Tiic Officers' Welfare Association vs Chief Secretary to Government and others

Srinivasan, J.—This writ petition has been filed by the TIIC Officers'' Welfare Association for issue of a writ of mandamus directing the

board of directors of the Tamil Nadu Industrial Investments Corporation Limited, (hereinafter referred to as ""the Corporation""), to implement the

decision taken by it in the board meeting held on September 8, 1989, at Park Sheraton Hotel at Madras, in respect of the revision in the scales of

pay of the members of the petitioner-association. According to the petitioner, the board of directors of the Corporation passed a resolution on

September 8, 1989, that proposals for revision in the scales of pay of the employees of the Corporation could be forwarded to the Government

for approval as the board had felt that there was a case for revision in the scales of pay. It is the case of the petitioner that the board of directors

has no business to forward the proposals to the Government, as the board is absolutely empowered to decide the matter and implement the

decision. According to the petitioner, the said act of the board is unconstitutional, unlawful and ultra vires. Several contentions have been raised in

the affidavit filed in support of the writ petition. But, the arguments of learned counsel for the petitioner were confined to four of them. I will refer to

the same a little later.

The writ petition was opposed by the Government as well as the Corporation. Learned counsel for the Corporation raised a preliminary

objection as to the maintainability of the writ petition. The preliminary objection is based on three grounds. First, the Corporation is not a public

authority or a statutory body; nor is it a State instrumentality or agency. Therefore, no writ can issue against the Corporation. Secondly, a writ of

mandamus will not lie as against a company to implement a resolution passed by the board of directors. Thirdly, there is no evidence as to the

petitioner being a registered body and at the instance of the petitioner association, no writ can be maintained.

On the merits, the contention of the Government and the Corporation is the same. It is argued that under article 174 of the articles of association

of the Corporation, the Governor of Tamil Nadu may issue such directions or instructions as he may consider necessary in regard to the affairs or

the conduct of the business of the company or the directors. Hence, according to them, the matter having been referred to the Government and it

being under consideration by the latter, the petitioners are not entitled to seek a mandamus for implementation of the proposals.

On the preliminary objection, the second and third parts of the argument of learned counsel for the Corporation have no substance. In fact, the

second part will depend upon my conclusion on the first part. If it is held that the Corporation is an authority amenable to writ jurisdiction, a writ

can certainly issue to enforce the implementation of a resolution passed by the board of directors. Recently, the Supreme Court had occasion to

consider the cases in which a writ of mandamus will issue in Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav

Smarak Trust and Others Vs. V.R. Rudani and Others, . It was held in that case that there are only two exceptions to mandamus, i.e., (1) if the

rights are purely of a private character, and (2) if the respondent is purely a private body with no public duty. Hence, the second part of the

argument has to be rejected, if I hold that the Corporation is a ""State"" within the meaning of article 12 of the Constitution of India.

The third part of the argument is met by the petitioner by producing a copy of the certificate of registration issued to the petitioner-association

under the Trade Unions Act, 1926. Hence, that part of the argument is also rejected.

Turning to the first part, the tests for determining whether a Corporation is an authority amenable to article 226 of the Constitution of India have

been clearly laid down in several decisions of the Supreme Court followed by various decisions of the High Courts. Counsel on both sides

adverted to this aspect of the matter at length. I do not think it necessary to refer to all the cases cited. In Ajay Hasia and Others Vs. Khalid Mujib

Sehravardi and Others, , the court summarised the tests prescribed in the earlier decision of the court in Ramana Dayaram Shetty Vs. International

Airport Authority of India and Others, :

(1) One thing is clear that if the entire share capital of the Corporation is held by Government it would go a long way towards indicating that the

corporation is an instrumentality or agency of Government.

(2) Where the financial assistance of the State is so much as to meet almost the entire expenditure of the corporation, it would afford some

indication of the corporation being impregnated with governmental character.

(3) It may also be a relevant factor ..... whether the corporation enjoys monopoly status which is State-conferred or State-protected.

(4) Existence of deep and pervasive State control may afford an indication that the Corporation is a State agency or instrumentality.

(5) If the functions of the corporation are of public importance and closely related to governmental functions, it would be a relevant factor in

classifying the corporation as an instrumentality or agency of the Government.

(6) Specifically, if a department of the Government is transferred to a corporation, it would be a strong factor supportive of the inference of the

corporation being an instrumentality or agency of the Government.

It has been pointed out that the test is whether the Corporation is an instrumentality or agency of the Government and not as to how it is created

and the question has to be decided on a proper assessee of the facts in the light of the relevant factors.

In this case, it is seen from the memorandum of association of the Corporation that the Government of Madras subscribed to 10,200 shares,

while the other six subscribers, viz., the Madras Provincial Co-operative Bank Ltd., the New Guardian of India Life Assurance Company, the

United India Life Assurance Co. Ltd., the Indo-Commercial Bank Limited, the Prithvi Insurance Company Limited and the Indian Bank Limited

put together subscribed to 102 shares only. It was stated by learned counsel for the Corporation in the course of the arguments that the State

Government owns 51% of the shares while the Industrial Development Bank of India owns 48% and the Life Insurance Corporation of India owns

1% of the shares. One of the objects of the Corporation as found in the memorandum of association is to take over and manage, administer and

generally control any firm, concern or limited company which had defaulted or contravened any of the conditions agreed to by it at the time of the

sanction of loan and subsequently or otherwise. Under article 84 of the articles of association, the number of directors shall be not more than 15 or

less than nine inclusive of the ex-officio directors and the Government of Tamil Nadu is at liberty to appoint three directors while the Industrial

Development Bank of India is at liberty to appoint two directors. The Government and the Industrial Development Bank of India are entitled to

remove from office such appointed directors and appoint any other person in their places. Under article 87, the Government of Tamil Nadu is

entitled to appoint a director as chairman of the board and also appoint an acting or temporary chairman. Under the same article, the Government

of Tamil Nadu is entitled to appoint a managing director to exercise control over the affairs of the Corporation and to perform the duties as may be

entrusted or delegated to him from time to time by the board of directors; but such appointment shall be in consultation with the board of directors

and the Industrial Development Bank of India and after obtaining the advice of the Industrial Development Bank of India. Under article 174,

notwithstanding standing anything contained in any of the other articles, the Governor of Tamil Nadu may, from time to time, issue such directions

or instructions as he may consider necessary in regard to the affairs or the conduct of the business of the company or the directors thereof and in

like manner may vary and annul such directions or instructions. The directors shall duly comply with and give immediate effect to the directions and

instructions so issued.

The Corporation has been notified by the Central Government as a financial corporation for the purposes of sections 4A, 7(2)(b), 10(f), 25(1)

(d), 27, 32A, 41A, 28(2) and (3), 29 to 32, 32B to 35A, 38 and 32G of the State Financial Corporations Act, 1951. The notifications of the

Central Government have been issued u/s 46 of the said Act. According to that section, when a notification is made by the Central Government,

the institution concerned shall be deemed to be a financial corporation established by the State Government for the State within the meaning of the

Act and the provisions of the Act shall become applicable thereto according to the tenor of the notification. The proviso to the section is to the

effect that no notification shall be issued under that section in respect of any institution unless a request is made in that behalf by the State

Government concerned. It is also not in dispute that seven out of the twelve directors belong to the cadre of the Indian Administrative Service

(IAS). Three of them have been nominated by the Government of Tamil Nadu and one by the Pondicherry Government. Two of them have been

nominated by the Industrial Development Bank of India, one represents the Reserve Bank of India, one represents the SIDCO, one represents the

SIPCOT and the remaining three represent public associations.

The above facts and circumstances are sufficient to prove that the Corporation is carrying out functions of public importance and closely

related to governmental functions. Besides that, there is deep and pervasive State control over the Corporation. Hence, I hold that the Corporation

is a ""public authority"" amenable to the jurisdiction under article 226 of the Constitution of India. Thus, the preliminary objection raised by learned

counsel for the Corporation is overruled.

On the merits, the writ petition has to be dismissed on the very simple ground that under article 174 of the articles of association of the

Corporation, the Governor is entitled to issue directions and instructions. If the board of directors decides to seek the approval or advice of the

Government on any particular matter, it cannot be challenged by any person on the ground that such act of the board of directors is

unconstitutional, illegal or ultra vires. The board of directors has only acted within the four corners of the articles of association in referring the

matter to the Government.

Learned counsel for the petitioner contends that the subject-matter of the resolution, viz., the pay scales of employees of the Corporation will

not-fall within the scope of article 174 of the articles of association. It is his contention that the article only refers to the affairs or the conduct of the

business of the company or the directors thereof. According to him, the pay scales of the employees of the Corporation will not fall within the

scope of these terms. I see no substance in this argument. The terms are wide enough to cover every part of the affairs of the company. When the

term used is ""affairs or the conduct of the business of the company or the directors thereof"", it would certainly include revision of the pay scales of

the employees.

Learned counsel for the petitioner contended that the Secretary to the Government, Finance Department, the seventh respondent herein, is a

member of the board of directors and if a matter considered by the board is referred to the Government, it is he who has to decide in his capacity

as the Finance Secretary whether the board''s proposal could be accepted. According to learned counsel, the same person cannot sit in judgment

over a decision to which he is factually or supposedly a party. In so far as the resolution dated September 8, 1989, is concerned, it is the case of

the petitioner that the seventh respondent did not attend the meeting and take part of the discussions. But, according to the petitioners, even if he

had not actually taken part in the meeting he is supposed to have been a party to the resolution passed by the board of directors and he cannot sit

in judgment over the same while functioning as a Finance Secretary. There is absolutely no substance in this argument also. It is not the decision of

the Finance Secretary, or any other Secretary for that matter, which will conclude the issue. Under article 174 of the articles of association, it is the

Governor who has to decide the issue and he does so on the advice of the Council of Ministers. In the counter-affidavit filed on behalf of the

Government it is stated in paragraph 17 as follows :

...... The Government, vide Government Order Ms. No. 985, Finance (BPE) Department, dated September 5, 1989, have informed that the

boards of loss-making companies, may forward their proposals for revision of scales of pay to the Government for its approval provided the board

has thoroughly discussed the need for pay revision specifically in the context of the financial situation of the State public sector undertakings.

Accordingly, the said proposals have been forwarded to the Government as under article 174 of the articles of the association, the board is to

comply with such directions/instructions issued by the Government.

In paragraph 20 of the counter-affidavit, it is stated as follows :

In so far as paragraphs 20 to 22 of the petitioner''s affidavit are concerned, it is submitted that the decision of the board is under active

consideration of the Government. Clause 174 of the articles of association of the Corporation empowers the Government to have a say in the

affairs of the Corporation and is empowered to issue directions/and instructions with regard to the affairs of the Corporation. The pay revision of

the employees is one of the most important affairs of the Corporation and the Government is empowered to decide on the issue to pay revision.

The contention of the petitioner that the action of the Government in considering the pay revision forwarded by the board, should be declared as

unconstitutional and ultra vires is not legally sustainable .....

The third contention urged by learned counsel for the petitioner is that the pay scales of the employees of the Corporation shall not be fixed on

part with those of Government servants as the employees of the Corporation are not enjoying several benefits which are available to Government

servants. That is not a matter which can be gone into at this stage or in this writ petition. When the matter is still under the consideration of the

Government, the petitioner cannot expect that the decision of the Government will be to revise the pay scales of the employees of the Corporation

on a par with those of Government servants.

The last contention urged by learned counsel for the petitioner is that any revision of the pay scales on the basis of the pay revision made to

Government servants will be disadvantageous to the employees of the Corporation. This contention is more or less the same as the earlier one

which I have rejected. Here again, it is not possible, at this stage, for the petitioner or anybody else to say that the ultimate decision of the

Government will be disadvantageous to the employees of the Corporation. The petitioner cannot cry before he is hurt.

In the circumstances, the writ petition fails on the merits and it is hereby dismissed. However, there will be no order as to costs.