very Important Point
The protection by way of sanction u/s. 197 Cr.P.C. 1973 is not applicable to the officers of the Government Companies or the public sector undertakings even when such Government Companies or public sector undertakings are ‘State’ within the meaning of Article 12 of the Constitution on account of deep and pervasive control of the Government.

Headnote:Criminal Procedure Code, 1973 -Section 197-Sanction to prosecute public servants-Constitution of India-Article 12-Public sector undertaking or Government Co. is ‘State’-Officers of public sector undertakings or the Government Companies committing offences having reasonable and rational nexus with official duties-Whether for prosecuting such officers, sanction u/s. 197 Cr.P.C. is warranted or not even though the concerned officer of the public sector undertaking or the Government Co. being State u/Art. 12 of the Constitution is removable from office by or with the sanction of the Government-(No) (Cr.P.C. 1973-Section 2(4) r/w Section 21 IPC) case law discussed.
       Held : Although the instrumentality or agency with a corporate veil, for all intents and purposes may be held to be a third arm of the government and such instrumentality discharges the duties and functions which the State intends to do as indicated in Ajay Hasia’s case (supra), such instrumentality or agency is none the less juridical person having a separate legal entity. Therefore, such instrumentality must be held to have an independent status distinct from the State and cannot be treated as a government department for all purposes. Therefore, even if an officer of such instrumentality or agency takes or receives, keeps or expends any property or executes any contract, such acts even though in ultimate analysis may be held to have been done in the interest of the State, such action cannot be construed, as of rule, an action of the government by its employees or by an authority empowered by the government. It may be indicated here that it is not necessary that persons falling under any of the descriptions given in various clauses under Section 21 of IPC need to be appointed by the government. If such person falls under any of the descriptions as contained in various clauses of Section 21 of the Indian Penal Code, such person must be held to be a public servant. Explanation 1 of Section 21 indicates that persons falling under any of the above descriptions are public servants whether appointed by the government or not Explanation 2 indicates that wherever the words ‘public servant’ occur, they shall be understood of every person who is in actual possession of the situation of a public servant, whatever legal defect there may be in his right to hold that situation. Sub clause (b) of clause twelve of Section 21 expressly makes the officers of local authority and corporation established by or under a Central. Provincial or State Act or a government owned company as defined in Section 617 of the Companies Act, 1956, public servants. But protection under Section 197 Cr.P.C. is not available to a public servant unless other conditions indicated in that Section are fulfilled. (Para 21)
       It is to be noted that though through the contrivance or mechanism of corporate structure, some of the public undertakings are performing the functions which are intended to be performed by the State, ex facie, such instrumentality or agency being a juridical person has an independent status and the action taken by them, however important the same may be in the interest of the State cannot be held to be an action taken by or on behalf of the government as such within the meaning of Section 127 Cr.P.C. (Para 22)
       For the purpose of enforcing the fundamental rights, the public undertakings which, on account of deep and pervasive control, can be held to be a State within the meaning of Article 12 has been treated at par with the government department out in all its facets, public undertaking has not been equated with the department run directly by the government. It was on this account that the Surgeon appointed in Hindustan Steel Works Ltd. has not been equated with the government servant for the purpose of applicability of Article 311 of the Constitution. In Praga Tool’s case (supra), even though Praga Tools was held to be an instrumentality or agency of the State, it has been indicated by this Court that Praga Tools Corporation had a separate legal existence and being a juridical person cannot be held to be a government concern run by or under the authority of the government. Similar view was taken by the Patna High Court in Sindhri Fertilizer’s case (supra) by indicating that even though the said concern was completely owned by the President of India who could also issue directions and the Directors were to be appointed by the President of India, in the eye of law, the company was a separate legal entity and had a separate legal existence. Such decision of Patna High Court has been approved by this Court. In Dhonoa’s case (supra), an IAS officer, when on deputation to a public undertaking having deep and pervasive control of the State, was not held to be a government officer entitled to protection under Section 197 of the Code of Criminal Procedure, even though such officer did not cease to be a government servant and had a lien in government service while on deputation. The protection which a government department was entitled to has also not been given to the Hindustan Steel Works Ltd. in K. Jaymohan’s case (supra). (Para 23)
       The importance of the public undertaking should not be minimised. The government’s concern for the smooth functioning of such instrumentality or agency can be well appreciated but on the plain language of Section 197 of the Code of Criminal Procedure, the protection by way of sanction is not available to the officers of the public undertaking because being a juridical person and a distinct legal entity such instrumentality stands on a different footing than the government departments. (Para 24)
       It is also to be indicated here that in 1973, the concept of instrumentality or agency of State was quite distinct. The interest of the State in such instrumentality or agency was well known. Even then, the legislature, in its wisdom, did not think it necessary to expressly include the officers of such instrumentality or the government company for affording protection by way of sanction under Section 197 Cr.P.C. (Para 25)
       It will be appropriate to notice that whenever there was felt need to include other functionaries within the definition of ‘public servant’, they have been declared to be ‘public servants’ under several special and local acts. If the legislature had intended to include officers of instrumentality or agency for bringing such officers under the protective umbrella of Section 197 Cr.P.C., it would have done so expressly. (Para 26)
       Therefore, it will not be just and proper to bring such persons within the ambit of Section 197 by liberally construing the provisions of Section 197. Such exercise of liberal construction will not be confined to the permissible limit of interpretation of a statute by a court of law but will amount to legislation by Court. (Para 27)
       Held finally : Therefore, in our considered opinion, the protection by way of sanction under Section 197 of the Code of Criminal Procedure is not applicable to the officers of Government Companies or the public undertakings even when such public undertakings are ‘State’ within the meaning of Article 12 of the Constitution on account of deep and pervasive control of the government. The appeals are disposed of accordingly. (Para 28)

Judgment

G.N. Ray, J.-The common question of law that arises in all these matters is whether the provisions of sanction under Section 197 of the Code of Criminal Procedure, 1973 are applicable for prosecuting officers of the public sector undertakings or the Government Companies when on account of deep and pervasive control of finance and administration of such undertakings and government companies, they are held as State within the meaning of Article 12 of the Constitution of India?

2. It will be appropriate at this stage to refer to the provisions of Section 197 of the Code of Criminal Procedure:-

Section 197: Prosecution of Judges and Public Servants-(1) When any person who is or was a Judge or Magistrate or a public servant not removable from his office save by or with the sanction of the Government is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duty, no Court shall take cognizance of such offence except with the previous sanction-

(a) in the case of a person who is employed or as the case may be, was at the time of commission of the alleged offence employed, in connection with the affairs of the Union, of the Central Government:

(b) in the case of person who is employed or as the case may be, was at the time of commission of the alleged offence employed, in connection with the affairs of a State, of the State Government:

Provided that where the alleged offence was committed by a person referred to in Clause (b) during the period while a proclamation issued under Clause (1) of Article 350 of the Constitution was in force in a State, Clause (b) will apply as if for the expression “State Government” occurring there, the expression “Central Government” were substituted.

(2) No Court shall take cognizance of any offence alleged to have been committed by any member of the Armed Forces of the Union while acting or purporting to act in the discharge of his official duty except with the previous sanction of the Central Government.

(3) ..........

(4) .........

Under the aforesaid provisions, in respect of prosecution of an accused who was or is a Judge or Magistrate or a public servant and not removable from his office save by or with the sanction of the government and if such person is accused of any offence alleged to have been committed by him while acting or purporting to act in the official discharge of his duties, no Court would take cognizance of such offence except with the previous sanction as enumerated in Clauses (a) and (b) of sub-section (1) of Section 197 of the Code of Criminal Procedure. For the purpose of requirement of sanction under Section 197 of the Code of Criminal Procedure, the accused will not only be a public servant but he will be such public servant who can not be removed from his office except by or with the sanction of the Government. Further, the accused will not only be a public servant of above description but the offence alleged to have been committed by such officer must have been committed while such public servant had been acting or purporting to act in the discharge of his official duties.

3. It is, therefore, necessary to analyse whether an officer of public sector undertakings or the government companies being State within the meaning of Article 12 of the Constitution, who under the terms of the appointment or the articles of the association of the government companies are removable from their respective office save by the sanction of the government when the offence alleged against them had been committed while acting or purporting to act in the discharge of official duties.

4. What acts can be alleged to have been committed by a public servant while acting or purporting to act in the discharge of his official duties is a vexed question and had often troubled various courts including this Court. Broadly speaking, it has been indicated in various decisions of this Court

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1998 Supreme(SC) 541

Cases Referred (7)