Public corporations: Legal status, characteristics, classification control of public corporations
Public Corporations
1. Legal Status of Public Corporations
Public Corporations are government-owned entities created to carry out commercial activities on behalf of the state. They have a distinct legal personality and are usually created by a special statute.
They are statutory bodies.
They enjoy separate legal entity status (like a company), meaning they can sue and be sued.
They are autonomous to some extent but operate under government control.
They have the power to acquire property, enter contracts, and employ staff.
2. Characteristics of Public Corporations
Created by statute: A public corporation is formed by a special act of legislature.
Separate legal entity: They are distinct from the government and enjoy legal personality.
Government ownership: Fully or majorly owned by the government.
Autonomy: Enjoy administrative and financial autonomy but under government policy control.
Commercial functions: Undertake business or commercial activities.
Public accountability: Subject to government audit and parliamentary oversight.
Permanence: Meant to be permanent institutions.
Funded by the government: Usually capitalized by government grants or borrowing.
3. Classification of Public Corporations
Public corporations can be classified based on:
Nature of functions:
Commercial Corporations (e.g., India Railways)
Service Corporations (e.g., Postal Services)
Extent of autonomy:
Autonomous Corporations
Semi-autonomous Corporations
Ownership pattern:
Fully owned by government
Partially owned (joint sector corporations)
4. Control over Public Corporations
Control exercised by the government over public corporations includes:
Administrative control: Appointment and removal of members, approval of policies.
Financial control: Approval of budgets, auditing, and control over borrowing.
Parliamentary control: Through parliamentary committees, question hours, and reports.
Judicial control: Courts can examine legality and fairness in administrative actions.
Detailed Case Laws on Public Corporations
1. S.P. Gupta v. Union of India (1981) AIR 87
Facts: Related to administrative independence and judicial review of public bodies including corporations.
Held: The Supreme Court asserted that public corporations exercising public functions are amenable to judicial review.
Significance: Clarified that such bodies must adhere to principles of fairness and legality.
Implication: Public corporations are subject to the Constitution and judicial scrutiny.
2. Hindustan Steel Ltd. v. Workmen, AIR 1960 SC 118
Facts: The dispute concerned the working conditions of employees in a public corporation.
Held: The Supreme Court held that public corporations, while enjoying autonomy, are still controlled by government policies and regulations.
Significance: Highlighted the balance between autonomy and government control.
Implication: Public corporations have operational freedom but within statutory limits.
3. Indian Airlines Ltd. v. K.V. Jankiraman, AIR 1997 SC 1333
Facts: The case dealt with the liability of a public corporation towards its employees.
Held: The court held that public corporations are liable under labor laws, just like private companies.
Significance: Demonstrated that public corporations must comply with all laws applicable to commercial entities.
Implication: Legal status does not exempt public corporations from statutory duties.
4. Bangalore Water Supply and Sewerage Board v. A. Rajappa, AIR 1978 SC 548
Facts: Whether a public corporation is an "industry" under labor laws.
Held: The court held that public corporations engaged in commercial activities fall under the definition of “industry.”
Significance: Extended labor law protections to employees of public corporations.
Implication: Affirmed the commercial nature of public corporations.
5. Rajasthan State Electricity Board v. Mohan Lal, AIR 1967 SC 1857
Facts: Dealt with control and administrative interference by government in a public corporation.
Held: The court held that public corporations must not be subjected to excessive government interference so as to hamper their autonomy.
Significance: Protected the quasi-autonomous nature of public corporations.
Implication: Ensured a balance between government control and operational freedom.
6. Calcutta Electric Supply Corporation Ltd. v. Subodh Gopal Bose, AIR 1962 SC 175
Facts: This case focused on the liability of public corporations for negligence.
Held: Public corporations are liable in tort just like private corporations.
Significance: Emphasized their separate legal entity status and responsibility.
Implication: Public corporations can be held accountable in courts.
Summary Table
| Aspect | Details |
|---|---|
| Legal Status | Statutory body with separate legal entity |
| Characteristics | Government ownership, autonomy, permanence |
| Classification | Commercial, Service, Autonomous, Semi-autonomous |
| Control | Administrative, Financial, Parliamentary, Judicial |
| Judicial Review | Subject to courts for legality & fairness |
Conclusion
Public corporations serve as crucial instruments of government policy in economic and social spheres. While enjoying autonomy and a separate legal status, they remain under significant government control to ensure accountability. Judicial pronouncements have helped balance this autonomy with public accountability and protection of rights.
RELATED Blog
0 comments