1. United India Insurance Company, Ltd., New India Assurance, Ltd, National Insurance Company, Ltd. and Oriental Insurance Company, Ltd., have filed the above writ petitions for quashing the demand for payment of contribution under the Tamil Nadu Labour Welfare Fund Act, 1972, and to direct the respondent to forbear from making any demand under S. 2 of the said Act.

2. The fact set out in the affidavits filed in support of the above writ petitions are similar. Hence, the brief facts from the affidavit in Writ Petition No. 2900 of 1987, is extracted below. The petitioner is a Government company registered under the Companies Act, 1956. It is a subsidiary of the General Insurance Corporation of India. The General Insurance Corporation of India is a Government company, formed in pursuance of S. 9 of the General Insurance Business (Nationalisation) Act, 1972. Under S. 16 of the said Act, the Union of India has framed schemes for running the business of the company. The schemes framed under S. 16 of the Act have the force of law, as it is placed on the table of Parliament as per S. 17 of the Act. The Corporation and company are created by the direction of the Central Government under S. 23 of the Act. The company is fully held and controlled by the Central Government. It is held to be a State under Art. 12 of the Constitution of India by the decisions of Court. The company is an establishment of the Central Government. Since the insurance company is controlled by the Central Government and having regard to the provisions of the General Insurance Business (Nationalisation) Act, 1972, it is an establishment of the Central Government. But the respondent has been demanding payment of contribution for the period from 1972 in spite of several discussions and correspondences. Hence, this writ petition.

3. A detailed counter-affidavit has been filed by the respondent. In the counter, it is stated that the Tamil Nadu Labour Welfare Fund Act, 1972, was enacted for the creation of a fund for the welfare of the labour. It has come into force from July 1, 1973. Section 15 of the Tamil Nadu Labour Welfare Fund Act, 1972, requires the employer to contribute Rs. 4 per employee per annum. Further, it empowers the employer to deduct from the salary of the employee Rs. 2 per annum towards the employees' contribution to the fund. Since, the petitioner is an establishment, demand was issued on February 4, 1987, for the contribution. The petitioners were contributing the amount demanded by the respondent up to 1986. The petitioners have challenged the demand thereafter, relying upon the decision in C.V Raman v. Bank of India [1984 (2) L.L N. 336], which arose under the Tamil Nadu Shops and Establishments Act, 1947. Section 2(d)(v) will cover the petitioners establishment. The exemption contained in the said section, namely, but does not include an establishment (not being factory) of the Central or any State Government. The Tamil Nadu Shops and Establishments Act, 1947, exempts all establishments under the Central and State Government as per S. 4. Therefore, this Court took the view that the nationalised banks could be an establishment under the Central Government, but the distinction contained in the Tamil Nadu Labour Welfare Fund Act, 1972, for exemption is “all the establishments of the Central or State Government.” It does not include, “an establishment under the Central Government.” In Union of India v. Additional Commissioner for Workmen's Compensation [98 L.W 174], this point was noted. The statutory corporations have a separate entity and they are under the Government but not of the Government. By noticing the expressions used in the Tamil Nadu Shops and Establishments Act, 1947, namely “under the Central Government” the aforesaid decision was rendered, on the facts of the said case. Hence, the writ petition is devoid of the merits.

4. Learned senior counsel, Sri A.L Somayaji, for the petitioners contended that the petitioner-company is an establishment of the Government. Hence, the exemption contained in S. 2(d)(v) is applicable to the petitioners. He also took me through the various provisions contained in the General Insurance Business (Nationalisation) Act, 1972.

5. As per S. 4(1) of the Act, all the shares in the capital of every insurance company got transferred and vested in the Central Government free of all liability and encumbrance. But, as per S. 4(2), the Central Government is empowered to transfer not less than ten shares to such persons as may be specified. As per S. 4(4), the name of the persons to whom the shares are transferred are to be mentioned in the register of members.

6. As per S. 9 of the Act, the Central Government has to form a Government company in accordance with the provisions of the Companies Act and to be known as the General Insurance Corporation of India for the purpose of superintending, controlling and carrying on the business of general insurance. The Corporation has an authorised capital of Rs. 75 crores, divided into seventy-five lakhs fully paid-up shares of one hundred rupees each.

7. Section 10 again provides for the vesting of all the shares in the capital of every Indian insurance company from the Government to the Corporation. Once again, the register of members of the company should include the name of the Corporation as holder of the shares. Here again, the shares transferred to any person under Sub-sec.(2) of S. 4 are exempted from vesting with the Corporation. In Chap. V, the Central Government is empowered to frame schemes for efficient carrying on of general insurance business. Section 16(1) reads as follows:

“16 (1). If the Central Government is of opinion that for the more efficient carrying on of general insurance business it is necessary so to do, it may by notification, frame one or more schemes providing for all or any of the following matters.

(b) The transfer to and vesting in the acquiring company of the undertaking (including all its business, properties, assets and liabilities) of any Indian insurance company which ceases to exist by reason of the scheme.

(c) The constitution, name and registered office and the capital structure of the acquiring company and the issue and allotment of shares.

(d) The constitution of a Board of management by whatever name called for the management of the acquiring company.”

8. A combined reading of Ss. 4(2), 4(4), 10 and 16 extracted above would go to show that the Government is given power to transfer its shares to any person. Sub-section (1)(c) of S. 16 provides for framing a scheme for the issue and allotment of shares. The issue and allotment of shares can be to any person, i.e, to any citizen of India. Therefore, there is a possibility of any citizen becoming a shareholder of the company.

9. As per S. 16(1)(d), the board of management can be constituted under the scheme. In the Board of management also a citizen of India can be included. It is not restricted to only Government officials. Section 16 or any other provision does not contain any such restriction.

10. It is true that as contended by learned counsel for the petitioner, the Central Government is the owner of the shares of the insurance companies, but at the same time the shares are transferred to the Corporation. This is found in S. 10. The Corporation known as the General Insurance Corporation of India, which is the superintending and controlling authority is also a company to be registered under the Companies Act. From the provisions of the Act alone one cannot derive the conclusion that the Corporation should be headed by the Government officers alone. That has to be provided for by the schemes framed. Section 20 provides for a distribution of the balance of profit of each insurance company as dividends.

11. Learned counsel for the petitioner contended that as per S. 4 all the shares of the insurance companies stand transferred to the Government. As per S. 9, the Corporation constituted by the Government is known as Government company. Section 16 provides power to the Government to frame scheme for the more efficient carrying on of general insurance business. The schemes framed under S. 16 have to be placed before Parliament and they become law. As per S. 22, the Central Government has power to transfer employees of the Corporation. As per S. 23, the Corporation and the company should abide by the directions issued by the Government in the discharge of their functions. As per S. 31, every employee of the Corporation is a Government servant. As per S. 32 all losses and expenses incurred by an officer or employees of the Corporation has to be indemnified by the Central Government. Above all, the dissolution or liquidation of the insurance company or the Corporation shall be by an order of the Central Government only. Therefore, learned counsel contended that for all purposes the insurance company and the Corporation are of the Government and they may be termed as the wing of the Government.

12. Learned counsel for the petitioner cited the following decisions in support of his contention:

(1) Ajay Hasia v. Khalid Mujib Sehravardi [1981 (2) L.L.N 613];

(2) C.V Raman v. Bank of India [1984 (2) L.L.N 336] (vide supra);

(3) S. Rajamohanan v. Assistant General Manager [1985 L.& I.C NOC 17];

(4) Life Insurance Corporation v. Escorts, Ltd. [(1986) 1 SCC 264];

(5) C.V Raman v. Bank of India [1988 (2) L.L.N 156]; and

(6) New Horizons, Ltd. v. Union of India [(1995) 1 SCC 478].

13. In Ajay Hasia v. Khalid Mujib Sehravardi [1981 (2) L.L.N 613] (vide supra), the Supreme Court has held as follows, in Para. 7, at page 619;

“It is the fundamental rights which along with the directive principles constitute the life force of the Constitution and they must be quickened into effective action by meaningful and purposive interpretation. If a Corporation is found to be a mere agency or surrogate of the Government, ‘in fact owned by the Government, in truth controlled by the Government and in effect an incarnation of the Government,’ the Court must not allow the enforcement of fundamental rights to be frustrated by taking the view that it is not the Government and, therefore, not subject to the constitutional limitations. We are clearly of the view that where a Corporation is an instrumentality or agency of the Government, it must be held to be an ‘authority’ within the meaning of Art. 12 and hence subject to the same basic obligation to obey the fundamental rights as the Government.”

14. In Para. 9, the learned Judges of the Supreme Court culled out the tests for determining as to whether a Corporation is an instrumentality or agency of Government. Again, in Para. 11, the learned Judges have held that the concept of instrumentality or agency of the Government is not limited to a Corporation created by a statute but is equally applicable to a company nor society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the company or society is an instrumentality or agency of the Government so as to come within the meaning of the expression “authority” in Art. 12.

15. From the above, it is clear that the learned Judges were concerned with the interpretation of Art. 12 only. Further, they have also held that whether the institution in question in the said case was an instrumentality or the agency of the Government and not as to the question whether the institution was a wing or establishment of the Government. In Para. 12, at page 622 of 1981 (2) L.L.N, the learned Judges have made it clear in the following words:

“It is also necessary to add that merely because a juristic entity may be an ‘authority’ and, therefore, ‘State’ within the meaning of Art. 12, it may not be elevated to the position of ‘State’ for the purpose of Arts. 209, 310 and 311 which find a place in Part XIV. …”

16. In C.V Raman v. Bank of India [1984 (2) L.L.N 336] (vide supra), a Division Bench of this Court has taken the view that the establishments of nationalised banks are exempted from the Tamil Nadu Shops and Establishments Act, 1947. The learned judges considered the meaning of the word “under.” The words used in the Tamil Nadu Shops and Establishments Act, 1947, is “under.” Section 4(1) of the said Act reads as follows:

“4(1). Nothing contained in this Act shall apply to—

(c) establishments under the Central and State Governments, local authorities, the Reserve Bank of India, etc.”

17. The question that was considered in the said case was whether the nationalised banks acquired under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (Central Act V of 1970), were the establishments under the Central Government. In fact, the learned Judges have considered in Para. 59 the arguments of counsel that in order that an establishment to be an establishment under the Government, it should be a department of the Government, were unable to persuade ourselves this view. If really that was the intention of the law makers, nothing would have been easier than to State a department of a Government under S. 4(1)(c) of the Shops Act. After rejecting the said contention, the learned Judges held that the nationalised banks were establishments under the Government even though they were not wings of the Government. But, in this case, the argument is that the insurance companies are wings of the Government. But a reading of the provisions of the General Insurance Business (Nationalisation) Act, 1972, does not lead us to the said conclusion. The exemption under the Tamil Nadu Labour Welfare Fund Act, 1972, is to an establishment of the Central Government and not to an establishment under the Central Government.

18. In S. Rajamohanan v. Assistant General Manager [(1985) L.& I.C NOC 17] (vide supra), a Single Judge of the Kerala High Court took the view that the United India Insurance Company though registered under the Companies Act, yet it is something more than a company, it was a creature of the Act, hence held that the United India Insurance Company was a “State” under Art. 12 of the Constitution. In the light of the observations contained in the decision in Ajay Hasia v. Khalid Mujib Sehravardi [1981 (2) L.L.N 613] (vide supra), merely because an establishment is construed to be a State within the meaning of Art. 12 of the Constitution, it will not be stated to be so for all purposes.

19. In Life Insurance Corporation of India v. Escorts, Ltd. (vide supra), the Apex Court has laid down that regard must be had to the substance and not to the form. It is also stated by the learned Judges, that the corporate veil should be lifted and the substance and form of the establishment should be perceived, in the light of the said decision. At the commencement of the judgment itself, I have set out in detail the various provisions with reference to the Corporation as well as the insurance companies to be constituted under the General Insurance Business (Nationalisation) Act, 1972. Apart from the name of the company or the Corporation, the sum and substance of the Corporation and the companies is to do insurance business. There are provisions for issue of and allotment of shares. If the shares of the Corporation or companies are issued or distributed to the public, certainly, the company cannot be construed to be an establishment of the Government.

20. C.V Raman v. Bank of India [1988 (2) L.L.N 156] (vide supra), is a case which is an appeal against the order of this Court in C.V Raman v. Bank of India [1984 (2) L.L.N 336]. The Apex Court upheld the views expressed by the Bench of this Court. The learned Judges have observed as follows, in Para. 11, at page 164:

“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 automony 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 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 convenience of management and administration cannot be allowed to obliterate the true nature of the reality behind which is the Government.”

21. The said paragraph extracted from the judgment in Ajay Hasia v. Khalid Mujib Sehravardi [1981 (2) L.L.N 613] (vide supra), indicates that the view of the Apex Court in the said decision is reiterated. It is needless to point out in the said judgment, the Apex Court has held that the institution in question was only an authority for the purpose of Art. 12 of the Constitution of India and it cannot be construed to be so far other purposes as we have already indicated.

22. In New Horizons, Ltd. v. Union of India [(1995) 1 SCC 478] (vide supra), also the Apex Court has reiterated the doctrine of lifting the Corporate veil and piercing the veil or seeing through the veil. In the said case, the Apex Court found that New Horizons, Ltd., was a joint venture with Indian group of companies owning 50 per cent share capital and a foreign based company owning 40 per cent shares. The department held that the company NHL had no experience as required under the advertisement for inviting a tender. The Apex Court, after applying the principle of lilting the veil, found out the aforesaid facts and held that the previous experience of the Indian group of companies and the foreign based companies had to be taken into consideration. Apart from emphasising the doctrine of lifting the veil, the other aspect of the judgment is not relevant for the purpose of deciding the case on hand.

23. Another contention raised by learned counsel for the petitioner is that the company has a welfare society which has more benefits from the Tamil Nadu Labour Welfare Fund. But learned counsel for the petitioner is not in a position to establish in what manner they are superior or better to the benefits conferred under the Tamil Nadu Labour Welfare Fund. Learned counsel for the respondent produced before me the list of banking institutions and other establishments of the Central Government covered by the said Labour Welfare Fund Act, 1972. He also produced a brochure/published by the Tamil Nadu Labour Welfare Board, Madras 600 006, containing various benefits available under the fund. We are not concerned here as to whether the benefits conferred by one is better or superior to the other. We are concerned only with the question as to whether the establishments, namely, Indian insurance companies, are establishments of the Government of India.

24. Learned counsel for the respondent contended that up to 1986, the insurance companies were paying contribution and only thereafter they have stopped it, therefore, they are estopped from raising the question now. I am not in a position to agree with the said contention. Mere payment of contribution for some years has not made the respondent to suffer any detriment, which is a sine qua non for the application of the doctrine of estoppel or waiver. From the records available, I am not in a position to hold that the petitioners have waived their right to challenge the Act by any of the earlier conduct. In the circumstances, therefore, the contention of learned counsel for the respondent is not acceptable.

25. After considering all the relevant facts and circumstances of the case, and the decisions cited by counsel for the petitioner and the respondent, I am of the view that the insurance companies are not establishments of the Central Government and hence they are liable to pay contribution under the Tamil Nadu Labour Welfare Fund Act, 1972. For the foregoing reasons, these writ petitions are dismissed with costs. Counsel fee is Rs. 250 in each of the writ petitions.