A comaparative study on public corporations and public undertakings
Comparative Study: Public Corporations vs Public Undertakings
1. Definitions
Public Corporation
A public corporation is a government-established entity formed by a special statute or legislation.
It has a distinct legal identity separate from the government.
It performs commercial or non-commercial activities.
Typically enjoys autonomy in management but accountability to government.
Examples: Reserve Bank of India, Life Insurance Corporation (LIC).
Public Undertaking
A public undertaking refers to any enterprise or business owned, controlled, or substantially financed by the government.
It may or may not have a separate legal identity.
Generally, a broader term including government departments, agencies, or corporations.
Example: A government-owned factory or public transport service.
2. Key Characteristics
| Feature | Public Corporation | Public Undertaking |
|---|---|---|
| Creation | By a specific statute | By government resolution or statute |
| Legal Entity | Separate legal entity | May or may not have separate entity |
| Autonomy | Generally autonomous | Controlled directly by government |
| Purpose | Public welfare + commercial activities | Mostly commercial or service provision |
| Funding | Mainly self-financed, but government-funded | Fully or partially government-funded |
| Management | Board of directors | Government officials or managers |
| Accountability | To legislature and courts | Direct government control and legislature |
3. Legal Framework and Judicial Review
Public Corporations
They enjoy immunity from certain government controls but are accountable under the law.
Courts have intervened when public corporations exceed their powers or violate statutory duties.
Public Undertakings
Subject to government control and policies.
Courts may intervene if government actions violate statutory or constitutional principles.
4. Case Laws on Public Corporations and Public Undertakings
1. Bharat Singh v. Union of India (1976)
Facts: The court examined whether a government-owned undertaking is entitled to sovereign immunity.
Holding: It held that government undertakings engaged in commercial activities do not enjoy sovereign immunity.
Significance: Distinguished government functions from commercial activities for liability purposes.
2. Rajasthan State Road Transport Corporation v. Krishna Kant Sharma (1969)
Facts: The court analyzed whether a state road transport corporation is subject to the Industrial Disputes Act.
Holding: Held that the public corporation engaged in commercial activities is subject to labor laws like private entities.
Significance: Established that public corporations operating commercially are liable under general laws.
3. Union of India v. Delhi High Court Bar Association (2001)
Facts: Concerned the extent of autonomy and government control over public corporations.
Holding: The Supreme Court held that public corporations have functional autonomy but remain accountable to the government.
Significance: Clarified the balance between autonomy and accountability.
4. State of West Bengal v. Kesoram Industries Ltd. (2004)
Facts: Dispute regarding government control over public undertakings and whether directions issued by the government are binding.
Holding: The Court emphasized that government control over public undertakings is valid unless statutory provisions provide otherwise.
Significance: Affirmed government’s control rights over public undertakings.
5. Life Insurance Corporation of India v. Escorts Ltd. (1986)
Facts: The court dealt with the powers of LIC (a public corporation) in acquiring shares in private companies.
Holding: The court held that LIC enjoys autonomy in its business decisions within the framework of law.
Significance: Reinforced the independent functioning of public corporations despite government ownership.
6. New India Assurance Co. Ltd. v. Union of India (2006)
Facts: The issue was whether a public corporation can be considered an “instrumentality of the state” for the purpose of writ jurisdiction.
Holding: The Court ruled that public corporations can be subject to writ jurisdiction if they perform public functions.
Significance: Expanded judicial oversight over public corporations acting as state instruments.
7. Food Corporation of India v. Kamal Singh (1978)
Facts: The Food Corporation was challenged on the grounds of its administrative autonomy.
Holding: The Court held that public corporations are subject to government policies but have discretion in operational matters.
Significance: Demonstrated the balance between operational independence and government control.
5. Differences Summarized
| Aspect | Public Corporation | Public Undertaking |
|---|---|---|
| Created by | Special Act | Government policy or statute |
| Legal personality | Separate legal entity | May lack separate legal identity |
| Degree of autonomy | Higher autonomy | Lesser autonomy |
| Accountability | To legislature and courts | To government and legislature |
| Subject to writs? | Yes, if performing public functions | Yes, depending on the control and role |
6. Conclusion
Public corporations enjoy a greater degree of independence and operate with a distinct legal identity, designed to balance public accountability with efficient business operations.
Public undertakings encompass a wider category, often directly controlled by the government, and may not have separate legal status.
Both are subject to judicial review, especially when acting ultra vires, violating statutory mandates, or infringing constitutional rights.
The judicial trend has been to uphold the autonomy of public corporations in their commercial role but insist on accountability and adherence to law.
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