Case Summary
| Citation | Telco Convoy Drivers Mazdoor Sangh v. State of Bihar(1989) 3 SCC 271 : AIR 1989 SC 1565 |
| Keywords | telco export ltd, citizen, corporation, transfer of goods, export, shareholders |
| Facts | Tata Engineering and Locomotive Co. Ltd., Jamshedpur, is a company that deals in manufacturing various goods and export them through Telco export Ltd. In order to sells products/vehicles to dealers, the petitioner enters into Dealership agreements. For this particular case, they claim that it was stock yard trade and thus is not liable under the Sales Tax Act. The sales are done in three channels: 1. Sales within Bihar 2. Sales through inter state 3. Sales from stockyards owned by company in another state. In similar view, the company had to pay taxes under these two above categories. The assistant commissioner of commercial tax sent a notice stating that sales have not been projected correctly and directed the company to file revised returns including those that have been missed out. The appellant company filed revised returns and raised an inquiry whether sales from stockyard is to be taxed but received no reply.The company also asked an opportunity to produce declarations from its opportunity but it is also denied. Then a petition is filed before high court. |
| Issues | Whether the position of the corporation can be considered as a citizen? Whether the petition under Article 32 by the corporation is competent to claim Article 19? Whether in the present case it is necessary to pierce the Corporate Veil? |
| Contentions | Contentions of the Petitioner The petitioners stated that the transactions happened outside the State of Bihar and that the sales tax was not applicable on them under Article 286(1)(a). They also stated that the shareholders must be allowed to file the petitions on the ground that corporations/companies are nothing but an association of shareholders and other members. They also contested that the transactions did not satisfy the criteria under the Central Sales Tax Act, 1956. Contentions of the Respondents A preliminary objection raised by the respondents was that the petitions filed by the petitioners were not competent as companies/corporations are not citizens and cannot plead for a violation of a fundamental right. A company is a legal entity and is different from that of its shareholders. It was decided to dismiss the petition. |
| Law Points | High Court dismiss the appeal on the ground that it was under ordinary law, that sales tax had not been exhausted. Then this case reached Supreme Court, the Supreme Court analyzed the nature of transactions that were conducted. The petitions under Article 32 were held incompetent. Article 19 which is a fundamental right is guaranteed to the citizens of India and does not cover the ambit of companies/corporations. Any violation of the fundamental right is against the State and therefore, in terms of any business of the company is a matter of the corporation. The internal business of a company is not the concern of the citizens. The petitioner’s contention of filing a petition cannot be held competent. Though the company has a legal entity of its own, it is entirely separate from its members and shareholders. The lifting of the corporate veil is also not necessary in the present case. The petitioner’s plea under Article 19(1)(g) and Article 32 is not strong enough to invoke the piercing of the corporate veil. The objection raised by the respondent was upheld and the petition was dismissed. |
| Judgement | The Court upheld the sanctity of the matters of a corporation and considered the length of argument by the petitioners. The pleadings were not strong enough to take any concrete action. |
| Ratio Decidendi & Case Authority |
Full Case Details
M.M. DUTT, J.
- The appellant Sangh represents about 900 convoy drivers. By a letter of demand dated 16-10-1986
addressed to the General Manager of the Tata Engineering and Locomotive Co. Ltd., Jamshedpur, the
Sangh demanded that permanent status should be given by the management to all the convoy drivers, and
that they should also be given all the facilities as are available to the permanent employees of TELCO on
the dates of their appointment. The said demand proceeds on the basis that the convoy drivers are all
workmen of TELCO. The dispute that has been raised in the said letter of demand is principally whether
the convoy drivers are workmen and/or employees of TELCO or not. In other words, whether there is
relationship of employer and employees between TELCO and the convoy drivers.
-. The appellants, Telco Convoy Drivers Mazdoor Sangh, Jamshedpur, and another,
have preferred this appeal against the judgment of the Patna High Court whereby the High Court
dismissed the writ petition of the appellants challenging the order of the State of Bihar refusing to make a
reference of the disputes raised by the appellants to the Industrial Tribunal under Section 10 of the
Industrial Disputes Act, 1947, hereinafter referred to as “the Act”. - The Deputy Labour Commissioner by his letter dated 26-2-1979 informed the appellant Sangh that
in view of the opinion of the Law Department of the year 1973 to the effect that there was no relationship
of master and servant between TELCO and the convoy drivers, the demands of the convoy drivers did not
come within the purview of the Act and, accordingly, it was not possible to take any action in regard to
the dispute of convoy drivers under the Act. The appellant Sangh being aggrieved by the said refusal to
make a reference under Section 10(1) of the Act, moved before the Ranchi Bench of the Patna High Court
a writ petition praying for a writ of mandamus commanding the State of Bihar to refer the dispute under
Section 10(1) of the Act. A learned Single Judge of the High Court, who heard the writ petition, took the
view that the letter of the Deputy Labour Commissioner only referred to the Law Departments opinion of
the year 1973 without indicating in what context and under what circumstance, he rejected the demand for
a reference. In that view of the matter, the learned Judge granted liberty to the Sangh to reagitate the
matter before the appropriate government and expressed the hope that the appropriate government would
consider the matter in a proper perspective in the light of the documents and the materials that would be
placed by the Sangh, in accordance with law. The writ petition was dismissed subject, however, to the
observation and direction mentioned above. - Pursuant to the liberty granted by the High Court, the Sangh made a representation to the
government for a reference of the dispute under Section 10(1) of the Act. The Deputy Labour
Commissioner, Jamshedpur, by his letter dated 6-11-1986 gave the same reply and refused to make a
reference. - Again, the appellant Sangh moved a writ petition before the High Court and, as stated already, the
High Court summarily dismissed the same holding that the appellants had failed to prima facie satisfy that
they were employed either by TELCO or by the Telco Contractors’ Association. Hence this appeal. - It has been urged by Mr Pai, learned counsel appearing on behalf of the appellants, that the
government exceeded its jurisdiction in purporting to decide the dispute raised by the appellant Sangh in
the said letter of demand. Counsel submits that in the facts and circumstances of the case, the government
should have made a reference to the Industrial Tribunal under Section 10(1) of the Act for the
adjudication of the dispute of the convoy drivers and should not have embarked upon the task of deciding
the dispute on its merits through the Deputy Labour Commissioner. - On the other hand, it has been vehemently urged by Mr Shanti Bhushan, learned counsel appearing
on behalf of TELCO, that the Government has the jurisdiction to consider whether any industrial dispute
exists or not and, in considering the same, as the government found that the convoy drivers were not even
workmen of TELCO or, in other words, there had been no relationship of master and servants between
TELCO and the convoy drivers, the government refused to make a reference of the dispute under Section
35
10(1) of the Act. It is submitted that the refusal by the Government to make a reference was perfectly
within its jurisdiction inasmuch as, in the opinion of the government, there was no existence of any
industrial dispute. - After conclusion of the hearing, we took the view that the Government should be given one more
chance to consider the question of making a reference and, accordingly, we by our order dated 30-3-1989
directed the Government to reconsider the question of referring the dispute raised by the convoy drivers to
the Industrial Tribunal under Section 10 of the Act, keeping the appeal pending before us. - The learned counsel, appearing on behalf of the government, has produced before us an order
dated 13-4-1989 of the government whereby the government has, upon a reconsideration of the matter,
refused to make a reference under Section 10(1) of the Act. In refusing to make a reference, the
government has adjudicated the dispute on its merits. - It is true that in considering the question of making a reference under Section 10(1), the
government is entitled to form an opinion as to whether an industrial dispute “exists or is apprehended”,
as urged by Mr Shanti Bhushan. The formation of opinion as to whether an industrial dispute “exists or is
apprehended” is not the same thing as to adjudicate the dispute itself on its merits. In the instant case, as
already stated, the dispute is as to whether the convoy drivers are employees or workmen of TELCO, that
is to say, whether there is relationship of employer and employees between TELCO and the convoy
drivers. In considering the question whether a reference should be made or not, the Deputy Labour
Commissioner and/or the government have held that the convoy drivers are not workmen and,
accordingly, no reference can be made. Thus, the dispute has been decided by the government which is,
undoubtedly, not permissible. - It is, however, submitted on behalf of TELCO that unless there is relationship of employer and
employees or, in other words, unless those who are raising the disputes are workmen, there cannot be any
existence of industrial dispute within the meaning of the term as defined in Section 2 (k) of the Act. It is
urged that in order to form an opinion as to whether an industrial dispute exists or is apprehended, one of
the factors that has to be considered by the government is whether the persons who are raising the
disputes are workmen or not within the meaning of the definition as contained in Section 2(k) of the Act. - Attractive though the contention is, we regret, we are unable to accept the same. It is now well
settled that, while exercising power under Section 10(1) of the Act, the function of the appropriate
government is an administrative function and not a judicial or quasi-judicial function, and that in
performing this administrative function the government cannot delve into the merits of the dispute and
take upon itself the determination of the lis, which would certainly be in excess of the power conferred on
it by Section 10 of the Act. - Applying the principle laid down by this Court in the above decisions, there can be no doubt that
the government was not justified in deciding the dispute. Where, as in the instant case, the dispute is
whether the persons raising the dispute are workmen or not, the same cannot be decided by the
government in exercise of its administrative function under Section 10(1) of the Act. As has been held in
M.P. Irrigation Karamchari Sangh [(1985) 2 SCR 1019], there may be exceptional cases in which the
State Government may, on a proper examination of the demand, come to a conclusion that the demands
are either perverse or frivolous and do not merit a reference. Further, the government should be very slow
to attempt an examination of the demand with a view to declining reference and courts will always be
vigilant whenever the government attempts to usurp the powers of the Tribunal for adjudication of valid
disputes, and that to allow the government to do so would be to render Section 10 and Section 12(5) of
the Act nugatory. - We are, therefore, of the view that the State Government, which is the appropriate government,
was not justified in adjudicating the dispute, namely, whether the convoy drivers are workmen or
employees of TELCO or not and, accordingly, the impugned orders of the Deputy Labour Commissioner
acting on behalf of the government and that of the government itself cannot be sustained.
36 - It has been already stated that we had given one more chance to the government to reconsider the
matter and the government after reconsideration has come to the same conclusion that the convoy drivers
are not workmen of TELCO thereby adjudicating the dispute itself. After having considered the facts and
circumstances of the case and having given our best consideration in the matter, we are of the view that
the dispute should be adjudicated by the Industrial Tribunal and, as the government has persistently
declined to make a reference under Section 10(1) of the Act, we think we should direct the government to
make such a reference. In several instances this Court had to direct the government to make a reference
under Section 10(1) when the Government had declined to make such a reference and this Court was of
the view that such a reference should have been made. - In the circumstances, we direct the State of Bihar to make a reference under Section 10(1) of the
Act of the dispute raised by the Telco Convoy Drivers Mazdoor Sangh by its letter dated 16-10-1986
addressed to the General Manager, TELCO, to an appropriate Industrial Tribunal within one month from
today. - The appeal is allowed and the judgment of the High Court and the impugned orders are set aside
