Bhagat Ram was appointed as an Assistant Manager in the Industrial Finance Corporation of India (IFC) in 1963. In 1967, he was removed from his job without being given a chance to be heard. Sunil Kumar Mukherjee joined the Life Insurance Corporation of India (LIC) in 1964 and was terminated after four years, but only after an internal departmental inquiry. Sukhdev Singh started working with the Oil and Natural Gas Commission (ONGC) in 1967 as a Field Manager. In 1971, he was also dismissed without following the inquiry process mentioned in the rules.
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Bhagat Ram challenged his removal by filing a writ petition under Article 226 of the Constitution before the Orissa High Court, which ruled in his favor and canceled his termination. Sunil Kumar Mukherjee and Sukhdev Singh also filed writ petitions under Article 226 in the Patna High Court and the Punjab & Haryana High Court, but both petitions were dismissed. All three employees then approached the Supreme Court of India through a special leave petition under Article 136 of the Constitution.
Issue before the Court
- Whether statutory corporations are considered "State" under Article 12 of the Indian Constitution?
- Whether the regulations made under a statutory Act (through delegated legislation) have the force of law and are binding?
- Whether employees of statutory corporations are protected under Articles 14 and 16 of the Constitution.
Petitioner’s Arguments
The petitioner’s lawyers argued that statutory corporations fall under the definition of “State” in Article 12, so they must follow constitutional protections like equality and fairness. They said the regulations made under the Act have the force of law. So, if an employee is removed in a way that goes against these rules, the removal is invalid. In such cases, employees should not only get compensation but also be allowed to continue in their jobs.
Respondent’s Arguments
The respondent’s lawyers argued that the service regulations are more like internal rules and are contractual in nature not laws. They claimed that if these rules are broken, the employee may get damages, but not reinstatement. They also pointed to sections of the ONGC Act, IFC Act, and LIC Act, which give corporations the power to appoint and manage employees. Therefore, they believe these matters are internal and do not require constitutional protection.
Analysis of the Court
The Court held that statutory corporations like ONGC, LIC, and IFC are considered “State” under Article 12 of the Indian Constitution. These organizations were created by laws passed by Parliament, perform public duties, and have the authority to make rules and regulations. Because of this, the Court said that employees of these corporations are protected by fundamental rights, especially under Articles 14 and 16, which deal with equality and non-discrimination.
The Court also made it clear that these corporations cannot act unfairly or arbitrarily and must follow the constitutional principles of fairness, especially when it comes to public employment. This judgment is important because it confirms that fundamental rights can be enforced against such bodies and helps define who falls under “State” in Article 12.
