GOPPULAL

11.

TllAKUlUI SHRIJI SHRIJI DWARKADHEESHJI & ANR.

March 12, 1969

[S. M. SIKRI, R. S. BACIIAWAT AND K. S. HEGDE, IJ.]

I Rajasthan Premises (Control of Rent & Eviction) Act, (Raj. 17 of 1950). s. 13(1)(e)-Subletting before enforcement of the Act-Eject ment, if possible-Landlord and tenant-Increase of rent-If imports new demise-Sub-letting-How established.

The respondent-landlord let out to the appellant four shops aod later on let out to him two more shops.

The respondent filed a suit alleging that subsequent to the letting of the shops, by a contract, the rent was consolidated and increased and that the shops we're sub-let by the appel

laot, so the appellant be ejected from all the six shops under s. IJ(l)(e) of the Rajasthan Premises (Control of Rent and Eviction) Act. The appellant denied the contract and denied the subletting altogether.

The trial court dismissed the suit, and the first appellate court affirmed the decree. Both these courts concurrently found that new contract of tenaocy was not created. it was only an increase of rent, the other terms of the tenancy remained unaltered, and that the two shops were sub-let but with the permission. of the landlord. The High Court, in second appeal, reversed the decree of the courts below, and held that there was one integrated tenancy of all the shops, that the four shops were sub-let with the permission of the landlord, but the later t\VO were sub-let without permission, and that having sub-Jet a .Part of the premises without the permission, the dec!ree for possession of all the shops must be passed.

In appeal to this Court, the appellant-tenaot contended that (i) the tenancy of all the six shops were not one integrated; (ii) two shops were not sublet without the permission of the landlord; and (iii) the sub-letting was before the Jaipllr Rent Control Order, 1947 came into force, which was repealed and continued by the promulgation of the Rajasthan Premises (Control of Rent & Eviction) Act, 1950, and therefore ejectment could not be claimed unde'r s. 13 (I )(e) of the Act.

HELD : The appellant could not be ejected from four shops, but ought to be ejected from the two shops.

(i) A mere increase or reduction of rent does not necessarily import the surrender of the existing lease and the grant of a new tenancy. In the present case the first two c'ollrts on a review of the entire evidence came to the conclusion that the increase of rent did not import a new demise.

This finding of fact was binding on the High Court in second appeal and it erred in holding that there was one integrated tenancy of the six shops.

[991 H-992 BJ

(ii) In the abs"'1ce of any pleading and any i'8ue on the question of sub-letting, the first two courts were in error in holding that the two shops we're sublet with the permission of the landlord. The permission of the landlord for the sub-letting cannot be established from the mere fact that the landlord realised rent after the sub-lettina in the absence of proof that the landlord had then clear knowled1e of the 1ub-le., e. [992 DJ

The date of the sub-letting of the two lhOJ!! is not mentioned in the plaint In the aboence of any plelQina and anv iS1ue on this queotion the

990 SUPllEME COURT REPORTS

[1969] 3 S.C.R.

High Court was error in reco'rding the finding that the two shops were sub-let towards the end of 1947 after the Jaipur Rent Control Order 1947 came into force.

It can only be said that the sub-letting was sometime :ifter 1945. (992 El

(iii) Section 13 ( l) ( c) of the Act was intended to apply to sub-letting before the Act came info force.

If the tenant had sub-let the premises \\'ithout the permission of the landlord either 1'efore or after the coming into force of the Act, he was not protected from eviction under s. 13 ( l) ( e), and it matters not that he had the right to sub-let the premises under s. I 08 ( i) cf the Transfor of Property Act.

The present perfect tense, bv words "has .sub-let" in s. lJ(J)(e) of the Act contemplates J completed event connected in some \Vay with the pi'esent time.

The \vords t:ike \vithin their sweep any sub-letting which was made in the part and hr1.r;; continued up t0 the present time.

It did not matter that the subletting \Vas either before or after the Act came into force.

Further

.'OS. 26 and 27(1) of the Act contemplated that grounds of eviction mentioned ins. 13 m:i.y have arisen before the Act came into force. [993 D-994 A]

CIVIL APPELLATE JURISDICTION: Civil Appeal No, 53 of 1969.

Appeal by special leave from the judgment and decree dated November 1, 1968 of the Rajasthan High Court in Civil Re; ular S2c0nd Appeal No. 487 of 1962.

C. B. Aganmla, Rames/11rnr Nath and Mahinder Narain, for 111e appellant.

B. R. L. Iyengar. S. K. Mehta and K. L. Mehta, for the respondents.

The Judgment of. the Court was delivered by

P.~h,, wat, 1. This appeal arises out of a suit for ejectment by a landlord a!!ainst a .tenant. The defendant is the tenant of six shops belonging to Thakurji Shri Shri Dwarkadheeshji installed in the temple at Chaura Raasta, Jaipur.

Devendra Prasad is the adhikari or manager of the temple.

He gave a notice to the. defendant to quit the shop on August 1. 1957. On February '.?8. 1958, the. deity and Devendra Prasad filed a suit against the defendnt claiming recovery of possession of the six shops and Rs. 1.0061on account of arrears of rent.

The suit was

ovcrned bv the Rajasthan Premises (Control of Rent and Eviction) Act. 1950 (Act No. XVII of 1950). The plaintiffs asked for ejectment of the defendant on the ground that he had suhlet the six shops.

The other grounds of ejectment were not e'tablished. and it is not necessary to mention them. The courts

blow concurrently found that Devendra Prasad as the adhikari of the temple was entitled to give the notice to quit and to maintaiJl the suit.

The trial court held that ( 1) all the six shops were sub-let hv the defendant; (2) the sub-letting wa~ with the penni!!illn of

uOPl'ULAL >'. DWAlt1'AlJHl!llSHJI (B•c/; QIV"l J.) 991

the iaadlord and (3) the notice to quit was waive<l by acceplanc~ of rent subsequently accrued due.

Accordingly, tht: trial cou.-1 dt>nJ.issed the suit so far as it claimed ejectment and passed a decree for Rs. 1,006 on account arrears of rent. The plaintiff filed an .ippeal against the decree.

The District Judge, Jaipur City, dismissed the appeal. The plaintiffs filed a second appcai agai, n.st .the dec<ce. The H.igh Court hdd that ( 1) there was on integra:ed

tenancy of ali the six shops; (2J four shops were sub-let with the permission of the landlord; ( 3) two shops were sub-:et w1lh out the permission of the landlord tuwards t!1e end of 19.+1; (4) the tenant having sub-kt a pan of the premises without the pe: - mission of the landlord the ground of eviction under claii>e ( e) of s. J 3 ( 1) was made out and the landlord was entitled to a decree for possession ol all the six shops and (5) thrc was no waiver of the notice to quit. Accordingly, the High Court allowed the appeal and passed a decree for eviction of the deiendant from the six shops. The present appeal has been field by the defendant after obtaining special leave.

Counsel for the appellant conceded that there was no waiver of the notice to quit by acceptance of rent or otherwise.

The points arising for determination in this appeal are : ( 1) was there on~ integrated temancy of all the six shops ? ( 2) were the two sub-let without the permission of the landlord towacds the end at 1947? and (3) is the sub-letting a ground of ejectment under clause ( e) of s. 13 ( 1) of the Rent Act ?

As to the first question, we !ind that four shops were let to the defendant in 1944 and the other two shops on the northern side of the staircase of the temple were let to him in 1945. The rent of the four shops was Rs. 150.'- per month.

The rent of the other two shops was Rs. 65, - per month.

In paragraph 5 of the plaint it was pleaded that in 1953 the defendant aoreed to pay a consolidated rent of Rs. 251 /8/- per month for all the >ix shops "!ld to vacate them by July 3 l, 1957.

In paragraph 5 of the wntten statement the defendant denied this contract and alleged that in 1953 there was only an enhancement of rent. The first two courts found that in l 953 there was no new contract of tenancy, that there was only an increase of rent and that the other terms and conditions of the tenancy remained unaltered.

This finding was not vitiated by any error of law.

A mere increase or reduction of rent does not necessarily import the surrender of the existing lea!e and the grant of a new tenancy.

As stated in Hill and Redman's Law of Landlord and Tenant, 14th ed., art. 385, p. 493 :-

"But a surrender does not follow from a mere agreement mde during the tenancy fur the reduction

992 SWl'lllld• COIJJ.T Ul'OJ.Tli

or increase of rent, unless there is some special reason to inlet a new tenancy, where for instance, the parties make the change in tne ren1 in the belief that the old tenancy is at an end." ln the present case the first two 1; ourts on a review of the entire evidence came to the conclusion that the increase of rent did not import a new demise.

This finding of fact was binaing on tbe

H1n Court in second appeal. The High Court was m error Ill holding that there was one integrated tenancy of the six shops.

As to the second question the defendant denied that he sublet the two shops. The courts below concurrently found that this derual was laJse and that he sub-let the two shops to his brotherin-law Ram Gopal.

There was no pleading nor any issue that the sub-1etting of the two shops was made with the permission of the landlord. It was not the case a.f the defendant at any stage of the tnal that he had obtained the permission of the landlord for sub-letting the two shops. In the aosence of any p1eadmg and any issue on his joint the first two courts were in error in holding that the two shops were sub-let with the permission of the landlord.

The permission of the landlord for the sub-letting is not established from the mere fact that the landlord realised rent after the sub-Jetting in the absence of proof hat the landlord had then clear lmowleage of the sub-lease:

The date of the sub-letting of the two shops is not mentioned in the. plaint. In the absence of any pleading and any issue on his question the High Court was in error in recording the finding that the two shops were sub., Jet towards the end of 194 7 after the Jaipur Rent Control Order 1947 came into force.

We can only say that the sub-Jetting was sometime after 1945.

As to the third question : section 13 ( 1) of the Rajasthan Premises (Control of Rent & Eviction) Act, 1950 provides :-

"Notwithstanding anythi, ng contained in any law or contract, no Court shall pass any decree, or make any order, in favour of a landlord, whether in execution of a decree or otherwise, evicting the tenant so long as he is ready and willing to pay rent therefor to the full extent allowable by this Act, unless it is satisfied-"

The sub-section then sets out several grounds of ejectment under twelve main heads, Clause ( e) mentions the following ground:-

"that the tenant has assigned, sub-let or otherwise H parted with the possession of, the whole or any part of th• prtmiHi without th• p1rmiaaio12 of th• landlord."

GOPPlJLAL V. DWAllKA!lHillSH.H (ll*KMWWI, J.) 9ii3

The appellant's contention is that sub-letting before the Act came into force is not within the purview of clause ( e). The High Court held that the two shops were sub-let after October 15, 1947 when the Jaipur Rent Control Order, 1947 came into force, that the sub-letting was a ground oi ejectmtmt under paragraph 8(l)(b)(ii) of thftt Order and that the tenant's liability for eviction on this ground continued after the promulgation of the Rajasthan Premises (Control of Rent and Eviction) Act, 1950.

With regard to this line of reason:ing it is sufficient to say that the plaintiffs have not established that the sub-letting was after October 15, 1947. The case must be decided on the footing that on the date of the sub-letting, no Rent Control legislation was in force.

The question whether a sub-letting before the coming into force of the Act is within the purview of clause ( e) of s. 13 ( 1) depends upon the construction of that clause. The relevant words are "has sub-let". The present perfect tense contemplates a completed event connected in some way with the present time.

The words take within their sweep any sub-letting which was made in the past and has continued up to the present time. It does not matter that the. sub-letting was either before or after the Act came into force. AH such sub-lettings are within the purview of clause (e).

Sections 26 and 27 ( 1) of the Act throw considerable light on the construction of s. 13 ( 1). They are as follows :-

"26. No decree fodhe eviction of a tenant from any premises in areas to which this Act extends for the time being, passed before the date of commencement of this Act shall in so far as it relates to the eviction of such tenant be executed against him, as long as this Act, remains in force therein, except on any oi the growids mentioned in s. 13 and under the circumstances specified in this Act. 27 (1) In all suits for eviction of tenants from any premises in areas to which this Act has been extended under section 2, pending on the date specified in tlie notification under that section, no decree for eviction shall be passed except on one or more of the grounds mentioned in section 13 and u:nder the circumstances specified in this Act."

Section 26 bars the execution of a decree for eviction passed before the commencement of the Act except on any of the QTOunds mentioned in s. 13 and under the circumstances specified in the Act. Likewise, s. 27 ( 1) bars the passing of a decree for eviction in a pending suit except on one or more of the groundi undtr

iii" SUllll>t& WU.ll.T ll.IPO.ll.Tii

[1116~] 3 S.C.R.

s. J 3 and under the . irumstances specified in the Act. Secti?ns 26 and 27 ( l) clearly contemplate that the grounds of eviction mentioned in s. 13 may have arisen before the Act came mto force.

The argument that section 13 ( l )( e) takes away vested rights and should not be give.n a retrospective effect is based on .faUa cious assumptions. Apart from th~ Rent Act th.e Jandlod IS e~ titled to eject the tenant on the expiry of the period mentioned .m the notice to quit. Section 13 ( l) protects the tenant from eviction except in certain specified cases. If one of the grounds of ejectment is made out the tenant does not qualify for protection from eviction. We find no reason for pfesuming that s. 13 (1 )( e) is not intended to apply to sub-lettings before the Act came into force. If the "tenant has sub-Jet" the premises without the permission of tlie landlord either before or after the coming into force of the Act, he is not protected from eviction under s. 13 ( l )( c), and it matters not that he had the right to sub-let the premises under s. 108 (j) of the Transfer of Property Act.

The plaintiffs have thus established the ground of eviction under s. 13 ( 1 )( e) with regard to the two shops on northern side of the staircase of the temple. With regard to the four other shops the courts below concurrently found that they were sublet with the permission of the landlord. In our opinion, the plaintiffs are entitled to a decree for ejectment of the defendant from the two shops and the claim for eviction from the other four shops should be dismissed.

In the result, the appeal is allowed in part. The decree passed by the High Court for eviction of the defendant from the four shops is set aside and the suit in so far as it claims eviction from the four shops is dismissed. The decree passed by the High Court for evict!on of the defe.ndant from the other two shops on the northern side of the .staircase of the temple mentioned in par_agraph 4 of the. plaint is affirmed. Parties will pay and bear their own costs throughout, in this Court and in all the courts below.

The defendant will have one month's time to vacate the two shops.

Y.P.

Appeal allowed in part.

GOPPULAL

THAKURJI SHRIJI SHRIJI DWARKADHEESHJI & ANR

March 12, 1969

S. M. SIKRI

K. S. HEGDE

s. 13(1)(e)

s. 13

Section 13

s. 13

C. B. Aganmla

Mahinder Narain

B. R. L. Iyengar

S. K. Mehta

K. L. Mehta

Dwarkadheeshji

Devendra Prasad

District Judge, Jaipur City

s. 13

July 3 l, 1957

Hill

Redman

art. 385

Ram Gopal

section 13

October 15, 1947

s. 13

Sections 26 and 27

s. 13

s. 13

section 2

section 13

Section 26

s. 13

s. 27

s. 13

section 13

Section 13

s. 13

s. 13

s. 108

Transfer of Property Act

s. 13


HEAVY ENGINEERING MAZOOOR UNION

THE STATE OF BffiAR & ORS.

March 12, 1969

[J. M. SHELAT AND V. BHARGAVA, JJ.]

Industrial Disputes Act, 1947, ss. 2(a) and !(}-Industry carritd'on by company incorporated under the Companies Act, 1956--E:ntire share capital subscribed by Central Government-Whether industry ca"ied on "under the authorirry of" the Central Government and if that the "apprn. priatt government".

Industrial Employment (Standing Orders) Act, 1946-Question.r pending before certifying authority-If bar to a reference of adjudication under s. 10 of the Industrial Disputes Act, 1947.

The Heavy En.gioeering Corporation Limited was incorporated under the Companies Act and its entire share capital contributed by the C.Cntral

Government. It was therefore a Government Company under s. 617 of the Companies Act.

Its Menwrandum and Articles conferred large powers on the Central Governrnent including the power to give directions

as regards the operation of the Company, the wages and salaries of its employees, and the appointment of directors of the company, Certain disputes arose between the Company and its workmen whereupon the

State Government of Bihar referred these disputes by a notification in November 1956 to the Industrial Tribunal for adjudication.

The workmen through their union filed a writ petition under Arts: 226 and 227 of the Constitution disputing the validity of the reference on two grounds :

(i) that the appropriate Government to make the said reference under s. 10 of the Industrial Disputes Act; 1947 was the Central Government and not the State Government; and (ii) that the questions refer'red for adjudication were at the time actually pending before the certifying authority under the Industrial Employment (Standing Orders) Ac\!, 1946. on an application for modificatioa of the Company's Standing Orders and therefore the said questions would not be indust'rial disputes which could be validly refei:red for adjudication.

The High Court negatived both the contentions and upheld the validity of the reference.

In appeal to this Court under Art. 133(i) (c) it was contended inter alia on behalf of the appellant that the industry in question was "carried on under the authority of the Central Government" within the meaning of s. Z(a) of the Act and the reference under s. 10 was therefore required to be made by that Government.

HELD, Dismissing the appeal: (i) The words "under the authority of' mean pursuant to the authority, such as where an agent o'r a servant acts under or pursuant to the authority of his principal or master. That obviously cannot be said of a company incorporated under the Companies Act whose Constitution, powers and functions are provided for and re~ gulated by its memorandum of association and the articles of association.

An incorporated company has a separate existence and the law recognises it as a juristic person separate and distinct from its members. The mere fact that the entire share capital of the respondent-company was contributed by the C.Cntra\ Government and the fact that all its shares were L 11 Sup CI;69-14

held by the President and certain officers of the Central Government did A not make any difference. [998 H-999 Gl

Salomon v. Salomon & Co., [1897) A.C. 22; Janson v. Driefontain CoMO/idated Mines; [1902) A.C. 484; Kuenigi v. Donnersmarck, [1955) I Q.B. 515; Graham v. Public Works Commissioners, [19011

(2) K.B. 781; The State Trading Corporation of India Ltd. v. The Commercial Tax Officer, Visakhapatnam [1964) 4 S.C.R. 99 at 188, per Shah J; Tamlin v. Hannaford [1950) I K.B. 18 at 25, 26; London County Te"i- B torial and Auxiliary Forces Association v. Nichols, [19481 2 All. E.R. 432;· referred to.

Although extensive powers were conferred on Central Government to give directions in regard to various matters; these powers were derived from the company's memorandum and articles and not by reason of the company bein2 the agent of the Central Government. [1000 BJ

The definition of "employer" in s. 2(g) of the Act suggests that an industry carried on by and under the authority of the Government means either the industry carried on directly by a department of the Government, such as the Posts and Telegraphs or the Railways, or one carried on by such department throu2h the instrumentality of an agent. [1001 Bl

Carlsbad Mineral Water Mfg. Co. v. P. K. Sarkar, (1952) (1) L.LJ. 488; Cantonment Board v. State of Punjab, [19611 (!) L.L.J. 734: Abdul Rehaman Abdul Gafur v. Mrs. E. Paul, A.I.R. 1963 Born. 267, referred to.

(ii) There was no force in the contention that as the questions relating to the modific!ation of the company's Standing Orders were pending before the certifying authority under the Industrial Employees (Standing Orders) Act, no reference could be made relating to these under s. 10 of the Act. [1001 DJ

Management of Banga/o, e W oo/len, Cotton and Silk Mills Co. Ltd.

v. Workmen, [19681 1 S.C.R. 581; Management of Shahdara (Delhi) Saharanpur Light Railway Co. Ltd. v. S. S.

Rallway Workers Union, [1969] 2 S.C.R. 131. followed.

CML APPELLATE JURISDICTION: Civil Appeal No. 1463 of 1968.

Appeal from the judgment and order dated September 5, 1967 of the Patna High Court in Civil Writ Jurisdiction Case No. 921 of 1966.

A. K. Nag, Jai Kishan and Ranen Ro, v, for the appellant.

V. P. Singh. for respondent No. 1.

B. P. Singh, for respondent No. 2.

The Judgment of the court was delivered by Shelat, 1.-The Heavy Engineering Corporation Ltd., Ranchi is a company incorporated under the Companies Act,

1956. Its entire share capital is contributed by the Central Govennment and all its shares Jiave been registered in the name of the President of India and certain officers of the Central Government. It is, therefore, a Government company within the

., '

HEAVY ENGIN. MAZDOOR UNION v. BIHAR (She/at, J.) 997

meaning of s. 617 of the Companies Act. The Memorandum of Association and the Articles of Association of the company confer large powers on the Central Government including the power to give directions as regards the functioning of the company. The wages and salaries of its employees are also determined in acc0rdance with the said directions. The directors of the company are appointed by the President. In its standing orders, the company is described as a Government undertaking. The workmen employed by .the company have two unions, the Heavy Engineering Mazdoor Union and the Hatia Project Workers Union.

Certain disputes having arisen between the company and its workmen, into which it is not necessary for the purposes of this judgment to go, the State Government of Bihar by its notification dated November 15, 1966 referred two questions to the Industrial Tribunal for its adjudication : firstly, as regards the number of festival holidays and secondly, whether the second Saturday in a month should be an off-day.

The Mazdoor Union thereupon filed a writ petition under Arts. 226 and 227 of the Constitution in the High Court of Patna disputing the validity of the said reference on two grounds : ( 1) that the appropriate Government to make the said reference under s. 10 of the Industrial Disputes Act, 194 7 was the Central Government and not the State Government and (2) that the questions referred to were at the time actually pending before the certifying authority under the Indus: trial Employment (Standing Orders) Act, 1946 on an application for modification of the company's standing orders and that therefore the said questions would not be industrial disputes which could be validly referred for adjudication. Before the High Court it was conceded that the company was not an industry carried on by the Central Government but the contention was that considering the fact that the entire share capital was contributed by the Central Government and extensive powers were conferred on it, the company must be regarded as an industry carried on under the authority of the Central Government and that therefore it was thai Government which was the appropriate Government which could make the said reference. On the second question, the contention was that the Industrial Employment (Standing Orders) Act was a self-contained code, that once a question relating to conditions of service was before the certifying authority constituted under that Act and was pending before him, the said question could not be an industrial dispute which could be referred for adjudication under s. 10 of the Industrial Disputes Act. It was urged that consequently the reference on both the grounds was invalid.

The High Court negatived both the contentions and upheld the validity of the reference.

The Mazdoor Union obtained a certificate under Art. 133(1)(c) and filed this appeal impugning the oorrectness of that decision.

Under s. 2 (a) 'appropriate Government' (leaving aside the words which are not relevant for our purposes) means (i) in relation to any industrial dispute concerning an industry carried on by or under the authority of the Central Government, the Central Government, and (ii) in relation to any other industrial dispute the State Government.

As was done before the High Court, Mr. Nag, appearing for the appellant-union, conceded that he would not contend that the company is an industry carried on by the Central Government but argued that it is an industry carried on under the authority of the Central Government and therefore it is that Government and not the State Government which is the appropriate Government for making a reference under s. JU of the Act. The first question raised by the appellantunion, therefore, turns solely upon the construction of the words "carried on under the authority of the Central Government". The contention was primarily grounded on the faqt that the entire share capital of the company has been contributed by the Central Government, all its shares are held by the President and certain officers of the Central Government presumably its nominees and extensive control is vested in the Central Government.

Before considering the authorities cited by counsel before us, we proceed first to examine the meaning of the words used lJy Parliament in the definition clause of 'appropriate Government'.

It is an undisputed fact that the company was incorporated under the Companies Act and it is the company so incorporated which carries on the undertaking.

The undertaking, therefore, is not one carried on directly by the Central Government or by any one of its depanrr.cnts as in the case of posts and telegraphs or the _ railways.

It was, therefore, rightly conceded both in the High Court as also before us that it is not an industry carried on by the Central Government.

That being the position, the question then is, is the undertaking carried on under the authority of the Central Government '! There being nothing in s. 2 (a) to th.~ contrary, the word 'authority' must be construed according to its ordinary meaning and therefore must mean a legal power given by one person to another to do an act.

A person is said to be authorised or to have an authority when he is in such a position that he can act in a certain manner without incurring liability, to which he would be exposed but for the authority, or, so as to produce the same effect as if the pe:son graning the aut.hority had for himself done the act.

For mstance, if A authonses B to sell certain goods for and on his behalf and- B does so, B incurs no liability for so doing in respect of such oos and confers a aood title on the purchaser. There clearly arises m such a case

th~ relationship of a principal and an agent. '.fhe words "under the authority of" mean pursuant to the authonty, such as where an agent or a servant acts under or pursuant to the authority of his principal or master.

Can the respondent-company, there-

., A

11BAVY .ENGIN. MAZilOOR UNION v. BIHAR (Shela/, J.) 99 9

fore, be said to be carrying on its business pursuant to the authority of the Central Government '?

That obviously cannot be said of a company incorporated under the Companies Act whose constitution, powers and functions are provided for and regulated by its memorandum of association and the articles of association.

An incorporated company, as is well known, has a separate existence and the Jaw recognises it as a juristic person, separate and distinct from its members.

This new personality emerges from the moment of its incorporation and from that date the persons subscribing to its memorandum of association and others joining it as members are regarded as a body inco:- porate or a corporation aggregate and the new person begins to function as an entity. (cf. Salomon V." Solomon & Co.)('). Its rights and obligations are different from those of its shareholders.

Action taken against it does not directly affect its shareholders.

The company in holding its property and carrying on its business is not the agent of its shareholders. An infringement of its rights does not give a cause of action to its shareholders. Consequently, it has been said that if. a man trusts a corporation he trusts that legal persona and must look to its assets for payment; he can call upon the individual shareholders to contribute only if the Act or charter creating the corporation so provides. The liability of an individual member is not increased by the fact that he is the sole person beneficially interested in the property of the corporation and that the other members have become members merely for the purpose of enbling the corporation to become incorporated and possess only a nominal interest in its property or hold it in trust for him. (cf. Halsbury's Laws of England, 3rd Ed. Vol. 9, p. 9). Such a company even possesses the nationality of the country under the laws of which it is incorporated, irrespective of the nationality of its members and does not cease to have that nationality even if in times' of war it falls under enemy control. (cf. Janson v.

Driefontai~ Consolidated Mines(') and Kuenigi

v. Donnersmarck('). The company so incorporated derives its powers and functions from and by virtue of its memorandum of association and its articles of association.

Therefore the mere fact f!1at the entire share capital of the respondent-coi'upany was contnbuted by the Central Government and the fact that all its shares are held by the President and certain officers of the Central Government does i; iot make any difference. The company and the shareholders bemg, as aforesaid, distinct entitles the tact

that the President of India and certain officers hold all its shares does not make the company an agent either of the President or the Central Government. A notice to the President of India and the said office.rs of the Central Government, who hold between them all the shares of the company, would not be a notice to the

---(JJ-11897] A:C:.22.---

(2) [1902] A.C.484.

(3) [1955] 1 Q.B. 515.

1000 SUPREME COURT REPOllTS [1969] 3 S.C.ll.

company; nor can a suit maintainable oy and in the name of the A company be sustained by or in the name of the President and the said officers. ·

It is true that besides the Central Government having contributed the entire share capital, extensive powers are conferred on it, including the power to give directions as to how the company B should function, the power to appoint directors and even the power to determine the wages and salaries payable by the company to its employees.

But these powers are derived from the company's memorandum of association and the articles of association and not by reason of the company being the agent of the Central Government.

The question whether a corporation. is c an agent of the State must depend on the facts of each case.

Where a statute setting up a corporation so provides, such a corporation can easily be identified as the agent of the State as in Graham v. Public Works Commissioners(') where Phillimore, J. said that the Crown does in certain cases establish with the consent of Parliament certain officials or bodies who are to be treated as agents of the Crown even though they have the power of D contracting as principals.

In the absence of a statutory provision, however, a commercial corporation acting on its own behalf, even though it is controlled wholly or partially by a Government department, will be ordinarily presumed not to be a servant or agent Of the State. The fact that a minister appoints the members or directors of a corporation and he is entitled to E call for information, to give directions which are binding on the directors and to supervise over the conduct of the business of the corporation does not render the corporation an agent of the Government. (see The State Trading Corporation of India Ltd.

v. The Commercial Tax Officer, Visakhapatnam( 2 ) and Tamlin

v. Hannaford('). Such an inference that the corporation ls the F agent of the Government may be drawn where it is performing in substance governmental and not .commercial functions. (cf.

London County Te"itorial and Auxiliary Forces Association v.

Nichols)(').

. In. this connection the meaning of the word 'employer' as given~ s. 2(g) of the Act may be looked at with some profit as G the legislture there has used identical words w)lile defining 'an

mployer. An employer under cl. (g) means, m relation to an' mdustry earned on by or under the authority of any department of the. Cenral Government or a State Government, the authority prescnbed m tha.t behalf or where l!lO such authority is prescribed,

th~ hea~ of the department.. No such authority has been pres- H cnbed m regard to the busmess carried on by the respondent-

(1) (19011.2 K.B. 781.

(2) 11964] 4 S.C.R. 99at188. per Shah. J.

(l) [19SO] I K.B.18 at 25. 26.

(4) [1948) 2 All. E.R. 432,

itEAVY llNGIN. MAZOOOR UNION V. BIHAR (She/at, J,) 1001

company. But that does not mean that the head of the department which gives the directions as aforesaid or which supervises

over the functioning of the company is the employer within the meaning of s. 2(g). The definition of the employer, on the contrary, suggests that an industry carried on by or under the authority of the Government means either the industry carried on directly by a department of the Government, such as the posts and telegraphs or the railways, or one carried on by such department through the instrumentality of an agent.

We find that the view which we are inclined to take on the interpretation of s. 2 (a) is also taken by the High Courts of Calcutta, Punja;,· and Bombay. (see Carlsbad Mineral Water Mfg. Co. v. P. K.

Sarkar('), Cantonment Board v. State of Punjab(2 ) and Abdul Rehaman Abdul Gafur v. Mrs. E. Paul('). In our view the contention that the appropriate Government to make the aforesaid reference was the Central Government and not the State Government has no merit and cannot be sustained.

The second contention that the questions referred to were regulated qy the company's standing orders and an application for a modification of the said standing orders relating to those questions was actually pending before the certifying authority under the Industrial Employees (Standing Orders) Act precluded a reference thereof under s. l 0 of the Act requires no discussion as it is covered by the decision in Management of Bangalore Woollen, Cotton & Silk Mills Co. Ltd. v. Workmen(<) and The

Management of Shahdra (Delhi) Saharanpur Light Railway Co.

Ltd. v. S. S. Railway Workers Union(").

Thus neither of the two contentions can be upheld. In the result the appeal is dismissed but there will be no order as to costs.

R.K.P.S.

(I) [1952] I L.L.J. 388.

(2) [1961 J I L.L.J. 734.

(3) A.I.R.1963 Born. 267.

(4) [1968] I S.C.R. 581.

(5) [1969) 2 S.C.R. 131.

Appeal dismissed.

HEAVY ENGINEERING MAZOOOR UNION

THE STATE OF BffiAR & ORS

March 12, 1969

M. SHELAT

V. BHARGAVA, JJ.

Industrial Disputes Act, 1947

ss. 2(a)

Companies Act, 1956

s. 10

Industrial Disputes Act, 1947

C.Cntral

Government

s. 617

Companies Act

State Government of Bihar

s. 10

Industrial Disputes Act

Central Government

Art. 133(i)

s. 10

Companies Act

C.Cntra\ Government

[1964) 4 S.C.R. 99

s. 2(g)

s. 10

Management of Banga

[1969] 2 S.C.R. 131

A. K. Nag

Jai Kishan

Ranen Ro

V. P. Singh

B. P. Singh

Shelat

s. 617

Companies Act

Memorandum of Association

Heavy Engineering Mazdoor Union

Hatia Project Workers Union

November 15, 1966

Mazdoor Union

Arts. 226 and 227

High Court of Patna

s. 10

Industrial Disputes Act

s. 10

Industrial Disputes Act

Mazdoor Union

Art. 133(1)(c)

s. 2

Nag

Parliament

Companies Act

s. 2

Companies Act

England

India

Phillimore

s. 2(g)

1964] 4 S.C.R. 99

s. 2(g)

s. 2

High Courts of Calcutta, Punja

[1969) 2 S.C.R. 131