Quick answer
No. In Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi (1975), a five-judge Constitution Bench held by majority that the Oil and Natural Gas Commission, the Life Insurance Corporation and the Industrial Finance Corporation, all created by Acts of Parliament, are "other authorities" and therefore "State" under Article 12. Regulations framed by these bodies under their statutes have the force of law, so an employee removed in breach of them can get a court declaration that he continues in service.
The case
Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, (1975) 1 SCC 421, AIR 1975 SC 1331, Supreme Court of India, 21 February 1975, five judges: A.N. Ray, C.J. (for himself, Y.V. Chandrachud and A.C. Gupta, JJ.), K.K. Mathew, J. (concurring) and A. Alagiriswami, J. (dissenting). The dispute arose from the removal of employees of the ONGC (Oil and Natural Gas Commission Act, 1959), LIC (Life Insurance Corporation Act, 1956) and IFC (Industrial Finance Corporation Act, 1948).
What the majority held
- Regulations are law: service regulations made under a specific statutory power are general rules binding both the corporation and the public, so they have the force of law.
- Statutory status of employees: employees enjoy a statutory status. If a removal violates the regulations, the court can declare that they continue in service. The employees are not, however, government servants of the Union or a State.
- Article 12: the three corporations are "authorities" because they are created by statute, are under deep government control, can make binding regulations, and enjoy statutory privileges and protections. Liability to pay tax or the ability to earn profit does not take them outside Article 12.
- Not like a company: a company incorporated under the Companies Act is not created by statute, so its articles of association are not law. These corporations, by contrast, owe their existence and their rule-making power to an Act.
Mathew J.'s instrumentality approach
K.K. Mathew, J. agreed with the result but went further. He saw the modern State as a service State that often acts through corporations, and said a corporation can be an instrumentality (a body through which government carries out its functions) or agency of the government. Relevant indicators included government contribution of capital, deep control over policy and management, a monopoly in an important public business, and whether the business is carried on for the benefit of the public. Alagiriswami, J. dissented, holding that a body is an "authority" only if it exercises a part of the sovereign power of the State.
Statutory corporation and private company compared
| Point | Statutory corporation (ONGC, LIC, IFC in 1975) | Company under the Companies Act |
|---|---|---|
| Origin | Created by an Act of Parliament | Registered under a general law |
| Service rules | Regulations under statute; force of law | Articles and contracts; no force of law |
| Remedy for wrongful removal | Declaration of continuance in service; writ available | Rules are not law, so the statutory-status remedy does not arise |
| Article 12 status | "Other authority" (State) | Depends on government control tests (later cases) |
Neha works for a statutory corporation created by an Act of Parliament. She is dismissed without the inquiry that the corporation's statutory service regulations require. Following Sukhdev Singh, the regulations bind her employer as law and the corporation is "State" under Article 12, so she can file a writ petition and ask for a declaration that she continues in service.
Later development
Mathew J.'s tests were elaborated in Ramana Dayaram Shetty v. International Airport Authority of India (1979) and restated by a Constitution Bench in Ajay Hasia v. Khalid Mujib Sehravardi (1981). In Pradeep Kumar Biswas v. Indian Institute of Chemical Biology (16 April 2002), a seven-judge bench, by a 5:2 majority, traced these tests back to Sukhdev Singh and held that the question is whether a body is "financially, functionally and administratively dominated by or under the control of the Government".
Exam point
Sukhdev Singh (1975): ONGC, LIC and IFC are "State" under Article 12, their statutory regulations have the force of law, and Mathew J.'s concurrence laid the foundation of the "instrumentality or agency of government" test.
