December 23, 2024
Company LawDU LLBSemester 3

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

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Case Summary

CitationState Trading Corpn. of India, Ltd. v. CTO(1964) 4 SCR 99
Keywordscitizen, article, constitution, corporations, natural persons
FactsIn 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.
IssuesWhether the state Trading Corporation registered under the Indian companies act, 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?
Whether the corporation can clean to enforce fundamental rights under part 3 of the Constitution against the state as defined in article 12 thereof?
Contentions
Law PointsCourt held that in part 3 of the constitution, it clearly mentions the difference between fundamental rights available to citizen and rights guaranteed to citizens.
Part 2 of constitution deals with “Citizen”, which states that only natural persons can be citizens, not any corporations.
The citizenship act,1955, only allows natural persons to claim rights of citizenship. The constitution’s provisions and status of corporation deals with natural persons and not artificial persons as Company is an artificial person.In other words, all citizens are persons but all persons are not citizens, under the constitution.
Corporation is national in the matters of International Law will not make them citizen of the constitution.
JudgementIt 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”.
Ratio Decidendi & Case Authority

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.

  1. 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.
  2. 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.

  1. 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.

  1. 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.
  2. 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.

  1. 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.
  2. 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.
  3. 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.

  1. 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)
  2. 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.”

  1. 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”.
  2. 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.

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