident fund, superannuation, welfare fund
and the like. Section 10(3) is important :

                  10. (3) The Government company in which the undertakings of Burmah Shell in
                  India are directed to be vested shall, as soon as may be after the date of vesting,
                  constitute, in respect of the moneys and other assets which are transferred to and
                  vested in, it under this section, one or more trusts having objects as similar to the
                  objects of the existing trusts as in the circumstances may be practicable so, however,
                  that the rights and interests of the beneficiaries of the trust referred to in sub-section
                  (1) are not, in any way, prejudiced or diminished.

Follow-up steps were accordingly taken and there is no quarrel over it. It is clear, therefore, that the
second respondent has ma de provision for the rights and interests, of the beneficiaries of the Trust
established by Burmah Shell for the benefit of the persons employed by it. Section 10(1) puts this
matter beyond doubt. this obligation of the second respondent is a statutory one and having regard
to the provisions of Section 11, it cannot be affected by any instrument or decree or order. The
statutory continuation of a pre-existing liability to pay pension, provident fund or gratuity, cannot be
avoided having regard to Section 10.

62. Shri Pai contends that the very root of the claim to pension is the Trust Deed which is to be read
integrally. Regulation 16 is part and parcel of the right to pension and cannot be divorced from
Regulation 13. Indeed, these regulations are so intertwined that the "authorised deductions" are an
inextricable part of the right to pension. If this approach be correct and if there be no o ther legal
prohibition in making the deductions, the conclusion is convincing that the quantum of pension
must sustain the authorised deduction immediately provident fund and gratuity are drawn. The
counter argument of Shri Parkh is that there is a statutory prohibition against any deduction from the
pension if the ground is drawal of provident fund or gratuity amount. In view of the statutory taboo
he contends, that the deduction is unauthorised even if the contract or trust may provide so. So, the
crucial question is whether there is a statutory ban on any diminution in the pension because of
provident fund and gratuity benefits ha ving been availed of. The PF Act and the Gratuity Act
contain cer tain protective provisions whose true import falls for construction and is decisive of the
point in dispute.

63. Let us assume for a moment that Regulation 16 authorises deductions and that discretionary
payments, although enjoyed by the employees, is liable to the stopped. The question is whether
Section 122 of the PF Act forbids any such reduction or deduction out of the benefits in the nature
of old age pension on the score of the payment of contribution to the provident fund, We may
extract Section 12 here for, according to Shri Parekh, the language speaks for itself :

No employer in relation to an establishment to which any scheme or the insurance scheme applies
shall, by reason only of his liability for the payment of any contribution to the Fund or the Insurance
Fund or any charges under this Act or the scheme, reduce, whether directly or indirectly, the wages
of any employee to whom the scheme of the Insurance Scheme applies or the total quantum of
benefits in the nature of old age pension, gratuity, provident fund or Life Insurance to which the
employee is entitled under the terms of his employment, express or implied.

We take the view that this benignant provision must receive a benignant construction and, even if
two interpretations are permissible, that which furthers the beneficial object should be preferred.
From that perspective, the inferece is reasonable that the total quantum of benefits in the nature of
old age pension, gratuity or provident fund, shall not be reduced by reason only of the liability of
the employer for payment of contribution to the fund. The section prevails over the Trust Deed. The
provident fund accrues by statutory force and Section 12 overrides any agreement authorising
deductions, argues Shri Parekh.

64. A similar result holds good even under the Gratuity Act. Section 14 of that Act reads thus :

                  The provisions of this Act or any rule made thereunder shall have effect
                  notwithstanding anything inconsistent therewith contained in any enactment other
                  than this Act or in any instrument or contract having effect by virtue of any
                  enactment other than this Act.

The expression "instrument" certainly covers a Trust Deed and, notwithstanding the deduction that
may be sanctioned by the Trust Deed, the overriding effect of Section 14 perserves the pension and
immunises it against any deduction attributable to the statutory payment of the provident fund. The
deduction made by the second respondent is, in that event, illegal.

65. Shri Pai argues that no reduction of retiral benefit is effected because the entitlement to pension
under Regulation 13 is itself conditioned by the clause for deduction and has no separate amplitude
de hors the 'authorised deduction' spelt out in Regulation 16. Let us examine these rival contentions.
If Regulation 16 is a provision which imposes a cut in certain eventualities it is possible to hold that
the employee has a certain pensionary right. But if he draws PF or gratuity that pension will be
pared down by a separate rule of deduction from the pension. It follows that there is no straining of
the language of the regulations to mean, firstly, a right to pension quantified in certain manner and,
secondly, a right in the management to make deduction from out of that pension if other retiral
benefits are drawn by the employee. That appears to be the pension scheme. If this be correct, there
is no substance in the argument that the pension itself is automatically reduced into a smaller scale
of pension on the drawal of provident fund or gratuity. Pension is one thing, deduction is another.
The latter is independent of pension and operates on the pension to amputate it, as it ware. If a law
forbids such cut or amputation the pension remains intact.

66. The public policy behind the provisions of sections 10,12 and 14 of the respective statutes is
clear. We live in a welfare State, in a 'socialist' republic, under a Constitution with profound concern
for the weaker classes including workers (Part IV). Welfare benefits such as pensions, payment of
provident fund and gratuity are in fulfilment of the directive principles. The payment of gratuity or
provident fund should not occasion any deduction from the pension as a "set-off". Otherwise, the
solemn statutory provision ensuring provident fund and gratuity become illusory. Pensions are paid
out of regard for past meritorious services. The root of gratuity and the foundation of provident fund
are different. Each one is a salutary benefaction statutorily guaranteed independently of the other.
Even assuming that by private treaty parties had otherwise agreed to deductions before the coming
into force of these beneficial enactments they cannot now be deprivatory. It is precisely to guard
against such mischief that the non obstante and overriding provisions are engrafted on these statutes.

67. We must realise that the pension scheme came into existence prior to the two beneficial statutes
and Parliament when enacting these legislations must have clearly intended extra benefits being
conferred on employees. Such a consequence will follow only if over and above the normal pension,
the benefits of provident fund and gratuity are enjoyed. On the other hand, if consequent on the
receipt of these benefits there is a proportionate reduction in the pension, there is no real benefit to
the employee because the Management takes away by the left hand what it seems to confer by the
right, making the legislation itself left-handed. To hold that on receipt of gratuity and provident fund
the pension of the employee may be reduced pro tanto is to frustrate the supplementary character of
the benefits. Indeed, that is why by Section 12 and 14 overriding effect is imparted and reduction in
the retiral benefits on account of provident fund and gratuity derived by the employee is frowned
upon. We, accordingly , hold that that it is not open to the second respondent to deduct from the full
pension any sum based upon Regulation 16 read with Regulation 13. If Regulation 16 which now
has acquired statutory flavour, having been adapted and continued by statutory rules, operates
contrary to the provisions of the PF Act and the Gratuity Act, it must fail as invalid. We uphold the
contention of the petitioner.

68. The only point that survives turns on the stoppage of the discretionary supplementary
pensionary benefit. What is discretionary depends on the discretion of the employer. But that power
when exercised by an agency of government like the second respondent, must be based upon good
faith and due care. If as a measure of reprisal or provoked by the drawal of gratuity, or by resort to
legal authorities, such supplementary benefit is struk off, it will case to be bona fide or valid. We
have no materiel to hold that the second respondent has independently considered this matter and so
we direct that if the supplementary benefit, it will be considered on its merits uninfluenced by
extraneous factors. We do not think it right or necessary to issue any further direction.

69. We hold that the petitioner is entitled to his full pension of Rs. 165.99. We further hold that, on
appropriate representation by him, the second respondent shall consider the grant or stoppage of the
supplementary pensionary benefit on its merits. The petition is allowed with costs which we qualify
at Rs. 2,000. Shri Parekh represents that this sum may be directed to be paid to the Legal Aid
Society in the Supreme Court. We appreciate this gesture of counsel and direct the Registry to act
accordingly.

70. Social justice is the conscience of our Constitution, the State is the promoter of economic
justice, the founding faith which sustains the constitution and the country is Indian humanity. The
public sector is a model employer with a social conscience not an artificial person without soul to be
damned or body to be burnt. The stance that, by deductions and discretionary withholding of
payment, a public sector company may reduce an old man's pension to Rs. 40 form Rs. 250 is
unjust, even if it be assumed to be legal. Law and justice must be on talking terms and what matters
under our constitutional scheme is not merciless law but humane legality. The true strength and
stability of our polity is society's credibility in social justice, not perfect legalese; and this case does
disclose indifference to this fundamental value. We are aware that, Shri G. B. Pai, for the
Management, did urge that 'principle' was involved and that settlements had been reached between
labour and management or many issues. We do appreciate the successful exercises of the
Management in reaching just settlements with its employees but wonder whether the highest
principle of our constitutional culture is not empathy with every little individual.

Pathak, J. (concurring) - I must confess to some hesitation in accepting the proposition that the
Bharat Petroleum Corporation Limited as a "State" within the meaning of Article 12 of the
Constitution. But in view of the direction taken by the law in this Court since Ramana Dayaram
Shetty v. International Airport Authority (Ramana Dayaram Shetty v. International Airport
Authority of India, (1979) 3 SCC 489) I find I must lean in favour of that conclusion. I would have
welcome d a wider range of debate before us on the fundamental principles involved in the issue
and on the implications flowing from the definition in the Companies Act, 1956 of a "Government
company", but perhaps a future case may provide that.

72. As regards the Burmah Shell (Acquisition of Undertakings of India) Act, 1976 I am unable to
see any support for the proposition in the provisions of the Act. The provisions will apply to any
Government company. they are provisions which could well have been applied to a private
corporation, if the Act had selected one for vesting the undertaking in it. Would that have made the
private corporation a "State" ?

73. On the merits of the petitioner's claim I need say no mort than I agree with my learned Brothers
that the petitioner should be granted the relied proposed by them.

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