Corporate Law Case Brief – Mysore Paper Mills Ltd. v. Mysore Paper Mills Officer’s Association

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FACTS:

The Respondent joined the services of the Appellant Company. The Company transferred him to the regional office in Calcutta. The Respondent challenged this order stated that this transfer was made to prevent him from becoming an Executive Member of the Appellant Company’s Officer’s Association.

ISSUE:

(i) Is the present Writ Petition maintainable against the Appellant Company? Is the Company considered “State or other authority” within Article 12 of the Constitution of India?

ANALYSIS:

  • Section 617 of the Companies Act, 1956 defines “Governmental Company”.
  • Section 617: Definition of” Government company”. For the purposes of 3 this Act] Government company means any company in which not less than fifty- one per cent. of the 4 paid up share capital] is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments 5 and includes a company which is a subsidiary of a Government company as thus defined].
  • If the Appellant Company falls within the ambit of the above definition, it is said to be ‘State or other authorities’ under Article 12 of the Constitution.
  • The Court also stated that the tests to determine whether a corporation is an instrumentality or agency of the Government laid down in Ajay Hasia and International Airport Authorities case are not conclusive but merely indicative which have to be used with care and caution, because while stressing the necessity of a wide meaning to be placed on the expression “other authorities”, it must be realized that it should not be stretched so far as to bring in every autonomous body which has some nexus with the government within the sweep of the expression.
  • The appellant-company in the present case is a Government company as envisaged in Section 617 attracting Section 619 of the Companies Act as more than 97% of the share capital has been contributed by the State Government and the financial institutions controlled and belonging to the Government of India.
  • The appellant-company with important public duties obligating to undertake, permit, sponsor rural development and for social and economic welfare of the people in rural areas by undertaking programmes to assist and promote activities for the growth of national economy which are akin and related to the public duties of the State.
  • 5 out of the 12 directors are Government and departmental persons, besides other elected directors also are to be with the concurrence and nomination of the Government and the various other form of supervision and control.
  • The above mentioned points show that the State Government has deep and pervasive control of the Appellant Company and its day-to-day administration confirm that the position of the Appellant Company is nothing but an instrumentality and agency of the State Government and the physical form of company is merely a cloak or cover for the Government.

Holding:

The Appellant Company falls within the ambit of “State and other authorities” under Article 12 of the Constitution. Appeals fail and stand dismissed.

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