Chief characteristics and working of statutory Public Corporations
🏛️ What Are Statutory Public Corporations?
A Statutory Public Corporation is a corporate body created by a special Act of Parliament or State Legislature. It has a distinct legal identity, perpetual succession, and independent finances, and performs public functions on behalf of the government.
📌 Chief Characteristics of Statutory Public Corporations
Created by Statute:
These bodies are set up by a specific law that defines their powers, duties, and functions.
Example: LIC Act, 1956, Airports Authority of India Act, etc.
Separate Legal Entity:
They have an independent legal existence, separate from the government.
They can own property, sue, and be sued.
State Ownership and Control:
Although they operate independently, the government usually holds majority control through appointments and capital investments.
Autonomous Functioning:
They enjoy administrative and financial autonomy, though subject to audit and parliamentary scrutiny.
Public Purpose and Accountability:
Set up to serve public interests, they are accountable to the legislature and sometimes subject to control through the parent ministry.
Power to Make Rules:
They may be empowered to frame their own regulations, within the framework of their enabling statute.
⚙️ Working of Statutory Public Corporations
🔹 Governance
Managed by a Board of Directors or Chairman-cum-Managing Director, appointed as per the statute.
Ministry oversight is limited to policy and budgetary matters.
🔹 Financial Framework
Funded through initial government investment.
May also raise funds through loans or internal revenue generation.
🔹 Administrative Autonomy
Can recruit staff, implement procedures, and undertake projects without day-to-day government interference.
🔹 Judicial Review
Their decisions can be challenged in courts under Administrative Law principles (especially natural justice).
⚖️ Case Laws – Detailed Explanation of More Than Five Cases
1. Praga Tools Corporation v. C.V. Imanual (1969) AIR 1306
Facts: Employee sought enforcement of service rights against a statutory corporation.
Held:
The Court held that a writ petition is maintainable against a statutory corporation if it performs public functions.
Even if a body is a non-government company, if it discharges public duties, it falls within Article 226 jurisdiction.
Importance:
Established that statutory corporations are subject to judicial review, even in matters related to employment and services.
2. Sukhdev Singh v. Bhagatram (1975) AIR 1331
Facts: Employees of ONGC, LIC, and IFC challenged their dismissals, claiming violation of constitutional safeguards.
Held:
The Supreme Court ruled that these corporations, though autonomous, are ‘State’ under Article 12 of the Constitution.
Therefore, their actions are subject to Fundamental Rights obligations.
Importance:
Cemented the idea that public corporations are bound by constitutional norms due to their public character.
3. R.D. Shetty v. International Airport Authority of India (1979) AIR 1628
Facts: A contract for running a canteen at the airport was denied based on arbitrary conditions.
Held:
The Court held that government corporations must act reasonably and fairly.
Public corporations cannot act arbitrarily in their contractual dealings.
Importance:
Introduced the idea that Article 14 (equality before law) applies to contractual actions of statutory corporations.
4. Ajay Hasia v. Khalid Mujib Sehravardi (1981) AIR 487
Facts: Admission to an engineering college run by a society funded by the government was challenged on the basis of unfair procedure.
Held:
Laid down the “instrumentality or agency” test.
If a body is financially, functionally, or administratively dominated by the government, it is considered the “State”.
Importance:
Many statutory corporations were brought under Article 12, ensuring they cannot violate constitutional rights.
5. Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986) AIR 1571
Facts: Corporation terminated an employee arbitrarily under a clause that allowed termination “without cause.”
Held:
The clause was declared arbitrary, unreasonable, and void under public policy (Section 23, Indian Contract Act).
The Court ruled that public sector corporations cannot impose unfair conditions.
Importance:
Reinforced that public corporations cannot escape judicial scrutiny by using “private law” contracts.
6. LIC of India v. Consumer Education and Research Centre (1995) AIR 1811
Facts: Challenged LIC’s policy of denying insurance to workers in hazardous industries.
Held:
Court held that right to life includes the right to health and life insurance.
LIC, being a statutory corporation, must function in a manner consistent with Article 21.
Importance:
Applied socio-economic rights against public corporations.
7. Zee Telefilms Ltd. v. Union of India (2005) 4 SCC 649
Facts: Question whether BCCI is a “State” under Article 12.
Held:
BCCI is not a statutory corporation; not created by a statute.
Only bodies created by statute and fulfilling public duties under government control can be considered “State”.
Importance:
Differentiated between statutory corporations and non-statutory bodies, emphasizing creation by statute as essential.
🧾 Summary Table of Cases
| Case Name | Key Point |
|---|---|
| Praga Tools v. Imanual | Writ lies against statutory corporation |
| Sukhdev Singh v. Bhagatram | Statutory corporations are ‘State’ under Article 12 |
| R.D. Shetty v. Int’l Airport Authority | Fairness and non-arbitrariness apply |
| Ajay Hasia v. Khalid Mujib | Instrumentality test for “State” |
| Central Inland v. Brojo Nath | Arbitrary contracts invalid for public corporations |
| LIC v. Consumer Education | Article 21 extends to public policy of corporations |
| Zee Telefilms v. Union of India | Only statutory bodies qualify as “State” |
✅ Conclusion
Statutory public corporations play a crucial role in governance, combining public accountability with operational autonomy. However, as evident from judicial decisions, their actions are not beyond judicial scrutiny. Courts have repeatedly held them to constitutional and administrative law standards, especially when it comes to public functions, employment matters, or contracts.
Justice and fairness in their functioning ensure that these bodies serve the public interest without becoming tools of arbitrary power.
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