TaxTMI 
TaxTMI 
2003 (5) TMI 359
X X X X Extracts X X X X
X X X X Extracts X X X X
....or a long time resulting in death of several persons and miseries brought to a large number of families as would appear from the following : Statement As of 12-3-2003 Sl. No. Name of Public Undertaking No. of Employees Date from which salary is due Nos. of Death of Employees 1. Bihar State Agro IndustriesDevelopment Corporation 630 May-93 70 2. Bihar State Medicine & Chemical Development Corporation 265 Aug-93 11 3. Bihar State Handloom & Handicraft Corpn. 429 In Headquarter from May 1996 in Unit from 1993 3 4. Bihar State Small Scale Industrial Development Corporation 141 In Headquarter from April 1995. In Unit from April 1993 36 5. Bihar State Sugar Corporation 9240 From January 2000 in Headquarter. In Unit from April 1992 476 6. Bihar State Leather Development Corpn. 471 From March 1993 13 6a. Bihar Finished Leathers 35 Sl. No. Name of Public Undertaking No. of Employees Date from which salary is due Nos. of Death of Employees 7. Bihar State Industrial Development Corporation 1551 In Headquarters from....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or a long time. The report further goes on to say that the leader of the opposition in the Bihar Assembly had alleged that over 1000 employees died "due to lack of salary for a period ranging from four months to 94 months". 4. In its counter affidavit, the State of Bihar does not deny about the factual statement made in the said writ petition. Its stand, however, is that salaries are being paid by the statutory authorities, the details whereof are in the following terms : "In the following 26 undertakings, salary payments are up to date (as on 30-9-2002) and are continuing on a regular basis as per reports from the Corporation :- 5. Bihar State Financial Corporation Ltd. 6. Bihar State Credit & Investment Corporation 7. Bihar State Agriculture Marketing Board 8. Bihar State Forest Development Corporation 9. Bihar State Pollution Control Board 10. Bihar State Warehousing Corporation 11. Bihar State Tourism Development Corporation 12. Bihar State Text Book Corporation 13. Bihar State Minerals Development Corporation 14. Bihar State Housing Board 15. Bihar State Police Building Construction Corporation 16. Bihar State Bridge Construction Corpo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pril, '98 Rs. 2.51 crores Nil As in para III above 41. Bihar State Textile Corporation 50 Nov., 96 Rs. 0.70 crores Nil -do- 42. Bihar State Film Dev. & Fin. Corpn. 08 Aug., 02 Rs. 55,000 Per month Nil -do- 43. Bihar State -Fruits & Vegetable Dev. Corpn. 16 Aug., 94 Rs. 1.8056 crores Nil -do- 44. Bihar State Seeds Dev. Corpn. 137 May, 99 Rs. 4.53 crores 5 Inadequate Medical Treatment 45. Bihar State Fisheries Development Corpn. 42 32-40 months to March, 00 Update from March, 00. Rs. 1 crore Nil NA 46. Bihar State Food And Civil Supplies Corporation 1716 Up to 40 Months Rs. 16.56 crores Nil -do- 47. Bihar State Panchayati Raj Finance Corporation 130 Mar '96 Rs. 3.75 crores Nil -do- 48. Bihar State Construction Corpn. 657 HQ Jan, 1995 Unit Jan. 1992 Rs. 37.50 crores Nil -do- 49. Bihar Hill -Area Lift Irrigation Corpn. 684 Being collected Being collected Nil -do- 6. The State accepts that although the Managing Director of the Bihar State Small Industries Corporation had initially re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not been paid their salaries for a long time; in some cases for a decade or more; stands admitted. 8. The Affidavit of the State of Bihar, purported to have been based on reports of the Managing Director of same Undertaking does not inspire confidence. The statements made therein are self-contradictory and inconsistent. It smacks of lack of bona fide and is full of afterthoughts. 9. The stand of the State of Bihar on law is that having regard to the fact that most of the undertakings or companies are registered or incorporated under the Indian Companies Act, 1956, the rights and liabilities of the shareholders would be governed by the provisions of the said Act and the liability of the said companies cannot be passed on to the State by taking recourse to the doctrine of 'lifting the veil' or otherwise. 10. Keeping in view the complexity of the matter, this Court appointed Shri P.S. Mishra, a senior counsel of this Court, as amicus curiae. Shri Amarendra Sharan also assisted the court. 11. The learned amicus curiae has, inter alia, submitted that the independent investigation revealed that the head offices of the Government companies are situated in rented premises. It ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....micus curiae, would submit that there is no reason as to why the burden of the State should be shifted to the Union of India and having regard to the provisions of articles 21 and 23 of the Constitution of India, this Court is entitled to pierce the corporate veil of the Government companies which are 'States' within the meaning of article 12 of the Constitution of India. According to Mr. Mishra, it is beyond any cavil of doubt that the State for all intent and purport was the sole shareholder of those companies and as such it cannot escape its liability having regard to the fact that it had deep and pervasive control including financial control over the affairs of the said companies. Mr. Mishra would urge that as indisputably the corporations owned and controlled by the State of Bihar are 'State' within the meaning of article 12 of the Constitu- tion of India, neither they nor the State of Bihar can escape their liability from enforcing the rights of the citizens of India under articles 21 and 23 of the Constitution of India. Mr. Mishra would submit that the Full Bench of the Patna High Court has referred to certain decisions of this Court which did not deal with an issue of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....panies so as to fulfil its own and/or the corporations' obligations to comply with the citizens' right under articles 21 and 23 of the Constitution of India? 3.Whether the State of Bihar can escape its liability having regard to the human rights problem involved in the matter? 4.Whether in a case of this nature the liability of the State of Bihar, if any, can be shifted to the Union of India? A company incorporated under the Companies Act is a juristic person. A company indisputably has a distinct and separate entity vis-a-vis its shareholders. 18. This Court in Electronics Corporation of India Ltd.'s case (supra ) opined : "15. A clear distinction must be drawn between a company and its shareholder, even though that shareholder may be only one and that the Central or a State Government. In the eye of the law, a company registered under the Companies Act is a distinct legal entity other than the legal entity or entities that hold its shares." (p. 464) 19. Yet again, a Constitution Bench of this Court in Steel Authority of India Ltd.'s case (supra) noticed the following decisions to hold that a company incorporated under the Companies Act being a juristic person wo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....officers was subject to certain constitutional limitations, a fortiori the Government acting through the instrumentality or agency of a corporation should equally be subject to the same limitations, was approved by the Constitution Bench and it was pointed out that otherwise it would lead to considerable erosion of the efficiency of the fundamental rights, for in that event the Government would be enabled to override the fundamental rights by adopting the stratagem of carrying out its function through the instrumentality or agency of a corporation while retaining control over it. That principle has been consistently followed and reiterated in all subsequent cases - See Delhi Transport Corpn. v. D.T.C. Mazdoor Congress (1991 Supp. (1) SCC 600 : 1991 SCC (L&S) 1213), Som Prakash Rekhi v. Union of India ([1981] 1 SCC 449 : 1981 SCC (L&S) 200), Manmohan Singh Jaitla v. Commr., Union Territory of Chandigarh (1984 Supp. SCC 540 : 1985 SCC (L&S) 269), P.K. Ramachandra Iyer v. Union of India ([1984] 2 SCC 141 : 1984 SCC (L&S) 214), A.L. Kalra v. Project and Equipment Corpn. of India Ltd. ([1984] 3 SCC 316 : 1984 SC (L&S) 497), Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Gangul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CIT [1944] 12 ITR 458 and Juggilal Kamlapat v. CIT [1969] 73 ITR 702]. 22. The corporate veil indisputably can be pierced when the corporate personality is found to be opposed to justice, convenience and interest of the revenue or workman or against public interest. [See CIT v. Meenakshi Mills Ltd. [1967] 1 SCR 934; Workmen Employed in Assn. Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1985] 4 SCC 11; New Horizons Ltd. v. Union of India [1995] 1 SCC 478; Renusagar Power Co.'s case (supra), Hussainbhai v. Alath Factory Thezhilali Union, Kozhikode [1978] 4 SCC 257 and Secretary H.S.E.B. v. Suresh [1999] 3 SCC 601]. 23. The test that a public sector undertaking or Government company can be a 'State' within the meaning of article 12 of the Constitution, only when it discharges some sovereign functions, has been given a go-bye by this Court in a recent decision in Pradeep Kumar Biswas v. Indian Institute of Chemical Biology [2002] 5 SCC 111. Disagreeing with the decision of this Court in Sabhajit Tewary v. Union of India [1975] 1 SCC 485, it was held that the premises whereupon the ratio of the said decision was based was not correct and followed the precedents like Su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rk that the salaries of their employees had not been paid for years leading to starvation death and/or commission of suicide by a large number of employees. Concept accountability arises out of the power conferred on an authority. 29. The State may not be liable in relation to the day to day functioning of the Companies, but its liability would arise on its failure to perform the constitutional duties and functions by the public sector undertakings, as in relation thereto the State's constitutional obligations. The State acts in a fiduciary capacity. The failure on the part of the State in a case of this nature must also be viewed from the angle that the statutory authorities have failed and/or neglected to enforce the social welfare legislations enacted in this behalf e.g. Payment of Wages Act, Minimum Wages Act etc. Such welfare activities as adumbrated in Part IV of the Constitution of India indisputably would cast a duty upon the State being a welfare State and its statutory authorities to do all things which they are statutorily obligated to perform. 30. In "The constitution, social rights and liberal political justification", Frank I. Michelman published in Internationa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... remind himself of the aspirations of the Constitution makers, the State, in our opinion, cannot be permitted to say that it has no such duty towards its own citizens. 32. Clauses (a), (b ) and (h) of article 51A of the Constitution of India read as under : "Art. 51A. It shall be the duty of every citizen of India- (a)to abide by the Constitution and respect its ideals and institutions, the National Flag and the National Anthem; (b)to cherish and follow the noble ideals which inspire our national struggle for freedom; (h)to promote harmony and the spirit of common brotherhood amongst all the people of India transcending religious; linguisitc and regional or sectional diversities; to renounce practices derogatory to the dignity of women;" In its attempt to interpret a statute in the light of the constitutional scheme, this Court has time and again interpreted a statute particularly in the light thereof. [See A.I.I.M.S. Students Union v. A.I.I.M.S. [2002] 1 SCC 428]. 33. The Universal Declaration of Human Rights, 1948 enumerates at least 27 broad rights including the right to life, freedom from slavery and forced labour. The Protection of Human Rights Act, 1993 d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ensure realization of this thought. 36. Justice Holmes expressed the following view in Missouri v. Holland 252 US 416 (433) : "When we are dealing with words that also are a constituent act, like the Constitution of the United States, we must realise that they have called into life a being the development of which could not have been foreseen completely by the most gifted of its begetters. It was enough for them to realise or to hope that they had created an organism, it has taken a century and has cost their successors must sweat and blood to prove that they created a nation. The case before us must be considered in the light of our whole experience and not merely in that of what was said a hundred years ago." Justice Frankfurter elucidated the interpretive role in "Some Reflections on the Reading of Statutes" : "There are varying shades of compulsion for judges behind different words, differences that are due to the words themselves, their setting in a text, their setting in history. In short, judges are not unfettered glossators. They are under a special duty not to overemphasize the episodic aspects of life and not to undervalue its organic processes - its continui....
X X X X Extracts X X X X
X X X X Extracts X X X X
....refer to the contents of articles 1 and 7 of the Universal Declaration of Human Rights [1948], which read : "All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood." "All are equal before law and are entitled without any discrimination to equal protection of the law. All are entitled to equal protection against any discrimination in violation of this Declaration and against any incitement to such discrimination". This declaration is similar to the declaration of equality made in the Rigveda. After the establishment of the State, the obligation to protect the right to equality was cast on the Rulers. It was made a part of the Rules of Raja Dharma, the Constitutional Law. Yatha Swarin Bhutani Dhara Dharyate Samam Tatha Swarin Bhutani Bibharte Parthivm Vartam "Just as the mother earth gives equal support to all the living beings, a king should give support to all without any discrimination" (Manu IX 31). This also meant that the kings were required to afford equal treatment to all the citizens in the same manner in which a mother treats all her childr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s About the Right to Food (FIAN) it is inter alia stated: "What does the Rights to Food mean? Can the existence of this Right cause laziness among people? The Right to Food is about respecting, protecting and fulfilling access to food producing resources and work. Therefore, the Right to Food doesn't make people lazy but busy, enabling them to feed themselves. Would the Right to Food be asking for too much from the government, and advocating for big government? The Right to Food in the context of Human Rights doesn't mean that the state is a super-entrepreneur determining and carrying out economic activities according to its own wisdom. It means the Right to Feed Oneself, which emphasizes dignity and self-reliance, very different from command economies of big government. Does the Right to Food require a moral revolution of society, allowing human rights to become the foundation of interpersonal ethics? The Right to Food does require a moral revolution. However, this moral revolution does not concern interpersonal ethics, but the duty to operationalize the state's obligations under Economic and Social Human Rights. Is hunger a violation of Human Rights? Lack of access to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h measures are continued to be taken, it will be a great relief to the people of Kalahandi and Koraput. We hope and trust that in view of the prompt action that has been taken by the Government, soon the miseries of the people of these two districts will be over." 43. Yet again in Shantistar Builders v. Naryan Khimalal Totame [1990] 1 SCC 520, this Court observed:- "Basic needs of man have traditionally been accepted to be three - food, clothing and shelter. The right to life is guaranteed in any civilized society. That would take within its sweep the right to food, the right to clothing, the right to decent environment and a reasonable accommodation to live in...": 44. This Court upheld the right to shelter in P.G. Gupta v. State of Gujarat [1995] Supp. (2) SCC 182, Chameli Singh's case (supra) and Ahmedabad Municipal Corpn. v. Nawab Khan Gulab Khan [1997] 11 SCC 121. 45. In Chameli Singh's case (supra), this Court held: "In any organized society, right to live as a human being is not ensured by meeting only the animal needs of man. It is secured only when he is assured of all facilities to develop himself and is freed from restrictions which inhibit his growth. All....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te of West Bengal AIR 1997 SC 10. (vii)Right to free legal aid - State of Maharashtra v. Manubhai Pragaji Vashi AIR 1996 SC 1. (viii)Right to primary education - Unnikrishnan v. State of A.P. [1993] 1 SCC 645; T.M.A. Pai Foundation v. State of Karnataka [2002] 8 SCC 481. (ix)Right to health and medical care - Consumer Education & Research Centre v. Union of India AIR 1995 SC 922; State of Punjab v. M.S. Chawla AIR 1997 SC 125. (x)Right to pollution-free environment - M.C. Mehta v. Union of India AIR 1987 SC 965. (xi)Right to Safe drinking water - AP Pollution Control Board v. M.V. Nayudu AIR 1999 SC 822. (xii)Sexual harassment of working women - Vishaka v. State of Rajasthan AIR 1997 SC 3011; AEPC v. A.K. Chopra [1999] 2 SCC 34. (xiii)Right to a quality life - Hinch Lal Tiwari v. Kamala Devi [2001] 6 SCC 496. (xiv)Right to Family Pension - S.K. Mastan Bee v. General Manager, South Central Railway [2003] 1 SCC 184. 49. While dealing with the right of the workmen, again this Court in People's Union for Democratic Right's case (supra) and in State of Gujarat v. Hon'ble High Court of Gujarat [1998] 7 SCC 392 held that constitutional provisions must be so inte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the guilty for unjustified failure to produce available evidence. Of course the rights of the accused have to be kept in mind and safeguarded, but they should not be over emphasized to the extent of forgetting that the victims also have rights. 14. It must also be remembered that the Criminal Procedure Code is an ongoing statute. The principles of interpreting an ongoing statute have been very succinctly set out by the leading jurist Francis Bennion in his commentaries titled "Statutory Interpretation", 2nd Edition page 617: "It is presumed the Parliament intends the court to apply to an ongoing Act a construction that continuously updates its wordings to allow for changes since the Act was initially framed. While it remains law, it has to be treated as always speaking. This means that in its application on any day, the language of the Act though necessarily embedded in its own time, is nevertheless to be construed in accordance with the need to treat it as a current law. ****** In construing an ongoing Act, the interpreter is to presume that Parliament intended the Act to be applied at any future time in such a way as to give effect to the original intention. Accord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us waste disposal decisions; although it was not currently an owner or operation of the facility within the meaning thereof in United States v. Fleet Factors Corpn. 20 ELR 20832. Thus a liability can be fastened both upon the owner as also the operator of the company under certain situations. 52. The right development in the developing countries is itself a human right. The same has been made a part of WTO and GATT. In 'The World Trade Organisation, Law, Practice, and Policy (Oxford) by Matusushita Schoenbaum and Mauroidis at page 389, it is stated: "The United Nations has proclaimed the existence of a human right to development. This right refers not only to economic growth but also to human welfare, including health, education, employment, social security, and a wide-range of other human needs. This human right to development is vaguely defined as a so-called third-generation human right that cannot be implemented in the same way as civil and political human rights. Rather, it is the obligation of states and inter-governmental organizations to work within the scope of their authority to combat poverty and misery in disadvantaged countries." [Emphasis supplied] The matter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....naging Committees [1995] 4 SCC 507, it was opined: "16. The constitutional mandate to the State, as upheld by this Court in J.P. Unni Krishnan v. State of A.P. 1993 (1) SCC 645 to provide free education to the children up to the age of fourteen - cannot be permitted to be circumvented on the ground of lack of economic capacity or financial incapacity." (p. 514) 56. However before we issue any direction, we may state that by no stretch of imagination, the liability of the State of Bihar can be shifted to the Union of India. Only because the Union of India allegedly is repository of funds raised by it through Central excise and other levies and impost, the same by itself would not mean that it is indirectly or vicariously liable for the failings on the part of the State Public Sector Undertakings. Either precedentially or jurisprudentially the Union of India cannot be held liable and no such direction can be issued as has been submitted by Mr. Shanti Bhushan. 57. The investments made by the State in the public sector undertakings in pursuit of social justice is from public account. It is in this behalf accountable to the public through the Legislature. If the State or the St....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te Reorganisation Act an furthermore as only four public sector undertakings have been transferred to the State of Jharkhand in respect of whereof the petitioner does not make any grievance. 62. In the peculiar facts and circumstance of this case in our opinion, interest of justice shall be met, if the following interim directions are issued for the present: 1.The High Court may strive to dispose of all liquidation proceedings in respect of the Government companies owned and controlled by the State of Bihar as expeditiously as possible. For the said purpose and/or purposes ancillary to or incidental therewith, it may pass an interim order and/or orders by way of sale and/or disposal of the properties belonging to such public sector undertaking and/or Government companies or to take such measure or measures as it may deem fit and proper. 2.For the aforementioned purposes a committee not consisting of more than three members chaired by a retired High Court Judge or a sitting District Judge may be appointed who may scrutinize the assets and liabilities of the companies and submit a report to the High Court as expeditiously as possible preferably within three months from the d....