State Trading Corpn. of India, Ltd. v. CTO(1964) 4 SCR 99

Case Summary

Full Case Details

In these three writ-petitions the State Trading Corporation of India Ltd. and K.B. Lal
who, at the time of the filing of the petitions was Additional Secretary, Ministry of Commerce
and Industry, Government of India, but is no longer holding such office now, are the
petitioners who seek relief against the State of Andhra Pradesh in two of the petitions and the
State of Bihar in the third petition by the issuance of a writ of certiorari or other appropriate
writ or direction for quashing the orders of a Commercial Tax Officer of the State concerned,
assessing the Corporation to sales tax and also for quashing the notice of demand issued to
them for payment of the sum assessed.
B.P. SINHA, C.J. – The following two questions have been referred to the Special Bench
by the Constitution Bench before which these cases came up for hearing.
(1) Whether the State Trading Corporation, a company registered under the Indian
Companies Act, 1956, is a citizen within the meaning of Article 19 of the Constitution
and can ask for the enforcement of fundamental rights granted to citizens under the said
article; and
(2) whether the State Trading Corporation is, notwithstanding the formality of
incorporation under the Indian Companies Act, 1956, in substance a department and
organ of the Government of India with the entirety of its capital contributed by
Government; and can it claim to enforce fundamental rights under Part III of the
Constitution against the State as defined in Article 12 thereof.

2. As the whole case is not before us, it is necessary to state only the following facts in
   order to appreciate how the controversy arises. The State Trading Corporation of India Ltd.,
   and K.B. Lal, the then Additional Secretary, Ministry of Commerce and Industries,
   Government of India, moved this Court under Article 32 of the Constitution for quashing by a
   writ of certiorari or any other appropriate writ, direction or order, certain proceedings
   instituted by or under the authority of the respondents, – (1) The Commercial Tax Officer,
   Visakhapatnam; (2) the State of Andhra Pradesh; and (3) the Deputy Commissioner of
   Commercial Taxes, Kakinada. Those proceedings related to assessments of sales tax under the
   provisions of the Andhra Pradesh Sales Tax Act. Writ Petitions 202 and 203 of 1961 are
   between the parties aforesaid. In Writ Petition 204 of 1961, the parties are the petitioners
   aforesaid against (1) the Assistant Superintendent of Commercial Taxes, I/c Chaibasa SubCircle, Bihar State; (2) the Deputy Commissioner of Sales Tax, Bihar, Ranchi and (3) the
   State of Bihar. Thus, the petitioners are the same in all the three cases, but the respondents are
   the State of Andhra Pradesh and its two officers in the first two cases and the State of Bihar
   and its two officers in the third case.
3. The first petitioner is a private limited company registered under the Indian Companies
   Act, 1956, with its head office at New Delhi, in May 1956. The second petitioner is a
   shareholder in the first petitioner company. The two petitioners claim to be Indian citizens as
   all its shareholders are Indian citizens. Proceedings were taken for assessment of sales tax,
   and in due course of those proceedings demand notices were issued. It is not necessary for the

purposes of deciding the two points referred to us to set out the details of the assessments or
the grounds of attack raised by petitioners. It is enough to say that the petitioners claim to be
Indian citizens and contend that their fundamental rights under Article 19 of the Constitution
had been infringed as a result of the proceedings taken and the demands for sales tax made by
the appropriate authorities. When the case was opened on behalf of the petitioners in this
Court, before the Constitution Bench, counsel for the respondents raised the preliminary
objections which have taken the form now indicated in the two questions, already set out. The
Bench rightly pointed out that those two questions were of great constitutional importance
and should, therefore be placed before a larger Bench for determination. Accordingly they
referred the matter to the Chief Justice and this larger Bench has been constituted to
determine those questions.

5. Before dealing with the argument at the Bar, it is convenient to set out the relevant
   provisions of the Constitution. Part III of the Constitution deals with Fundamental Rights.
   Some fundamental rights are available to “any person”, whereas other fundamental rights can
   be available only to “all citizens”. “Equality before the law” or “equal protection of the laws”
   within the territory of India is available to any person (Article 14). The protection against the
   enforcement of ex-post-facto laws or against double-jeopardy or against compulsion of selfincrimination is available to all persons (Article 20); so is the protection of life and personal
   liberty under Article 21 and protection against arrest and detention in certain cases, under
   Article 22. Similarly, freedom of conscience and free profession, practice and propagation of
   religion is guaranteed to all persons. Under Article 27, no person shall be compelled to pay
   any taxes for the promotion and maintenance of any particular religious denomination. All
   persons have been guaranteed the freedom to attend or not to attend religious instructions or
   religious worship in certain educational institutions (Article 28). And, finally, no person shall
   be deprived of his property save by authority of law and no property shall be compulsorily
   acquired or requisitioned except in accordance with law, as contemplated by Article 31. These
   in general terms, without going into the details of the limitations and restrictions provided for
   by the Constitution, are the fundamental rights which are available to any person irrespective
   of whether he is a citizen of India or an alien or whether a natural or an artificial person. On
   the other hand, certain other fundamental rights have been guaranteed by the Constitution
   only to citizens and certain disabilities imposed upon the State with respect to citizens only.
   Article 15 prohibits the State from discriminating against any citizen on grounds only of
   religion, race, caste, etc, or from imposing any disability in respect of certain matters referred
   to in the Article. By Article 16, equality of opportunity in matters of public employment has
   been guaranteed to all citizens, subject to reservations in favour of backward classes. There is
   an absolute prohibition against all citizens of India from accepting any title from any foreign
   State, under Article 18(2), and no person who is not a citizen of India shall accept any such
   title without the consent of the President, while he holds any office of profit or trust under the
   State [Article 18(3)]. And then we come to Article 19 with which we are directly concerned in
   the present controversy. Each one of these guaranteed rights under clauses (a) to (g) is subject
   to the limitations or restrictions indicated in clauses (2) to (6) of the Article. Of the rights
   guaranteed to all citizens, those under clauses (a) to (e) aforesaid are particularly apposite to
   natural persons whereas the freedoms under clauses (f) and (g) aforesaid may be equally
   enjoyed by natural persons or by juristic persons. Article 29(2) provides that no citizen shall

be denied admission into any educational institution maintained by the State or State-aid on
grounds only of religion, race, caste, language or any of them. This short resume of the
fundamental rights dealt with by Part III of the Constitution and guaranteed either to ‘any
person’ or to ‘all citizens’ leaves out of account other rights or prohibitions which concern
groups, classes or associations of persons, with which we are not immediately concerned. But
irrespective of whether a person is a citizen or a non-citizen or whether he is a natural person
or a juristic person, the right to move the Supreme Court by appropriate proceedings for the
enforcement of their respective rights has been guaranteed by Article 32.

6. It is clear on a consideration of the provisions of Part III of the Constitution that the
   makers of the Constitution deliberately and advisedly made a clear distinction between
   fundamental rights available to ‘any person’ and those guaranteed to ‘all citizens’. In other
   words, all citizens are persons but all persons are not citizens, under the Constitution.
7. The question next arises: What is the legal significance of the term “citizen”? It has not
   been defined by the Constitution. Part II of the Constitution deals with “Citizenship”, at the
   commencement of the Constitution. Part II, in general terms, lays down that citizenship shall
   be by birth, by descent, by migration and by registration. Every person who has his domicile
   in the territory of India shall be a citizen of India, if he was born in the territory of India or
   either of whose parents were so born or who has been ordinarily resident in the territory of
   India for not less than five years immediately preceding the commencement of the
   Constitution (Article 5). Secondly, any person who has migrated to the territory of India from
   the territory included in Pakistan shall be deemed to be a citizen of India, if he satisfied the
   conditions laid down in Article 6(a) and 6(b)(i). Any person who does not come within the
   purview of Article 6(a) and 6(b)(i), but who has migrated to India and has been registered, as
   laid down in Article 6 (b)(ii), shall also be deemed to be a citizen of India. Similarly, a person
   of Indian origin, residing outside India, shall be deemed to be a citizen of India if he has been
   registered as such by an accredited diplomatic or consular representative of India in the
   country where he has been residing (Article 8). Persons coming within the purview of Articles
   5, 6 and 8, as aforesaid, may still not be citizens of India if they have migrated from India to
   Pakistan, as laid down in Article 7, or if they have voluntarily acquired the citizenship of any
   foreign State (Article 9). Those, in short, are the provisions of the Constitution in Part II
   relating to ‘Citizenship’, and they are clearly inapplicable to juristic persons.
   By Article 11, the Constitution has vested Parliament with the power to regulate, by
   legislation, the rights to citizenship. It was in exercise of the said power that Parliament has
   enacted the Citizenship Act (LVII of 1955). It is absolutely clear on a reference to the
   provisions of this statute that a juristic person is outside the purview of the Act. This is an Act
   providing for acquisition and termination of Indian citizenship. The Constitution in Part II, as
   already indicated, has determined who are Indian citizens at the commencement of the
   Constitution. As the Constitution does not lay down any provisions with respect to acquisition
   of citizenship or its termination or other matters relating to citizenship, after the
   commencement of the Constitution, this law had to be enacted by way of legislation
   supplementary to the provisions of the Constitution as summarised above. The definition of
   the word “person” in Section 2(1)(f) of this Act says that the word “person” in the Act “does
   not include any Company or association or body of individuals, whether incorporated or not”.

Hence, all the subsequent provisions of the Act relating to citizenship by birth, citizenship by
descent, citizenship by registration, citizenship by naturalisation and citizenship by
incorporation of territory have noting to do with a juristic person.

8. It is thus absolutely clear that neither the provisions of the Constitution, Part II, nor of
   the Citizenship Act aforesaid, either confer the right of citizenship on, or recognise as citizen,
   any person other than a natural person. That appears to be the legal position, on an
   examination of the relevant provisions of the Constitution and the Citizenship Act.
9. On an examination of the relevant provisions of the Constitution and the Citizenship
   Act aforesaid, we have reached the conclusion that they do not contemplate a corporation as a
   citizen. But Mr Setalvad, appearing on behalf of the petitioners, contended that Part II of the
   Constitution relating to citizenship is not relevant for our purposes because it does not define
   “a citizen” nor does it deal with the totality of “citizenship”. It was further submitted that the
   same is the position with reference to the provisions of the Citizenship Act. It is common
   ground, therefore, that the constitutional and the statutory provisions discussed above have no
   reference to juristic persons. But even so, it was contended, we have to review the legal
   position in the light of the pre-existing law, i.e., the Common Law, which, it was claimed,
   was preserved by Article 372 of the Constitution. In this connection, reference was made to
   Halsbury’s Laws of England, Vol. 6, 3rd Ed., p. 113,114, para 235, which lays down that, on
   incorporation, a company is a legal entity the nationality or domicile of which is determined
   by its place of registration. Reference was also made to Vol. 9 of Halsbury’s Laws of
   England, p. 19, paras 29-30, which say that the concept of nationality is applicable to
   corporations and it depends upon the country of its incorporation. A corporation incorporated
   in England has a British nationality, irrespective of the nationality of its members. So far as
   domicile is concerned, the place of incorporation fixes its domicile, which clings to it
   throughout its existence. It is not necessary to refer to other decisions, because the position is
   absolutely clear that a corporation may claim a nationality which ordinarily is determined by
   the place of its incorporation. But the question still remains whether “nationality” and
   “citizenship” are interchangeable terms. “Nationality” has reference to the jural relationship
   which may arise for consideration under international law. On the other hand “citizenship”
   has reference to the jural relationship under municipal law. In other words, nationality
   determines the civil rights of a person, natural or artificial, particularly with reference to
   international law, whereas citizenship is intimately connected with civic rights under
   municipal law. Hence, all citizens are nationals of a particular State, but all nationals may not
   be citizens of the State. In other words, citizens are those persons who have full political
   rights as distinguished from nationals, who may not enjoy full political rights and are still
   domiciled in that country.
10. In our opinion, it is not correct to say, that the expression “citizen” in Article 5 is not
    as wide as the same expression used in Article 19 of the Constitution. One could understand
    the argument that both the Constitution and the Citizenship Act have not dealt with juristic
    persons at all, but it is more difficult to accept the argument that the expression “citizen” in
    Part II of the Constitution is not conterminous with the same expression in Part III of the
    Constitution. Part II of the Constitution, supplemented by the provisions of the Citizenship
    Act (LVII of 1955) deals with “citizens” and it is not correct to say that citizenship in relation

to juristic persons was deliberately left out of account so far as the Constitution and the
Citizenship Act were concerned. On the other hand, the more reasonable view to take of the
provisions of the Constitution is to say that whenever any particular right was to be enjoyed
by a citizen of India, the Constitution takes care to use the expression “any citizen” or “all
citizens”, in clear contradistinction to those rights which were to be enjoyed by all,
irrespective of whether they were citizens or aliens, or whether they were natural persons or
juristic persons. On the analogy of the Constitution of the United States of America, the
equality clause in Article 14 was made available to “any person”. On the other hand, the
protection against discrimination on denominational grounds (Article 15) and the equality of
opportunity in matters of public employment (Article 16) were deliberately made available
only to citizens.

15. We have already referred, in general terms, to those provisions of the Constitution,
    Part III, which guarantee certain rights to “all persons” and the other provisions of the same
    part of the Constitution relating to fundamental rights available to “citizen” only, and,
    therefore, it is not necessary to recount all those provisions. It is enough to say that the makers
    of the Constitution were fully alive to the distinction between the expressions “and person”
    and “any citizen”, and when the Constitution laid down the freedoms contained in Article
    l9(l)(a)-(g),as available to “all citizens”, it deliberately kept out all non-citizens. In that
    context, non-citizens would include aliens and artificial persons. In this connection, the
    following statement in Private International Law by Martin Wolff, is quite apposite:
    “It is usual to speak of the nationality of legal persons, and thus to import something
    that we predicate of natural persons into an area in which it can be applied by analogy
    only. Most of the effects of being an ‘alien’ or a ‘citizen’ of the State are inapplicable in
    the field of corporations; duties of allegiance or military service, the franchise and other
    political rights do not exist.” (p. 308)
16. This apart, it is necessary to refer to another aspect of the controversy. It was argued
    on behalf of the petitioners that the distinction made by the Constitution between “persons”
    and “citizens” is not the same thing as a distinction between natural and juristic persons, and
    that as “persons” would include all citizens and non-citizens, natural and artificial persons, the
    makers of the Constitution deliberately left artificial persons out of consideration because it
    may be that the pre-existing law was left untouched. It is very difficult to accept the
    contention that when the makers of the Constitution were at pains to lay down in exact terms
    the fundamental rights to be enjoyed by “citizens” and those available to all “persons”, they
    did not think it necessary or advisable clearly to indicate the classes of persons who would be
    included within the expression “citizen”. On the other hand, there is clear indication in the
    provisions of Part III of the Constitution itself that they were fully cognizant of the provisions
    of the Constitution of the United States of America, where the Fourteenth Amendment
    (Section 1) clearly brings out the antithesis between the privileges or immunities of citizens of
    the United States and life, liberty or property of any person, besides laying down who are the
    citizens of the United States. Section 1 aforesaid is in these terms and brings out the
    distinction very clearly:
    “All persons born or naturalized in the United States, and subject to the jurisdiction
    thereof, are citizens of the United States and of the State wherein they reside. No State

shall make or enforce any law which shall abridge the privileges or immunities of citizens
of the United States; nor shall any State deprive any person of life, liberty, or property,
without due process of law; nor deny to any person within its jurisdiction the equal
protection of the laws.”

17. The question may be looked at from another point of view. Article 19 lays down that
    “all citizens” shall have the right to freedoms enumerated in clauses (a) to (g). Those
    freedoms, each and all of them, are available to “all citizens”. The Article does not say that
    those freedoms, or only such of them as may be appropriate to particular classes of citizens,
    shall be available to them. If the Court were to hold that a corporation is a citizen within the
    meaning of Article 19, then all the rights contained in clauses (a) to (g) should be available to
    a corporation. But clearly some of them, particularly those contained in clauses (b), (d) and
    (e) cannot possibly have any application to a corporation. It is thus clear that the rights of
    citizenship envisaged in Article 19 are not wholly appropriate to a corporate body. In other
    words, the rights of citizenship and the rights flowing from the nationality or domicile of a
    corporation are not conterminous. It would thus appear that the makers of the Constitution
    had altogether left out of consideration juristic persons when they enacted Part II of the
    Constitution relating to “citizenship”, and made a clear distinction between “persons” and
    “citizens” in Part III of the Constitution. Part III, which proclaims fundamental rights, was
    very accurately drafted, delimiting those rights like freedoms of speech and expression, the
    right to assemble peaceably, the right to practise any profession, etc., as belonging to
    “citizens” only, and those more general rights like the right to equality before the law, as
    belonging to “all persons”.
18. In view of what has been said above, it is not necessary to refer to the controversy as
    to whether there were any citizens of India before the advent of the Constitution. It seems to
    us, in view of what we have said already as to the distinction between citizenship and
    nationality, that corporations may have nationality in accordance with the country of there
    incorporation; but that does not necessarily confer citizenship on them. There is also no doubt
    in our mind that Part II of the Constitution when it deals with citizenship refers to natural
    persons only. This is further made absolutely clear by the Citizenship Act which deals with
    citizenship after the Constitution came into force and confines it only to natural persons. We
    cannot accept the argument that there can be citizens of this country who are neither to be
    found within the four-corners of Part II of the Constitution or within the four-corners of the
    Citizenship Act. We are of opinion that these two provisions must be exhaustive of the
    citizens of this country, Part II dealing with citizens on the date the Constitution came into
    force and the Citizenship Act dealing with citizens thereafter. We must, therefore, hold that
    these two provisions are completely exhaustive of the citizens of this country and these
    citizens can only be natural persons. The fact that corporations may be nationals of the
    country for purposes of international law will not make them citizens of this country for
    purposes of municipal law or the Constitution. Nor do we think that the word “citizen” used
    in Article 19 of the Constitution was used in a different sense from that in which it was used
    in Part II of the Constitution. The first question, therefore, must be answered in the negative.