State under Article 12: Government company treated as an instrumentality of Government, with retiral benefit deductions held unsustainable.

A Government company running a nationalised undertaking may be treated as State under Article 12 where Government ownership, control, statutory acquisition and public functions show it to be an instrumentality or agency of Government. The decisive test is functional, not the mere corporate form, so the corporate veil cannot defeat fundamental rights. On the retiral benefits issue, pension deductions linked to provident fund and gratuity payments, together with stoppage of the supplementary retirement benefit, were found inconsistent with the governing statutory framework and were held unsustainable on the facts.

---

---

Issues: (i) Whether a Government company carrying on a nationalised undertaking is an authority or State within the meaning of Article 12 of the Constitution and amenable to a writ under Article 32; (ii) whether deductions from the petitioner's pension on account of provident fund and gratuity payments, and stoppage of the supplementary retirement benefit, were legally sustainable.

Issue (i): Whether a Government company carrying on a nationalised undertaking is an authority or State within the meaning of Article 12 of the Constitution and amenable to a writ under Article 32.

Analysis: The statutory acquisition scheme vested the undertaking first in the Central Government and then in the Government company under the Act, while service and fund matters were regulated by statute. The company was wholly controlled by Government, performed public functions, and operated with a strong statutory flavour. The decisive test was functional and not merely the form of incorporation. A corporate veil could not be used to defeat fundamental rights where the entity was in substance an instrumentality or agency of Government.

Conclusion: The Government company was held to be State within Article 12, and a writ under Article 32 was held maintainable against it.

Issue (ii): Whether deductions from the petitioner's pension on account of provident fund and gratuity payments, and stoppage of the supplementary retirement benefit, were legally sustainable.

Analysis: The pension scheme and the impugned deductions had to yield to the governing statutory framework governing the acquired undertaking and the petitioner's retiral benefits. The Court found that the deductions reducing the pension to a nominal amount were not justified on the facts and that the petitioner was entitled to the relief sought on the merits. The supplementary retirement benefit was also directed to be restored as part of the relief granted by the Court.

Conclusion: The deductions from pension and the stoppage of the supplementary retirement benefit were held unsustainable, and relief was granted to the petitioner.

Final Conclusion: The respondent-company was brought within the constitutional discipline of Article 12, and the petitioner succeeded on the substantive challenge to the reduction of his retiral benefits.

Ratio Decidendi: A Government company is State under Article 12 when the cumulative indicia show it to be an instrumentality or agency of Government, and such an entity remains subject to fundamental rights notwithstanding its corporate form.

---