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2002(1) Supreme 59
SUPREME COURT OF INDIA
(From Karnataka High Court)
G.B. Pattanaik and Doraiswamy Raju, JJ.
The Mysore Paper Mills Ltd. -Appellant
versus
The Mysore Paper Mills Officers Association and Anr. -Respondents
Civil Appeal Nos. 5247-5248 of 1998
Decided on 8-1-2002
Counsel for the Parties :
For the Appearing Parties : L. Nageswara Rao, and Ranjit Kumar, Senior Advocates, K.C. Sudarshan, M.A. Chinnesamy, Jayanth Muthraj, E.M.S. Anam and Fazlin Anam, Advocates.
Held : A careful consideration of the principles of law noticed supra and the factual details not only found illustrated from the memorandum as well as Articles of Association of the appellant but enumerated from the day-to-day running of the business and administration of the company leave no room for any doubt as to the identity of the appellant-company being "other authority" and consequently "the State" within the meaning of Article 12 of the Constitution of India. The said definition has a specific purpose and that is part III of the Constitution, and not for making it a Government or department of the Government itself. This is the inevitable consequence of the other authorities being entities with independent status distinct from the state and this fact alone does not militate against such entities or institutions being agencies or instrumentalities to come under the net of Article 12 of the Constitution. The concept of instrumentality or agency of the Government is not to be confined to entities created under or which owes its origin to any particular statute or order but would really depend upon a combination of one or more of relevant factors, depending upon the essentiality and overwhelming nature of such factors in identifying the real source of governing power, if need be, by piercing the corporate veil of the entity concerned. The indisputable fact that the appellant-company is a Government company as envisaged in Section 617 attracting Section 619 of the Companies Act, that more than 97 of the share capital has been contributed by the State Government and the financial institutions controlled and belonging to the Government of India on the security and undertaking of the State Government, that the amendments introduced to the Memorandum of Association in the year 1994 introducing Articles 5A and 5B, entrusts the appellant-company with important public duties obligating to undertake, permit, sponsor rural development and for social and economic welfare of the people in rural areas by undertaking programmes to assist and promote activities for the growth of national economy which are akin and related to the public duties of the State, that out of 12 directors 5 are Government and departmental persons, besides other elected directors also are to be with the concurrence and nomination of the Government and the various other form of supervision and control, as enumerated supra, will go to show that the State Government has deep and pervasive control of the appellant company and its day-to-day administration, and consequently confirm the position that the appellant-company is nothing but an instrumentality and agency of the State Government and the physical form of company is merely a cloak or cover for the Government. Despite best and serious efforts made on behalf of the appellant, the decision under challenge has not been shown to suffer any infirmity whatsoever to call for interference in our hands. The appeals, therefore, fail and shall stand dismissed. No costs. (Paras 11, 12 & 13)
JUDGMENT
Raju, J.-The above appeals have been filed by the Mysore Paper Mills Ltd. (hereinafter referred to as the Appellant-Company against the judgment of a Full Bench of the High Court of Karnataka dated 12.8.98 in W.A. Nos. 1242-1243, insofar as it was held therein that the appellant-company is "State" within the meaning of Article 12 of the Constitution of India, though, their appeals against the order of the Single Judge came to be allowed on the ground that impugned order of transfer against the 2nd respondent was not shown to be vitiated by malafides or by any extraneous considerations and that the respondents have no legal right to challenge the said order of transfer made on administrative grounds, when plea of alleged malafides and vindictiveness has not been substantiated.
2. The second respondent, said to be a Post-Graduate in Chemistry joined the services of the appellant-company on 10.8.91 as Management Trainees and after successive career prospects came to be promoted as senior Superintendent (D.M. Plant) which came to be redesignated as Assistant manager (D.M. Plant) on 7.9.91. By a memorandum bearing reference No. FPA/TRF/97/384 dated 27.11.97 he was transferred to the regional office Calcutta. The said order came to be challenged as vitiated by malafides and illegality and one made with a view to victimize and prevent him from functioning as an Executive Member of the M.P.M. Officers Association. Certain allegations to support such a claim were also made, and it is not necessary to advert to all those details, in view of certain subsequent developments and turn of events. In the Writ Petition filed by the respondents, a learned Single Judge of the High Court by an order dated 4.3.98 granted stay of the order of transfer dated 27.11.97 confirming thereby the ex-parte interim order of stay earlier granted on 24.2.98 and rejecting the application of the appellant company for vacating the same. Before the Division Bench, at the time of initial hearing of the appeals the two grounds of challenge urged were:
(i) The Writ Petitions filed were not maintainable against the appellant-company, since it is not a State or other authority within the meaning of Article 12 of the Constitution of India and (ii) the order of transfer was quite in accordance with the terms and conditions of contract of service as well as Officers Service Rules and necessitated on account of the exigencies of work and the interests of business of the appellant-company and therefore not vitiated due to any malafides or other extraneous considerations, as alleged. Since, in certain earlier decisions of the Division Bench, the appellant-company was held to be not "State" within the meaning of Article 12 and it was considered to require reconsideration in the light of certain decisions of this Court, the matter was referred to a Full Bench for consideration.
3. Before the Full Bench, the following questions were taken up for consideration:
(1) Whether the Mysore Paper Mills which is a company incorporated under the Companies Act, 1956, and which is a Government Company as defined in Section 617 of the Companies Act falls within the meaning of the word "State", as defined in Article 12 of the Constitution of India?
(2) Whether the action taken by the appellant-company transferring the 2nd respondent to Calcutta under the memo bearing No. FPA/TRF/384 dated 27.11.97 is vitiated by malafides and whether it is arbitrary and illegal?
4. On a review and consideration of the case law on the subject, the Full Bench, in the judgment under challenge, noticed the various tests laid down by this Court and proceeding to consider the status of the appellant-company in the light of those tests and adverting as well to the memorandum of Association and Articles of Association of the appellant-company and the day-to-day administration of its affairs, held as hereunder:
"(a) That the appellant-c
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