Case Note & Summary
This writ petition under Article 226 of the Constitution of India challenged an award of the Central Government Industrial Tribunal which had dismissed an application by the management questioning the maintainability of a reference under Section 10 of the Industrial Disputes Act, 1947. The petitioner, Rashtriya Chemicals and Fertilizers Ltd., a Government of India undertaking incorporated under the Companies Act, 1956, contended that the appropriate government for the industrial dispute was the State Government and not the Central Government. The respondent was RCE Employee's Union, a recognized trade union under the Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act, 1971. The dispute originated from a settlement between the parties fixing a five-day working week at the petitioner's units at Trombay and Thal. In June 1988, the management issued a notice of change under Section 9A of the Industrial Disputes Act, proposing to reintroduce a six-day week. Conciliation proceedings ensued, but the Government of India initially refused to make a reference. The union challenged this refusal in writ proceedings before the Bombay High Court. A Division Bench, on 28 June 2001, quashed the refusal, holding that the Central Government could not enter into the merits of the dispute, and directed a reference to be made under Section 10(1). In compliance, the Central Government made the reference on 22 April 2002. Before the Industrial Tribunal, the petitioner management raised a preliminary objection that, in view of the Supreme Court's decision in Steel Authority of India v. National Union Water Front Workers (2001 III CLR 349), the appropriate government was the State Government. The Tribunal dismissed this application on the ground that the petitioner was a Government of India undertaking over which the Central Government exercised full control, relying on Hindustan Aeronautics Ltd. v. Hindustan Aero Canteen K. Singh (2002(95) FLR 1178). Aggrieved, the petitioner approached the High Court. The sole legal issue before the High Court was the construction of Section 2(a)(i) of the Industrial Disputes Act, 1947, which defines 'appropriate government' for certain industries. The provision states that in relation to an industrial dispute concerning an industry carried on by or under the authority of the Central Government, the appropriate government is the Central Government; otherwise, the State Government is appropriate. The question was whether the petitioner company fell within the phrase 'by or under the authority of the Central Government.' The petitioner argued that the company, though wholly owned by the Central Government, was a separate juristic entity not carried on by the Central Government and that the authority to carry on business derived from its Memorandum and Articles of Association, not from government control. The union contended that as a Government of India undertaking with extensive control, the Central Government was the appropriate government. The court analyzed the Supreme Court's decision in Heavy Engineering Mazdoor Union v. State of Bihar (1969) 1 SCC 765, which laid down the principle that a company incorporated under the Companies Act is not an industry carried on by the Central Government merely because the entire share capital is held by the government. The test for 'under the authority' is the existence of an agency relationship between the company and the government. The court extracted four principles from Heavy Engineering: (i) control through Memorandum and Articles does not make the company an agent; (ii) agency depends on all circumstances; (iii) a statutory corporation can easily be identified as an agent, but a commercial corporation is not presumed to be an agent; (iv) an inference of agency may be drawn if the corporation performs substantial governmental functions. However, the court noted that in subsequent decisions, especially in Hindustan Aeronautics Ltd. v. Hindustan Aero Canteen K. Singh, the Supreme Court held that a Government of India undertaking over which the Central Government exercises full control is an industry carried on under the authority of the Central Government. The Industrial Tribunal had found that the petitioner was such an undertaking with full control by the Central Government, and the High Court saw no reason to interfere with this finding. Consequently, the court held that the Central Government was the appropriate government under Section 2(a)(i) and dismissed the writ petition, upholding the Tribunal's award. The key takeaway is that for a government company, the determination of the appropriate government under the Industrial Disputes Act turns on whether the Central Government exercises such pervasive control that the company can be regarded as its agent, a factual inquiry influenced by the nature of functions and degree of government supervision.
Headnote
A) Industrial Disputes - Appropriate Government - Sections 2(a)(i), 10(1), Industrial Disputes Act, 1947 - Test of agency for determining 'under the authority of Central Government' - The petitioner, a Government of India undertaking incorporated under Companies Act, 1956, challenged the maintainability of a reference made by the Central Government contending that the State Government was the appropriate government. The court examined the principles from Heavy Engineering Mazdoor Union v. State of Bihar, holding that mere shareholding and control through Memorandum and Articles does not create an agency relationship; the test is actual agency. However, subsequent decisions, particularly Hindustan Aeronautics Ltd. v. Hindustan Aero Canteen K. Singh, established that a Government of India undertaking over which the Central Government exercises full control is an industry carried on by or under the authority of the Central Government. Finding that the petitioner was such an undertaking with full control by the Central Government, the court dismissed the petition and upheld the Tribunal's finding that the Central Government was the appropriate government. - Held: Central Government is the appropriate government for the petitioner under Section 2(a)(i). (Paras 5-7).
Issue of Consideration
Whether the Petitioner, Rashtriya Chemicals and Fertilizers Ltd., a Government of India undertaking incorporated under the Companies Act, 1956, is an industry carried on by or under the authority of the Central Government within the meaning of Section 2(a)(i) of the Industrial Disputes Act, 1947, and consequently whether the Central Government is the appropriate Government to make a reference under Section 10 of the Act.
Final Decision
The writ petition was dismissed. The High Court upheld the award of the Industrial Tribunal, holding that the Central Government is the appropriate government under Section 2(a)(i) of the Industrial Disputes Act, 1947 in respect of the petitioner company, which is a Government of India undertaking over which the Central Government exercises full control. The Court found no reason to interfere with the Tribunal's finding, and dismissed the petition, thereby affirming the maintainability of the reference.
Law Points
- A company incorporated under Companies Act is a separate juristic person
- not an industry carried on by Central Government merely by virtue of shareholding
- The test for 'under the authority of the Central Government' under Section 2(a)(i) of the Industrial Disputes Act
- 1947 is the existence of agency relationship between the company and the government
- Agency relationship is not ordinarily presumed for a commercial corporation even if wholly controlled by a government department
- Statutory corporations can be identified as agents of the state
- Inference of agency may be drawn when a corporation performs substantial governmental functions
- A Government of India undertaking over which Central Government exercises full control qualifies as 'industry carried on by or under the authority of the Central Government' and thus Central Government is the appropriate government under Section 2(a)(i) of the Industrial Disputes Act
- 1947
