Sukhdev Singh v. Bhagatram

The case was a group of four appeals involving three statutory corporations: the Oil and Natural Gas Commission (O.N.G.C.), the Life Insurance Corporation (L.I.C.) and the Industrial Finance Corporation (I.F.C.). A statutory corporation is a corporation created by a special Act of Parliament.

In the main appeal, Bhagatram Sardar Singh Raghuvanshi was an employee of O.N.G.C. who had been removed from service. He complained that O.N.G.C.'s own statutory regulations were not followed when he was removed. The High Court declared his removal null and void and held that he continued in service.

Sukhdev Singh and the other appellants appealed to the Supreme Court on behalf of O.N.G.C. against this decision. That is why the case is named Sukhdev Singh v. Bhagatram. The other appeals raised similar questions about L.I.C. and the I.F.C.: what is the legal status of these corporations' regulations, and what happens when action is taken in breach of them? The principle of natural justice was also relevant.

1. Are statutory corporations 'State' under Article 12?

2. Are the regulations made under these corporations' Acts (for example, conditions of service) 'law', or are they merely contractual terms?

3. Can an employee of a statutory corporation claim the protection of Article 14 (equality before law) and Article 16 (equality of opportunity in public employment)?

4. If an employee is removed without following the regulations, is the employee entitled only to damages (compensation), or must the employee be reinstated in service?

For the employees: The terminations went against statutory provisions. The regulations made under the I.F.C. Act, the L.I.C. Act and the O.N.G.C. Act have the force of law. Any order that violates these regulations is void. The employee's right is not only to damages but also to continue in service.

For the corporations: The regulations are not law but a kind of contractual rules. This is a matter of internal management, so even if there was a breach, at most damages could be awarded, not reinstatement. Provisions such as Section 12 of the O.N.G.C. Act and Section 23 of the L.I.C. Act give the corporations the power to appoint employees and regulate their service, so the terminations were valid within their autonomy.

Background: The general rule is that a contract of personal service (a master-and-servant kind of contract) is not specifically enforced. A wrongly dismissed person usually gets only damages, not the job back. The exceptions include government employees protected under Article 311, cases under industrial law, and cases where a statutory body acts in breach of its own mandatory statutory provisions. The real question was whether these corporations fell within this third exception.

The decision was delivered on 21 February 1975 by a five-judge Constitution Bench, by a majority of four to one.

Majority: Chief Justice A. N. Ray wrote the majority opinion, joined by Justice Y. V. Chandrachud and Justice A. C. Gupta. The Court held that statutory corporations such as I.F.C., L.I.C. and O.N.G.C. are 'State' under Article 12. They are not merely business entities; they perform public duties. The rules and regulations made under their Acts are delegated legislation and have the force of law. Delegated legislation is law that the legislature does not make itself but empowers another authority to make. So these corporations are bound to follow Articles 14 and 16, and a termination made without following the statutory regulations is void. The Court also referred to Rajasthan State Electricity Board v. Mohan Lal (1967), which had held that statutory authorities fall within Article 12.

Concurring opinion: Justice K. K. Mathew wrote a separate concurring opinion, regarded as the most far-reaching opinion in the case. He said that the modern welfare State performs many functions through corporations, so public corporations are in reality an agency or instrumentality of the government. If such corporations were kept outside Article 12, the government could take the form of a corporation and escape fundamental rights altogether.

Dissent: Justice A. Alagiriswami dissented. In his view, these corporations do not exercise the sovereign power of the State and so are not an 'authority' under Article 12. Their regulations do not have the force of law, so the employees could not get a declaration that they continued in service.

Outcome: Employees are not limited to damages. They can get a declaration that they continue in service. In Bhagatram's case, the Supreme Court upheld the High Court's declaration that his removal was null and void and that he continued in service. Employees of statutory corporations are entitled to the protection of fundamental rights and to the principles of natural justice.

Constitution of India, Article 12; Constitution of India, Article 14; Constitution of India, Article 16; Constitution of India, Article 311 (discussed as an exception to the rule against specific enforcement of service contracts); O.N.G.C. Act, Section 12; L.I.C. Act, Section 23; I.F.C. Act (regulations made under it)

This is a key link in the development of the meaning of 'State' under Article 12. It comes after Rajasthan State Electricity Board v. Mohan Lal (1967). It confirmed that public sector corporations such as L.I.C. and O.N.G.C. cannot escape constitutional accountability. It also settled that their service regulations have the force of law, so wrongly removed employees can get their jobs back through a declaration of continuation in service.

Justice Mathew's concurring opinion on 'agency or instrumentality of the government' later grew into the instrumentality test in the R. D. Shetty case (1979) and the Ajay Hasia case (1980). Students should remember the four-to-one split, the names of the majority, concurring and dissenting judges, and the link to these later cases.

Hypothetical: Farhan is an officer in a corporation created by a special Act of Parliament. The corporation's statutory service regulations say that no officer can be dismissed without a show-cause notice and an inquiry. Without giving Farhan any notice or hearing, the chairperson, Zoya, dismisses him. Farhan challenges the dismissal. Applying the principle in Sukhdev Singh v. Bhagatram, the corporation is 'State' under Article 12, and its regulations have the force of law. Because the dismissal breaks those mandatory regulations and ignores natural justice, it is void. Farhan can get a declaration that he continues in service, not just compensation.