The State Government is not liable to pay the salary and allowances of employees of Government companies incorporated under the Companies Act.

S.N.Jha, J.

1. A significant question of law arises for decision in these two writ petitions-whether the State Government is liable to pay the salary and allowances of a Government company.

2. In C.W.J.C. No. 1718 of 1994 the petitioners are the employees of the Bihar Finished Leathers Limited, a subsidiary company of the Bihar Leather Industries Development Corporation Ltd. In C.W.J.C. No. 5015 of 1986 the petitioners are the employees of the Bihar State Agro industries Development Corporation Ltd. They, in substance, seek direction to the concerned Corporation for payment of salary etc. and further direction to the State Government to make sufficient fund available to them (Corporations) to facilitate payment. Since the writ petitions involved pure question of law, it is not necessary to set out the factual details of the cases.

3. The respondents do not deny that the petitioners or, indeed, other employees of the two Corporations are entitled to payment of salary etc. While the Corporations have taken the plea of non availability of the adequate fund-generated either from its own resources or made available by the Government, the stand of the State is that the petitioners are the employees of the Corporations, which are companies incorporated under the Companies Act and the Government can not be fastened with the liability.

4. Mr. Umesh Prasad Singh, learned Counsel for the petitioners, contended that the mere fact that the Bihar Finished Leathers Limited or the Bihar Agro industries Development Corporation Ltd. are incorporated under the Companies Act, is not conclusive of the question of liability of the State, for it is the State which is carrying on the trade and business in the grab of a company and, therefore, the ultimate liability rests with it. He submitted that Article 298 of the Constitution of India envisages and permits the Union and the States to carry on trade or business, acquire, hold and dispose of property and make contracts for any purpose. The only rider is that in case of the States, if the purpose is one with respect the which Parliament is competent to make laws, the exercise of such executive power is subject to legislation by the Parliament and vice versa. In other words, the executive power of the Union and the States extends to carrying on trade and business etc. even with respect to matters which fall within the competence of the State legislature or the Parliament, respectively and until and unless legislation is made by either Parliament or State legislature, as the case may be, neither the Union of India can restrain the States from carrying on trade and business with respect to any matter falling within their competence not the Sates can restrain Union of India from doing so with respect to matters falling within their domain. Reference was made in this connection to H. Anraj and ors. V/s. State of Maharashtra -- .

5. Mr. Umesh Prasad Singh submitted that Article 298 does not contemplate that trade or business is to be carried on or property is to be acquired, held or disposed of or the contracts are to be made only through the Departments of the Government. According to the counsel, it is open to the Government to carry on trade or business etc. either directly through Departments of the Government or form company and do the same through it. And where it is found that the control of the State or Union, as the case may be, is all-pervasive, no distinction can be made between carrying on trade or business directly through Department or doing the same through at Government company. Counsel in this connection referred to the Rules of Executive Business framed under Article 166 (3) of the Constitution by the Governor of Bihar. Pointed reference was made to Rule 5 of the said Rules which lays down that, "the business of the Government shall be transacted in the Departments specified in the First Schedule and shall be classified and distributed between those Departments as laid down therei