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AMICUS AI
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  • Industrial Disputes Act, 1947 (hereinafter referred to as the Central Act) and the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (hereinafter referred to as the Maharashtra Act)
  • section 7 of the Indian Telegraphs Act (hereinafter referred to as the Act).
  • SECTION 2 INDUSTRIAL DISPUTES ACT
  • Maharashtra Act, and the Central Industrial
  • section 2A of the Industrial Disputes Act
  • ARTICLE 226 CONSTITUTION OF INDIA
  • section 28 of the Maharashtra Act,
  • section 2(a) of the Central Act
  • sub-section 4(a) of section 7
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Citation Codes
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citation codes
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  • Industrial Disputes Act, 1947 (hereinafter referred to as the Central Act) and the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (hereinafter referred to as the Maharashtra Act)
  • section 7 of the Indian Telegraphs Act (hereinafter referred to as the Act).
  • SECTION 2 INDUSTRIAL DISPUTES ACT
  • Maharashtra Act, and the Central Industrial
  • section 2A of the Industrial Disputes Act
  • ARTICLE 226 CONSTITUTION OF INDIA
  • section 28 of the Maharashtra Act,
  • section 2(a) of the Central Act
  • sub-section 4(a) of section 7
Smart Summary

Factual and Procedural Background

This judgment concerns two consolidated appeals arising from a dispute about which government is the "appropriate Government" for purposes of the Industrial Disputes Act, 1947 (the Central Act) and the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (the Maharashtra Act).

Key factual and procedural points stated in the opinion:

  • Prior to April 1, 1986, the Department of Telecommunications, Ministry of Communications, Government of India, carried on the functions now undertaken by the Mahanagar Telephone Nigam Limited (the Nigam). The Nigam was established on April 1, 1986.
  • At the Nigam's Cooperage, Bombay establishment a canteen was run by the Bombay Telephone Co-operative Canteen Society Limited (5th respondent). Some employees at the canteen were employees of the Nigam.
  • On or about September 18, 1979 the services of three canteen employees were terminated (two of these are respondents 6 and 7). On September 19, 1979 the Hotel Mazdoor Sabha raised an industrial dispute under the Central Act before the conciliation officer of the State of Maharashtra. After conciliation failed, the State Government referred the dispute to the State Labour Court, Bombay.
  • The Society raised a preliminary objection on January 1, 1981 contending the State Government had no authority to make the reference because the appropriate Government was the Central Government. The Labour Court upheld that objection, holding the Central Government to be the appropriate Government, and rejected the reference.
  • The dispute was thereafter taken to the Central Government conciliation officer and on December 16, 1986 the Central Government referred the dispute to the Central Government Industrial Tribunal. The Nigam had already come into existence on April 1, 1986.
  • Separately, on March 1, 1987 Respondent No. 6 (Bombay Telephone Canteen Employees' Association) filed a complaint under section 28 of the Maharashtra Act (ULP No. 290 of 1987) before the State Industrial Court concerning non-implementation of recommendations of the Fourth Pay Commission. The Industrial Court issued directions to the Nigam; when these were not implemented, an application was filed in the labour court.
  • A preliminary objection raised before the Industrial Court asserted that the Maharashtra Act did not apply because the State Government was not the appropriate Government. The Industrial Court overruled this objection by order dated April 27, 1988, holding the State Government to be the appropriate Government for the canteen.
  • The Nigam filed a writ petition under Article 226 challenging the Industrial Court's April 27, 1988 order and the pendency of references before the Central Government Industrial Tribunal. The learned single Judge, by order dated June 9, 1988, admitted the petition and granted interim relief preventing the State Industrial Court from proceeding, while allowing the Central Industrial Tribunal to proceed.
  • The present consolidated appeals (variously numbered in the opinion) were filed by the Bombay Telephone Canteen Employees' Association and the Nigam challenging the orders described above.

Legal Issues Presented

  1. Whether the "appropriate Government" for the Nigam (for purposes of the Industrial Disputes Act, 1947 and the Maharashtra Act, 1971) is the Central Government or the State Government.
  2. Whether the Maharashtra Act applies to the canteen run by the Bombay Telephone Co-operative Canteen Society Limited in light of the appropriate-Government determination.
  3. Whether an incorporated entity such as the Nigam should be treated as an agent/instrumentality of the Central Government (and therefore subject to the Central Government's jurisdiction) despite its separate corporate existence.

Arguments of the Parties

Appellants (Bombay Telephone Canteen Employees' Association) — Counsel: Mr. Vardaiya

  • Relied on the decision in Abdul Rehman Abdul v. B. Paul (1963 Mh. L.J. 261 : AIR 1963 Bom. 267).
  • Placed reliance on Supreme Court authorities including Heavy Engineering Mazdoor Union v. State of Bihar ((1969) 1 SCC 765 : AIR 1970 SC 82) and Hindustan Aeronautics Limited v. Their Workmen (1975 (11) LLJ 336).
  • Asserted the precedents relied upon supported their contention regarding the appropriate forum (as presented through cited authorities).

Respondent Workmen — Counsel: Mr. Ganguli

  • Also relied heavily on Heavy Engineering Mazdoor Union v. State of Bihar ((1969) 1 SCC 765 : AIR 1970 SC 82).
  • Relied on Regional Provident Fund Commissioner, Karnataka v. Workmen, General Secretary, Karnataka Provident Fund Employees' Union (1984 Supp SCC 418 : AIR 1984 SC 1897).
  • Relied on International Airports Authority of India v. P.K. Srivastava (1986 Mh. L.J 491 : 1986 (1) Bom. C.R 335).

Appellant (the Nigam) — Counsel: Mr. Kapadia

  • Relied upon authorities cited by both sides and additionally relied on Bank of India v. P.A. Stalin ((1988) 3 SCC 105).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Abdul Rehman Abdul v. B. Paul (1963 Mh. L.J 261 : AIR 1963 Bom. 267) Interpreted "under the authority of the Central Government" in section 2(a)(i) of the Industrial Disputes Act to apply to industries carried on directly under Central Government authority; held incorporated commercial corporations governed by their own constitution are not ordinarily "under the authority" of the Central Government. The court cited this decision to show the established view that, as a general rule, an incorporated corporation governed by its own constitution is not to be treated as carried on under Central Government authority; the court contrasted that general rule with the present facts and distinguished the present case on factual grounds.
Heavy Engineering Mazdoor Union v. State of Bihar ((1969) 1 SCC 765 : AIR 1970 SC 82) Defined "authority" and "under the authority of"; explained that a corporation may act as agent of the State in appropriate factual circumstances; ordinarily a commercial corporation is presumed not to be an agent unless statute provides otherwise or it performs governmental functions or the facts indicate an agency relationship. The court adopted the Heavy Engineering formulation to derive the tests for agency: whether the company carries on a function exclusively reserved to the Government and whether Government exercises control or supervision; applied the exception recognized in Heavy Engineering to hold that the Nigam, on the facts, was an agent of the Central Government.
Hindustan Aeronautics Ltd. v. Their Workmen (1975 (11) LLJ 336) Followed Heavy Engineering and held HAL to be an entity separate from the Government (not an agency) on that case's facts; addressed argument about exclusive governmental functions being determinative. The court noted the HAL decision and the argument drawn from it, observed the HAL distinction was of no consequence in that case, and used the lineage of the authority to contextualize whether Nigam's facts met the exception; ultimately treated HAL as a precedent to contrast with the present facts.
Regional Provident Fund Commissioner, Karnataka v. Workmen, General Secretary, Karnataka Provident Fund Employees' Union (1984 Supp SCC 418 : AIR 1984 SC 1897) Held that where the admitted position is that an organisation's business is a governmental function, the appropriate Government is the Central Government. The court cited this as an example where a body performing a governmental function was treated as subject to the Central Government for appropriate-Government purposes, supporting the analysis that governmental character of functions can make the Central Government appropriate.
International Airports Authority of India v. P.K. Srivastava (1986 Mh. L.J 491 : 1986 (1) Bom. C.R 335) Held authority was created to discharge governmental functions, worked under control and authority of Central Government, and thus appropriate Government was Central Government. The court relied on this decision as an example confirming that where an authority is created to discharge government functions and works under Central Government control, the Central Government is the appropriate Government; used it to reinforce the agency conclusion on the facts of the Nigam.
Bank of India v. P.A. Stalin ((1988) 3 SCC 105) Considered the Heavy Engineering and Ajay Hasia line of authorities and concluded in that case that nationalised banks established under the Central Government were subject to Central Government as appropriate Government. Referred to by counsel and discussed by the court as part of the jurisprudence showing instances where Central Government was held appropriate; used in the court's survey of authorities leading to the two-test formulation.
Ajay Hasia v. Khalid Mujib Sahravardi ((1981) 1 SCC 722) Observed that corporate form does not necessarily obscure the substantive reality of pervasive Government presence; where Government acts through instrumentality of a corporation, the juristic veil cannot obliterate that reality. The court quoted Ajay Hasia (paragraph 7) approvingly to support the proposition that a corporation's separate corporate form may be disregarded where the reality is pervasive Government control and the corporation functions as an instrumentality/agency of the State; this supported the court's finding that Nigam was effectively the Central Government's agent.

Court's Reasoning and Analysis

The court's legal analysis proceeded in a stepwise manner, grounded in the authorities summarized above and the specific documentary record (licence, memorandum and articles, and statutory provisions):

  1. Derivation of legal tests: From the surveyed decisions the court distilled two conjunctive tests to determine whether a company or corporation is an agent of the Government:
    • (i) whether the company/corporation is established to carry on a function which is exclusively the privilege of the Government; and
    • (ii) whether the Government exercises control or supervision over the working of the company/corporation.
    The court stated that both tests must be satisfied for a finding of agency.
  2. Statutory framework: The court analysed section 4 of the Indian Telegraphs Act, 1885 which vests in the Central Government the exclusive privilege of establishing, maintaining and working telegraphs (which includes telephones). The statute permits delegation to a Telegraph Authority and licensing to others subject to conditions.
  3. Factual application — licence terms and corporate documents: The court examined the licence granted to the Nigam (notification of March 27, 1986), the memorandum and articles and related instruments. The court identified numerous features evidencing central control and governmental oversight:
    • The licence was time-limited, revocable on breach, and subject to schedules and general conditions prescribed by the Telegraph Authority and Central Government rules.
    • The Nigam's activities (schedules A and B) were to be carried out subject to Central Government rules and Telegraph Authority approval, including introduction of new services only as approved and equipment acceptance by Departmental bodies.
    • Employees of the Nigam were to be treated as telegraph officers for specified purposes; executive designations were to be equated with departmental heads for exercising powers under the rules.
    • The Nigam could not fix rates, charges, deposits or fees without the written consent of the Telegraph Authority; many powers were delegated subject to the Telegraph Authority's control.
    • The Nigam was bound to give facilities to Central and State Governments during public emergency and to abide by orders under the Act, and to indemnify the Central Government for licensed acts.
    • The Memorandum and Articles expressly contemplated close liaison with the Telecommunication Board and Department of Telecommunications, with specific functional areas enumerated (development of communications, standards, interconnection, implementation of orders under the Indian Telegraph Act, introduction of new services, revenue sharing, use of Telecommunications Board infrastructure, etc.).
    • The President (Central Government) owned the entire share capital; the Board of Directors comprised the President and his nominees; the President could appoint and remove directors and reserve important matters for his decision and approval.
    • Numerous significant corporate decisions required prior approval of the President (appointments above a pay threshold, foreign appointments, substantial capital expenditure, issue of debentures, winding up, sale/lease of significant property, formation of subsidiaries, five-year plans and capital budgets, revenue deficits to be met by Central Government funds, tariff changes, withdrawal of services, and other major contracts).
    • The President could give written directives on matters involving national security or substantial public interest; the Board had to give immediate effect to such directions and to record them in the annual report (subject to national security exceptions).
    • Financial and audit control: the Comptroller and Auditor-General had specified powers with respect to appointment of auditors, audit instructions, supplementary audits and access to company records; auditors' reports were to be submitted to the Comptroller and Auditor-General who could comment and supplement.
  4. Synthesis and conclusion on agency: The court concluded that the Nigam performed a function previously exercised exclusively by the Central Government and that Central Government exercised all-pervasive control and supervision in both material and day-to-day matters. The court therefore concluded that the Nigam was, in substance, an agent or instrumentality of the Central Government despite its corporate form.
  5. Legal consequence: Because the court found that both tests for agency were satisfied, it applied the exception in Heavy Engineering Mazdoor Union and Ajay Hasia and held that the Nigam must be treated as the Central Government for the purposes of section 2A (and related provisions) of the Industrial Disputes Act.
  6. Procedural outcome based on reasoning: Given that the appropriate Government for the Nigam is the Central Government, disputes between the Nigam and its employees could only be referred for adjudication by the Central Government and not by the State Government; accordingly the court set aside the Industrial Court order of April 27, 1988 and quashed the proceedings before the State Industrial Court under both the Central Act and the Maharashtra Act, allowing the references pending before the Central Government Industrial Tribunal to proceed.

Holding and Implications

Holding:

The court held that, for the Nigam, the appropriate Government is the Central Government; the Nigam, although incorporated, is an instrumentality/agent of the Central Government for the purposes of the Industrial Disputes Act and the Maharashtra Act.

Direct consequences and orders (as stated in the opinion):

  • The Industrial Court's order of April 27, 1988 (holding the State Government to be the appropriate Government) is set aside.
  • The proceedings before the State Industrial Court (both under the Central Act and under the Maharashtra Act) are quashed.
  • The references pending before the Central Government Industrial Tribunal are to proceed.
  • The writ petition (challenging the Industrial Court order and related matters) was disposed of by consent and the rule made absolute with no order as to costs.
  • Appeal No. 988 filed by the Bombay Telephone Canteen Employees' Association is dismissed; the application for leave to appeal to the Supreme Court was rejected on the ground that no question of law requiring Supreme Court consideration was involved.

Implications:

The immediate practical effect is that disputes between the Nigam and its employees fall within the Central Government's jurisdiction and must be adjudicated through Central Government mechanisms (Central Government Industrial Tribunal). The opinion applies and clarifies how the established tests from prior authorities are to be applied to the facts of this case. The court did not state that it was creating a new legal precedent beyond applying and reconciling existing authorities to the present facts; the decision is an application of established principles to conclude the Nigam is an agent of the Central Government.

Order accordingly.

    Bombay Telephone Canteen Employees' Association v. Mahanagar Telephone Nigam Ltd., Bombay And Others

    Sawant, J.:— The common question as to which is the ‘appropriate Government’ under the Industrial Disputes Act, 1947 (hereinafter referred to as the Central Act) and the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (hereinafter referred to as ‘the Maharashtra Act’) arose in both these appeals and therefore they are being disposed of by this common Judgment. In Appeal No. 958 of 1987, the relevant facts are as follows:

    2. Prior to coming into existence of the 1st Respondent the Mahanagar Telephone Nigam Limited (hereinafter referred to as ‘the Nigam’) on April 1, 1986, all the functions of the 1st respondent were admittedly carried on by the Department of Telecommunications, Ministry of Communications, Government of India. At its establishment at Cooperage, Bombay, a Canteen for the benefits of its staff was being run by a Co-operative Society called the Bombay Telephone Co-operative Canteen Society Limited which is the 5th Respondent to the appeal. In the canteen some employees were employed who are admittedly the employees of the Nigam. On or about September 18, 1979, the Services of three of the employees were terminated and two of them are respondents 6 and 7 to the appeal. On September 19, 1979, the Hotel Mazdoor Sabha, a trade union raised an industrial dispute in respect of the said termination of the services, before the conciliation officer of the State of Maharashtra under the Central Act. The conciliation having failed, the State Government made a reference of the dispute to the Labour Court, Bombay. In the dispute, a preliminary objection was raised on January 1, 1981 by the society, contending that the State Government had no authority to make the reference and the State Labour Court had no jurisdiction to entertain the dispute, since the appropriate Government under the Central Act in the present case was Central Government. The Labour Court upheld the preliminary objection holding that the appropriate Government was the Central Government and not the State Government. In that view of the matter, the Labour Court rejected the reference. Thereafter, the same dispute was raised before the Central Government Conciliation Officer, and on December 16, 1986 the Central Government referred the dispute to the Central Government Industrial Tribunal and said dispute has since been pending before the said Tribunal. In the meanwhile the 1st respondent, Nigam had already come into existence from April 1, 1986.

    3. In appeal No. 775 of 1988, on March 1, 1987, Respondent No. 6, the Bombay Telephone Canteen Employees' Association, filed a complaint against the Nigam under section 28 of the Maharashtra Act, being complaint (ULP) No. 290 of 1987 before the State Industrial Court against the non-implementation of the recommendations of the 4th pay commission. In that complaint, the Industrial Court issued certain directions to the appellant Nigam. Since those directions were not implemented, an application, being miscellaneous application No. 25 of 1987 was filed before the Vth labour court in the main complaint. While both the application and the main complaint were pending a preliminary objection was raised in the main complaint contending that the Maharashtra Act had no application to the canteen run by the society since the State Government was not the appropriate Government in relation to it as required by the Maharashtra Act. The objection was overruled by the Industrial Court by its order of April 27, 1988 holding that the appropriate Government for the canteen was the State Government and hence the Maharashtra Act had application to the complaint before it.

    4. Against the decision of April 27, 1988 of the Industrial Court, the Nigam preferred a writ petition to this court under Article 226 of the Constitution of India challenging not only the order passed by the Industrial Court under the Maharashtra Act, but also the pendency of references before the Central Govt. Industrial Tribunal under the Central Act, and the learned single Judge by his impugned Order of June 9, 1988 admitted the petition and granted interim relief whereby the State Industrial Court was prevented from proceeding with the complaint under the Maharashtra Act, and the Central Industrial Tribunal was allowed to proceed with the industrial dispute pending before it. It is aggrieved by this order that the Bombay Telephone Canteen Employees' Association as well as the Nigam have preferred the present two separate appeals Nos. 958 of 1988 and 775 of 1988 respectively.

    5. It is a little cunous aspect of this dispute that the employees are sharply divided against each other on the issue of the proper form to redress their grievances. The employees involved in the dispute pending before the Central Government Industrial Tribunal are naturally reluctant to support the contention of the employees whose complaint under the Maharashtra Act is pending before the State Industrial Court and want to support the proposition that it is the Central Government which is the appropriate Government under the Central Act. The Nigam is not interested in taking any side but is naturally keen on getting the issue with regard to the forum decided finally.

    6. On behalf of the appellants in appeal No. 988 of 1988 viz. the Bombay Telephone Canteen Employees' Association, Mr. Vardaiya the learned Counsel places reliance on a decision of the single Judge of this Court in the case of Abdul Rehman Abdul v. B. Paul, reported in 1963 Mh. L.J 261 : AIR 1963 Bom. 267 and two decisions of the Supreme Court, namely Heavy Engineering Mazdoor Union v. State of Bihar reported in (1969) 1 SCC 765 : AIR 1970 SC 82 and Hindustan Aeronautics Limited v. Their Workmen reported in 1975-11 LLJ 336. As against this Mr. Ganguli appearing for the respondent workmen in appeal No. 775 of 1988 while placing heavy reliance also on the decision of the Supreme Court reported in (1969) 1 SCC 765 : AIR 1970 SC 82 (supra), refers us to yet another decision of the Supreme Court reported in 1984 Supp SCC 418 : AIR 1984 SC 1897, Regional Provident Fund Commissioner, Karnataka v. Workmen, General Secretary, Karnataka Provident Fund Employees' Union. He also seeks to draw support from the decision of one of us (Mrs. Sujata Manohar, J.) reported in 1986 Mh. L.J 491 : 1986 (1) Bom. C.R 335, International Airports Authority of India v. P.K Srivastava. Mr. Kapadia appearing for the Nigam relies upon the decisions pointed out on both sides and in addition relies on the decision of the Supreme Court reported in (1988) 3 SCC 105, Bank of India v. P.A Stalin.

    7. In 1963 Mh. L.J 261 : AIR 1963 Bom 267, the learned single Judge was called upon to decide whether in a dispute between the Mazgaon Dock Limited and its employees, it was the State or the Central Government under the Central Act. The learned Judge held that the expression “under the authority of the Central Government” as contained in section 2(a)(i) of the Industrial Disputes Act must mean and is intended to apply to industries carried on directly under the authority of the Central Government. Industries which are carried on for their own purposes by incorporated commercial corporations which are governed by their own constitution, as authorised by the Companies Act, cannot be described as carried on “Under the authority of the Central Government”. Such corporations are independent legal entities and they run the industries for their own purposes. Even when the Central Government controls these corporations, the industries are worked by the corporation under the authority of their own constitution or charters. Consequently where the Central Government owns the entire share capital of a corporation which is incorporated under the Companies Act and which runs different industries, and when a dispute arising between the workers of one of such industries and its management is referred to a conciliation officer appointed by the State Government, his jurisdiction cannot be challenged by contending that the appropriate Government in respect of such industry is the Central Government and only such Officer as is appointed by the Central Government can consider he dispute.

    8. In (1969) 1 SCC 765 : AIR 1970 SC 82 (Heavy Engineering Mazdoor Union v. State of Bihar) which is relied upon by both sides, the court considered the meaning of the Word ‘authority’ used in section 2(a) of the Central Act and also the question as to when the corporation acts as an agent of the State. While dealing with the meaning of the word ‘authority’, the Court held that the word must be construed according to its ordinary meaning and therefore must mean the legal power given by one person to another to do an act. A person is said to be authorised or to have an authority when he is in such a position that he can act in a certain maimer without incurring liability to which he would be exposed but or the authority, or so as to produce the same effect, as if the person granting the authority had for himself done the act. According to the court in such a situation there clearly arises the relationship of a principal and agent. The court further considered the meaning of the expression ‘Under the authority of’ and observed that this expression means “pursuant to the authority” such as where an agent or servant acts under or pursuant to the authority of his principal or master.

    9. While dealing with the question whether the corporation in the present case before it was the agent of the State, the court held that it would depend on the facts of each case. Where a statute setting up the corporation so provides such a corporation can easily be identified as the agent of the State. In the absence of a statutory provision, however, a commercial corporation acting on its behalf, even though it is controlled wholly or partly by the Government department will be ordinarily presumed not to be a servant or agent of the State. The fact that the Minister appoints the members or directors of the corporation and he is entitled to call for information and to give directions which are binding on the Directors and to supervise over the conduct or business of the corporation is agent of the Government. The court also observed that an inference that the corporation is the agent of the Government may be drawn where it is performing in substance governmental and not commercial functions.

    (emphasis supplied)

    10. While dealing with the nature of an incorporated company as a special entity, the Court stated that an incorporated company has a separate existence and the law recognises it as a juristic person separate and distinct from its members. This new personality emerges from the moment of its incorporation and its rights and obligations are different from those of its shareholders. Action taken against it does not directly affect its shareholders. The company in holding its property and carrying on its business is not the agent of its shareholders. The liability of an individual member is not increased by the fact that he is the sole person beneficially interested in the property of the corporation and that the other members have become members merely for the purposes of enabling the corporation to become incorporated and possess only a nominal interest in its property, or hold it in trust from him. Having made these observation the court held that the mere fact that share capital of the Heavy Engineering Corporation was contributed by the Central Government and the fact that all its shares are held by the President and certain officers of the Central Government does not make any difference to the proposition that the corporation was a separate entitled and not an agent of the Central Government.

    11. In 1975 (11) LLJ 336 (Hindustan Aeronautics Ltd. v. Their Workmen) the Supreme Court followed its earlier decision in the Heavy Engineering Mazdoor Union (supra) and held that Hindustan Aeronautics Limited was a entity separated from the Government, and it was not the agency of the Government. It may be mentioned here that an argument was advanced before the court to which our attention was pointedly drawn by Mr. Vardaiya “that the company there was not an industry as it was carrying on a function which Government alone was entitled to carry on to the exclusion of the private operations, unlike in the case of the Heavy Engineering Industries”. The court while dealing with this argument observed that the distinction so made was of no consequence and does not affect the ratio of the case in Heavy Engineering Industries Limited, and held that the appropriate Government in that case was not the Central Government but the State Government.

    12. In 1984 Supp SCC 418 : AIR 1984 SC 1897 (Regional Provident Fund Commissioner, Karnataka v. Workmen, General Secretary, Karnataka Provident Fund Employees' Union) the admitted position was that the business of the Provident Fund Organisation was a governmental function. There was therefore, no difficulty in holding that the appropriate Government was the Central Government.

    13. In 1986 Mh. L.J 491 : 1986 (1) Bom. C.R 335 (International Airports Authority of India v. P.K Srivastava) it is held that the authority was created to discharge the functions of the Government and it was working under the control and authority of the Central Government. Hence the appropriate government was the Central Government.

    14. In (1988) 3 SCC 105 (Bank of India v. P.A Stalin) the same question was again agitated. The Supreme Court after dealing with the Heavy Engineering Mazdoor Union (supra) and Hindustan Aeronautics Limited (supra) and other cases also referred to another of its decision viz. Ajay Hasia v. Khalid Mujib Sahravardi, (1981) 1 SCC 722 and approvingly quoted the following observations made in paragraph 7 of that judgment which are as follows:

    “It is undoubtedly true that the corporation is a distinct juristic entity with a corporate structure of its own and it carries on its functions on business principles with a certain amount of autonomy which is necessary as well as useful from the point of view of effective business management, but behind the formal ownership which is cast in the corporate mould the reality is very much the deeply pervasive presence of the Government. It is really the government which acts through THE instrumentality or agency of the corporation and the juristic veil of corporate personality worn for the purpose of the convenience of management and administration cannot be allowed to obliterate the true nature of the reality behind which is the Government”.

    (emphasis supplied).

    15. The Court ultimately came to the conclusion in that case that the appropriate Government in the case of dispute between the Bank of India, a nationalised Bank and its employees was the Central Government. The Court held that the Bank of India as well as other nationalised Banks were established under the Central Government.

    16. It is in the light of the aforesaid decisions that we have to decide whether in the present case it is the Central Government or the State Government which is the appropriate Government under the Central Act. According to us, two tests which emerge from the aforesaid decisions and which are relevant for considering whether a Company or Corporation is an agent of the Government or not are (i) whether the Company or the Corporation is established to carry on a function which is exclusively the privilege of the Government to carry on and (ii) whether the Government exercises control or supervision over the working of such a Company or Corporation. Both the tests must be satisfied before it is held that the Company or Corporation is an agent of the Government.

    17. In the present case, in the first instance, admittedly prior to the coming into existence of the Nigam on 1st April 1986, all the functions which are now being performed by the Nigam were carried on exclusively by the Central Government trough its Telecommunication Department working under the Ministry of Communications, under the provisions of section 4 of the Indian Telegraphs Act, 1885. Section 4 of the Act follows:

    “4.(1) Within India the Central Government shall have the exclusive privilege of establishing, maintaining and working telegraphs:

    Provided that the Central Government may grant a licence, on such condition and in consideration of such payments as it thinks fit, to any person to establish, maintain or work a telegraph within any part of India:

    Provided further that the Central Government may, by rules made under this Act and published in the official Gazette, permit, subject to such restrictions and conditions as it thinks fit, the establishment, maintenance and working.

    (a) of wireless telegraphs on ships within Indian territorial waters and on aircraft within or above India, or Indian territorial waters and (b) of telegraphs other than wireless telegraphs within any part of India.

    (2) The Central Government may, by notification in the official Gazette, delegate to the telegraph authority all or any of its powers under the first proviso to sub-section (1).

    The exercise by the telegraph authority of any power so delegated shall be subject to such restrictions and conditions the Central Government may, by the notification, thinks fit to impose”.

    18. The aforesaid provision shows that the privilege of establishing, maintaining and working telegraph which includes telephones is exclusively that of the Central Government. The Central Government or its delegate the Telegraph Authority under sub-section (2), has, however, the power to grant a licence to any other person or authority to run the said function on such condition as it may think fit. It is in exercise of this power that by a notification of March 27, 1986 the Telegraph Authority granted licence to the Nigam to carry on the said functions. The terms of the licence produced before us, show that, among other things, the licence is granted to the Nigam for a period of 5 years with an option to renew the same. The licence reserves the power to the telegraph authority to revoke the same on breach of any terms and conditions of the licence. The list of services handed over to the Nigam are in schedule ‘A’ to the licence whereas scheule ‘B’ mentions the general conditions for the establishment, maintenance and working of the services listed in schedule ‘A’. The list mentions, among other things that the Nigam will introduce new services as may be approved by the Telegraph Authority from time to time. The general conditions state that the terms and conditions of the making over of the management, control and operation of the services from the Telecommunication Board to the Nigam and the condition for consequent transfer of assets and sharing of revenues for services rendered jointly by the Department of Telecommunications and the Nigam and the conditions governing the staff are covered separately by the memorandum dated March 27, 1986 of the Telecommunications Board and that Memorandum and the orders/notification referred to therein shall constitute an integral part of the general conditions an the licence will be subject to full compliance with the same. The genera conditions further state that the Nigam will have non-exclusive right to establish, maintain and work the services mentioned in schedule A and that the service-shall be established, maintained and marked in accordance with the rules made from to time by the Central Government under section 7 of the Indian Telegraphs Act (hereinafter referred to as ‘the Act’). Any person employed by the Nigam for the purpose shall be considered as a Telegraph Officer in accordance with sub-section (2) of section 3 of the Act. For the purposes of exercising the authority under the rules made under section 7 of the Act, the Executive Directors of the Nigam shall be treated as equivalent to the Heads of circles, districts and General Managers of Department of Telecommunications, and the Managing Director of the corporation will be treated as the Head of the Department, and he may also exercise special powers as may be delegated by the Telegraph Authority from time to time by notification published in the Gazette. As regards the other officers, the Nigam has to intimate the Telegraph Authority the designation adopted and their equivalence to the designation in the Department of Telecommunication and accordingly the Telegraph Authority is to authorise the officers to exercise appropriate power under the said rules by suitable modifications.

    19. The Nigam can fix rates, charges, deposits and fees for the establishment, maintenance, working, repair, transfer or shifting of any telegraph only as prescribed by the Telegraph Authority and published in the Gazette and the Nigam cannot fix the said rates, deposits, fees etc. without the written consent of the Telegraph Authority.

    20. Under the general conditions, further the power to enter into individual agreements as defined in sub-section 4(a) of section 7 as well as powers to place and maintain the telegraph lines and posts and to enter property conferred on the Telegraph Authority under sections 10 and 11 of the Act are delegated by the Telegraph Authority to the Nigam and it is also expressly provided that arbitration of any dispute between the Nigam and the subscriber shall be dealt with in accordance with section 7(b) of the Act as the dispute between the Telegraph Authority and subscriber.

    21. The Nigam is further bound to give all facilities to the Central and State Governments to exercise all powers during public emergency or in the interest of public safety and abide by the orders issued under the Act. So also the Nigam has to indemnify the Central Government against all actions, claims and demands which may be brought against it in respect of any injury from any act licensed or permitted by the licence.

    22. The Nigam may further issue administrative instructions for the conduct of telegraphs provided those instructions are not in conflict with the provisions under the Indian Telegraph Rules framed under section 7 of the Act or the administrative instructions issued by the Department of Telecommunications under the Telephone allotment rules.

    23. The Nigam has further to provide to the Performance Monitoring Unit of the Department of Telecommunication the required data and the facility and access for the purposes of data collection and analysis.

    24. The acceptance and testing of switching and transmission equipment of the Nigam is to be carried out by the Acceptance Testing Organisation of the Department of Telecommunication and the introduction of new services and new technology has also to be done by the Nigam in consultation and close co-ordination with the said Department. The Nigam further has no power to sublicence the privileges granted to it under the licence.

    25. In addition to the aforesaid conditions of the licence, the Memorandum of Association and Articles of Association of the Nigam show that the Nigam was established to take over management, control and operation of two telephone districts, namely, Delhi Telephone District and Bombay Telephone District of the Department of Telecommunications together with all their assets and liabilities and to plan, establish, develop, provide, operate and maintain all types of Telecommunication services under licence and/or delegated powers under the Act and work in close liaison with the Telecommunication Board and Department of Telecommunications in the matters, among others of:—

    (a) Overall development of communication services in India and in the field of overseas communications.

    (b) Technical specifications, standards and norms of services in the local and long distance communications.

    (c) Inter connection of the local networks services, long distance transmission systems managed by the Telecommunication Board or any other Organisation/Company.

    (d) Implementation of any order and/or directive issued under the Indian Telegraph Act or rules framed thereunder by the Telegraph Authority or any office duly authorised by the Telegraph Authority or the Act.

    (e) Introduction of new services.

    (f) Sharing of revenues collected by the company for various services with the Department of Telecommunications or any other agency for the usage of the facilities provided by them and vice versa.

    (g) Utilisation of the infrastructure facilities of the Telecommunications Board like Quality Assurance and Inspection, Training, Telecommunications Research Centre, stores and factory organsation etc. by the company or mutually agreed terms till such time as required by the company.

    (h) In the ordering of equipments and stores which are having limited availability and/or limited sources of supply and are required both by the company and the Telecommunications Board.

    26. The Nigam has further to obtain specific prior approval of the Telecommunication Board in cases of proposals to withdraw an existing service as well as to fix, modify, increase or decrease of Tariffs for any of the services by it.

    27. The entire share capital of the Nigam belongs to the Central Government and the Borad of Directors consists of the President of India and his nominees. It is the President who has the power to appoint as well as to remove all the directors and to fix their remuneration. The Chairman of the Board of Direcotrs who is the nominee of the President is further required to reserve for decision of the President any proposals or decisions of the Board or any matter brought before it which raises in his opinion any important issue and which is on that account fit to be considered by the President who has the power to modify the proposal of the decision. The prior approval of the President is further necessary in the following matters:—

    (a) Appointment which term will include initial appointment, extension in service and re-employment of personnel who have attained the age of 58 years on a pay (including pension and pensionary equivalent of retirement benefits) exceeding Rs. 2,500/- (Rupees Two thousand five hundred) per mensem.

    (b) Appointment of any foreign national to post in the company.

    (c) Any programme of capital expenditure for an amount which exceeds Rs. 20 crores in each case. However in regard to the sanction of expenditure on township residential quarters etc. this limit shall be Rs. 50 lakhs only. These powers are subject to the condition that the Board of Directors do not incur capital expenditure on schemes not included in their capital budget approved by the Government.

    (d) Issue of Debentures.

    (e) Winding up of the company.

    (f) Sale, lease or disposal of any property having an original book value of Rs. 10 lakhs and above.

    (g) The formation of a subsidiary company.

    (h) Company's Five Year and annual Plans for Development and capital budgets.

    (i) Revenue Budget of the company in case there is an element of deficit which is proposed to be met by obtaining funds from Central Government.

    (j) Agreement involving foreign collaboration proposed to be entered into by the company.

    (k) Purchases and contracts of a major nature involving substantial capital outlay which are in excess of the powers vested in the company.

    (l) Withdrawal of an existing service.

    (m) Fixation, modification, increase or reduction in tariff for different kinds of services provided by the company.

    28. The President has power to issue general directions or instructions which are considered necessary with regard to the conduct of the business and affairs of the Nigam and the Board of Directors have to give immediate effect to such directions and instructions.

    29. In particular the President has powers:—

    (i) To give directives to the company as to the exercise and performance of its functions in matters involving national security or substantial public interest.

    (ii) To call for such returns, accounts and other information with respect to the property and activities of the company as may be required from time to time.

    (iii) To provide wholly or partly owned company(ies) or subsidiary(ies) including participations in their share capital irrespective of the sources from which the operations of such companies are to be financed.

    (iv) To determine in consultation with the hoard annual, short and longterm financial and economic objectives of the company:

    Provided that all directives issued by the President shall be in writing addressed to chairman. The Board shall, except where the President considers that the interest of national security requires otherwise, incorporate the contents of directives issued by the President in the annual report of the company and also indicate its impact on the financial position of the company.

    (v) To take decisions regarding entering into partnership and/or regarding arrangements for sharing profits.

    30. The Nigam can invest its moneys only in securities approved by the President and cannot give percentage in profit to any person employed by it without his approval. The Nigam cannot even borrow, raise or secure money without the approval of the President. The approval of the President is also necessary for the declaration of the dividend.

    31. The auditor or auditors of the Nigam are further to be appointed or reappointed by the Central Government on the advice of the Comptroller and Auditor-General of India who has the power—

    (a) to direct the manner in which the company's accounts shall be audited by the auditor/auditors appointed in pursuance of Article 111 hereof and to give such auditor/auditors instructions in regard to any matter relating to the performance of his/their functions as such.

    (b) to conduct a supplementary or test audit of the company's accounts by such person or persons as he may authorise in this behalf, and for the purposes of such audit, to have access, at all reasonable times, to all accounts, account books, vouchers documents and other papers of the Company and to require information or additional information to be furnishing to any person or persons so authorised, on such matters, by such person or persons and in such forms as the Comptroller and Auditor-General may, by general or special order, direct.

    32. The auditor/auditors so appointed have to submit a copy of his/their reports to the Comptroller and Auditor-General who shall have the right to comment upon and supplement the audit report in such manner as he may think fit. Such comment has to be placed along, with the report before the annual general meeting.

    33. Thus the provisions of the licence and of the Memorandum and Articles of Association show that the Nigam is not only carrying on the function which hitherto was exclusively carried on by the Central Government but also that the said function is being carried on under the all-pervasive control of the Central Government. In all matters material even to the day to day management of the affairs of the Nigam a substantial control vests virtually in the Government. The all embracing supervision and control of the Government leave no manner of doubt that the Nigam is created as a separate entity only for administrative convenience. For all practical purposes it is an agent of the Government. The relationship between the two is that of the principal and the agent and its real management is by the Government. Its corporate structure is only a veil. The present case therefore satisfied both the tests of the agency and is governed by the exception carved out by the Supreme Court in the case of Heavy Engineering Mazdoor Union v. State of Bihar, (1969) 1 SCC 765 : AIR 1970 SC 82 (supra) where the court has observed that in cases where the company or the corporation carries on function which is exclusively reserved for the Government and does so as an agent of the Government the company or the corporation though constituted as a separate entity can be said to be nothing more than an agent of the Government. Since on facts in that case these tests were not satisfied the court had held that the Heavy Engineering Industries was not an agent of the Central Government but was a separate entity apart from the Government. To the same effect are the observations of the Court in Ajay Hasia v. Khalid Mujib Sehravardi (supra) quoted extensively above. We are therefore more than satisfied that the Nigam is nothing but the Central Government notwithstanding its incorporation as a separate company.

    34. Hence for the purposes of section 2A of the Industrial Disputes Act the appropriate Government for the Nigam is the Central Government and the dispute between the Nigam and its employees can be referred for adjudication only by the Central Government and not by the State Government. This being the case, the Maharashtra Act will also not apply to the dispute between the Nigam and its employees. Hence the order passed by the Industrial Court on April 27, 1988 is hereby set aside and the proceedings before the State Industrial Court both under the Central Act as well as under the Maharahstra Act are quashed. For the same reason, the references pending before the Central Government Industrial Tribunal will proceed.

    35. In view of our above findings, by consent the writ petition stands disposed of and the rule is made absolute accordingly with no order as to costs.

    36. Appeal No. 988 filed by the Bombay Telephone Canteen Employees' Association is dismissed. Mr. Varadaiya applies for leave to appeal to the Supreme Court. According to us, no question of law is involved in this appeal which requires to be considered and decided by the Supreme Court. Hence the application for leave is rejected.

    Order accordingly.
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