Case Note & Summary
The dispute arose after the bifurcation of the State of Bombay, when the Gujarat legislature enacted the Bombay Labour Welfare Fund (Gujarat Extension and Amendment) Act, 1961, making amendments to the Bombay Labour Welfare Fund Act, 1953. The Act provided for the constitution of a Labour Welfare Fund and treated unpaid accumulations as abandoned property to be taken over by the Board, eventually appropriated by the State as bona vacantia. Respondent companies, employers, challenged the constitutionality of provisions after the State demanded payment of unpaid accumulations. The High Court held sections 3(1), 3(2)(b), 3(4), 6A and rules 3 and 4 unconstitutional and void, reasoning that they violated Article 19(1)(f) of citizen-employers and employees and that discrimination was present in the definition of establishment under Article 14. The State appealed to the Supreme Court. The main legal issues were whether the impugned provisions violated fundamental rights; whether a corporation, being a non-citizen, can challenge a law as void for violating citizens' rights; the scope of voidness under Article 13(2); whether unpaid accumulations could be validly taken over; and whether the definition of establishment was discriminatory. The respondents argued that the provisions abridged Article 19(1)(f) rights, hence were void under Article 13(2) and the demands were without authority of law, and that the definition was discriminatory. The State contended that a corporation is not a citizen, unpaid accumulations are employees' property, the State was entitled to appropriate them as bona vacantia after notice, and there was no discrimination. The Supreme Court held that a corporation is not a citizen for purposes of Article 19 and has no fundamental right thereunder. The court interpreted Article 13(2) as rendering laws void only to the extent of contravention of fundamental rights, not void in rem; thus a law offending Article 19 remains operative against non-citizens. Unpaid accumulations were held to be employees' property, representing employers' obligations; they could be deemed abandoned property under Section 6A and appropriated by the State as bona vacantia only after notice and claims procedure. The seven-year period for claims was reasonable, and employers' liability was discharged upon payment to the Board. The court also held that the respondent failed to show discrimination in the definition of establishment. The appeal was allowed, the High Court judgment was set aside, and the impugned provisions were upheld.
Headnote
A) Constitutional Law - Fundamental Rights - Corporation not a citizen - Constitution of India, 1950, Article 19 - The respondent corporation, being a non-citizen employer, could not claim that the impugned law was void as against it under Article 13(2) merely because it abridged citizens' fundamental rights under Article 19(1)(f). Held that a corporation is not a citizen for the purposes of Article 19 and has no fundamental right thereunder. (Paras Not mentioned) B) Constitutional Law - Article 13 - Voidness of laws inconsistent with fundamental rights - Constitution of India, 1950, Articles 13(1) and 13(2) - The court interpreted the word 'void' in Article 13 as meaning void only against persons whose fundamental rights are taken away or abridged, not void in rem. The expression 'to the extent of the contravention' refers to the extent of contravention of rights conferred, and pre-constitutional and post-constitutional laws remain operative against non-citizens. Held that non-citizens cannot take advantage of voidness arising from contravention of citizens' fundamental rights. (Paras Not mentioned) C) Labour Law - Unpaid Accumulations - Employees' property and bona vacantia - Bombay Labour Welfare Fund Act, 1953, Sections 2(10), 3, 6A - Unpaid accumulations represent obligations of employers to employees and are the property of employees. They may be deemed abandoned property under Section 6A(1) and appropriated by the State as bona vacantia only after notice and claims procedure. Held that the period of seven years allowed for claims is reasonable and does not infringe any constitutional rights of employees. (Paras Not mentioned) D) Labour Law - Employer Liability - Payment to Board discharges employer - Bombay Labour Welfare Fund Act, 1953, Section 6A - When an employer pays unpaid accumulations to the Board, liability to employees is discharged to the extent of the amount paid, and the employer cannot object if the State is lawfully entitled to demand payment. Held that employers are debtors and payment to the State under the statute releases them of their liability. (Paras Not mentioned) E) Constitutional Law - Article 14 - Discrimination in definition of establishment - Bombay Labour Welfare Fund Act, 1953, Section 2(4) - The High Court held that discrimination was writ large in the definition of 'establishment'. The Supreme Court found no violation of Article 14. Held that the respondent failed to show that the definition of establishment was discriminatory. (Paras Not mentioned) F) Constitutional Law - Standing - Challenge to statute by non-citizen - Constitution of India, 1950, Article 13 - One to whom the application of a statute is constitutional will not be heard to attack the statute on the ground that as applied to other persons or situations it may be unconstitutional. Held that a corporation cannot challenge a law for violating citizens' fundamental rights. (Paras Not mentioned)
Issue of Consideration
Whether provisions of Bombay Labour Welfare Fund Act, 1953 as amended by Gujarat Act, 1961 relating to unpaid accumulations and definition of establishment violated Articles 19(1)(f) and 14 of the Constitution; whether a corporation, being a non-citizen, can contend that a law is void as against it because it abridges fundamental rights of citizens; scope of voidness under Article 13(2).
Final Decision
The appeal was allowed. The High Court judgment was set aside, and the impugned provisions of the Bombay Labour Welfare Fund Act, 1953 as amended were upheld. The court held that a corporation is not a citizen under Article 19 and cannot claim that the law is void as against it merely because it abridges citizens' fundamental rights. Unpaid accumulations are employees' property, and the State may validly take them over as abandoned property and appropriate them as bona vacantia after the statutory notice and claims procedure. The definition of 'establishment' is not shown to violate Article 14.
Law Points
- Corporation is not a citizen under Article 19
- voidness under Article 13(2) is only to extent of contravention of fundamental rights
- non-citizen cannot challenge law for violating citizens' rights
- unpaid accumulations are employees' property and may be appropriated as bona vacantia after notice
- employer's liability discharged upon payment to Board
- period of 7 years for claims is reasonable
- definition of establishment not discriminatory
