PUBLIC CORPORATIONS

General
• The passive policy of ‘laissez faire’ has been given up by the
state and today, it has not confined its scope to the traditional,
minimum functions of defence and administration of justice.
The old police state has now become a welfare state. It seeks
to ensure Social Security and social welfare for the common
mass. It also participates in trade, commerce and business.
With a view to achieving object of socialist , Democratic
Republic, constitutional protection is afforded to state
monopoly and necessary provisions are incorporated in the
constitution itself by laying down the directive principles of
state policy contained in Article 39 (b) and (c) .
• The political philosophy of the 20th century has, therefore
impelled the government to enter into trade and commerce
with the view to making such enterprises pursue public
• Prior to Independence, there were few ‘Public Sector’
Enterprises in the country. These included the Railways, the
Posts and Telegraphs, the Port Trusts, the Ordinance
Factories, All India Radio, few enterprises like the
Government Salt Factories, Quinine Factories, etc. which
were departmentally managed.
• Independent India adopted planned economic development
policies in a democratic, federal polity. The country was
facing problems like inequalities in income and low levels of
employment, regional imbalances in economic development
and lack of trained manpower.
• India at that time was predominantly an agrarian economy
with a weak industrial base, low level of savings, inadequate
investments and infrastructure facilities.
• In view of this type of socio-economic set up, our visionary
leaders drew up a roadmap for the development of Public
Sector as an instrument for self-reliant economic growth.
This guiding factor led to the passage of Industrial Policy
Resolution of 1948 and followed by Industrial Policy
Resolution of 1956.
• The 1948 Resolution envisaged development of core sectors
through the public enterprises. Public Sector would correct
the regional imbalances and create employment. Industrial
Policy Resolution of 1948 laid emphasis on the expansion of
production, both agricultural and industrial; and in particular
on the production of capital equipment and goods satisfying
the basic needs of the people, and of commodities the
export of which would increase earnings of foreign exchange.
• In early years of independence, capital was scarce and
the base of entrepreneurship was also not strong
enough. Hence, the 1956 Industrial Policy Resolution
gave primacy to the role of the State which was
directly responsible for industrial development.
Consequently the planning process (5 year Plans) was
initiated taking into account the needs of the country.
• The industrial policy resolutions clearly declared that
important industries should be under the control of
state enterprises . Public bodies can also generate
resources needed for the development of the country.
• The Industrial Policy Resolution of 1956: laid down
that all industries of basic and strategic importance, or
in the nature of public utility services, should be in
public sector. Based on this resolution, rapid growth
has taken place in the public sector and this has been
achieved both by setting up new enterprises and by
nationalizing some of the pre-existing private sector
enterprises.
• The public sector provided the required thrust to the
economy and developed and nurtured the human
resources, the vital ingredient for success of any
enterprise; public or private.
• Once, the government entered the field of trade and
commerce, it became increasingly evident that the
governmental machinery hitherto employed merely
for the maintenance of law and order was wholly
inadequate and unsuitable for business exigencies,
which demanded a flexible approach. It was
therefore, felt necessary to evolve a device which
combined the advantages of flexibility with public
accountability. It was in response to this need that the
institution of public corporation grew .
• Characteristics of Public Enterprises :
1. Government Ownership and Management
2. Financed from Government Funds
3. Public Welfare
4. Public Utility Services
5. Public Accountability
Public Undertakings
• The business units owned, managed and controlled by the
central, state or local government are termed as public sector
enterprises or public enterprises. These are also known as
public sector undertakings. A public sector enterprise may be
defined as any commercial or industrial undertaking owned
and managed by the government with a view to maximize
social welfare and uphold the public interest.
• Structurally, public undertakings can there, be classified into
three broad categories:
• i) Public corporations, ii) Departmental undertakings and iii)
Government companies
i. Departmental Undertaking : form of organisation is primarily
used for provision of essential services such as railways, postal
services, broadcasting etc. Such organizations function under
the overall control of a ministry of the Government and are
financed and controlled in the same way as any other
government department. This form is considered suitable for
activities where the government desires to have control over
them in view of the public interest.
ii. Statutory Corporation (or public corporation): refers to a
corporate body created by the Parliament or State Legislature
by a special Act which define its powers, functions and pattern
of management. Statutory corporation is also known as Public
Corporation. Its capital is wholly provided by the government.
Examples : Life Insurance Corporation of India, Industrial
iii. Government Company: refers to the company in
which 51 percent or more of the paid up capital is held
by the government. It is registered under the
Companies Act and is fully governed by the provisions
of the Act. Most business units owned and managed by
government fall in this category.
Example: Oil and Natural Gas Corporation , Coal India
Ltd. , Hindustan Machine Tools Ltd., Steel Authority of
India Ltd.
Statutory Public Corporations
• A statutory Public corporation may be defined as an agency
created by an Act or under the statute, operating a service on
behalf of the government, but as an independent legal entity
with funds of its own and largely autonomous in
management.
• According to Garner: ‘ a public corporation is a legal entity
established normally by parliament and always under legal
authority, usually in the form of special statute charged with
the duty of carrying out specified governmental functions in
the national interest, those functions being confined
competitively restricted field, and subjected to control by the
executive, while the corporation remains juristically an
• In S.S.Dhanoa v. Muncipal Corporation Delhi, (1981) 3 SCC 431, -
a corporation is defined as: ‘a corporation is an artificial being
created by law having entity entirely separate and distinct from
the individuals who compose it with the capacity of continuous
existence and succession, not withstanding changes in its
membership. In addition, it possesses the capacity as such legal
entity of taking, holding and conveying property, entering into
contracts, suing and be sued, and exercising such other powers
and privileges as may be conferred on it by the law of its
creation just as a natural person may.’
• In Halsbury’s Laws of England : a corporation is defined as body
of persons or an office which is recognized by law as having a
personality which is distinct from the separate personalities of
the members of the body or the personality of the individual
holder for the time being of office in question.
Characteristics
• A corporation created by a statute possesses the
following main characteristics:
1. Corporation is a creature of the statue which lays
down it’s rights, duties and obligations. Therefore, a
corporation can have those rights and exercise those
functions which are authorized by the statute, either
expressly or by necessary implication, provided it is not
expressly prohibited. Actions of a corporation outside
the authorized area of operation are ultra vires and
cannot bind the corporation.
2. It has separate legal entity and, therefore can sue or be
sued in its corporate name. It can hold and dispose of
property by such name. It is a body corporate with perpetual
succession and a common seal.
3. Depending on the provisions of the statute of it’s creation,
the corporation is largely autonomous in finance and
management. It has funds of its own.
4. It operates an activity on behalf of the government which
may be regulatory, commercial or developmental.
5. The statute may delegate rulemaking power to a
corporation; such rules and regulations are binding if they are
within the authority, made in the manner let down by the
statute and do not violate any provision of the constitution.
6. An appropriate government may issue directives relating to
policy matters . The corporations are bound by and have to act
in accordance with such directions.
7. A corporation created by statute can be said to be an
agency or instrumentality of the government and ‘State’
within the definition of the term in Article 12 of the
constitution, and therefore is subject to writ jurisdiction of the
Supreme Court and High Courts under Articles 32 and 226 of
the constitution.
8. However, corporation is not a citizen within the meaning of
part II of the constitution and therefore, it cannot claim
benefits of those fundamental rights which have been
conferred only on the citizens.
• Classification
• A logical classification of public corporations is not
possible, and neither Parliament nor the courts have
made any serious attempt in that direction.
• Public corporations may be classified into four main
groups:
a) Commercial corporations
b) Development corporations
c) Social services corporations
d) Financial corporations.
Commercial corporations
• This group includes those corporations which perform
commercial and industrial functions. The managing body of a
commercial corporation resembles the Board of Directors of
a Public Company. As their functions are commercial in
nature, they are supposed to be financially self-supporting
and they are also expected to earn profit. At the same time
they are required to conduct their affairs in the interests of
the public and do not operate merely with a profit earning
motive unlike a private industry.
• State Trading corporation, Hindustan machine tools, Indian
Airlines corporation and Air India International are some of
the commercial corporations.
• Development Corporations
• Development corporations are those which encourage national
progress by undertaking developmental work in the country. Oil
and natural gas commission, Food Corporation of India, National
Small Industries Corporation, Damodar Valley Corporation, River
Boards, etc
• Social Service Corporations
• Corporations which have been created for the purpose of
providing certain essential services to the people, they are not
commercial in nature. They undertake welfare activities of the
state. Infact, as the object is to render social service, they are
not required to conduct their affairs for the purpose of earning
profits. Generally, they depend on the government for financial
assistance.
• Financial Corporations
• This group includes financial institutions, like Reserve Bank of
India, State Bank of India, Industrial Finance corporation of
India , Life Insurance corporation of India. They advance
loans to institutions getting on trade, business or industry on
such terms and conditions as may be agreed upon. They may
provide credit to those institutions which find it difficult to
avail of the same or which do not find it possible to have
recourse to capital issue methods (e.g., Industrial Finance
Corporation).
Liabilities of Public Corporations
• Liability in Contracts
• A public corporation can enter into a contract. It can sue and be sued
for breach of contract. Since a public corporation is a statutory public
undertaking, it can do only those acts which are authorized by the
statute either expressly or by necessary implication. If any
requirements has been laid down in the constituent statute or in the
rules, regulations or bye-laws of the corporation, it can be complied
with. Whatever is not expressly or impliedly authorized by the
constituent statute can be said to be prohibited and must be held to be
ultra vires. The contract which is ultra vires is void ab initio and cannot
be ratified (Lakshmanaswami v. L.I.C, A.I.R 1963 SC 1185).
• Since a corporation is neither an agency nor a department of the
government, the requirements of a valid government contract as laid
down in Article 299 of the constitution do not apply in case of a suit
• The requirement of a statutory notice of two months as laid
down under section 80 of Civil Procedure code before filing a suit
against the government does not apply in case of a public
corporation.
• Liability in Torts
• A public corporation is liable in tort like any other person. It can
be sued for the torts committed by its servants provided the act
is within the powers of the corporation and that it would be
actionable if committed by a private individual. But the
corporation would not be liable if the act of the servant is ultra
vires the powers of the corporation or is such that it could under
no circumstances have authorized its servants to commit it. For
acts which are ultra vires, the servant would be personally liable.
• The extent of liability of the corporation for the torts committed
by its servants will be the same as that of a private servant,
• The statute may exclude liability for acts done by its servants in good
faith in discharge of their duties. For example section 28 of the Oil
and Natural Gas Commission act, 1959.
• A corporation can sue for the torts committed by any person against
it. It can maintain an action for libel or slander if it adversely effects its
business (South Hettton Coal Co. Ltd. V. Noth Eastern News Assn. Ltd.,
(1891) I QB 133 (CA).
• Liability for Crimes
• Statutory corporations can also incur criminal liability. Corporations
have been held to be liable for the offences committed by its
servants. The liability even extends to offences involving mens rea,
such as libel, fraud and public nuisance. However, since it possesses
only a corporate identity, it cannot be punished with death or
imprisonment. A corporation can also not be found guilty of offenses
which can be committed by natural persons alone, for example
murder, hurt, bigamy etc.
• Status of the Employees
• The employees of the corporation are appointed by the
corporation. Their terms and conditions of service are
regulated by the rules and regulations framed by the
corporation. Therefore , employees of the corporation are
not government servants and consequently not entitled to
the protection of Article 311 of the Constitution.
• However, where the undertaking is not an independent
statutory but merely a limb of the government, its employees
would be government employees.
• Being subject to the provisions of the statute and the rules
and regulations framed there under, an employee of
corporation does not enjoy a ‘status’ . His services are purely
contractual.
Control of Statutory Corporations
• The main purpose of establishing public corporations is to
promote economic activity through autonomous bodies.
With that object, these corporations have been granted very
wide powers and there is no interference by any authority in
exercise of these powers by the corporations. But it is also
necessary that some control over these corporations should
be there so that the powers conferred may not be arbitrarily
exercised or abused.
• Such controls may be exercised through :
a) Parliamentary Control c) Governmental Control
b) Judicial Control d) Control by Public
a) Parliamentary Control
• Parliamentary control is implied in statutory corporations as
they owe their origin and continued existence to a statute
passed by parliament. They are expected to exercise their
powers in the public interest. It is therefore, necessary for
parliament to exercise some degree and mode of control and
supervision over these corporations.
• There are 4 methods to exercise such control:
i) Statutory provisions: all public corporations established by
or under statutes enacted by parliament or state legislatures.
The powers to be exercised by such corporations can be
defined by them. If any corporation exceeds or abuses its
powers, parliament or state legislature can dissolve or even
abolish the said corporation.
• Even though this type of control is not frequently employed,
it is a salutary check on the arbitrary exercise of power by
the corporation. Parliament also exercises effective control
through the technique of ‘laying’.
ii) Questions : through this traditional method, the members
of parliament put questions relating to the functions
performed by public corporations to the minister concerned.
But this method has not proved to be very effective because
of the authority of public corporations in their fields .
Accordingly, broad principle subject to which questions
relating to these undertakings can be asked, have been laid
down, namely questions relating to policy, an act or omission
on the part of a minister, or a matter of public interest are
ordinarily admissible.
iii). Debates : a more significant and effective method of
parliamentary control is oh debate on the affairs of a public
corporation. Usually, this method is followed when annual
accounts and reports regarding the corporation are placed
before the parliament for discussion in accordance with the
provisions of the statute concerned .
• There is no general obligation on the part of all
corporations to present their budget estimates to
parliament. Estimates committee therefore,
recommended that corporations should prepare a
performance and program statement for the budget year
together with the previous years statement and it should
be made available to parliament at the time of annual
budget.
iv). Parliamentary Committees: effective form of control- the
real end effective parliamentary control is exercised through
committees of parliament. Before 1964, the estimates
committee and the Public Accounts Committee we’re doing
the work of scrutinizing the functioning of corporations . But
in 1964, on the recommendation of Menon committee, a
separate committee known as the committee on public
undertakings was established for this purpose. It consists of 15
members, 10 from the Lok Sabha and 5 from the Rajya Sabha.
It is appointed for a period of one year.
Functions: its functions include the examination of reports and
accounts of the corporations and the report of the comptroller
and Auditor General of public undertakings.
• It also undertakes the examination of the entire
working of the corporations to find out if the affairs of
the corporations are being conducted in accordance
with the policy of the government and the rules of
commercial accountability . Though the functions of
the committee are advisory, yet they go a long way in
informing the mind of the MP’s and thus, making
parliamentary control effective.
• Government Control
• In order to ensure that the affairs of statutory
corporations are conducted in the best interests of
society, a general governmental control over the
working of the corporations is highly desirable .
However, general control does not mean governmental
interference in the day-to-day working of the
corporations, which is highly destructive of the idea of
autonomy necessary for the success of any commercial
or service undertaking. The governmental control is not
uniform or in any set pattern over all statutory
corporations. The nature and extent of control depends
on the provisions of the statute creating the
• However, the techniques of control it may take any of the
following shapes or a combination of these:
i) Power of dissolution, removal and appointment : the
statute creating the corporation may provide for the
appointment and removal by the government of the
authority managing the affairs of the corporation . The
Reserve Bank of India act, 1934 lays down that the governor
of the bank shall be appointed by the government and may
be removed by the .
• Going a step further, the statute may also provide that the
government shall have the power to dissolve the corporation.
The Tea Act, 1953 and the Coffee Act, 1942 contain such a
provision. This gives ample power to the government to
ensure that the corporation functions according to the policy
ii) Power to issue directions: the statute may provide that
the government shall have the power to issue directions
to the corporation . This is done to ensure that the affairs
of the corporation are conducted in accordance with the
policy pattern of the government. These directions may
be specific or general, mandatory or directory,
depending on the provisions in the statute.
• The Delhi Transport Undertaking Act empowers the
government to issue specific directions on such matters
as wages and terms and conditions of service of the
employees. On the other hand, the Tea Act, 1953 makes
provisions for the issuance of general instructions, but it
is obligatory on the board to follow them.
• The purpose of directions as a technique of governmental
control can prove beneficial only if these directions do serve
only as directions to the corporation. If the government,
through directions, interferes with the day-to-day
functioning of the corporations, it would be a self-defeating
technique .
iii) Power to control finances: financial control provides teeth
to the governmental control over the affairs of the
corporation. Financial control may adorn various shapes
depending on the terms of the statute .
• Sometimes the whole capital of the corporation may be
provided by the government. For example the total capital of
the life insurance corporation is provided by the government.
• However, at times the statute may invest the government
with the power to control capital formation, borrowings and
expenditure. The statute establishing Hindustan Steel Ltd.
requires prior approval of the government in case of increase
of capital, reduction of capital, and consolidation or division
of share capital.
• The Damodar Valley corporation act, 1948 makes provision
for the approval of the government in case of borrowings
and capital investment. The Air Corporations Act, 1953
provides for control of expenditure by the government. The
Act provides for the prior approval of the government for
incurring capital expenditure over Rs. 15 lacs, or for
disposing of property, right or privilege exceeding Rs. 10 lacs.
• Section 36 of the same act further requires the corporation
to submit to the government a statement of their programs
of development and operation at least 3 months before the
commencement of the financial year. The statute may
further provide for audit by the Auditor General or an
auditor appointed by the government. The statute may also
invest the government with the power to call for the budget,
accounts and annual report of the corporation.
iv) Power to institute enquires: the statute may empower the
government to institute enquiries into the working of the
corporation under certain circumstances. This provides
sufficient deterrent against any deviation from the norms of
public functioning. The Delhi Transport Undertaking Act
invests government with such powers .
• Judicial Control
• A Statutory corporation is a “State” within the meaning of
Article 12 of the constitution and is, therefore, subject to the
writ jurisdiction of the Supreme Court and the high courts. A
corporation can sue and be sued like any ordinary person. It
is liable for the torts committed by its servants and is also
liable for damages in case of breach of contract.
• If a Corporation is to discharge a public or statutory duty,
mandamus would lie for the enforcement of such duty. In
Corpn. of Nagpur v. Nagpur Electric, Light & Power Co., 1958
the writ of mandamus was issued against a public utility
undertaking to compel it to supply electricity to the
corporation.
• In matters of suit, the statutory corporation is not
entitled to any of the privileges and immunities of the
state . Fundamental rights can be claimed against the
statutory corporation; therefore, in case of breach of
fundamental rights, the Supreme Court or a High
Court can exercise its jurisdiction whenever necessary
for the ends of law and justice. Courts can also control
the actions of the corporations in cases of lack of
jurisdiction, excess of jurisdiction and abuse of
jurisdiction at the instance of any person who is
adversely affected by such actions.
• In Kartik Enterprises (P) Ltd, AIR 1980 Ori 3- the court
made a significant observation which may herald a
new era of judicial control of public undertakings. In
this case, the Orrisa State Electricity Board had
increased electricity rates for various categories of
consumers. While challenging the increased tariff, the
Petitioners made a unique contention. They argued
that the statue casts an obligation on the Board to
operate efficiently and economically, therefore tariff
cannot be enhanced unless the corresponding
obligations are fulfilled.
• The court held that “Without the corresponding
obligation to act efficiently economically, the board is
not intended to exercise the power to adjust it’s tariff.
We cannot accept a situation where the state or any
of its instrumentalities would have power without any
correlative duty to exercise such powers..”
• It was made amply clear that if other control
mechanisms (legislative and executive) fail, the
judicial control has to be operative.
• No matter the court is not competent authority to
examine entrepreneurial activities, but in exercise of
their constitutional obligation, the courts have never
• hesitated to interfere if there is a breach of the broad
parameters of fairness in the administration, bona
fides in action, and the fundamental rules of
reasonable management of public business.
• Courts have never hesitated in quashing the actions of
corporations if found to be illegal, arbitrary,
unreasonable or discriminatory. Even in case of grant
of largess, jobs, contracts and issuance of quota and
licences, courts have held that the corporation have to
act in accordance with the provisions of law (R D
Shetty v. International Airport Authority of India,
1979).
• LIC V. Consumer Education & Research Centre, 1995- the
Supreme court held that in prescribing terms, conditions
and rates of premium while issuing policy, the corporation
must act reasonably and fairly. The eligibility must be just
and reasonable.
• Powers and duties of the courts
• It is true that public corporations must have liberty in
framing their policies. If the decisions have been taken
bona fide although not strictly in accordance with the
norms laid down by courts, they have been upheld on the
principle let down by Holmes J that they must be allowed
some freedom of ‘play in the joints’.
• It cannot however, be overlooked that such power is
not absolute or blanket . If it is shown that exercise of
power is arbitrary, unjust or unfair, an instrumentality
of state cannot contend that it’s action is in
accordance with the “letter of the law”. Whatever
may be the activity of a corporation , it must be
subject to the rule of law and should meet the test of
article 14 of the Constitution.
Public Control
• In the ultimate analysis, public corporations are
established for the public and they are required to
conduct their affairs in the public interest. In the
ultimate analysis, public enterprises are owned by the
people and those who run them are accountable to
the people. It is, therefore necessary that in addition
to judicial parliamentary and governmental control
these corporations must take into account, public
opinion. There are different means of representation
of the ‘consumer’ or public interest.
• However effective public control over these agencies
may be exercised through the following channels:
i) Mass media : mass media in any free society not only
reflects public opinion but also creates public opinion
by informative and investigative journalism. Therefore,
by exposing political interference, bureaucratic,
corruption and inefficiency, mass media can go a long
way in making these agencies respond to the need of
public interest. Sometimes, single newspaper can
influence public bodies, the policies and actions by
discovering and publishing facts which embarrass or
discredit the government and its agencies.
• In India this control mechanism is highly weak and
sterile because television and radio are government
departments and the press is largely dependent on
the government for financial assistance in the form of
advertisements and newsprint and other assistance.
Under these and various other constraint parameters,
the mass media in India has not been able to establish
its role of exercising control over the affairs of public
bodies in the public interest.
ii) Consumer Organizations and Councils: these are bodies
established under the authority of the statute constituting the
corporations concerned with the object of enabling
consumers to ventilate their grievances, or make their views
known to the corporations.
• In Western countries consumers are well informed and
organized, therefore their organizations provide an effect
check on the planning, policies and actions of public bodies.
In the US, various occasions, the corporations have to bring
down the prices of their commodities because consumer
organizations decided not to purchase their products .
Through such organizations, consumers also ventilate their
grievances and make their views known to the corporations.
• In England, the consumer councils have been established in
the electricity, gas and coal industries under a statute.
• In India, this control is most feeble, partly because the
consumer is unorganized and partly because we have still to
learn to work in groups. It is desirable that some pattern of
consumer consultative machinery must be evolved for every
public undertaking.
• For the present, administrative agencies established under
the Consumer Protection Act, 1986 and The Monopolies And
Restrictive Trade Practices Act, 1969 are the only official
agencies providing control over public bodies in the interest
of the consumers in India.
• The outstanding examples of Consumer Councils are
to be found in the electricity and gas industries. The
difficulty about these councils is that the members of
the general public have neither the technical
knowledge nor a keen interest in the affairs of certain
consumer councils; For example Gas or Electricity
Consumer Council. These councils may make
recommendations to their boards, but there have
been very few occasions when alterations of policy
decisions have resulted.
iii). Consumer Grievances redressal forums
• The Consumer Protection Act passed by parliament in
1986 and amended in 1993 & 2019 provides for the
establishment of consumer protection councils at the
center, state level and district level in order to protect
the rights of the consumers . These forums now
provide less expensive and quick justice to the
consumers of goods and services. By the 1993
amendment, these forums have been invested with
the power to pass “cease and desist” order, and order
“recall” of defective goods.
iv.) Membership
• In some cases, parliament has arranged for members of
certain public corporations to be nominated by local
authorities and other bodies interested in the functions of
the particular corporation.
• Thus members of Hospital Management Committee are
appointed by the Regional Hospital boards after
consultation with local health authorities, executive
councils and other officials as required by the statute.
Sometimes such consultation is made mandatory. Some
statutes also provide that certain members of the council
• That the public corporations must be autonomous in
their day-to-day working and there should be no
interference by the government in it . At the same
time, the wide powers conferred on such corporations
should not be abused or arbitrarily exercised and they
should not become the 4th branch of the government.
Government Companies
• Besides statutory corporations the government carries on its
commercial and service functions through nonstatutory
companies registered under the Companies Act, 1956 . These
are limited liability companies where the government holds
the majority share capital. They are found either to start a new
venture to take over an existing business.
• Definition of ‘government company’: government company
means any company in which not less than 51% of the paid up
share capital is held by the central government, or by the state
government or governments, or partly by the central
government and partly by one or more state governments and
includes a company which is a subsidiary of a government
company.
• After registration the government company, like any
other company, is considered a distinct legal person
with perpetual succession and common seal. But the
government company is different from other
companies in as much as it’s capital is subscribed by
the government and no other person can purchase its
share except with the permission of the government.
• Government company is not a “state” within the
meaning of Article 12 of the constitution and its
employees are not government servants within the
meaning of Article 311 of the constitution.
• Since a government company is neither the creation of a
statue nor a department or an agent of the government,
it is not subject to the writ jurisdiction of the High Court
under Article 226 of the constitution.
• However a writ of mandamus would you lie against a
government company to enforce statutory or public duty
required by the statute . Therefore, the Kerala High Court
issued a writ against a government company when it
acted in violation of a statutory duty imposed upon it by
the Import And Export Control Act, 1947 in matters of
regulation of import and export in cashew nuts. (K.L
Mathew v. Union of India, 1974)
• Some high courts have also issued writs against government
companies for violation of standing orders made under the
Industrial Employment (Standing Orders) Act 1946 on the
ground that standing orders thus made have the force of law.
• A government company would be subject to all those
limitations which are imposed by the Companies Act, 1856.
• The modern state acts through its own civil service as well as
through the instrumentalities of corporations and
companies. Such instrumentalities acting as an
instrumentality or agency of the government act for the
state, though in the eyes of law they possess distinct
personality.
• Their actions are state actions, and like the state, they are
bound to respect fundamental norms of public action.
Therefore, these state agencies will be subject to the same
constitutional or public law limitations as government.