INTRODUCTION
The subject matter of the case “Hindustan Steel Works Construction Co. Ltd. v. State of Kerala”, is about the legal status of a government company under company law Also, whether such company is exempted from the Kerala Construction Workers Welfare Funds Act. In that context, a government company is any company where the central government or a state government, or either of them partly, has held up the share capital which is not less than 51 percent. Also, it can be of any subsidiary company under that particular government company, and this is according to the provisions of the Companies Act.
It should be highlighted that any subsidiary of a government firm must likewise be classified as a government corporation. A government corporation, on the other hand, is neither a government establishment nor a government department, regardless of whether the government owns the majority of the paid-up share capital. Companies formed under the Companies Act have a separate corporate legal identity from the government. The government exclusively holds the share capital; everything else, including the property and land, is held by that of the corporation.
FACTS of Hindustan Steel Works Construction Co. Ltd. v. State of Kerala (1998)
The facts of the case, wherein the Greater Cochin Development Authority and the Hindustan Steel Works Construction company negotiated a deal for the building of a stadium ground at Kaloor, Ernakulam, Kerala. The former being respondent and the latter being appellant respectively.
The agreement’s provisions, among other things, stated that any subordinate contractors hired by the company for contractual terms had to be accepted by the authorities of the concerned department in this case the greater Cochin development. The company/appellant began the stadium project and hired several subcontractors on a contractual approach periodically.
The Greater Cochin Development Authority began deducting 1% of the invoiced sum from partial settlement of the charges collected by the construction company for the services performed by them on grounds of participation there under the Welfare Funds Act, as well as the programmes designed according to the section. The construction company objected to the development authority’s reduction, claiming that the company, as a corporation, is entirely operated and managed by the Central Government, and didn’t come down under the ambit of the Welfare Funds Act of Kerala.
Hindustan company argues that it is entirely held and controlled by the central government. The Indian President has the only right to assign and dismiss the Board of Directors. The Central Government oversees every aspect of the company’s performance. Because of the central government’s broad and widespread influence over the company’s enterprise, the company is effectively a Government of India organization or entity.
ISSUES
- Whether a government company, even though wholly owned and operated by the Central Government, falls within the definition of a government agency or institution exempt from the provisions of the Kerala Construction Workers Welfare Fund Act
- Whether the employees of a government company entitled to the same rights and benefits as employees of the Central or State Government, especially w.r.t. salary and pay scale revisions?
- What is the extent to which the control by the Central Government over a government company affects its legal status as a separate corporate entity under the Companies Act?
JUDGEMENT
Once after the sincere contemplation of the circumstances revolving around the case and the separate arguments advanced by the skilled lawyers for the clients, the court concluded that the Hindustan company can hardly be considered as a government agency. The government may have extensive and comprehensive influence over the construction corporation, and the Hindustan company may therefore be a Central Government essential portion or its instrumental tool, and hence a “State” within the sense of Article 12 of the Constitution .
Although the construction company is a Central Government agency of an essential nature, it cannot always be considered a government division or institution. In its most basic sense, the term “government company” refers to an institution that is managed officially by the government rather than through a public body or utility. The Welfare Funds Act is primarily intended to safeguard the interests and welfare of workers.
It would not be suitable to read the said Act in a broad scope by eliminating the legal personality to exempt such usefulness or institution from the scope of the Welfare Act except if the government body is specifically maintained outside the ambit of the Act. As a result, the court saw no grounds to overturn the challenged judgment of the Kerala High Court, and therefore the appeal was rejected and was discharged. Nevertheless, the court finally held that there would be no charging requirement in this particular case.
ANALYSIS of Hindustan Steel Works Construction Co. Ltd. v. State of Kerala (1998)
The court gave out one of the possible verdicts revolving around the issue of whether the Hindustan company which is entirely governed and managed by the central government would be exempted from the scope of the Welfare Funds Act of Kerala. Wherein the main objective of the act was to protect workers and bring welfare to them.
In that context, the decision was made as to that it is not excluded from the provisions of the act because any government company is an instrument used by the government and not an entirely body corporate of the government. Even in the arguments put forth by the appellant/company’s party that, the appealing party company is completely possessed by the Central Government. The board of administration of the appealing party company comprises people designated by the Central Government.
There’s profound and unavoidable control of the Central Government of all the exercises of the appealing party company. But essentially pointed out this factor that it certainly is not as how it is mentioned by the company in the contention. Therefore, while studying this case, it could be said that in simple words with an example of taking government employees a relation could be made with this case.
In that context, the workers of the Government Company are not the workers of the Central or the State Government. Since representatives of Government companies are not Government workers, they have no lawful right to claim that the Government ought to pay their compensation or that the extra consumption brought about on account of the amendment of their pay scales ought to be met by the Government.
Since representatives of Government companies are not Government hirelings; they have no lawful right to claim that the Government ought to pay their compensation or that the extra use caused on account of modification of their pay scales ought to be met by the Government. The company must pay them their salaries and this judgement was important and brought significant actions against government companies.
CONCLUSION
This was one of the important cases regarding the legal status of a government company in India under the Companies Act, back in those days. In this particular case, the court effectively pointed out the fact of control and operation of a government company by a central government. Despite the government’s extensive influence, a firm is hardly a government agency or a government body. It is only a government instrument of power or body and thus is exempt from the Kerala Construction Workers Welfare Fund Act’s legal examination.
But even so, in which the State-owned financial establishments governed and the Government of India made a significant contribution of more than 97% of the company’s common stock on the security and endeavour of the State Government, the articles of incorporation bestowed the company with significant public responsibilities. That out of 12 executives, 5 were Government and departmental people, other than chosen executives moreover they were to be with the concurrence and the designation of the Government. It was clear that the State Government had profound and inescapable control of the company and its day-to-day organization, and the company was nothing but an instrument and organization of the State Government and the physical shape of the company was just a concealment for the Government.
A Government company can indeed sue the Government if it possesses the title of a prosecutor. But, since an extended case between a government company on the one hand and a government division on the other, comes about in squandering in case open cash and other assets counting time, such debate is settled, as distant as conceivable, exterior the juridical process.
