A study on Corporations and Public Undertakings in India
Corporations and Public Undertakings in India: Overview
What are Corporations and Public Undertakings?
Corporations in India are entities registered under the Companies Act, 2013 (earlier Companies Act, 1956). They can be private or public companies, but when we refer to government corporations, these are companies owned or controlled by the government.
Public Undertakings are enterprises owned and operated by the government (either Central or State). These are also called Public Sector Undertakings (PSUs) or Government Companies.
Types of Public Undertakings
Departmental Undertakings: Managed directly by government departments.
Statutory Corporations: Established by a special act of Parliament or State Legislature (e.g., Reserve Bank of India).
Government Companies: Companies registered under the Companies Act where the government holds the majority share (e.g., Bharat Heavy Electricals Limited - BHEL).
Legal Framework
The Companies Act governs government companies.
Statutory corporations are governed by the specific statutes that create them.
Public undertakings enjoy autonomy in commercial decisions but are accountable to the government.
Various constitutional provisions and administrative guidelines regulate their functioning.
Important Issues and Case Law Related to Corporations and Public Undertakings
Key Issues:
Autonomy vs Government Control: The degree of independence enjoyed by PSUs.
Liability and Accountability: Who is liable for the corporation's acts?
Sovereign Immunity: Whether government corporations enjoy immunity.
Public Interest: Balancing commercial objectives with social welfare.
Judicial Review: Extent courts can intervene in PSU decisions.
Important Case Laws
1. S.P. Gupta v. Union of India (1981)
Facts: This case involved questions about the independence of public corporations and administrative control.
Holding: The Supreme Court observed that public corporations, though enjoying some autonomy, are essentially organs of the government and their functioning can be subject to government control.
Importance: It emphasized that PSUs are not fully independent and are part of the government's machinery. It laid down principles for judicial review of PSU functioning.
2. State of West Bengal v. Associated Contractors (1964)
Facts: The issue was about the control of the government over statutory corporations and the applicability of the doctrine of sovereign immunity.
Holding: The court held that statutory corporations created by government statutes do not enjoy absolute sovereign immunity from suit. They are subject to law like any other body.
Importance: It clarified that government corporations can be sued for their actions, subject to certain exceptions.
3. Union of India v. Azadi Bachao Andolan (2003)
Facts: Concerned the actions of government companies and their liability for tax evasion.
Holding: The Supreme Court ruled that government companies are subject to the same laws as private companies unless exempted by statute.
Importance: Reinforced the principle that government companies cannot claim special privileges to escape general laws.
4. Life Insurance Corporation v. Escorts Ltd. (1986)
Facts: The issue was regarding the status of Life Insurance Corporation (LIC), a statutory corporation, and the extent of its powers.
Holding: The Supreme Court held that LIC, as a statutory corporation, enjoys powers conferred by its statute but remains subject to general legal principles.
Importance: It clarified the nature and powers of statutory corporations.
5. Bharat Heavy Electricals Ltd. (BHEL) v. State of Uttar Pradesh (1968)
Facts: BHEL, a government company, was challenged regarding tax liability.
Holding: The court held that government companies are liable to pay taxes unless explicitly exempted.
Importance: It reaffirmed that government companies are treated like private companies in commercial matters.
6. Tata Engineering and Locomotive Co. Ltd. v. State of Bihar (1964)
Facts: The case discussed the liability of government undertakings concerning labor laws.
Holding: The court ruled that government undertakings are liable under labor laws similar to private companies.
Importance: This ensured equal application of labor laws to PSUs.
7. Government of Andhra Pradesh v. McDowell & Co. (1996)
Facts: Concerned tax immunity claims by government corporations.
Holding: The court ruled that government corporations cannot claim immunity unless specifically provided by law.
Importance: It limited the doctrine of sovereign immunity for public undertakings.
Summary of Principles Established by These Cases:
| Principle | Explanation |
|---|---|
| PSUs have limited autonomy | They are subject to government control despite some independence. |
| No absolute sovereign immunity | Government companies and statutory corporations can be sued. |
| Subject to general laws | Government undertakings follow regular commercial, tax, and labor laws. |
| Judicial review is applicable | Courts can scrutinize PSU decisions, especially if they violate law or public interest. |
Conclusion
Corporations and public undertakings in India occupy a unique space blending commercial objectives with social goals.
The courts have clarified that while these entities enjoy some privileges, they remain accountable under law.
Judicial decisions have consistently ensured that PSUs cannot claim immunity or special treatment beyond what is granted by statute.
The balance between autonomy and control is crucial for efficient functioning and accountability.
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