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PUBLIC CORPORATIONS[1]

Table of Contents

QUESTION BANK

Q1. Define public corporation. Explain fully the Reserve Bank of India.

Q2. Write a full-dressed note on the parliamentary control of the public corporation in India.

Q.3. State the necessity of public corporations and the various modes of keeping control of them.

Q.4. What mean by the public corporation? How do the legislative & Government keep control of it?

SHORT NOTES

State Bank Of India.
Reserve Bank Of India.
Life Insurance Corporation of India.

SYNOPSIS

PUBLIC ENTERPRISES
CLASSIFICATION OF PUBLIC ENTERPRISES

1) Government Departmental Undertakings

2) A Government company

3) Public Corporation

III. CONSTITUTIONAL POSITION OF CORPORATIONS

INSTANCES OF PUBLIC CORPORATION

1] Reserve Bank of India: –

a) Constitution:
b) Object: –
c) Management
d) Powers and functions

2] State Bank of India: –

a) Constitution
b) Object: –
c) Management
d) Powers and functions: –

3] Life Insurance Corporation of India: –

a) Constitution
b) Object:
c) Management
d) Capital
e) Functions
CONTROLS OVER PUBLIC CORPORATIONS:
a) Judicial control
Ultra-vires act
Writ jurisdiction
b) Government Control
Appointment and removal of members: –
Finance:-
Directives: –
Rules and Regulations
Parliamentary control
Statutory provisions
Questions: –
Debate
Parliamentary Committee:
Public Control

I. PUBLIC ENTERPRISES[2]:-

Introduction: –

Today’s State is a welfare state; in addition to its traditional functions, i.e., defense and administration of justice, it also participates in trade, commerce, and business. Through various public enterprises, the State carries out these economic activities. ‘Public enterprises’ is a very broad term[3]. It includes, in its scope, all activities which are either commercial or service rendering. It includes in its scope all ‘economic activities’ of the State conducted through three types of agencies (i.e., public sector undertakings) viz –

a) The Department of Government[4] , e.g., the Posts and Telegraphs and the Railways, etc.
b) Statutory Corporations[5]– The Life Insurance Corporation, The State Bank of India, Reserve Bank of India, Damodar Valley Corporation, etc.;
c) Companies[6] registered under the Companies Act – The Hindustan Steel, Hindustan Heavy Electrical Ltd, Bharat Electronics Ltd. etc.

II. CLASSIFICATION OF PUBLIC ENTERPRISES: –

Though in this topic we are specifically discussing statutory corporations (i.e.-Public, corporations), nevertheless the study of Government Department undertaking and companies registered under the Companies Act would help in better understanding the subject ‘public corporations’.

Therefore, they are in brief discussed here-

1). Government Departmental Undertakings[7]: –

This is the oldest form of public enterprise. Railway, Post, and Telegraph are examples of it. Such enterprises are owned by the Government department headed by a minister. The minister is answerable to the Cabinet and Parliament for its activities. Such enterprises are financed by annual appropriation.[8] , and their revenues are paid into the treasury. It is staffed by persons who are Government servants enjoying privileges or immunities like other Government servants and also subject to the same discipline

2) A Government company[9]: –

The Government may incorporate a company under the provisions of the Companies Act 1956. They are incorporated[10] under the Companies Act to free these companies from red-tapism[i][11] and procedural delays, which are major drawbacks of the Government Department. A Government company is defined as “one in which not less than 51% of the share capital is held by the Central Government, or by State Government or in joint (by Central and State Governments)”. Hindustan Steel Ltd., Hindustan Heavy Electrical Ltd., Bharat Electronics Ltd., etc., are examples of Government companies. It works more flexibly than Government Departments. The employees of these companies are not treated as ‘Government employees’.

3. Public Corporation[12]: –

‘Public Corporations’ are created by statute. It is wholly owned by the State but has a separate (independent) legal personality from the government. For all practical purposes, it is an independent organization free from Parliamentary estimating, appropriating, and accounting procedures, unlike Government Department. Its servants are not called ‘Government Servants’. The main public corporations are the Life Insurance Corporation, Reserve Bank of India, State Bank of India, Damodar Valley Corporation, Air India International and Indian Airlines, Prasar Bharati Broadcasting Corporation of India, etc.

III. CONSTITUTIONAL POSITION OF CORPORATIONS[13]: –

The constitution of India recognizes the establishment of public corporations. Art.298 of the constitution provides that ‘the executive power of the Union and each State shall extend to the carrying on of any trade or business and the acquisition, holding and disposal of property and the making of the contracts for that purpose’.

Art. 19 (6) sub-clause (2) provides that the State can make a law relating to the carrying on by the State or by any corporation, owned or controlled by the State, of any trade, business, industry, or service, whether to the exclusion, complete or partial, of citizens or otherwise. This provision enables the State to create a monopoly.

IV. INSTANCES OF PUBLIC CORPORATION[14]: –

The following are some examples of public corporations that were discussed.

1] Reserve Bank of India[15]: –

a) Constitution: –

The Reserve Bank of India was constituted under the Reserve Bank of India Act. 1934. It is a corporate body with perpetual succession and a common seal. It can sue and be sued.

b) Object: –

It was established to regulate the credit structure, conduct banking business, and secure monetary stability in the country.

c) Management: –

It is managed by the Board of Directors, which consists of a Governor, two Deputy Governors, and several Directors. The Governor and Deputy Governor are full-time employees. They are appointed by the central government and are eligible for re-election.

d) Powers and functions: –

Under the Banking Companies Act of 1949, the Reserve Bank has extensive powers over the banking business in India.

It can grant, refuse, and cancel the license for a company to carry out banking business.
Before granting a licence, the company can inquire about its affairs to see its credibility in refund deposits.
It may inquire into the affairs of any bank, inspect its books of accounts, and hold an investigation.
It has to send the inquiry report of an inquired bank to the Central Government.
It determines the policy relating to bank advances, frames proposals for the amalgamation[16] of two or more banks, etc.

2] State Bank of India

a) Constitution: –

The State Bank of India has stepped into the shoes of the old Imperial Bank of India by virtue of the State Bank of India Act 1955. It operates as a corporate body with a common seal and perpetual succession.

b) Object: –

It was established with the objective of expanding banking facilities in rural and semi-urban areas[17].

c) Management: –

The Central Government, in consultation with the governor of the Reserve Bank and the chairman of the State Bank, directs (banks) policy pertaining to the public interest. It is to operate as an agent of the Reserve Bank of India.

d) Powers and functions[18]: –

It has to exercise the following powers and functions.

It is to operate as an agent of the Reserve Bank of India.
It has to receive, collect, and remit money, bullion, and securities on behalf of the Government of India.
It has a duty to furnish to the Reserve Bank of India and Central Government its Balance-sheet, the profit and loss Account, and the Auditor’s Report on its working.

3] Life Insurance Corporation of India[19]: –

a) Constitution: –

The corporation was established under the Life Insurance Corporation Act of 1956. It is a body corporate with perpetual succession and a common seal. It has the power to acquire, hold, and dispose of property. It can sue and be sued.

b) Object: –

The Corporation was established to carry on the life insurance business alone, excluding all other persons and institutions. The Act requires the corporation to develop the business to the best advantage of the community.

c) Management: –

The Corporation is guided by the directions given in writing by the Central Government officers.

The management of the corporation is done by a Board of Directors (15 or fewer) whom the Central Government appoints; one of them is a chairman. It has zonal offices[20] in Mumbai, Kolkata, Kanpur and Chennai. Each zone has divisional offices and branches. The general superintendence and direction of the corporation’s affairs are carried on by an executive committee consisting of not more than five members of the corporation. The Managing Director, a whole-time officer, acts under the control of this Executive committee.

d) Capital: –

The original capital of the corporation was Rs. 5 crores, provided by the Central Government.

e) Functions: –

The general function of the corporation is to carry out life insurance business in and outside India. It is also empowered to carry on the general insurance business. Its business also includes capital reduction, investment of funds, and giving loans on security.

The Court can hold it liable for breach of contract and the torts committed by its servants.[21].

V. CONTROLS OVER PUBLIC CORPORATIONS[22]: –

The corporations are granted very wide powers. To avoid arbitrary use or abuse of power, the following controls are laid on public corporations: –

a) Judicial control[23]: –

Since a public corporation is a legal entity, it can sue and be sued. Therefore, it is subject to the Court’s jurisdiction. Judicial review of an act of a public corporation is based on two grounds.

1. Ultra-vires act[24]: –

Since the public corporation is created by statute, it is required to exercise its powers within the limits laid down by that Act. Otherwise, the action of the corporation is declared ultra-vires.

In R.D. Shetty V/s. The International Airport Authority of India

Supreme Court Held that: – If an action of a public corporation is illegal, arbitrary, or unreasonable, the Court would quash and set it aside. While granting largess jobs, contracts, quotas, licenses, etc., such public corporations and companies have to act in accordance with the law.

2. Writ jurisdiction[25]: –

Public Corporations perform functions that the Government otherwise performs. Therefore, they are held as “State” under Art.12 of the Constitution. Therefore, like the State, they are the subject matter of writ jurisdiction of the Supreme Court under Art.32 and the High Court under Art.226 of the Constitution.

In Sukhdev Singh V/s. Bhagat Ram[26]

Facts: Bhagat Ram was an employee of an Oil and Natural Gas corporation. The corporation was established by the central government through statute and funded by the Government. Under the power delegated to it by the parliament, the corporation framed its own rules of administration and conduct by employees. The corporation dismissed Bhagat Ram without completing its own rules. Bhagat Ram filed a writ petition seeking mandamus to reinstate him.

Held: -The Oil and Natural Gas Corporation (ONGC) is an instrumentality of the State and, therefore, is a ‘State’ under Art.12 of the Constitution. Court issued mandamus

b) Government Control[27]: –

Since the government creates and finances corporations and considers them ‘State’ under Art.12 of the Constitution, the Government exercises control over public corporations in the following ways.

1. Appointment and removal of members[28]: –

Generally, the government has the power to appoint and remove the chairman and Board members of public corporations. This is the most effective means of controlling corporations.

2. Finance:-

Generally, corporations are dependent on the Government for finance. Therefore, it has to act according to the directions of the Government and statutes.

3. Directives[29]: –

A statute may empower the Government to issue such directives as it thinks necessary on policy affecting how a corporation may perform its functions.

4. Rules and Regulations[30]: –

Usually, a constituent statute creating a corporation empowers the Government to frame rules and regulations for the corporation’s conduct of business.

c. Parliamentary control[31]: –

Parliament exercises control over the affairs of public corporations in the following ways: –

1. Statutory provisions[32]: –

All public corporations are established by statute enacted by parliament or state legislature. The statutes clearly define the corporation’s powers and limits. If any corporation exceeds these powers, Parliament or state legislatures can supersede or even abolish it.

2. Questions: –

Parliament can ask the concerned minister questions about public corporations’ functions. Such questions may relate to policy and the public interest served by the corporation.

3. Debate: –

Debate is the most significant and effective method of parliamentary control over the ‘public corporations’ affairs. The debate may take place when annual accounts and reports regarding the corporation are placed before parliament for discussion.

4. Parliamentary Committee[33]: –

It is yet another effective form of parliamentary control. Parliament is a busy body; therefore, it can’t go into detail about the workings of the ‘public’ corporation. It is, therefore, that the parliament constituted a committee on public undertakings in 1964. The committee’s functions are to examine the reports and accounts of public undertakings. To see whether they are conducting their affairs properly or according to law. The committee submits its report to the Government. The government thereafter may take proper steps on the report.

d. Public Control[34]: –

Public Corporations are established in the public interest. Therefore, in addition to the above controls, corporations should consider the public interest.

Therefore, the ‘consumer councils[35]’ are established to make known grievances[36] of the public about corporations’ affairs. Consumer councils are formed in the electricity and gas industries.

In some circumstances, the members of certain public corporations are nominated by local and other bodies interested in their functions; for example, the members of hospital management committees are appointed by Regional Hospital Boards.

The writ petitions and Public Interest Litigations (P.I.L) have also, to a great extent, positively affected public corporations’ affairs to guide them in the public interest.

The Consumer Protection Act of 1986 has greatly affected the attitude of ‘public corporations’ toward consumers.

*****

[1] सार्वजनिक उपक्रम/महामंडळे कंपन्या इ. [सार्वजनिक उद्यम/निगम कंपनियां आदि।]

[2] सार्वजनिक उपक्रम [सार्वजनिक उद्यम]

[3] विस्तृत संकल्पना [व्यापक अवधारणा]

[4] सरकारी खाती [सरकारी खाते]

[5] महामंडळे [निगमों

[6] कंपनी कायदयाखाली नोंदणीकृत सरकारी कंपन्या [कंपनी अधिनियम के तहत पंजीकृत सरकारी कंपनियां]

[7] सरकारी खाती

[8] वार्षिक अंदाजपत्र [वार्षिक बजट

[9] सरकारी कंपन्या

[10] नोंदणी करणे [पंजीयन]

[11] लाल फित [लालफीताशाही]

[12] सार्वजनिक महामंडळे [सार्वजनिक निगम]

[13] महामंडळाचे घटनात्मक स्थान [निगम की संवैधानिक स्थिति

[14] सार्वजनिक महामंडळाची उदाहरणे [सार्वजनिक निगमों के उदाहरण]

[15] भारतीय रिजर्व बॅंक [भारतीय रिजर्व बैंक]

[16] एकत्रिकरण [समेकन]

[17] ग्रामीण व निम-शहरी भाग [ग्रामीण और अर्ध-शहरी क्षेत्र]

[18] अधिकार व कार्ये [शक्तियां और कार्य

[19] आयुर्विमा महामंडळ [जीवन बीमा निगम]

[20] विभागीय कार्यालये [संभागीय कार्यालय

[21] 4) Damodar Valley Corporation:-

a) Constitution:-

It was established under the ‘Damodar Valley Corporation Act, 1948.

b) Management:-

It is managed through the Board of Management consisting a Chairman and two other members appointed by the government of India in consultation with the governments of the states of Bihar and West Bengal.

c) Powers:-

The corporation is empowered to acquire, hold and dispose of property. It has its own funds deposited in the Reserve Bank of India. It can borrow money with the previous approval of the Central Government. It is liable to pay taxes on its income. It has a separate and independent existence and it is an autonomous body independent of the central or the state Governments. There is no interference by the Government in the matter of execution of its programmes and day to day administration.

d) Functions and duties:-

The function of this corporation is to promote and operate irrigation schemes, water supply, drainage, generation of electricity and electrical energy, navigation, flood management etc, in the river Damodar.

It has to send its annual reports to the Governments (i.e. Central Government, State Government of Bihar and Bengal).

5) The Air Corporation:-

a) Constitution:-

The corporations known as ‘Indian Airlines’ and ‘Air India International’ are established under the Air Corporations Act. 1953.

b) Management:-

Each of the corporations has a Board of management consisting of not less than five but not more than nine members, appointed by the Central Government. One of them is appointed as a chairman of the corporation. The same person may be appointed as the member in management of both the corporation and the same person may be the chairman of both the corporations.

c) Functions of the corporations-

The function of the corporation is to provide safe, efficient, adequate, and economical and properly co-ordinate air transport services.

d) Powers-

Each of the above corporations are body corporate, with perpetual succession and having common seal. It has a power to acquire and hold property.

[22] महामंडळावर नियंत्रण [निगम पर नियंत्रण]

[23] न्यायिक नियंत्रण [न्यायिक नियंत्रण]

[24] अधिकाराचा गैरवापर [अधिकार का दुरुपयोग

[25] लेखादेष अधिकारक्षेत्र [लेखा क्षेत्राधिकार]

[26] AIR 1975 SC 1331

[27] सरकारी नियंत्रण [सरकारी नियंत्रण]

[28] सदस्यांची नियुक्ती व बडतर्फी [सदस्यों की नियुक्ति और बर्खास्तगी]

[29] निर्देष/सूचना

[30] नियम आणि मर्यादा [नियम और सीमाएं]

[31] संसदीय नियंत्रण

[32] कायदेषिर तरतुदी [कानूनी प्रावधान]

[33] संसदीय समिती

[34] लोक नियंत्रण [लोग नियंत्रित करते हैं]

[35] ग्राहक मंच

[36] गा-हाणी [तक्रार]