CANARA BANK Vs. APPELLATE AUTHORITY

JUDGEMENT

(1.) One common question arises for consideration in both these cases and that is whether the Canara Bank and Bank of India both nationalised banks are "establishments under the Central Government" exempted under S.3(1)(c) of the Kerala Shops and Establishments Act, 1960. The question arose in both the cases because the second respondent in the Writ Appeal and the first respondent in the Original Petition moved the Appellate Authority under S.18 of the Act against the Section taken by the concerned banks terminating their engagements. The Appellate Authority has in the appeal filed by the second respondent found that the Canara Bank will not come within the scope of "establishments under the Central Government" to claim exemption of the provisions of the Act. That view has been affirmed by the learned Single Judge in the Original Petition filed by the Canara Bank against the decision of the Appellate Authority. The Bank of India filed the Original Petition for a writ of prohibition against the Appellate Authority from proceedings with the appeal filed by the concerned respondent against the action taken by the Bank. They have also taken up the contention that their establishment is an "establishment under the Central Government" and hence exempted under S.3 from the scope of the Kerala Shops and Establishments Act. How far this contention raised by both the Banks is correct is the question.

(2.) According to the counsel for the Banks, under the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act 5 of 1970, these Banks have been established and under the scheme of that Act these Banks are under the control of the Central Government and therefore the establishments of these Banks are "establishments under the Central Government". To understand their contention we have to briefly notice the scheme of the above Act before proceeding further. Under this Act new banks were established and the paid up capital of each new bank was equal to the paid up capital of the existing bank in relation to which the new bank is a corresponding bank. The entire capital of each new bank belong to the Central Government. Each bank is a body corporate with perpetual succession and a common seal with power to hold and dispose of property, to contract and to sue and be sued in its name. The undertakings of the existing banks were transferred to the new banks and the undertaking was deemed to include all assets, rights, powers, authorities and privileges and all property, movable and immovable. The Head Office of each corresponding new bank shall be at such places as the Central Government may notify. The general superintendence, directing and management of the affairs of the new bank shall vest in a Board of Directors constituted by the Central Government. S.8 provides for the new bank to be guided by such directions in regard to matters of policy involving public interest as the Central Government may give. Central Government is also empowered to make a scheme for carrying out the provisions of the Act with special reference to matters like the capital structure, the constitution of the Board of Directors, the reconstitution of any new bank into two or more corporations, the amalgamation of any corresponding new bank with any other new bank; and every scheme made by the Central Government must be placed before both the Houses of Parliament. The accounts are to be audited by an Auditor appointed by the new bank and the audit report must be presented to the Government and the Central Government has to lay such report before the Parliament. For the purpose of Income Tax Act a new bank is to be an Indian company in which the public are substantially interested, but at the same time, the provision of law regarding winding up of corporations are not made applicable to the new banks and the power to liquidate the new bank is vested only in the Central Government. This is substantially the scheme of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. From this counsel for the new banks argue that full control of the new banks is practically vested in the Central Government and therefore it is an establishment under the Central Government. Various decisions were cited to show that corporations constituted under legislative enactments have been treated as other authorities' and therefore 'State' within the meaning of Art.12 of the Constitution particularly the decisions of the Supreme Court in Ramana v. I. A. Authority of India ( AIR 1979 SC 1628 ), Som Prakash v. Union of India ( AIR 1981 SC 212 ) and Ajay Hasia v. Khalid Mujib ( AIR 1981 SC 487 ). In the first of these decisions, it is true, the Supreme Court, has held that for the purpose of Part III of the constitution authorities like International Air Port Authority, though a statutory corporation, is an agency or instrumentality of the Government and as such an authority under the control of the Government within the meaning of that expression under Art.12 of the Constitution. In the third case even a society registered under the Societies Registration Act has been held to be an authority under the control of the Government for the purpose of Part III of the Constitution. If the State through the instrumentality of another agency, whether created by itself or constituted under any statute violates any provision of Part III of the Constitution, that action will be taken as a State action for the purpose of considering the limitations imposed on State action by Part III. That is because of the wording of the Art.12 which reads as follows:

(3.) The veil of the corporate personality of these new banks is not allowed to be pierced except to the extent of finding out the nature of the action taken by the State through them and to see whether that action violates Part III of Constitution. In other words, in the matter of finding out whether the State action violates any of the fundamental rights the agency or instrumentality through which the State activity is carried on, is identified with the State. To that extent alone the veil of the corporate personality is permitted to be pierced and this is because of the definition of the expression 'State' in Art.12 of the Constitution. In all other respects the separate corporate personality of the State remains in tact. This is clear from the recent decisions of the Supreme Court referred to above and also the decision in Ajay Hasia v. Khalid Mujib (AIR 1981 SC 487).