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1963 (7) TMI 35
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....ch office now, are the petitioners who seek relief against the State of Andhra Pradesh in two of the petitions and the State of Bihar in the third petition by the issuance of a writ of certiorari or other appropriate writ or direction for quashing the orders of the Commercial Tax Officer of the State concerned assessing the Corporation to sales tax and also for quashing the notice of demand issued to them for payment of the sum assessed. When the learned Attorney-General opened the case for the petitioners in Writ Petition No. 202 of 1961, learned counsel appearing for the respondents asked for our permission to raise certain preliminary objections to the maintainability of the Writ Petitions Nos. 202 and 203 of 1961. Learned counsel for the respondents in Writ Petition No. 204 of 1961 Intimated to us that his clients have already raised certain preliminary objections to the maintainability of the writ petition and they also wish to take objections similar to those taken oh behalf of the respondents in Writ Petitions Nos. 202 and 203 of 1961. We asked learned counsel for the respondents in Writ Petitions Nos. 202 and 203 of 1961 that he should formulate his preliminary object....
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.... and organ of the Government of India with the entirety of its capital contributed by Government, and can it claim to enforce fundamental rights under Part III of the Constitution against the State as denned in article 12 thereof ? " The questions were raised by way of preliminary objections to the maintainability of the writ petitions under article 32 of the Constitution. As the whole case is not before us, it is necessary to state only the following facts in order to appreciate how the controversy arises. The State Trading Corporation of India Ltd. and K.B. Lal, the then Additional Secretary, Ministry of Commerce and Industries, Government of India, moved tins court under article 32 of the Constitution for quashing by a writ of certiorari or any other appropriate writ, direction or order, certain proceedings instituted by or under the authority of the respondents, (1) the Commercial Tax Officer, Visakhapatnam; (2) the State of Andhra Pradesh; and (3) the Deputy Commissioner of Commercial Taxes, Kakinada. Those proceedings related to assessments of sales tax under the provisions of the Andhra Pradesh Sales Tax Act Writ Petitions Nos. 202 and 203 of 1961 are between the parti....
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....ts can be available only to "all citizens". "Equality before the law" or "equal protection of the laws" within the territory of India is available to any person (article 14). The protection against the enforcement of ex post facto laws or against double-jeopardy or against compulsion of self-incrimination is available to all persons (article 20), so is the protection of life and personal liberty under article 21 and protection against arrest and detention in certain cases, under article 22. Similarly, freedom of conscience and free profession, practice and propagation of religion is guaranteed to all persons. Under article 27, no person shall be compelled to pay any taxes for the promotion and maintenance of any particular religious denomination. All persons have been guaranteed the freedom to attend or not to attend religious instructions or religious worship in certain educational institutions (article 28) And, finally, no person shall be deprived of his property save by authority of law and no property shall be compulsorily acquired or requisitioned except in accordance with law, as contemplated by article 31. These, in general terms, without going into the details of the limita....
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....to " all citizens " leaves out of account other rights or prohibitions which concern groups, classes or associations of persons, with which we are not immediately concerned. But irrespective of whether a person is a citizen or a non-citizen or whether he is a natural person or a juristic person, the right to move the Supreme Court by appropriate proceedings for the enforcement of their respective rights has been guaranteed by article 32. It is clear on a consideration of the provisions of Part III of the Constitution that the makers of the Constitution deliberately and advisedly made a clear distinction between fundamental rights available to "any person" and those guaranteed to "all citizens". In other words, all citizens are persons but all persons are not citizens, under the Constitution. The question next arises : What is the legal significance of the term "citizen"?. It has not been defined by the Constitution. Part II of the Constitution deals with "Citizenship", at the commencement of the Constitution. Part II, in general terms, lays down that citizenship shall be by birth, by descent, by migration and by registration. Every person who has his domicile in the territory....
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.... not include any company or association or body of individuals, whether incorporated or not". Hence, all the subsequent provisions of the Act relating to citizenship by birth (section 3), citizenship by descent (section 4), citizenship by registration (section 5), citizenship by naturalisation (section 6) and citizenship by incorporation of territory (section 7) have nothing to do with a juristic person. It is thus absolutely clear that neither the provisions of the Constitution, Part II, nor those of the Citizenship Act aforesaid, either confer the right of citizenship on, or recognise as citizen, any person other than a natural person. That appears to be the legal position, on an examination of the relevant provisions of the Constitution and the Citizenship Act. But it was contended that this court had expressed itself to the contrary in certain decisions, and some of the High Courts have also taken a contrary view, which we may now proceed to consider. In what is now known as the First Sholapur case, Chiranjit Lal Chowdhuri v. Union of India [1950] S.C.R. 869; [1951] 21 Comp. Cas. 33. , Mukherjea J., speaking for the majority of the court, made the following observations at p....
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....ompensation, and had thus violated the fundamental rights of the company under article 31(2) of the Constitution. It will thus appear that the decision of this court proceeded on an examination of the provisions of article 31, which is not confined to citizens only and has reference also to the property of " any person ". But there are observations made in the course of the judgment which would support the view propounded on behalf of the respondents. At page 694, Mahajan J., while discussing the scope and effect of the provisions of the Constitution in Part III, with particular referenda to articles 19 and 31, made the following observations: "In considering article 31 it is significant to note that it deals with private property of persons residing in the Union of India, while article 19 only deals with citizens defined in article 5 of the Constitution. It is thus obvious that the scope of these two articles cannot be the same as they cover different fields. It cannot be seriously argued that so far as citizens are concerned, freedoms regarding enjoyment of property have been granted in two articles of the Constitution, while the protection to property qua all other persons ha....
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....t necessary to refer to certain decisions of the Madras, Bombay and Calcutta High Courts as they cannot be decisive one way or the other in the absence of a clear decision of this court. We have, therefore, to examine the legal position afresh on the footing that it is still an open question. On an examination of the relevant provisions of the Constitution and the Citizenship Act aforesaid, we have, as already indicated, reached the conclusion that they do not contemplate a corporation as a citizen. But Mr. Setalvad, appearing on behalf of the petitioners, contended that Part II of the Constitution relating to citizenship is not relevant for our purposes because it does not define "a citizen" nor does it deal with the totality of "citizenship". It was further submitted that the same is the position with reference to the provisions of the Citizenship Act. It is common ground, therefore, that the constitutional and the statutory provisions discussed above have no reference to juristic persons. But even so, it was contended, we have to review the legal position in the light of the pre-existing law, i.e., the common law, which, it was claimed, was preserved by article 372 of the Con....
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....titution. One could understand the argument that both the Constitution and the Citizenship Act have not dealt with juristic persons at all, but it is more difficult to accept the argument that the expression " citizen " in Part II of the Constitution is not conterminous with the same expression in Part III of the Constitution. Part II of the Constitution, supplemented by the provisions of the Citizenship Act (LVII of I955) deals with " citizens " and it is not correct to say that citizenship in relation to juristic persons was deliberately left out of account so far as the Constitution and the Citizenship Act were concerned. On the other hand, the more reasonable view to take of the provisions of the Constitution is to say that whenever any particular right was to be enjoyed by a citizen of India, the Constitution takes care to use the expression " any citizen " or "all citizens", in clear contradistinction to those rights which were to be enjoyed by all, irrespective of whether they were citizens or aliens, or whether they were natural persons or juristic persons. On the analogy of the Constitution of the United States of America, the equality clause in article 14 was made availab....
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....clude aliens and artificial persons. In this connection, the following statement in Private International Law by Martin Wolff is quite apposite : "It is usual to speak of the nationality of legal persons, and thus to import something that we predicate of natural persons into an area in which it can be applied by analogy only. Most of the effects of being an ' alien or a 'citizen' of the State are inapplicable in the field of corporations ; duties of allegiance or military service, the franchise and other political rights do not exist." (page 308). This apart, it is necessary to refer to another aspect of the controversy. It was regard on behalf of the petitioners that the distinction made by the Constitution between " persons " and " citizens " is not the same thing as a distinction between natural and juristic persons and that as " persons" would include all citizens and non-citizens natural and artificial persons, the makers of the Constitution deliberately left artificial persons out of consideration because it may be that the pre-existing law was left untouched. It is very difficult to accept the contention that when the makers of the Constitution were at pain to lay down....
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....tion relating to "citizenship", and made a clear distinction between " persons " and " citizens " in Part III of the Constitution. Part III, which proclaims fundamental rights, was very accurately drafted, delimiting those rights like freedoms of speech and expression, the right to assemble peaceably, the right to practise any profession, etc., as belonging to "citizens" only and those more general rights like the sight to equality before the law, as belonging to " all persons." In view of what has been said above, it is not necessary to refer to the controversy as to whether there were any citizens of India before the advent of the Constitution. It seems to us, in view of what we have said already as to the distinction between citizenship and nationality, that corporations may have nationality in accordance with the country of their incorporation; but that does not necessarily confer citizenship on them. there is also no doubt in our mind that Part II of the Constitution when it deals with citizenship refers to natural persons only. This is further made absolutely clear by the Citizenship Act which deals with citizenship after the Constitution; came into force and confines it o....
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....hallenges the demand on the ground, inter alia, that the impugned order and the demand for the tax infringe its fundamental rights which are guaranteed to citizens by article 19(1), sub-clauses (f) and (g). These sub-clauses read : 19 (1) All citizens shall have the right- (f) to acquire, hold and dispose of property ; (g) to practise any profession, or to carry on any occupation, trade or business. The State Trading Corporation claims to be a citizen for the application of these sub-clauses, which fact being disputed on the other side, has given rise to the two questions above set out. As the questions amply indicate, the share capital of the State Trading Corporation is entirely contributed by the Central Government. The shares are held by the President of India and two Secretaries to Government. The State of Andhra Pradesh, therefore, denies that the State Trading Corporation being an artificial person is a citizen and, consequently, contends that article 19 is inapplicable because the word " citizen " in the article refers to natural persons. Additionally, it contends that being a department of Government, the State Trading Corporation cannot claim protection of art....
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....ding Corporation cannot be equated with the shareholders or the Government since the corporate veil cannot be allowed to be pierced. He points out that there are several States in our Republic and there is a great danger of one Government stifling the trading activities of another Government either by law or executive action against which article 19 is the only effective safeguard. He submits that it could not have been intended that while every individual citizen should be protected, a group of citizens, should by mere incorporation, lose the benefits of the guarantee in article 19. We are dealing here with an incorporated company. The nature of the personality of an incorporated company, which arises from a fiction of law, must be clearly understood before we proceed to determine whether the word " citizen " used in the Constitution generally or in article 19 specially, covers an incorporated company. Unlike an unincorporated company, which has no separate existence and which the law does not distinguish from its members, an incorporated company has a separate existence and the law recognises it as a legal person separate and distinct from its members. This new legal personali....
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....reated as a subject of the Republic notwithstanding the nationality of its shareholders." (Per Lord Brampton at page 501). He contends that there is no difference between " nationality" and " citizenship" and the two words are synonymous and relies upon the following passage from Weiss on Nationality and Statelessness in International Law (1956), pages 4, 6: " One of the terms frequently used synonymously with nationality is citizenship. Historically, this is correct for States with the Roman conception of nationality, but not for States with the feudal conception of nationality, where citizenship is used to denote not political status but membership of a local community. It has, however, become usual to employ the term ' citizen' instead of ' subject' in republican States -including common law countries such as the United States : he who before was a 'subject of the King ' is now a ' citizen of the States'- and in that sense and in those States the terms ' nationality ' and ' citizenship' must be regarded as synonymous." It is, therefore, contended somewhat syllogistically that all incorporated corporations have the nationality of the State under the laws of which they are i....
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.... therefore, conceivably bears this extended meaning at least in some-places in Part III of the Constitution. But it is not necessary to determine where in the Constitution the word " person " includes a company, etc., because that word has not been used, in article 19. The claim of corporations aggregate, like the petition to the benefits which article 19 gives, must depend on whether the word " citizen " which is actually used can bear a similar enlarged meaning. Mr. Setalvad is right in contending that the use of the word " person " with an enlarged meaning in some places and of the word " citizen " in other places does not by itself prove that artificial person are outside the meaning of the word " citizen ". The contrast may not be between natural and artificial persons, so much as between citizens and non-citizens, and it is possible that where the benefit is intended to go to non-citizens, a word of wide meaning is used and where the benefit is meant for citizens, only the word " citizen " is used. It is true that the word " citizen " cannot include an enemy or an alien while the more general word " person " may, but that does not answer the question whether the word " citize....
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....to the Parliament and Assemblies of the people. They are persons who were declared citizens on the inauguration of the Constitution and those on whom the rights of citizens were conferred and on whom they may be conferred by law. Of course the Constitution also confers some rights on aliens and assists and protects them but the guarantee in the preamble is to the citizens alone, that is, individuals who enjoy full civic rights in the body politic. Then follows a special chapter entitled "Citizenship". That part contains seven articles. Article 5 spoke at the commencement of the Constitution. That article uses the word "person" but the context shows that only natural persons were meant. Citizenship was conferred on every person who had his domicile in the territory of India, and (a)who was born in the territory of India ; or (b)either of whose parents was born in the territory of India; or (c)who has been ordinarily resident in the territory of India for not less than five years immediately preceding such commencement. The reference to the birth of the person or of his parents clearly shows that only natural persons were meant because corporations though born in a met....
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....rticle 29(1), where citizens residing in the territory of India having distinct language, scripture or culture of their own have been given a right to preserve the same, the word definitely refers to natural persons. In article 20(2) entrance to educational institutions is guaranteed to citizens and the entrant can only be a natural person and not a corporation. The above analysis shows that in 34 places, the words " citizen " and " citizenship" refer to natural and not artificial persons. The question is whether in the thirty-fifth place the word is meant to include corporations aggregate. For this purpose we must ascertain if there is anything special which points to a different use of the word. Sub-clauses (a) to (e) of article 19 contemplate natural persons. The claim is that the word "citizen" must bear a different meaning in respect of clauses (f) and (g) because corporations acquire, hold and dispose of property and carry on trade or business. It is argued that if several citizens carry on business together as an incorporated company they cannot lose the guarantee which is given to citizens, and we are invited to give a meaning to the word which is wide enough to include ....
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....e ". But even under him, the concept of citizenship was immature. The first recognition of citizenship came with Cleisthenes under whose reforms there was a distribution of the population on a geographical basis and an enfranchisement of persons' of pure or partial Athenian descent. Resident foreigners had inter married and though there was a partial recognition of foreigner permanently settled (domiciled) in Athens even from the days of Peisistratus there was no recognition of the offsprings of mixed marriages as citizens. These were added to the list of citizens because citizenship no longer depended on membership of the phratries. This state of affairs continued till Pericles abrogated the enlightened measure. He limited citizenship to those of Athenian descent on both sides. Had he come earlier some famous men of Athens like Themistocles would have been barred from not only office but other civic rights. It is not necessary to follow the history of Athens further. It is reasonable to believe that all other States in Greece except Sparta followed this kind of citizenship. The Spartans had their own system of rule with two kings and an elected council (gerusia) elected by the cit....
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...., determined the privilege but at no time was there a concept of citizen ship of any but a natural person. In Roman Law citizenship was transmitted by birth to an offspring of a Roman citizen. So far we have dealt with citizenship, namely, membership of body politic with full civic rights. In the middle ages this membership of the State began to carry a dual status, one status was political and the other civil. The double status came in Central Europe in the wake of Roman Law and was partly due to the growth of feudal vassalage; by which what might have grown into nations composed of " clans " became divided into feudal chieftainships. The feudal lord did not concern himself with descent as such so long as his follower held land or rendered service according to his laws. Such laws did not apply to foreigners but if the foreigner held lands or chattels or rendered service he was equally bound. But the main reason was the impact of international relations. An individual began to be viewed in two capacities. Firstly, he was regarded as the subject of a certain State (a political status) and, secondly, as one entitled to certain rights and privileges in his own State (a civil status....
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....namely that of domicil, which is the criterion established by law for the purpose of determining civil status. For it is on this basis that the personal rights of the party, that is to say, the law which determines his majority or minority, his marriage, succession, testacy or intestacy, must depend." Thus, in the middle ages, it was begun to be realised that the legal personality of persons was composed of a political status and a civil status ; It was possible for a person to have political status but not civil status, that is to say, he could be a national but not a citizen but it was difficult to imagine a citizen without political status. This political status was determined according to two different theories. One was the theory of descent (jus sangunic) and the other a theory of domicile (jus soli). The European countries applied the former and the common law countries the latter to determine the status. We have already seen that according to Roman Law the son of a Roman citizen was also a Roman citizen and it did not matter where he was born and this was the theory which was recognised in Central Europe. In the common law countries (and 1 include the United States of Ame....
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....s such descent is considered applicable up to grandchildren. Thus certain statutes before the Act of 1914 conferred British citizenship and nationality upon grandchildren born abroad of natural born subjects, while the French Naturalization Law (1889) gave recognition only to childern born in France of a father also born in France and to children born abroad of a French father. The former German law adhered only to the principle of descent but later recognised marriage, naturalization, etc. In Italy long residence of the lather and his domicile in Italy is considered sufficient. Today nationality has assumed enormous importance and the principles of dual nationality and statelessness cut across some of the former theories and Cogordan's statement "que tout homme doit posseder une nationalite" Every person must possess a nationality) is no longer true because of many stateless persons. It is not my intention to speak exhaustively about citizenship and nationality. I have, I hope, sufficiently established my point that citizenship and nationality from the earnest times to date have been viewed as the attributes of natural persons. We are not concerned, however, with other peoples ....
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....nwealth countries were about to enact their own citizenship and nationality laws. The Act of 1948 did two things with which we are concerned. It laid down rules by which the status of British subjects was conferred on persons who were citizens of certain countries named in the Act. India was one of such countries. This new citizenship was Commonwealth citizenship. It also contained transitional provisions and section 12(4) provided : "12. (4) A person who was a British subject immediately before the date of the commencement of this Act and does not become a citizen of the United Kingdom and colonies by virtue of any of the foregoing provisions of this section shall on that date become such a citizen unless- (a) he is then a citizen of any country mentioned in sub-section (3) of section 1 of this Act under a citizenship law having effect in that country or a citizen of Eire; or (b) he is then potentially a citizen of any country mentioned in sub-section (3) of section 1 of this Act..." One of the Commonwealth countries (Canada) had already such laws, but others followed immediately afterwards. India lagged behind and the citizenship laws came in the Constitution and in t....
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....tablish that citizenship as viewed from country to country and from one period of time to another was concerned with natural persons. The manner of acquisition of citizenship and/or nationality described by me are admirably summed up by Mervyen Jones in his book " British Nationality Law ", at page 9; in the form of a pedigree which may be seen. It is enough to read the various headings in the pedigree to realize' that there is no room for artificial persons there. From the point of view of Mr. Setalvad's argument this raises an intriguing situation. If corporations possessed citizenship immediately before our Constitution they would be citizens under the English Act of 1948, that is to say, British subjects without citizenship or commonwealth citizens and only potential citizens oGBP India. The Indian Constitution dealt with natural persons and not artificial persons in its provisions dealing with citizenship and the status of corporations was not disturbed by those provisions. When, the Citizenship Act was enacted in 1955, it began to speak from January 26, 1950, and it might have affected corporations but for the fact that it excluded them. Thus if there was any citizenship whic....
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....r to give effect to law-making treaties applying to " nationals " (See Starke, An Introduction to International Law, 4th edition, page 256). Starke has pointed out that there is no unanimity of opinion regarding the tests to be applied to ascertain the nationality of corporations. Clive Parry does mot recognise this nationality and calls it quasi-nationality. I shall now (explain in what sense the word "nationality" is used in this connection. There have been many theories about the nationality of corporations which were again reconsidered during the First World War. According to Hilton Young (22 Harward Law Review, page 2) there were four main theories at first. The first theory viewed a corporation as the national of the State in which its members or the majority of them or owning the greater part of the capital, were nationals. This theory considered the word " corporation " as " a collective name for the corporators", the corporate veil being considered to be of such gossamer texture as to hide almost nothing. This theory of which the chief proponents were Sommieres and Morawets was criticised on all hands and particularly by Maitland and was abandoned as it made nationality....
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....nded upon where it came into being and this domicile was not changeable though Lord St. Leonards was of a contrary opinion in Carron Iron Co. v. McLaren [1855] 5 HL, Cas. 416 Similarly, it was held that a corporation had a residence though it could change its residence and even have more than one residence under certain laws. On what then did nationality depend ? According to English common law a corporation incorporated under the English law had British nationality and it did not matter if its members held a different nationality. A corporation which was not of British nationality was an alien corporation. According to the laws of many European countries, particularly France, nationality depended upon the siege social by which is meant the seat or centre of control. Both, these theories suffered during the First World War. As regards the English common law the leading case was Janson v. Driefontein [1902] AC. 484, from which I have already quoted certain extracts. In that case it was decided that a company possessed the nationality of the country under the laws of which it was incorporated and that the nationality of the shareholders was not determinative of the question. Once thi....
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....This is admittedly so in times of peace, during which every shareholder is at liberty to exercise and enjoy such rights as are by law incident to his status as shareholder... (5) In a similar way a company registered in the United Kingdom, but carrying on business in a neutral country through agents properly authorized and resident here or in the neutral country, is prima facie to be regarded as a friend, but may, through its agents or persons in de facto control of its affairs, assume an enemy character. (6) A company registered in the United Kingdom but carrying on business in an enemy country is to be regarded as an enemy." The House of Lords case is regarded as an instance of judicial legislation on the subject of "enemy character" and it undoubtedly was so. It is not as if this theory has been universally accepted. It was criticised by Sir Arnold McNair in 1923/24 British Year Book of International Law, page 44, and by Mr. Ralph A. Norem in American Journal of International Law, volume 24, page 310. We have seen that in the United States a corporation is a domestic corporation of the State which incorporates it or under the laws of which it is incorporated. Some of....
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.... to have its seat where the " brain" was and not where it had its centre of exploitation. The Italians also adopted the same test. The Belgians framed a law which sums up the new theory in crisp legal language (Act 172-Mai 23, 1913): "Toute societe dont le principal establissement est en Belgique est soumise a la lot beige, Men que I'acte constitulif ait etc passe en pays etranger" (Every society of which the principal establishment is in Belgium is under the laws of Belgium, notwithstanding that the incorporation took place in a foreign country). In the Mixed Arbitral Tribunals which followed the First World War there were some cases which were decided on the theory of control but many others were decided on the theory of domicile depending upon the composition of the Tribunal. There are indeed many other tests which I have not mentioned such as the test of beneficial interest, or of substantial ownership or of responsibility which it is not necessary to describe here. It would not be wrong to say that the control theory is also losing ground and there is a great support for the theory that the juridical life of the corporation must ultimately fix its nationality. It is a....
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....a juridical person, but could not be a subject at common law, because allegiance, being essentially a personal bond, was a conception limited in its application to individuals. Nor have corporations been recognised as statutory British subjects or as citizens of the United Kingdom and colonies." Oppenheim also points out (International Law, Lauterpacht Edition) page 642, note 3 : " The nationality of corporations is mainly a matter of Private International Law, and considerations of public policy have a decisive influence upon the attitude of every State with regard to it." Citizenship depends upon municipal law and the same learned author says (ibid, page 643): " It is not for international law but for municipal law to determine, who is, and who is not, to be considered a subject." Hyde in his International Law volume (2nd edition) page 1066 also says : " Citizenship as distinct from nationality, is a creature solely of domestic law. It refers to rights which a State sees fit to confer upon certain individuals who are also its nationals." But perhaps the most practical argument against the recognition of corporations as citizens comes from M. Niboyet (who, as ....
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....ent of India and two Secretaries to Government in their official capacities and that its management is a governmental function for the benefit of the nation. It may be conceded that it possesses Indian nationality in an ideal sense and that there is also no possibility of its acquiring an enemy character. But even so it is not a " national ", that is to say, an individual who is a part of our nation./ When we count Indian nationals for purposes of census we do not count the corporations as nationals. The argument is not one whit advanced by dropping the word "citizen" and using the word "national". No doubt the existence of corporations as entities is recognised but the entity obtains only such rights as the law confers on it. This entity cannot claim other rights as a matter of course or by standing side by side with citizens. This entity cannot aspire to hold a public office or to membership of Parliament or the legislatures or to franchise or to entry into educational institutions. This is because it is not a citizen in the true sense of the term and because its " nationality " though of consequence in public or private international law, in treaties, in conventions and in proto....
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....e corporations are expressly mentioned. It is not necessary to refer to these Constitutions because no inspiration can be drawn from them to rewrite our Constitution. As Willis said (and he is not alone in this) of the position in the United States that the rights and liabilities of corporations " have been worked out under and through the judge-made United States Constitution ". Perhaps this was forced upon the Supreme Court by the diversity of citizenship existing in the United States but it may be noted that the word " citizen " has not been held to include corporations in other articles. Since this precedent was strongly relied upon I shall briefly refer to it. The Constitution of the United States of America overlooked corporations and this has made the language intractable in places. The Supreme Court has supplied this want by " judicial legislation ". How this was done may be explained. I have already referred to the dictum of Chief Justice Taney and to the attitude of the Congress and the Supreme Court on the subject of nationality of corporations. There is a fixed view that nationality follows incorporation and is unalterable. This geographical theory coupled with dual ....
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.... from Willis on Constitutional Law of the United States (page 850): " At first a corporation was not regarded as a citizen for any purpose and it could not get into or be taken into the federal courts on the ground of diversity of citizenship. Then a case arose where all of the stockholders of the corporation were citizens of the same State where the corporation was incorporated and the plaintiff was a citizen of another State, and it was held that the court would look behind the corporate veil to the stockholders and give the federal courts jurisdiction because of the diversity of citizenship thus found. In a later case some of the stockholders were not citizens of the State where the corporation was incorporated but of the state in which the opposing litigant was a citizen. To avoid robbing the federal courts of their jurisdiction, the court held that for purposes of diversity of citizenship all of the stockholders of a corporation would be conclusively presumed to be citizens of the chartering State. This rule, however, had to be modified later so as to make an exception in the case of a stockholder plaintiff. Now it is believed that the courts have come to the position that ....
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.... the United States. Corporations were thus not included because, in the words of Buckley L.J., a corporation cannot be loyal or disloyal. For international purposes a corporation is treated as a national if subjected to illegal treatment in an international aspect by a foreign power. The position of corporations is protected in treaties as, for example, the treaties between Great Britain and the United States of 1783 and 1794 and the treaty of Guadalupe Hidalgo between the United States and Mexico, Other examples are found in Hyde and international documents. Similarly, treaties of commerce are construed to include corporations within expressions denoting natural persons. But even in international sphere corporations are not on a par with natural persons or nationals. As Hyde points out : "..........at least in a technical sense, a corporation is not, for many purposes, to be deemed a national of the State to which its life is due, and lacks many privileges that enure to a natural person......." The question is whether the precedent of the United States Supreme Court should be followed. Apart from the fact that this involves a conscious effort at judicial legislation, I am of....
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....orporation vests in the Government of India. Now there are not two veils so to speak, so that by lifting the first, one sees the shareholders and by lifting the other, the Government of India. There is but one veil and if it is at all to be lifted, it must be lifted right off. What one would see on lifting the veil may be described in the words of Martin Wolff (Private International Law (1945), at page 56) as follows : " It occurs frequently that a State creates, e.g., for a commercial purpose, a separate legal entity, in law distinct from the State, but in fact, if the veil of personality is pierced, identical with it. Examples are. . . . . . . . notably many companies under State control, the State possessing all or practically all the shares in that company." If the corporation is to be regarded as a separate entity from its members and not merely as an association of individuals, it is not permissible to tear the veil aside. Corporations in which the State owns the stock do not, in the United States, benefit from the immunity of the State. It is because of these difficulties that the Supreme Court of the United States settled the question of Federal jurisdiction in the fa....
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.... the Daimler case [1917] 166 N.Y.S. 567, that the Supreme Court had laid down the principle that a court may look behind the corporate name to ascertain the character of the individuals comprising it, was, said Justice Lehman, obviously not accurate." I have earlier quoted from St. Louis and San Francisco Railway Co. v. James [1896] 161 US. 545 ; which also supports Dr. Schuster's view. In my judgment it is not possible to pierce the veil of incorporation in our country to determine the citizenship of the members and then to give the corporation the benefit of article 19. If we did pierce the veil and saw that the corporation was identical with Government there would be difficulty in giving relief unless we held that the State can be its own citizen. Nor is it possible to raise an irrebuttable presumption about the citizenship of the members. I have given detailed reasons already in answer to the first question posed for our decision. If we go by the corporate entity then we must hold that article 19 applies to natural persons. On that subject I have said a great deal but what I have said sums up to the following passage from Ducat v. Chicago [1868] 48 111. 172, quoted by Far....
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....the shares in particular. They are amply protected under our Constitution. There can be no discrimination, no taxation without authority of law, no curbs involving freedom of trade, commerce or intercourse and no compulsory acquisition of property. There is sufficient guarantee there and if more is needed then any member (if citizen) is free to invoke article 19(1)(f) and (g) and there is no doubt that the corporation in most cases will share the benefit. We need not be apprehensive that corporations are at the mercy of State Governments. For these reasons my answers to the questions posed are against the State Trading Corporation. Das Gupta, J.-I think the State Trading Corporation of India is entitled to fundamental rights under article 19(1)(f) and (g) of the Constitution as a citizen of India. The petitioner bases its claim to these fundamental rights on the fact that all its members are citizens. That this is so is not disputed by the respondent. But the respondent resists the claim on the legal basis that the Corporation is not a natural person but only an artificial person forming a distinct entity from the natural persons who are its members. According to the respo....
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....who has voluntarily acquired the citizenship of any foreign State shall not be a citizen of India. Article 10 embodies the provisions of continuity of citizenship "subject to the provisions of any law that may be made by Parliament"; article it makes an express provision that Parliament would be competent to make any provision with respect to acquisition and termination of citizenship and all other matters relating to citizenship. I agree with the contention raised on behalf of the respondent that it is not reasonably possible to read into these articles of the Constitution any intention that an artificial person might also be a citizen. We also find that the Citizenship Act, 1955, which was enacted by Parliament in exercise of the powers preserved to it by article 11 of the Constitution, expressly excludes from its benefit " any company or association or body of individuals, whether incorporated or not." A corporation is not a citizen under the Citizenship Act; 1955, nor is a corporation as such a citizen under the constitutional provisions on the question of citizenship. From this it seems an easy step to say: articles 5 to 11 do not make the corporation a citizen; the .Citize....
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....operty under article 19 of the Constitution. When A engages with another such citizen, B, in business the two can still come to the courts to claim the benefit of the same fundamental right. The position remains the same if A and B join more persons without incorporating themselves into a company; even if the number is seven or more they can still join in the same application and come to the court jointly for enforcement of their fundamental right under article 19 when they are jointly engaged in the same business. For, in all these cases the claim of each to the fundamental right cannot be in law defeated by the fact that several other citizens have joined him in making a similar claim for themselves. As soon as, however, two or more persons, who are in their own right citizens of India, form themselves into a private company, or seven or more persons, each of whom is a citizen in his own right form a public incorporated company, they are faced with the proposition that the company not being a citizen, it is excluded from the right which they could have claimed. It is well known that for many years before 1950 when the Constitution came into force much of the trade and industry....
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....ess of what has been called " tearing the veil" and granted to a corporation composed of citizens of a State some of the rights of a citizen of that State, in spite of the fact that the corporation as such is an artificial person distinct from its members. Is it not reasonable to think that the makers of our Constitution trusted that courts in India would also not hesitate to apply a similar process of going under the surface and looking at the composition of the corporation, in deciding whether the corporation is entitled to fundamental rights ? In my judgment the answer to the question must be in the affirmative. Indeed I would go further and say that to take another view is an insult to the intelligence and understanding of those who drafted the Constitution. I am thus clearly of opinion that the Constitution-makers, when they used the word " citizen " in article 19, intended that at least a corporation of which all the members were citizens of India would get the benefit of the fundamental rights enshrined in that article. The legal position that the corporation is a distinct entity from its members does not appear to me to create any real difficulty in the way of giving eff....
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....es in which this court as also the High Courts have given companies of which the members were Indian citizens the benefit of fundamental rights, special to citizens. In some of these cases the question was sometimes raised whether or not a corporation was a citizen for the purpose of the fundamental rights but that was left unanswered. Among the cases in which relief claimed on fundamental rights specially conferred on citizens have been granted to corporations may be mentioned : Express Newspapers {Private) Ltd. v. Union of India [1959] SCR. 12 Bengal Immunity Co. v. State of Bihar [1955] 2 SCR. 603 ; 6 STC. 446 Bombay Dyeing and Manufacturing Co. Ltd. v. State of Bombay [1958] SCR. 1122. In my judgment, therefore, the first question referred to this Special Bench should be answered in the affirmative. On the other question that has been referred, I agree with the conclusion of my learned brother. Shah J, that the State Trading Corporation is not in substance a department and organ of the Government of India. As I entirely agree with the reasoning on which he has based this conclusion, I do not propose to discuss the matter further. For the reasons mentioned above I would....
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....hts guaranteed to citizens under the said article? and (2) Whether the State Trading Corporation is, notwithstanding the formality of incorporation under the Indian Companies Act, 1956, in substance a department and organ of the Government of India with the entirety of its capital contributed by Government and can it claim to enforce fundamental rights under Part III of the Constitution against the State as defined in article 12 thereof ?" We are not at this stage concerned to deal with any right which the second petitioner, K. B. Lall, may have, to maintain the petition, for the questions deal only with the right of the company to set up the protection of article 19(1)(f) and (g ) of the Constitution. Article 19 guarantees certain basic freedoms in favour of citizens; it provides that : " (1) All citizens shall have the right- (a) to freedom of speech and expression; (b) to assemble peaceably and without arms; (c) to form associations or unions ; (d) to move freely throughout the territory of India; (e) to reside and settle in any part of the territory of India; (f) to acquire, hold and dispose of property; and (g) to practise any profession, or to....
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.... useful to consider the scheme under which the diverse fundamental rights are declared and guaranteed by Part TIT of the Constitution and the extent of protection afforded against infringement of those fundamental rights. The Constitution, in declaring the fundamental rights, use different expressions to denote the beneficiaries of different rights. By articles 14, 20 (1), (2) and (3), 21, 22(1), (2) and (4). 25(1), 27, 28(3) and 31 certain fundamental rights are declared in favour of persons. By articles 15 (1) and (2), 16(1) and (2), 19(1) and 29(2) citizens are the recipients of fundamental rights guaranteed thereby. Certain fundamental rights are declared in favour of groups such as denominations, sections, minorities or institutions, e.g., articles 26, 29(1), 30(1) and 30(2): these would in the very nature of things be groups of individuals. By certain other articles prohibitions are declared, e.g., articles 17, 23(1), 24 and 28(1), for removal of evils, such as untouchability, traffic in human beings, forced labour, employment of children in hazardous employment and against imparting of religious instructions in educational institutions. The expression " citizen " used in Cha....
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.... (freedom from payment of taxes for promotion of any particular religion or religious denomination), article 20(1) and (2) (bar against retrospective operation of penal statutes, and rule against double jeopardy) and article 31 (bar against deprivation of property otherwise than by authority of law) are guaranteed even in the case of artificial persons, but some of the most cherished rights, i.e., right to acquire, hold and dispose of property, and to carry on trade or business of artificial persons may not be protected against executive or legislative action. Was it intended by the Constituent Assembly when declaring the freedoms under article 19 to make a deliberate departure, and in respect of rights declared under article 19 to restrict the enforcement thereof against action of the law-makers or the executive only in favour of natural persons and not in favour of artificial persons ? It is in this background we may turn to the question whether the declaration of citizenship under articles 5, 6 and 8 of the Constitution, and the Citizenship Act, 1955, was to be exhaustive, or merely to deal with the rights of natural persons. It may be necessary first to have a true concept o....
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....al and personal rights within the United States, while some persons-such as those belonging to territories and possessions which are not among the States forming the Union-are described as ' nationals'. They owe allegiance to the United States and are United States nationals in the contemplation of international law; they do not possess full rights of citizenship in the United States... In the British Commonwealth of Nations it is the citizenship of the individual States of the Commonwealth which is primarily of importance for international law, while the quality of a ' British subject' or ' Commonwealth citizen' is probably relevant only as a matter of the municipal law of the countries concerned." Citizenship and nationality emphasize different facets of a single concept of association with or membership of a political community. The form and content of the association have varied in their historical evolution with the complexion of the governmental machinery, but in essence they denote the relation which a person bears to the sovereign authority. Citizenship is the relation that a person bears to the State in its national or/and municipal aspect; nationality appertains to ....
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..... The English statute law did not regulate the nationality of corporations, but the decisions of the highest tribunals regarded them for certain purposes as capable of possessing all the attributes of nationality. In Janson v. Driefontien Consolidated Mines Ltd. [1902] AC. 484, the House of Lords regarded a company registered under the laws of the South African Republic as a national of that State. The observations of Lord Macnaghten at page 497, of Lord Davey at page 498, of Lord Brampton at page 501 and of Loud. Lindley at page 505, proceed on the view that the company concerned in that case was a national of the Republic of South Africa and the question as to the validity of the contract of insurance by British underwriters against capture during transit to the United Kingdom by the foreign State before declaration of war was valid. Similarly, Attorney-General v. Jewish Colonization Association [1901] 1 KB. 123 ; 1 EDC. 303 was decided on the footing that a public corporation is capable of nationality, and in Generali v. Selim Cotran [1932] AC. 268 it was accepted that a public corporation has the attributes of nationality. In Gasque v. Commissioners of Inland Revenue [1940] 2 K....
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....s but the capacity to exercise franchise is not a sine qua non of citizenship. The State normally affords to corporations protection as to its nationals abroad and recognises its corporate character with capacity to exercise rights within the realm. In the matter of protection, the law makes no distinction between natural persons and artificial persons like corporations. Was it then intended by the Constitution which afforded protection of the widest amplitude in favour of corporations as well as natural persons against discrimination under article 14, against deprivation of property under article 31(1), against compulsory acquisition or requisition of property for purposes not public and without payment of compensation under article 31(2), against imposition of taxes the proceeds of which are specifically appropriated for payment of expenses for maintenance of a particular religion or religious denomination under article 27, against being subjected to taxation without authority of law under article 265, and to the freedom of trade, commerce and intercourse, subject only to the provisions of Part XIII still did not guarantee the right to carry on business or trade, to acquire, hold....
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.... language used in the Constitution, or the history of our national evolution. The status of British Indians prior to 1947 was governed by the British Nationality and Status of Aliens Act, 1914. They were regarded as British subjects, and entitled in British India to such rights and privileges as were accorded to British nationals in India. Their status as British subjects was analogous to the status of citizens of a republic. They exercised civil rights, and such political rights as the form of Government permitted. If a citizen is a national who under the law of the State is entitled to enforce full civil and political rights, British Indian subjects prior to the Constitution had within the territory of British India that quality of rights which would go to make them citizens. Similarly, the subjects of the Indian States had the rights of citizenship within their own States, and those rights were not affected by the standstill and merger agreements of their rulers with the Dominion of India. The thesis being merely to establish the existence of rights which were analogous to rights of citizenship prior to the enactment of the Constitution, it is Unnecessary to enter upon a detaile....
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....on into India. The British Nationality Act, 1948, was enacted after the Indian Independence Act, 1947, and was not incorporated in the stream of the statute law in India. The effect of that Act was to create a new statutory concept of citizenship of the various constituent units of the British Commonwealth and to provide for a dual citizenship, citizenship of the country in which the local community resided within the units and of the Commonwealth. The concept of allegiance, which was the foundation of the status of a subject, was excluded from the rules governing local citizenship. The Act contemplated the passing of Citizenship Acts by various Dominions and till the enactment of such Acts accorded to the citizens, potential or actual, of any Dominion (which expression included India) the status of Commonwealth citizen. In relation to this citizenship, allegiance to the British Crown was not a condition. This brief review of the legislative history is sufficient to destroy the assumption that the status of citizenship was not recognized under the common law operative in India prior to January 26, 1950, for, in my judgment, British subjects of Indian origin held for all purposes....
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....72 US. 552 and Bankers Trust v. Texas and Pacific Railway 241 US. 295. In cases arising under article 4, section 2 it was also held that a corporation could not be regarded as a citizen of a State other than the State of its incorporation. In Paul v. Virginia 75 US. 357, Field J., delivering the opinion of the court, observed at page 359: "But in no case which has come under our observation, either in the State or Federal Courts, has a corporation been considered a citizen within the meaning of that provision of the Constitution which declares that the citizens of each State shall be entitled to all the privileges and immunities of citizens of the several States." The learned judge however made it clear that he was restricting the observations only to the claim of citizenship made by a corporation in a State other than the State which incorporated it. On page 360 he observed : ". . . . a grant of corporate existence is a grant of special privileges to the corporators, enabling them to act for certain designated purposes as a single individual, and exempting them (unless otherwise specially provided) from individual liability. The corporation being the mere creation of loca....
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....nment to appoint new directors and restricted the rights of shareholders in the matter of voting and appointment of directors, passing resolutions and applying for winding up and which further authorised the Government to modify the Indian Companies Act was ultra vires the legislative authority of Parliament, in that it infringed the fundamental rights of the shareholders and the action taken thereunder infringed the shareholders' fundamental rights under articles 19(i)( f), 31 and 14 of the Constitution. The court in that case dismissed the petition holding that the fundamental rights of the petitioner under articles 31(1) and (2), 19(1) (f) and 14 were not infringed. The observations of Mukherjea J. cannot be regarded as an expression of a considered opinion of the court holding that all fundamental rights are enforceable by individual citizens as well as corporate bodies. The question was mooted in two later cases: Bengal Immunity Company Ltd. v. State of Bihar [1955] 2 SCR. 603 ; 6 STC. 446 and State of Bombay v. R. M. D. Chamarbaugwala [1957] SCR. 874. It may be pointed out that the High Court of Bombay in State of Bombay v. R.M. D. Chamarbaugwala ILR [1955] Bom. 680, held tha....
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....High School and Intermediate Education, U. P. AIR. 1955 All. 595, a single judge of the Allahabad High Court held that article 5 applied to natural born persons and not to artificial persons and hence a corporation is not a citizen within the meaning of article 19. But the Rajasthan High Court in Maharaja Kishangarh Mills Ltd. v. State of Rajasthan ILR. [1953] 3 Raj. 363, assumed that the question whether a corporation was a citizen for the purpose of article 19 was generally decided in Chiranjit Lal Chowdhuri's case [1959] SCR. 869 ; [1951] 21 Comp. Cas 33 and held that a corporation was entitled to raise by a petition under article 226 a plea of a breach of a fundamental right under article 19. Authorities in the Calcutta High Court appear to be somewhat conflicting. In Everett Orient Line Incorporated v. Jasjit Singh AIR. 1959 Cal. 237, it was held that the rights conferred by article 19 being granted only to citizens, non-citizens could not enforce such rights and the company incorporated in India not being a citizen could not challenge the validity of sections 52-A and 167 (12A) of the Sea Customs Act on the ground that those provisions infringed article 19 (1)(g) of the Const....
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.... citizen for the purpose of article 19(1), but Parliament has not done so. But the very curious anomaly that arises is that when we turn to some of the provisions of article 19(1) it is impossible to contend that it could ever have been the intention of the Constituent Assembly that the rights guaranteed by those provisions were not to apply to corporations but only to individual citizens. Take two of the rights guaranteed under article 19(1)(f) and (g). Can it be suggested that a corporation which, let us assume, is Indian in every sense of its term-its shareholders are Indians, its directors are Indians, its capital is Indian-that such a corporation should not have the right under clause (f) to acquire, hold and dispose of property, or under clause (g) to practise any occupation trade or business ?" In Assam Co., Ltd. v. State of Assam AIR. 1953 Assam 177, the High Court of Assam proceeded to consider the claim for protection of fundamental rights under article 19(1)(f) on the assumption that a corporation could seek to enforce those rights. In Reserve Bank of India v. Palai Central Bank Ltd. ILR. [1961] 1 Ker. 166 ; 31 Comp Cas 154, Raman Nair J. observed : "Many of the....
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....o reason why such a presumption of allegiance, may not be made in respect of artificial persons like corporations. It was also submitted that corporations are incapable of rendering military service, or to assist in the maintenance of peace when called upon to serve the State. But that again, in my view, is not a ground on which the rights of citizenship could be denied. Incapacity to render service may arise on account of diverse causes such as infancy, physical or mental incapacity, and such incapacity in the case of a natural person will not deprive him of the rights of citizenship. By reason of their constitution, artificial persons are incapable of rendering service -military or civil-but that may not by itself be a ground for holding that they cannot be citizens. If the corporations or artificial persons can be regarded as nationals of the State where they are incorporated and if they are permitted to exercise the various functions for which they are constituted and no prohibition is imposed upon them in the enforcement of the rights similar to those which are enforceable by natural persons who are citizens, notwithstanding the special character of the corporations and the....
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....elying upon a number of cases which arose under article 3, section 2, of the Constitution of the United States of America, expressed the view that it was open to the court " to tear the corporate veil " and to look behind it and 'if all the shareholders of the corporation are found to be citizens, the corporation should not be denied the fundamental rights which each of the shareholders has under article 19(1)(g) of the Constitution. In reaching that conclusion the learned Chief Justice relied upon the observations made by Mukherjea J. in Chiranjit Lal Chowdhury's case [1951] 21 Comp Cas 33 (SC), which have already been set out. I am, however, unable to agree with the principle enunciated by the learned Chief Justice. A corporation is distinct from the shareholders who constitute it. The theory of corporate existence independent of shareholders, and its capacity to exercise rights has been built on Salomon v. Salomon and Co. Ltd. [1807] AC. 22 The rights and obligations of the company are different from the rights and obligations of the shareholders. By action taken against the company, the shareholders may be indirectly affected because their interest in the capital of the company....
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....on the company, it would be impossible to project the citizenship of the shareholders upon the company so as to enable it to claim this reflected right and on that basis to claim relief for breach of fundamental rights. The first part of the second question raises what is essentially a question of fact. The State Trading Corporation was, on the date of the petition, functioning under the direct supervision of the Government of India, the shareholding was in the names of the President and two Secretaries to the Government and its entire subscribed capital was contributed by the Government of India. But it is a commercial body, incorporated as the memorandum of association indicates to organise and undertake trade generally with State trading countries as well as other countries in commodities entrusted to it for such purpose by the Union Government from time to time and to undertake purchase, sale and transport of such commodities in India or anywhere else in the world and to do various acts for that purpose. The articles of association make minute provisions for sale and transfer of shares, calling of general meetings, procedure for the general meetings, voting by members, board....
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....ficial interest in the income. The principle of that case, in my judgment, has no application in the present case. The Custodian who was constituted a corporation sole was regarded by the House of Lords as entitled in the circumstances of the case to Crown immunity from payment of income-tax. The question whether the corporation either sole or aggregate is an agent or servant of the State must depend upon the facts of each case. In the absence of any statutory provision a commercial corporation acting on its own behalf even if it is controlled wholly or partially by a Government department, will be presumed not to be a servant or an agent of the State. The fact that a Minister appoints the members of the corporation and is entitled to call for information and to supervise the conduct of the business, does not make the corporation an agent of the Government. Where, however, the corporation is performing in substance governmental, and not commercial functions, an inference that it is an agent of the Government may readily be made. In Tamlin v. Hannaford [1950] 1 KB. 18, a house had vested by the operation of the Transport Act, 1947, in the British Transport Commission and the q....