Lec-XIII]__ Public Undertakings and Public Corporations _129 Nevertheless, a Writ of mandamus would be issued against a Government Company to enforce a statutory or public duty required by the statute (Praga Tools Corp. vs. C.A.Jmmanuel, ATR 1969 SC 1306). Accordingly, the Kerala High Court issued a Writ against a Government Company when it acted in violation of statutory duty imposed upon it by the Import and Export Control Act, 1947 in matters of regulation of import and export in cashewnuts (K.L.Mathew vs. Union of India, AIR 1974 Kerla). A number of huge projects are being run as Government Companies rather than statutory Corporations, E.g.: Hindustan Steel Ltd., Heavy Engineering Corporation; Mining and Allied Machinery Corporation; Steel Authority of India; Fertilizer Corporation; Hindustan Antibiotics, Cement Corporation; State Trading Corporation of India etc. iii, Public Corporation:— It is discussed below in detail. 2. Public Corporations or Statutory Corporations Meaning:— A public corporation may be taken to mean a body created by or under a statute and entrusted with various functions of public importance and owned or controlled by the State. It is an artificial person being created by law havin; separate and distinct from the individuals wl capacity of continuous existence and succ: changes in its membership. The public corporation) has both the features of a Gove business company. ig legal entity entirely ho compose it with the ession notwithstanding corporation (statutory mment Department and Definition:— There is no precise definition to the expression corporation’ either in the statutes or in the judicial decisions, Public corporation means a body established by or under a statute and is ‘ and which is entrusted with various developmental, managerial, or economic functions of public importance.| Lec-XUL 130 Lectures on Administrative Law. [Lec a sated b A Pubic Corporation may be defined as an agency cre ated by running a service on behal y with funds of its own no regular form and no ‘ent to confer corporate tram (AIR 1975 sc If of the government, and largely specialised a statute of legislature but as an independent legal entit autonomous in management. It has function. It is employed wherever it is conveni personality. In Sukhdev Singh vs, Bhaga 1331), Mathew, J, elucidates: ublic Corporation is a new type ocial and economic es not neatly fit into the latter should The crux of the matter is that P of institution which has sprung from the new s\ functions of government and that it therefore dot tegories. Instead of forcing it into them, needs of changing times and conditions. 3: A Public Corporation is a legal d always under legal old legal be adapted to the Garner rightly enunciate: entity established normally by Parliament ani authority, usually in the form of a special statute charged with the duty of carrying out specified governmental functions in the national interest, those functions being confined to a comparatively restricted field, and subjected to control by the Executive, while the Corporation remains juristically an independent entity nor directly responsible to Parliament. In Halsbury’s Laws of England a Corporation is defined as ‘a body of persons or an office which is recognised by law as having a personality which is distinct from the separate personalities of the members of the body or the personality of the individual holder for the time being of the office in question. A Corporation is defined in Dhanoa vs. Municipal Corporation, Delhi (ATR 1981 SC 1395) in the following terms: A Corporation is an artificial being created by law having legal entity entirely separate and distinct from the individuals who compose it with the capacity of continuous existence and succession notwithstanding changes in its membership. In addition, it posseseds the capacity as such legal entity of taking, holding and conveyin; property, entering into contracts, suing and being sued, and exercisingLec-XI1]__Public Undertakings and Public Corporations 131 such other powers and privileges as may be conferred on it by the law of its creation just as a natural person may. Characteristies:— A Public Corporation is a ‘hybrid organism’, since it contains/comprises of both the features of a Government department and of a business company. A Public Corporation whether created by or under a statute possesses the following characteristic features: i iti, vi. A Public Corporation is created by or under a statute. It Operates an activity on behalf of the government in public interest. It discharges functions of a government character. A Public Corporation possesses an independent corporate personality. It is a body corporate with perpetual succession and common seal. It can sue and be sued in its corporate name. A Public Corporation has those rights and exercises those functions entrusted to it by its constituent statute by which itis created. Any action of such Corporation not expressly or impliedly authorised by the statute is ultra vires and cannot bind the Corporation. Such ultra vires action has no legal effect whatsoever. A Public Corporation can possess, hold and dispose of property by its corporate name. Depending on the provisions of the statute by or under which a public Corporation is created such Corporation is by and large an autonomous body. The Corporation is its own master in day-to-day management and administration. The constituent statute may delegate rule-making power to a Public Corporation. Such rules, regulations and bylaws are binding and enforceable unless they are ultra vires the enabling Act and the Constitution of India. A Public Corporation created by or under a statute is a ‘State’ within the definition of the term in Article 12 of the132 3. i c-XI1 Lectures on Administrative Law [Le j Jrit jurisdiction Constitution, and therefore, is subject to the ae a eh of the Supreme Court under Article 32 an ° Courts under Article 226 of the Constitution. ‘Civil viii. Employees of a Public Corporation do not hold a ‘Civi Post’ under the Union or the State within the meaning of Part XIV of the Constitution of India. ix. A Public Corporation is not a ‘citizen’ within the meaning of Part II of the Constitution and therefore, it cannot claim the benefits of those Fundamental Rights, which have been guaranteed only to the citizens. x. Since a Public Corporation is neither a department nor an organ of the government, it cannot claim the privilege of the government to withhold documents. Classification of Public Corporations Basing on the nature of work undertaken, Public Corporations may be classified into 4 categories as follows: The above classification dominant objective of the conc i. Commercial Corporations; ii, Development Corporations; iii, Social Services Corporation; and iv. Financial Corporation. is not watertight and is based on the emed undertaking. Commercial Corporations: — those Corporations, which ¢: industrial functions. State Trading Corporation, Hindustan Machine Tools Ltd., Indian Airlines Corporation and Air India are some of the Commercial Corporations, Development Corporations: — This classification includesLec-XIII]__ Public Undertakings and Public Corporations 133 ot Smal Industries Corporation, Damodar Valley ena iver Boards, Warchousing Corporations, eRe eee Development Corporation Ltd., a n Housing Corporation Ltd., etc. are Development Corporations. iil. Social Service Corporations: — Corporations which have been created for the purpose of providing certain essential services to the people, like transportation, electricity, communications, energy, etc. are social services Corporations. This objective of such Corporations is to provide services to the community economically and efficiently and earning profits is not the primary aim. Hospital Boards, Employees’ State Insurance Corporation, Housing Board, etc. are included under this classification. Financial Corporations:— Under this classification one may include such Corporations as Reserve Bank of India, State Bank of India, Industrial Finance Corporation, Life Insurance Corporation of India, Film Financing Corporations, Industrial Reconstruction Bank, Unit Trust of India, etc. These bodies advance loans to institutions carrying on trade, business or industry on such terms and conditions as may be agreed upon. 4. Reasons for Growth of Public Corporations Following are the main reasons for the growth and development of the Public Corporations: The main reason for its tremendous growth is the change in the government philosophy from the ‘laissez fair’ concept to the ‘social welfare state’. The multifarious functions of the modern welfare state cannot be discharged through the government departments alone. Thus for doing various functions of the government a number of public corporations have been created. ii. The Directive Principles of State Policy [Art.38 (b) (c)] which requires the state to adopt a policy towards securing ey134 iti, Lectures on Administrative Law [Lec-XIII the ownership and control of material resources of the community are so distributed as best to serve the common good, and the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. To achieve this goal the government has also entered the commercial world through various public corporations. The Industrial Policy Resolution, 1948 of the government was strongly in favour of public corporations for the management of state enterprises. Administrative Reforms Commission, 1967 also recommended the creation of public corporations for government’s commercial activities. 5. Working of Public Corporations The Constitution, structure, functions, powers and duties of the public corporations can be better understood by the survey/study of the actual working of a few public corporations as detailed below: 44. Life Insurance Corporation of India (L.L.C). ii. Ati . Oil and Natural Gas Commission (O.N.G.C). iv. i vi. A. viii. Reserve Bank of India (R.B.1). State Bank o India (S.B.1). Road Transport Corporation RTC). _ State Trading Corporation (S.T.C). Air Corporations. Damodar Valley Corporation (D.V.C). Rehabilitation Finance Corporation. Broadcasting Corporation of India. Life Insurance Corporation of India (L.LC):— The Life Insurance Corporation of India has been established by the Life Insurance Corporation Act, 1956 to carry on the business of Life Insurance which has beenLee-XIII]_Publi dertakings and Public Corporations 135 Nationalised. Itis at 5 ws body Corporate with perpetual ucces ion and common seal. It can acquire, hold and dispose of property. It can sue and be sued The Corporation is constituted of such number of persons not exceeding sixteen as the Central Government may think fit to appoint. It has a Central Office and a number of Zonal Offices. It enjoys exclusive privilege of carrying on Life Insurance business in India. Under the Act, the Corporation is required to develop the business to the best advantage of the community. The Central Government is empowered to give directions in writing in the matters of policy involving public interest. The Corporation shall be guided by such directions. The Corporation is an autonomous body as regards its day- to-day management and administration. It is an independent institution free from ministerial control as to broad guidelines of policy. Reserve Bank of India (R.B.I):— The Reserve Bank of India was established under the Reserve Bank of India Act, 1934. It was Nationalised in 1948 by the Reserve Bank (Transfer of Public Ownership) Act, 1948. It is a body corporate with perpetual succession and common seal. It is a legal entity. It can sue and be sued. It is managed by a Board of Directors, consisting of a Governor, two Deputy Governors and a number of Directors. The Governor and Deputy Governors are whole-time employees. They are appointed by the Central Government y receive such salaries and for a term of five years. They ; allowances as may be fixed by the Board with the approval" of the Central Government. The Reserve Bank has been given extensive powers over the Banking business in India by the Banking Companies Act, 1949. It is empowered to grant licences without whichint AAUUTES On Administrative Law [Lec-X1T so Company can carry on Banki + « Ing business, Before giving such licence, it can Inquire into back to its depositors, It can cancel a licence on the ground that the conditions specified therein had not been complied with, Broad dise} etionary powers have been conferred on the Reserve Bank. It determines the policy relating to Bank advances frames proposals for amalgamation of two or more Banks. Representation may be made by it to suspend the operation of the Banking Companies Act. In case of emergency, the Governor of the Bank is empowered to suspend the operation of the Act for 30 days. The Courts have upheld the validity of these broad discretionary powers. —_ State Bank of India (S.B.I):— The State Bank of India was created by the State Bank of India Act, 1955 to carry on Banking business under Government Control. It follows the policies laid down by the Central Government. The Central Government determines the policies in consultation with Governor of Reserve Bank and Chairman of the State Bank. The decision of the Central Government is final on matters of policy in public interest, Oil and Natural Gas Commission (O.N.G.C):— The Oil and Natural Gas Commission has been set up by the Oil and Natural Gas Commission Act, 1959, for the development of petroleum resources. It isa body corporate and enjoys perpetual succession and common seal. It can sue and be sued. It has power to hold and dispose of property. The Commission consists of the Chairman and two or more members not exceeding eight. All are to be appointed by the Central Government, Except the Finance Minister,“0 Public Corporations 137 others ma ‘i Y be pa: ™e or full-tim member may be Temoved by the Ca « members, giving a show-cause Notice ang ae of being heard, ~. 8 feason: Any ‘Overnment after able pPortunity The Commission S funds and all i . . , Tec Commission are credited thereto and expenditures ra rae - a S of the Commission are made therefrom, It also i account with the R di . ere in approval of the Ce 2 Come tte Prior borrow money, n has its Own The functions of the Commission Tange from planning, Promotion, organisation or ; ; ‘ation of programs for the development of petroleum Tesources to production and within the meaning of the aforesaid Act. Road Transport Corporations (R.T.C):— The Road Transport Corporation Act, 1950 empowers State Governments for the incorporation of Road Transport Corporations in which the Central and State Governments are to be properly represented, for the Purpose of improving Road Transport facilities, E.g.: Gujarat State Road Transport Corporation. A Road Transport Corporation is managed bya Chief Executive Officer, a General Manager and a Chief Accountant who are appointed by the State Government for constituting the Corporation. The capital is contributed in part by the Central Government, while the penning Capital is borne by the State Government ae iin Proportions as agreed. The capital can be raised byvi, Lectures on Administrative Law [Lec-XIII Corporation by issuing non-transferable eee te Capital, Shares and dividends are guaran’ Government. h The Corporation is a legal entity and independent of t ; State Government. It is a body corporate with perpetua succession and a common seal. It can sue and be sued in its corporate name. The employees are public servants within the meaning of Sec.21 of the Indian Penal Code, and not Civil Servants within the meaning of Articles 311 of the Constitution. As regards function, the Corporation is required to provide efficient, adequate, economical and a properly co-ordinate system of Road Transport Services in the Country. It has Power to acquire, hold and dispose of property. It can borrow money subject to approval of the State Government, State Trading Corporation (S.T.C):— State Trading Corporation of India is a Governme: wholly owned by the Government. Al by the Central Government and tw Government of India. nt Company. It is I the shares are held ‘© Secretaries of the The object of the Corporation as stated in the memorandum of the association is to or; ‘anise and undertake generally untries and also other Countries Itis neither a departme: G of India. Its functions © Sovernment are commercial in nature,viii. It] Public Undertaki: 8S and Publi Air Corporati panne - 10: 7 i established two corporate ee ¢ ions, called ‘ i. Maia rporat led ‘Indian Airlines’ and Fen vationte ae This Act was enacted with the : existing airlines in I object in India. Each poration 1s managed by a Board of Directors and the Chairman of each A co : : Government. Tporation is appointed by the Central ns 139 It is the function of each Corporation to provide safe. efficient, adequate, economical and properly co-ordinate an transport services, whether national or international or both. However, in discharging its duties, each corporation is to act on business principles. Damodar Valley Corporation:— Damodar Valley Corporation (D.V.C) has been set up by the Damodar Valley Corporation Act, 1948. The Damodar Valley Corporation is a corporate body having perpetual succession and common seal. It has separate legal entity. The Board of Management consists of a Chairman and two members. They are to be appointed by the Union Government in* consultation with the State of the West Bengal and Bihar and they may be removed by the Union Government for incapacity or abuse of position. The Corporation has been established for controlling floods in Damodar River and for utilising the water of Damodar river for irrigation, navigation and generation of electrical energy: For this purpose, the Corporation has been given power to establish experimental institutions and research stations. It can establish and operate laboratories also. The Corporation provides assistance in construction of powerhouses, dams, etc. It also promotes sanitation and economic and social welfare of the Damodar Valley and supplies electricity and water. The corporation has its own funds. Its funds have been of India. The Corporation ted in the Reserve Bank ¢ ; oe ecto money after obtaining the approval of the140 [Lec-XUT wer Union Government. It is a legal person and has a ° acquire, hold and dispose of its property and " ¢ to income tax, sales tax, etc. It can suc and be sued in its own name. Rehabilitation Finance Corporation: — It has been established by the Rehabilitation Finance Corporation Act, 1948. It has separate legal personality and has perpetual succession and common seal. Its main object 1s to provide financial assistance on reasonable terms to displaced persons so as to enable them to settle in business, trade or industry. It has been given wide powers for the recovery of the loans. It is managed by a Chairman and other members appointed by the Union Government. They hold offices during the pleasure of the Union Government. The Advisory Board and Regional Committces extend them assistance to it in the discharge of its functions. Broadcasting Corporation of India:— The Central Government declared the constitution of Broadcasting Board of India on November 23, 1997. It is notable that the Broadcasting Corporation of India Act granting autonomy to Radio and Television came into force on September 15, 1997, but even after, the signature of the President, it was kept pending for 7 years and was notified on July 22, 1997, Although the Board will not be under the control of the Government, even then it is provided in the Act that the Government can issue directions to prevent any special broadcasting or broadcast any special matter. On account of certain practical shortcomings existing in the Broadcasting Corporation of India Act, the Central Government has made certain important amendments in the Act by issuing an Ordinance on October 31, 1997,Lec-XIII]__ Public Undertakings and Public Corporations _141 6. Status of Public Corporations Public Corporations enjoy juristic and constitutional status as stated below: A Public Corporation is a juristic person. It possesses a separate and distinct corporate personality. It is a body corporate having perpetual succession and a common seal. It can sue and be sued in its corporate name. Public Corporations has been recognised in the Constitution of India. As provided under it, the State may carry on any trade, industry, business or service either itself or through a Corporation owned or controlled by it to the exclusion of citizens. The laws providing for State monopolies are also saved by the ae ecm 7. Rights and Liabilities of Public Corporation SweR Rights:— Public Corporation (statutory corporation) has independent legal personality. It is a legal person. It is a body corporate and has perpetual succession and a common seal. Being a legal person, it can own, enjoy and dispose of property in its own name. Being a legal person, it can sue and be\sued in its own name. A Public Corporation is a person but not a citizen. And therefore it can claim the benefit of the Fundamental Rights guaranteed to the every person whether citizen or non- citizen but it cannot claim the benefit of the Fundamental Rights guaranteed only to the citizens. Thus, being a person, a public corporation can enforce those Fundamental Rights which are guaranteed to all persons whether citizen or not but not being a citizen, it cannot enforce the Fundamental Right guaranteed only to the citizens. It is to be noted that the Fundamental Rights in Articles 15, 16, 19, 29 and 30 are available only to the citizens while the Fundamental Rights guaranteed by other Articles are available to the citizens and also to non-citizens. A public corporation is not a citizen cod VE Paabon lal-).Se held tet 12 Shetd Trclade otter Clehutes whieh lows[Lec-XTI trative Law 142 Lectures on Admi and therefore it cannot enforce the Fundamental Rights ae by Articles 15, 16, 19, 29 and 30 but being a person it can enforce the Fundamental Rights guaranteed by the other Articles. Ay Liabilities of the Public Corporation:— The uaa a ~ Public Corporations may be explained with reference to the following heads: i. Liability in Contracts or Contractual Liability. ii, Liability in Torts or Tortious Liability; and iii, Liability for Crimes or Criminal Liability. Liability in Contracts or Contractual Liability:— A Public Corporation can enter into contract. It can sue and be sued for breach of contract. Since a public Corporation is a statutory public undertaking, it can do only those acts which are authorised by the statute either expressly or by necessary implication. If any requirement has been laid down in the constituent statute or in the rules, regulations or bylaws of the Corporation, it must be complied with (Cope vs. Thames Rly Co. (1849) 3 Ex 841; British Transport Corpn. vs. Westmorland Country Council, (1957) 2 All ER 353). Whatever is not expressly or impliedly authorised by the constituent statute can be said to be prohibited and must be held to be ultra vires. The contract, which is ultra vires, is void ab initio and cannot be ratified (Lakshmanswami vs. L.I.C., ATR 1963 sc 1185). No right can be said to have accrued in favour of a private individual and_no corresponding duty of a Corporation arises for breach of a contract, which is void. Liability in Torts or Tortious Liability:— A public Corporation can be sued for the torts committed by its servants provided the act is within the powers of the Corporation and that it would be actionable if committed by a private individual. But the Corporation would not be liable if the act of the servant is ultra vires the powers of Mi —Lec-XHIT]__ Public Undertakings and Public Corporations 143 the Corporation or is such that it could under no circumstances have authorised its servant to commit it. For acts, which are ultra vires, the servant would be personally liable (Lakshmanswami vs. L.I.C., ATR 1963 SC 1185). A state creating a Public Corporation may exclude liability for acts done by its servants in good faith under the Act. For example, Section 28 of the Oil and Natural Gas Commission Act, 1959 lay down: “No suit, prosecution or other legal proceedings shall lie against the Commission or any member or employee of the Committee for anything which is in good faith done or intended to be done in pursuance of this Act or of any rule regulation made thereunder”. '*” iii, Liability for Crimes or Criminal Liability:— A Public Corporation may also incur liability for offences committed by its servants in the course of employment. However, since it is an artificial person having corporate identity, it cannot be punished with death or imprisonment. It follows that a Corporation cannot be found guilty of an offence for which the punishment is death or imprisonment. A Corporation can also not be held liable for an offence, which can only be committed by a natural person, E.g.: Bigamy. But a Public Corporation can be held vicariously liable for offences committed by its agents, servants and employees, E.g.: Libel (Triplex Safety Glass Co. vs, Lancegaya Safety Glass Co. (1939) 2 All ER 613), Fraud (R. vs. L.C.R.Hanlage (1944) 1 All ER 691), and Public Nuisance (Compbell vs. Paddington Corpn. (1911) 1 KB 869). 8. Controls over Public Corporations Public Corporations are established with the objective of promoting economic activity. Since the public corporations are conferred autonomy and enormous powers, there is a possibility for[Lec-XIII 144 ctures on Administrative Law misuse of the power. Therefore, it is necessary to control the pabtle Corporation so that the powers of the public corporations ue co misused. Such controls are discussed under the following heads: A) Judicial Control. B) Parliamentary Control. C) Government Control, and D) Public Control. A) Judicial Control A Public Corporation is a juristic person having legal entity to sue and be sued. It is a body corporate with perpetual succession and common seal. Legal proceedings may be instituted by or against a Corporation in its corporate name. Its entity is distinct and separate from government. Jurisdiction of Courts over a Public Corporation is the same as it is over a private or Public Company, which can sue and be sued like any ordinary person. Accordingly, a Public Corporation is liable for a breach of contract and also in tort for the tortious acts of its servants like any other person. It is bound by a statute. Traditionally, judicial control on corporation is exercised through the doctrine of ultra vires by declaring an act ultra vires if the corporation exceeds its authority. In practice, however, it may be difficult to invoke the doctrine of ultra vires because in many cases powers of the corporation are so widely described that it may not be possible for the court to declare any particular act of the corporation to be ultra vires. With the passage of time, the courts have been expanding the scope and extent of their control over public corporations beyond the doctrine of ultra vires. The courts have been conscious of the fact that the bodies participating in the administrative process are kept out of their supervision, then there will be arbitrariness in the administration. In Lakshmanaswami vs, L..C. of India, the Company passed a resolution donating a sum of Rs.2 lakhs to a trust from the amount iiLec-XIII] Public Undertakings and Public Corporations _145 to be paid to the shareholders. Under the Articles of Association, the Company was not authorised to make such donation The Supreme Court held that the resolution was ultra vires. In course of time, the Courts have been expanding the scope and extent of their control over public undertakings beyond the confines of the doctrine of ultra vires. The Courts have been conscious of the fact that a ‘Welfare State’ acts through statutory Corporations and Companies. Thus, Corporation has become a third arm of the government. The functions, which they perform, are otherwise to be performed by the government. Being a creation of State, a public corporation must be subject to the same constitutional limitations as the State itself. Moreover, statutory Corporations and Government Companies are held to be other authorities and as such, State within the meaning of Article 12 of the Constitution. There is no reason why these Corporations should not be subject to the same judicial control as the government itself. However, statutory Corporations are subject to the Writ jurisdiction of the Supreme Court and High Courts (R.D.Shetty vs. International Airport Authority, AIR 1979 SC 1628). Explaining the philosophy of judicial control of public undertakings in Fertilizer Corporation Kamgar Union vs. Union of India (AIR 1981 SC 344) Krishna lyer, J. observed that Public Sector has assumed great significance in India. Public enterprises are owned by the people and those who run them are accountable to the people. Public enterprises are autonomous and this autonomy 1s vital to effective business management. But judicial control of public power is essential to ensure that it does not behave in an irresponsible rman a ne words of Justice Iyer: ‘The active co-existence of setae eta eevee managment creative claims upon functional juri: ‘ad ing to berserk, 's one of the the commanding heights of vali a eae occupies sector cannot assert a right to be free ME ee ‘¢ from judicial review,iv [Lee-X1I 146 Lectures on Administrative Law el i corporations 1S With regard to the judicial control over pubic reparations concerned, the question that arises is whet Das Se eataraine are state within the meaning Art.12 for " en eee fundamental rights against it. Faced with this f c orporations so as to have extended the notion of state to the COE eT a bring them within the bounds of judicial con t al c ver the public extent and effectiveness of judicial control o ae corporations. And as such it is subject to the enna a Supreme Court under Art.32 and the High Courts unt 226. In Rajasthan State Electricity Board vs. Mohanlal (AIR 1967 SC 1857) the question arose whether the Electricity Board was an authority and hence state within the meaning of Art.12., The Supreme Court held the Board to be state. The reason given by the Court to treat the Board as state were (I) it was created by a statute and (ii) it was carrying on governmental or quasi-governmental functions. Applying the same tests in Sukhdev Singh vs. Bhagatram (AIR 1974 SC 1331) the Supreme Court held that the Oil and Natural Gas Commission, the Life Insurance Corporation and the Industrial Finance Corporation as a state within the meaning of Art.12, The Supreme Court continued to attach great importance to the manner of creation of the bodies, in determining their legal status was evident from Sabhajit Tewary vs. Union of India (AR 1975 SC 1331) wherein the Supreme Court held that the Council of Scientific and Industrial Research which is a Society registered under the Societies Registration Act not to be State. The court held that the society does not have a Statutory character, The question received a detailed examination in RD.Shetty ys, International Airport Authority of India (AIR 1979 Sc 1628) andLee-XII]_ Public Undertakings and Public Corporations _147 an irrelevant consideration in determining the question whether it is State. The same view was expressed by the Supreme Court in Ajay Hassia vs. Kalid Mujib (AIR 1981 SC 487). In this case Bhagwati J. said ‘it is immaterial for determining whether a corporation is an authority, whether the corporation is created by a statute or under a Statute. The test is whether it is an instrumentality or agency of the government and not how it is created. The enquiry has to be not as to how the juristic person (corporation) is born but why it has been brought into existence’, Still, it remains how far can the court go? Apart from applying the constitutional and public law checks, could the court act as a Super watchdog? The courts can control the corporation on the broad parameters of fairness in administration, bona fides in action and the reasonable management of public business. A public corporation can be sued for breach of contract under ordinary law. It is vicariously liable for torts committed by its servants just like any other incorporated body. The writ of mandamus will lie against a public corporation for enforcement of statutory duty, such as duty to provide public benefit or facility. In Corporation of Nagpur vs. Nagpur Electric Light & Power Co. (AIR 1953 Bom. 498) mandamus was issued at the instance of Corporation of Nagpur (a consumer) against the respondent, a public utility corporation established for the supply of electricity to the public, to compel it to supply electricity to the Nagpur Corporation. In Rowjee vs. State of A.P. (AIR 1964 SC 1962) the Supreme Court struck down a scheme prepared by the A.P.S.R.T.C. to nationalise certain road transport routes. There was evidence that the scheme was prepared at the instance of the Transport Minister who had political rivalry with private bus operators whose routes were proposed to be nationalised. The Court viewed the action mala fide and on the ground it struck down the scheme. B) Parliamentary Control Public Corporations are created and owned by the State. They are financed from the funds supplied by the government. They are[Lec-X1II 148 Lectures on Administrative Law 148____Lectures on Administrative Paw __1 inter ;, therefore, ¢ their powers in public interest. It is, t read control over these Corporations. required to exerci necessary for Parliament to exercise public corporation ablishment and continuance of the ablishment vie eoested by The depend on the statute, which creates it, coos sition, (staguloty Parliament for the creation of the public corpora ’ corporation) determines the powers and functions of the Seared The public corporation cannot violate the provisions of the statute, Which creates it, It can do only those acts, which are authorised by the statute either expressly or by necessary implication. The act of the public corporation which is not expressly or impliedly authorised by the statute is held to be ultra vires and, therefore, void and cannot be validated by ratification. If the powers are misused and the Corporation acts against the interest of society. Parliament which has passed the statute for the establishment of the corporation may supersede or abolish it. Parliament can amend the statute, which has been passed by it for the establishment of the corporation. At the time of amendment of the statute. Parliament gets opportunity to discuss the affairs of working of the corporation. When the bill for the creation of the public corporation is presented in the House for passage, it is debated for a long time and an attempt is made to insert in the bill the provisions or its Proper control so that the Powers are not misused. The another method of controlling the public corporation is the Provision for laying the tules and regulations on the table of the House of Parliament. Usually the statute creating the Corporation contains the provision requiring the rules and regulations made under the ig h ‘ : gi er Statutes do not contaj e ‘ament. However, all the Valley Corporation Act does not Provision enables ParliaLec-XIII]_ Public Undertakings and Public Corporations 149 parliamentary control of the public corporations. This also Lanes opportunity to Parliament for discussion on the functioning o . public corporation. However, there is no general, legal a the part of the public corporation to present their budget estimat 5 to Parliament. The real control is exercised by Parliament throug! its committee. The most effective Parliamentary control over the affairs conducted by public Corporations is exercised through the Parliamentary Committees. Parliament is too large and busy body and it is not possible for it to probe into details the working of these Corporations. It was in sequel to the recommendations of Menon Committee on Parliamentary Supervision over State undertakings that the Parliament has constituted the Committee on Public Undertakings in 1964. The functions of the Committee are: a) to examine the reports and accounts of the public undertakings; b) to examine the reports, if any, of the Comptroller and Auditor General on the Public Corporations; c) to examine in the context of the autonomy and efficiency of the Public Corporations whether their affairs are being managed in accordance with sound business principles and prudent commercial practices, The recommendations of the Committee are advisory and therefore, not binding on the government. they are regarded as the recommendations of Parliament, and the government accepts them, and in case of non-acceptance, the Ministry concerned has to give reasons therefor, ©) Government Control (Ministerial Control) However, by convention, Since Government is the custodian of public interest, it also exercises: control and supervision over the affairs of public Corporations. However, government control does not mean Sovernmental interference in the day-to-day working of the[Lec-XIII of the idea of autonomy Corporation, which is highly destructive dertaking necessary for the success of any commercial or service vn iver Bi There is not any uniform pattern of governmental con! a ae statutory public Corporations. However, there are various ses of governmental control in the following shapes: ver, By issuing Directions to the Corporation. i, Appointment and removal of members. ii. iii, Order enquiries. iv. Financial Control. y. Rules and Regulations. i. By issuing Directions to the Cor| the important methods of Governmental Control of the public corporation is to authorise the Government to issue directives to the public corporation on the matters of policy. For example, the Life Insurance Corporation Act, 1956 provides that in the discharge of its functions under this Act, the Corporation shall be guided by such directions in matters of policy involving public interest, as the Central Government therein shall be final. Similarly, under the Damodar Valley Corporation Act, 1948 the Central Government has been authorised to give directions to the corporation with regard to its policy. The corporation is required to follow this direction. In practice, it is very difficult to distinguish the matters of policy from day to day working of the corporation and usually the Government has upper hand in deciding whether a matter is of policy or not and, therefore, by this method the public corporation may effectively be controlled by the Government. poration:— One of ii, Appointment and removal of members:— Generally, the power to appoint and remove the Chairman and the Members of a Public Corporation is vested in the Government by the constituent statute. This is the mostLee-XIII] Public Undertakings and Public Corporations 151 effective means of control Over a pubic Corporation. In Some statutes, the terms of office of a member is left to be determined by the government. In some case, the government is empowered to remove a member of the Corporation. Order enquiries:— Usually the Government is given power to order enquiries regarding the functions of the public corporation. By this method the misuse of the power by the corporation can be brought into light and such misuse may be checked and suitable action may be taken by the Government. The Government may appoint, through its executive power, a committee or commission to review the working of a public undertaking. Financial control:— The Government’s control over the financial matters relating to the public corporation provides teeth to the Governmental control of the public corporations. Generally, the Government is vested with the powers of controlling the borrowing expenditure and capital formation. For example, the Oil and Natural Gas Commission Act, 1956 provides that the Commission can borrow money with the prior approval of the Central Government. Similarly, the Damodar Valley Corporation Act provides that the Corporation can borrow money with the prior approval of the Central Government. The statute creating the corporation may require the corporation to submit to the Government its budget and program for the next year. Rules and Regulations:— Usually the statute creating the corporation empowers the Central Government to make rules to give effect to the provisions of the Act. Sometimes the corporation is empowered to make regulations with the prior approval of the Central Government. This also helps the Government in controlling the public corporation,ive Law {Lec-XIIT 152 D) Public Control . The public corporations arc created for the benefit o public Their main aim is not to make profit but to promote the public good. They are rans to manage the affairs in public interest. They must respond to the opin ; ie A balance between the accountability to the people and tion should be maintained. Consequently, the mass rporations. and to promote public interest. citizens. autonomy of ac i media may play a significant role in controlling the public co: They may expose the corruption and inefficiency prevailing in the management of the public corporations. The Consumer Protection Act, 1986 makes provisions for the establishment of the Central Consumer Protection Council and the State Consumer Protection Councils. The object of the Councils is to promote and protect the rights of the consumer. The Central Council shall consist of the Minister-in-charge of the Department of Food and Civil Supplies in the Central Government who shall be its chairman and such other members as may be prescribed. The State Consumer Protection Council shall consist of such member or members as may be prescribed by the State Government. These Councils are expected to be useful in controlling the public enterprises including public corporations in the interest of the consumers. They will be helpful in curbing the growth of corrupt practices.