Author: Harsh Verma, Galgotias University

Editor: I Sharan

ABSTRACT

In this case, the question arose as to Whether the acquisition of the Burmah Shell Oil Storage undertakings by the Distribution Company Ltd. Bharat Petroleum Corp. can be termed as ‘State’ as provided in Art. 12 of the COI. The petitioner in this case, Som Prakash Rekhi was a clerk in Burmah Sheel.  Som Prakash has taken voluntary retirement & he entitled himself to a pension as mentioned in the company’s deed.  Pension towards the petitioner was highly reduced after the deduction of provisional funds & other payments. And also, the benefits which were entitled to the petitioner were stopped.

Being unfolded that the Bharat Petroleum Corp is a corporation, that has acquired the Burmah Shell, the main issue raised here was whether the writ petition against Bharat Petroleum can be raised under Art.32 of the COI.

Bench Judges majority held that Bharat Petroleum Corp was a State as defined under Art. 12 of COI & a writ petition can be filed against Bharat Petroleum Corp.- written by Justice Krishna Iyer & Justice Chinnappa Reddy. There was a contrary direction issued by Justice Pathak wherein he held that Bharat Petroleum cannot be regarded as a state and that no writ petition can lie against him.

Keywords (Minimum 5): Acquisition of Undertakings, Burmah Shell, Pension, Provident Fund, Gratuity, Statutory Corporation, State under Article 12

CASE DETAILS

 

i) Judgement Cause Title / Case Name	Som Prakash Rekhi vs. Union of India & Anr.
ii) Case Number	Writ Petition No. 1212 of 1977
iii) Judgement Date	13 November 1980
iv) Court	Supreme Court of India
v) Quorum / Constitution of Bench	V.R. Krishnaiyer, O. Chinnappa Reddy, R.S. Pathak
vi) Author / Name of Judges	V.R. Krishnaiyer, O. Chinnappa Reddy, R.S. Pathak
vii) Citation	1981 AIR 212, 1981 SCR (2) 111, (1981) 1 SCC 449
viii) Legal Provisions Involved	Article 12 of the Constitution of India

INTRODUCTION AND BACKGROUND OF JUDGEMENT

Som Prakash Rekhi vs Union Of India & Anr is a case founded on the extended use of the term ‘State’ under Article 12 of the Indian Constitution, working out far-reaching effects so far as the enforcement of fundamental rights is concerned. In this case, the petitioner was one Som Prakash Rekhi, employed with Burmah Shell Oil Storage Ltd., and had gone in for voluntary retirement. It thus made him entitled to the pension and supplementary retirement benefits paid for under a trust deed of 1950.

In 1976 the Central Government of India enacted the Burmah Shell Acquisition of Undertakings in India) Act, effecting nationalisation of Burmah Shell Oil Storage Ltd. and its vesting in Bharat Petroleum Corporation Limited, hereinafter referred to as BPCL. Consequently, vesting deductions in the petitioner’s pension and withdrawal of supplementary retirement benefits to him were ordered. Aggrieved, he approached the Supreme Court of India for relief and to quash the actions of BPCL, in simple words.

The court had to determine whether BPCL is an instrumentality of the government and whether it comes within the meaning of ‘State’ under Article 12. Resolution of this issue was of great importance because if BPCL was to be held to be a ‘State,’ then the writ petition would clearly be maintainable under Article 32 and consequently, the petitioner would be able to enforce his fundamental rights vis-à-vis BPCL. This would thus be the case leading up to an answer as to how far the government, in and through its corporations, would be responsible under the Constitution. This judgment of the Supreme Court has gone into the question of control and ownership of BPC through government intervention and whether such control would be enough to bring BPC under the definition of a ‘State’.

The consequences of this judgment were huge for all public sector undertakings and their responsibility towards the fundamental rights of the people in general and employees and retirees in particular who suffered because of the nationalization of banks and companies under the PSU umbrella and all actions the corporate entity took after it.

FACTS OF THE CASE

1. Procedural Background of the Case

The writ petition under Article 32 of the Constitution of India has been filed by the petitioner herein praying, inter alia, what has been sought to be relief against Bharat Petroleum Corporation Limited, that it should be directed by issuing a writ or a writ like mandamus to consider his representation dated 22nd October 2015 and that action on the part of the respondents not taken by him. He contended though the Bharat Petroleum Corporation Limited was an Indian Company registered under the Indian Companies Act, 1956, it was a corporation under the Government and hence, being a state within the meaning of the definition of ‘State’ contained in Article 12 of the Constitution, and hence, therefore, its conduct was subject to judicial review.

2. Factual Background of the Case

Som Prakash Rekhi was a workman in the labour force of Burmah Shell Oil Storage and Distributing Company of India Ltd. He availed of a scheme of voluntary retirement and retired on 1 December 1972. He was entitled to a pension from Burmah Shell Oil Storage Ltd. under a trust deed executed in 1950.

It means all the undertakings of Burmah Shell in India shall stand transferred to and vested in the Central Government or to the Government company; also, because of the takeover, the company government of India nationalizes Burmah Shell Oil Storage Ltd. It implies that the assets of the company become properties of the government.

After the nationalisation, the quantum of pension payable to him was reduced by deductions made by BPCL and his supplementary retirement benefits to which he was entitled under the trust deed, were stopped by BPCL.

Thereafter, he represented BPCL for redressal of his grievances but the dues were not settled, compelling him to knock at the doors for judicial redress. It is submitted that the act on the part of BPCL is arbitrary and their action violated the fundamental rights of the petitioner under Article 21 of the Constitution of India in particular.

The question that prominently arose for determination in the said case was as to whether BPCL being a State controlled entity can be held as an organ of ‘State’ under Article 12 so that it can be made amenable to writ jurisdiction and its acts may be quashed on the grounds of infringement of any of the fundamental rights.

LEGAL ISSUES RAISE

1. Whether the Bharat Petroleum Corporation, the statutory successor of Burmah Shell, can be considered as ‘State’ within the meaning of Article 12 of the Constitution, thereby making it amenable to the writ jurisdiction of the Supreme Court under Article 32[1].
2. Whether the petitioner is entitled to the full pension as per the terms of the trust deed, or whether the deductions made for provident fund and gratuity payments are justified.

PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the Petitioner submitted that:

1. Bharat Petroleum Corporation Limited (BPCL) as ‘State’: It was urged that BPCL is an instrumentality of the state since it was a company incorporated as a result of the nationalisation of Burmah Shell. Given the pervasive control and deep involvement of the government in its operation, BPCL could indeed be treated as a ‘State’ under Article 12 of the Constitution. In any case, therefore, BPCL would be amenable to the jurisdiction of the Supreme Court in Article 32 for the enforcement of fundamental rights.
2. Infringement of Fundamental Rights: The petitioner herein has contended that an arbitrary reduction in his pension and withdrawal of supplementary retirement benefits by BPCL infringe his fundamental rights under Article 21, which assures protection for life and personal liberty. The petitioners have convincingly brought out the violation of the right to livelihood and existence worthy of retired life in so far as the reduction and withdrawal of supplementary retirement benefits were dues to him.
3. The argument made during the hearing is that BPCL is completely owned by, and comes under the total control of, the Government of India; hence, BPCL is taken to be an extension of the State. The financial policies are controlled by the Board of Directors appointed by the Government, and business at BPCL is conducted by it. The extent of control by the State and ownership brings BPCL within the purview of the meaning of ‘State’ under Article 12.
4. Trust Deed and Contractual Obligations: What the petitioner strongly brought out was that by the 1950 trust deed he had contractual rights for some pension benefits, for continuation of which immediately after nationalization, BPCL was under obligation to do so. Failure to do so, as pointed above is a breach of contractual obligation on the part of BPCL hence interference by courts is called for.
5. Precedents and Judicial Interpretation: Public sector companies have been held to be ‘State’ in various judgments, wherein learned counsel appearing for the petitioner placed reliance. According to him, the ratio of the said judgments squarely applies to the BPCL, and it cannot escape the liability for violation of constitutional rights.
6. Arbitrary and Unfair Dealings: It was the Petitioner’s case that the deductions from his pension and removal of supplementary benefits were all unjustified and arbitrary and not transparent. That an action by a public body of that nature was unfair dealing deserving of redress from the courts.

RESPONDENT’S ARGUMENTS

The counsels for the Respondent submitted that:

1. BPCL Not a ‘State’: It was urged on behalf of the respondents that Bharat Petroleum Corporation Limited was not a ‘State’ within the meaning of Article 12 of the Constitution of India. What was argued in the case of BPCL was that whereas it may be an enterprise owned by the Government, it is an independent corporate unit with its separate, independent corporate unit of management and operational policies and cannot be reckoned as an instrumentality or agency of the Government in the strict concept considering Article 12.
2. Writ Jurisdiction Inapplicable: is inapplicable as BPCL was not put to the test on the yardstick of being classed as ‘State’ for a purpose under Article 12 and hence if a writ petition under Article 32 is maintainable is at issue. Correspondingly, the stand taken by the respondents was against BPCL constitutional remedies in the enforcement of the.
3. Contractual Nature of Pension: All of the petitioner’s claims that were pressed by the respondents were wholly traceable to that Trust Deed and, therefore, purely of a contractual nature. Such disputes should be adjudicated in appropriate Civil laws dealing with Contracts and Trusts; and not under Constitutional Law, much less under a writ petition.
4. Compliance with Legal Provisions: Therefore, the Respondents contended that the deduction of an amount from the Pension of the Petitioner and ceasing the supplementary benefits are by luck due to compliance with the legal provisions and policies prevalent then. According to them, none of these acts was arbitrary or unlawful but it was a total conformity with the nationalization and transfer undertakings.
5. Counsel appearing on behalf of the respondents has contended that though BPCL is one public sector undertaking owned by the Government, it was managed autonomously and decision-making was not controlled by the Government of India. It is the management of BPCL that decides pension and retirement benefits, totally outside the governance of the Government.
6. No Violation of Fundamental Rights: It was of course submitted on behalf of respondents that the acts of BPCL did not violate the petitioner’s fundamental rights under Article 21. The modifications made in his pension being purely administrative decisions taken within the spacious fours of existing laws and policies could not amount to a violation of the petitioner’s right to livelihood or personal liberty.
7. Distinguishing Precedents: It was contended by the respondents that they have banked upon the judicial precedents wherein despite being wholly owned by the Government, the corporate entities cannot be brought within the definition of ‘State’.They have put forth that the ratio in the said judgments applied squarely in the case of BPCL and that the challenger’s reliance upon the earlier cases was misconceived and not at all relevant to the present case.

RELATED LEGAL PROVISIONS

• Article 12 of the Constitution of India:

 Definition.: In this Part, unless the context otherwise requires, “the State” includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.

• Article 21 of the Constitution of India:

Protection of life and personal liberty.: No person shall be deprived of his life or personal liberty except according to procedure established by law.

• Article 32 of the Constitution of India:

Remedies for enforcement of rights conferred by this Part:

(1) The right to move the Supreme Court by appropriate proceedings for the enforcement of the rights conferred by this Part is guaranteed.

(2) The Supreme Court shall have the power to issue directions or orders or writs, including writs like habeas corpus, mandamus, prohibition, quo warranto and certiorari, whichever may be appropriate, for the enforcement of any of the rights conferred by this

(3) Without prejudice to the powers conferred on the Supreme Court by clauses (1) and (2), Parliament may by law empower any other court to exercise within the local limits of its jurisdiction all or any of the powers exercisable by the Supreme Court under clause (2).

(4) The right guaranteed by this article shall not be suspended except as otherwise provided for by this Constitution.

JUDGEMENT

RATIO DECIDENDI

• Conclusion Having construed the provisions, the Supreme Court held that Bharat Petroleum Corporation Limited is a ‘State’ for Article 12 of the Constitution of India. It has been argued before this Court that the amount of control, that the Government wields over the company concerning its ownership and management and how the company was being conducted, places the company in question in the amplitude of a State entity. It is, therefore, urged that this brought BPCL into the writ jurisdiction of the Supreme Court under Article 32.
• Fundamental Rights Enforcement, In holding BPCL to be ‘state, the Supreme Court has validated that the actions of the company can now be questioned on the footing of breach of fundamental rights. The Court validated that the superior petitioner is entitled to prosecute by appropriate proceedings anything done in contravention of the fundamental rights. Therefore, the petitioner is a corporate citizen, and his right to use material time of this life for the nurturing and growth of the material life meets the constitutional guarantee, and the court would exercise its constitutional responsibility in recognizing the nicety of balance between the fundamental rights of the petitioner and the apprehended.

GUIDELINES

• Tests for ‘State’: It elaborated on the tests for determining an entity to be ‘State’ within the meaning of Article 12. It resorted to factors like ownership, financial control, managerial control and quantum of governmental influence over the operations of the entity. This would be the guiding framework for future cases on the question of the classification of public sector undertakings and other government-controlled entities.

OVERRULING JUDGMENTS

• Not Any Judgement Overruled: In the above judgment, it was not clearly stated that any prior judgment was overruled; the judgment was delivered based on precedents, that is, on the principles stated in the judgments; specifically, help was taken from the cases of Rajasthan Electricity Board v. Mohan Lal, and Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, which discussed elaborately the scope of the definition of ‘State’ under Article 12.

OBITER DICTA

• Accountability of PSUs There are some observations the court has made in its obiter dicta in this respect relation to the public accountability of the public sector undertakings before the public and their employees. The verdict pointed without a shadow of a doubt that companies with a mark of heavy government hand cannot disentangle themselves with constitutional norms and they cannot discriminate against their employees unduly thus once again reiterating that public accountability would apply inter alia to PSUs.

CONCLUSION & COMMENTS

For all reasons and substantial importance, it is also this judgment in the case of Som Prakash Rekhi vs The Union of India & Another, which left the question regarding the scope of Article 12 of the Constitution open.  It is the judgment of the Supreme Court of India that tagged Bharat Petroleum Corporation Limited as ‘State’ under Article 12 which has extended this realm of constitutional accountability to public sector undertakings.

Conclusion:

Thus, the sterling judgment of the Supreme Court that BPCL is ‘State’ under Article 12 has its impact and goes to impress on all concerned things may be constitutionally untouchable no matter how much sway the government may exercise in an entity. Now, there exists a clear precedent for all government-controlled corporations to be warned not to try to wriggle out of liability for acts infringing their fundamental right. It was one of the factors taken into account in the judgment that the Court arrived at, among others, notably because of a fastidious analysis of just how pervasive government control and involvement have been within BPCL.

The judicial record is available. The decision could well be one of the most momentous given that it strengthens the rights of employees and retirees of such companies whose companies have been nationalised and who can now turn to the judiciary to provide redress in the event they have been subjected to arbitrary and unfair treatment. By interpreting the declaration of BPCL as a ‘State’, it will only make the said entities owe a statutory and constitutional obligation towards fundamental rights.

Comments:

Interpretation of expression ‘State’: The rule constructed thereby held that Article 12 would mean and signify any unit of the ‘State’ in the hands of a government of appropriate magnitude. The decision has been important in the imposition of constitutional rights of citizens while dealing with public sector undertakings.

Protection of Employee Rights: The judgment is celebrated and denominated as the leading judgment in the protection of rights for employees, particularly those who operate under the atmosphere of nationalized undertakings. In that regard, this judgment works as a security net for the workers by protecting the government-controlled companies from arbitrarily changing pension benefits or other retirement entitlements.

Judicial Oversight: By bringing BPCL within the ambit of Article 12, the Court has thereby reiterated the role of judicial review in correcting any arbitrary action at the hands of a state-controlled instrumentality. That will go a long way in having a salutary effect in checking any possible administrative excesses.

A Precedent for Future Cases: The principles which this case leys down shall be the guiding framework for any future public sector undertaking. This “lays down the benchmark for assessing the quantum of control which the government needs to exercise to classify it as ‘State’.”.

Balancing autonomy with accountability: While BPCL enjoys to some extent its autonomy in the process of decision-making, the Judgment has placed it beyond the conversion of such autonomy into being unaccountable. That is to say, operational independence has been balanced against constitutional responsibility by the judgment.

The judgment of Som Prakash Rekhi vs. Union of India and Another, therefore, can be said as one of the landmark decisions with constitutional protections to the public while dealing with public sector undertakings and tends to give strength to the aforesaid principle that the entity is high on the government’s altar of control and is answerable to the Constitution for ensuring Fundamental Rights to the citizens.

REFERENCES

Important Cases Referred

• Rajasthan Electricity Board v. Mohan Lal[2] – This case established that statutory bodies and corporations with significant state control fall under ‘State’ for Article 12.
• Sukhdev v. Bhagatram[3] – This case reinforced that corporations created by statute and subject to substantial state control are ‘State’ under Article 12.
• Airport Authority[4] – This case further clarified the parameters for determining whether an entity qualifies as a ‘State’ under Article 12.

Important Statutes Referred

• Burmah Shell (Acquisition of Undertakings in India) Act, 1976
• Employees Provident Fund and Miscellaneous Provisions Act, 1952
• Payment of Gratuity Act, 1972

[1] INDIA CONST. art 32.

[2] [1967] 3 SCR 377

[3] [1975] 3 SCR 619

[4] [1979] 3 SCC 489