The State Trading Corporation of India Ltd. & Ors Vs. The Commercial Tax Officer, Visakhapatnam & Ors [1963] INSC 157 (26 July 1963)

26/07/1963 SINHA, BHUVNESHWAR P.(CJ) SINHA, BHUVNESHWAR P.(CJ) DAS, S.K.

GAJENDRAGADKAR, P.B.

SARKAR, A.K.

WANCHOO, K.N.

HIDAYATULLAH, M.

GUPTA, K.C. DAS SHAH, J.C.

AYYANGAR, N. RAJAGOPALA

CITATION: 1963 AIR 1811 1964 SCR (4) 89

CITATOR INFO:

R 1964 SC1451 (10) R 1965 SC 40 (4,6,23) F 1966 SC1436 (5) R 1967 SC 295 (17) OPN 1967 SC1318 (4) RF 1970 SC 82 (5) RF 1970 SC 564 (7) R 1971 SC 870 (7,13) RF 1973 SC 106 (11) MV 1975 SC1331 (127,177) R 1975 SC1737 (2) R 1981 SC1368 (7) RF 1983 SC 937 (12) F 1988 SC1708 (13) D 1989 SC1713 (10)

ACT:

Fundamental Right, Enforcement of-Corporation, if a citizen entitled to claim fundamental rights-Constitution of India, Arts. 19(1)(f) and (g), 32.

HEADNOTE:

The State Trading Corporation of India is a private limited company registered under the Indian Companies Act, 1956, with its head Office at Delhi and its entire capital is contributed by the Government of India. The Sales-tax Authorities of the States of Andhra Pradesh and Bihar sought to assess the Corporation to sales tax under their respective Sales Tax Acts and issued notices of demand. The Corporation claiming to be an Indian citizen filed petitions under Art. 32 of the Constitution for quashing the said proceedings on the ground that they infringed its fundamental rights under Art. 19(1) (f) and (g) of the Constitution. Preliminary objections having been taken by the respondents to the maintainability of the said petitions, the Constitution Bench hearing the matters referred the two following questions for decision by the special bench.

"(1) Whether the State Trading Corporation, a company registered under the Indian Companies Act, 1956, is a citizen within the meaning of Art. 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 -,-id 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 Art. 12 thereof.

Held, (DAS GUPTA and SHAH JJ., dissenting) that the answer to the first question must be in the negative.

Per SINHA, C. J., S. K. DAS, GAJENDRAGADKAR, SARKAR, WANCHoo and Ayyangar JJ. There can be no citizens of India not mentioned in Part 11 of the Constitution or by the Citizenship Act, 1955. These provisions are wholly exhaustive and contemplate only natural persons.

Part III of the Constitution makes a clear distinction between fundamental rights available to "any person" and those guaranteed 100 to "all citizens", indicating thereby that under the Constitution all citizens are persons but all persons are not citizens Part II of the Constitution relating to 'citizenship' is clearly inapplicable to juristic persons and the provisions of the Citizenship Act, 1955, enacted by Parliament under Art. 11 of the Constitution, show that such persons are outside the purview of the Act.

It cannot therefore, be said that either Part II of the Constitution or the Citizenship Act, 1955, confers the right of citizenship or recognises as citizen any person other than a natural person. They do not contemplate a corporation as a citizen.

In none of the relevant decisions this Court gave its considered judgment on the present issues and the question now raised are open questions.

Chiranjit Lal Chowdhuri v. Union of India [1950] S.C.R. 869, Dwarkadas Srinivas of Bombay v. The Sholapur Spinning & Weaving Co. Ltd. [1954] S.C.R. 674 and Bengal Immunity Co.

Ltd. v. State of Bihar, [1955] 2 S.C.R. 603, considered.

'Nationality' and 'citizenship' are not synonymous. A corporation can claim nationality which is ordinarily determined by the place of its incorporation. But while nationality determines the civil rights of a natural or artificial person, particularly with reference to international law, citizenship is intimately connected with civic rights under municipal law. All citizens are, therefore, nationals of a particular State and enjoy full political rights but all nationals are not citizens and do not have full political rights.

It was not correct to say that the word 'citizen' in Art. 5 was not as wide as in Art. 19 of the Constitution or that Part II of the Constitution supplemented by the provisions of the Citizenship Act, which deals with citizens, deliberately left out of account citizenship in relation to juristic persons. When the Constitution confers any particular right to be enjoyed by a citizen it uses the words "any citizen" or "all citizens" in clear contradistinction to those rights which are to be enjoyed by all, whether citizens or aliens, natural or juristic persons.

There is no reason to think that the word 'citizen' in Art.

19 is used in a different sense from that in which it is used in Part II of the Constitution.

Per HIDYATULLAH J.-Both the questions must be answered in favour of the respondents.

Before independence there was no law of citizenship in India. Under the British Nationality Act, 1948, Indians became Commonwealth citizens or British subjects without citizenship and were regarded as potential citizens of India. The Indian Constitution made provision for citizenship under which certain natural persons alone could be citizens of India and the Citizenship Act, 1955, excluded persons other than natural persons from citizenship.

101 It is not correct to say that corporations were citizens before the Constitution. They enjoyed only such privileges under the municipal law which that law expressly conferred on them.

The nature and personality of an incorporated company have their origin in a fiction of law. This personality arises from the moment of incorporation and from that date the persons subscribing to the memorandum of association or joining as members become a body corporate. But they cannot be said to Pool their status and even if all of them are citizens of India, the Company does not become a citizens of India.

G. E. Rly. v. Turner, (1872) L. R. 8 Ch. App. 152, Salomon V. Salomon & Co. (1897) A. C. 22 and Janson v. Driefontein Consolidated Mines Ltd., (1902) A. C. 484, referred to.

The seven freedoms guaranteed by Art. 19(1) arc for the citizens of India. The Constitution in using the word "person", a word of larger import, in some other places makes its intention to exclude corporations clear.

Chiranjit Lal Chowdhuri v. Union of India, [1950] S.C.R.

869, explained.

The precedents of the Supreme Court of the United States which hold that corporations are citizens of the State of incorporation for purposes of federal jurisdiction cannot be followed in India. The diversity of citizenship which has led to such rulings does not exist in India. As a corporation is a separate entity from its members, it is not possible to pierce the veil of incorporation to determine the citizenship of its members in order to give the corporation the benefit of Art. 19.

The State Trading Corporation is not, therefore, a citizen either by itself or as the aggregate of Indian citizens.

Its Indian nationality is not to be confused with citizenship of natural persons and the word 'citizen' in Art' 19(1) (f) and (g) can refer to no other than natural persons. The State Trading Corporation is really a department of Government behind the corporate veil.

Per DAS GUPTA J.-The first question must be answered in the affirmative.

It has been repeatedly laid down by this Court that in interpreting the Constitution a broad and a liberal and not merely the grammatical view should be taken. A syllogistic or mechanical approach has always to be avoided, more so when interpreting the Constitution. The attempt should be to reach the intention of the Constitution makers by examining the substance and give effect to that intention, if possible.

So judged, it is clear that the Constitution makers when they used the word 'citizen' in Art. 19 had the intention that at least a corporation constituted wholly by citizens of India would get 102 the benefit of the fundamental rights enshrined in that There is -nothing in the Constitution that stands in the giving all citizens of India, whether forming a corporation the benefit of Arts. 19(1) (f) and (g).

State of Bombay v. R. M. D. Chamarbaughwala, I.L.R. Bom.

680, Chiranjit Lal Chowdhuri v. Union of India, S.C.R. 869, Express Newspapers (P) Ltd. v. Union of India, S.C.R. 12, Bengal Immunity Co. v. State of Bihar, [1955] 2 S.C.R. 603 and Bombay Dyeing Manufacturing Co. Ltd. v. State of Bombay, [1958] S.C.R. 112 2, referred to.

The first part of the second question should be answered in the negative and the second part in the affirmative.

Per SHAH J.-In ascertaining the meaning of expressions used in a vital document like the Constitution of a nation,mechanical approach is impermissible. The Constitution is the declaration of the will of the people and should be interpreted liberally and not in a narrow or doctrinaire spirit. Such interpretation should be in accordance with the true purpose and intent as disclosed by the phraseology understood in its natural signification in the light of its setting and its dynamic character which is intended to fulfill the aspirations of the people.

Citizenship means the members of a jural society investing the holder with all the rights and privileges enjoyed by its nationals and subjecting him to corresponding duties.

Nationality links a person to a State and ensures his rights in international affairs. While a citizen is a national, every national is not always a citizen.

Virginia L. Minor v. Reese Happersett, 21Wall. 162: 88 U.S.

627, referred to.

Under the English Common Law which formed the foundation of the Indian jurisprudence, a company or a corporation aggregate is a national of the State in which it is incorporated and is clothed with a personality given by the law of the land, capable of exercising rights arid entitled to protection a broad.

Janson v. Driefontein Consolidated Mines Ltd. L. R. (1902) A.C. 492, Attorney-General v. Jewish Colononization Association, (1901) 1 K.B. 133, Generali v. Salim Cotran, L.R. (1932) A.C. 288, Gasque v. Commissioner of Inland Revenue, L.R. (1940) 2 K.B. 36 and Kuenigl v. Donnersmark, L.R. (1955) 1 Q.B. 515, referred to.

So also in India a juridical person is capable of exercising to the fullest extent a large majority of civil rights which natural persons may exercise as citizens, its incapacity to exercise other rights arises from the nature of its personality and constitution and not from any special restriction imposed upon it. The Constitution, as is apparent from various other Articles, afforded the widest protection to corporation as it did to natural persons.

Unless 103 therefore, the language or the scheme of the Constitution is compulsive, it is impossible to put a limited connotation on the expression 'citizen' occurring in Art. 19(1).

To say that Arts. 5, 6 and 8 and the law made under Art. 11 are exhaustive and there can be no citizen except those expressly covered thereby is to assume that there were no citizens in India before the Constitution, an assumption which is not warranted either by the language of the Constitution or the' history of our national evolution. The legislative history shows that British subjects of Indian origin held the status of citizens in British India and there was no statute before the Constitution which indicated even indirectly that a corporation aggregate could not be a citizen.

Although this Court did not make any definite expression of opinion, it has consistently assumed that corporations aggregate are entitled to claim protection under Art. 19(1) as citizens.

Chiranjit Lal Chowdhuri v. Union of India. [1950] S.C.R. 869, Bengal Immunity Company Ltd. v. State of Bihar [1955] 2 S.C.R. 603, State of Bombay v. R. M. D. Chamar baughwala, [1957] S.C.R. 874 and State of West Bengal v. Union of India, [1964] 1 S.C.R. 371, referred to.

In numerous cases in this Court it was assumed, without contest, that a company is a citizen of India and competent to enforce fundamental rights under Art. 19(1)(f) and (g) of the Constitution.

Case law referred to.

In view of the fact that a company is invested with important fundamental rights under various other Articles of the Constitution and it is recognised as a person capable of holding and disposing of property and carrying on business, commerce and intercourse, it could not be held that the expression 'citizen' in Art. 19 was intended to be restricted to a natural person.

A corporation is, however, distinct from its share-holders and even if all the shareholders are Indian Citizens, its claim to citizenship cannot be founded on that ground for that would lead to anomalous results.

Salomon v. Salomon and Co. Ltd. L.R. (1897) A.C. 22, relied on.

State of Bombay, v. R.M.D. Chamarbaugwala, I.L.R. [1955] Bom. 680, disapproved.

The question whether a corporation is an agent or servant of the State must be decided on the facts of each case. In the absence of any statutory provision, a commercial corporation acting on its behalf, even if it is controlled wholly or partially by a Government department, will be presumed not to be a servant or an agent of the State. where, however, the corporation is performing in substance Governmental, and not commercial, functions, an inference will readily be made that it is an agent of the Government.

104 Tamlin v. Hannaford, L.R. (1950) 1 K. B. 18, referred to.

Bank Voor Handel En Scheepvaart N. V. v. Administrator. of Hungarian Property, L.R. (1954) A.C. 584, held inapplicable.

There is no warrant for the proposition that a department or an organ of the Union or the State, if it is a citizen, cannot enforce fundamental rights against the State as defined by Art. 12 of the Constitution.

ORIGINAL JURISDICTION : Writ Petitions Nos. 202-204 of 1961.

Writ Petition under Art. 32 of the Constitution of India for enforcement of Fundamental Rights.

M. C. Setalvad, G. S. Pathak, B. Parthasarthy, B. Dutta, B. Dadachanji O. C. Mathur and Ravinder Narain, for the Petitioners (in all the petitions).

D. Narasarj Advocate-General for the State of Andhra Pradesh and T. V. R. Tatachari, for the respondents (in Petitions Nos. 202 and 203 of 1961).

V. K. Krishna Menon, Anil Kumar Gupta, R. K. Garg, D. P. Singh, M. K. Ramamurthi and S. C. Agarwala, for the respondents (in Petition No. 204 of 1961).

A. Ranganadham Chetty and A. V. Rangam, for Intervener No. 1. S. M. Sikri', Advocate-General for the State of Punjab and Gopal Singh, for Intervener No. 2.

B. Sen, M. K. Banner" and P. K. Bose, for Intervener No. 3.

J. M. Thakore, Advocate-General for the State of Gujarat and K. L. Hathi, for Intervener No. 4.

G. C. Kasliwal, Advocate-General for the State of Rajasthan, S. K. Kapur and K. K. lain, for Intervener No. 5.

July 26, 1963.-The judgment of Sinha C. J., S. K. Das, Gajendragadakar, Sarkar, Wanchoo and Ayyangar JJ. was delivered by Sinha, C. J. Hidayatullah J., delivered a separate opinion. Das Gupta and Shah JJ. delivered separate dissenting opinions.

SINHA C.J.-The following 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, 105 1956, is a citizen within the meaning of Art.

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 Art. 12 thereof.

The questions were raised by way of preliminary objections to the maintainability of the Writ Petitions under Art. 32 of the Constitution.

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 Art. 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 Sub-Circle, 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.

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 8-2 S. C. India/64 106 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 the petitioners. It is enough to say that the petitioners claim to be Indian citizens and contend that their fundamental rights under Art. 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.

At the very outset of the arguments, we indicated that we shall give our decision only on the preliminary questions and that the decision of the controversies on their merits will be left to the Constitution Bench.

Before dealing with the arguments 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 (Art. 14). The protection against the enforcement of ex-post-facto laws or against double-jeopardy or against compulsion of -self-incrimination is available to all persons (Art. 20); so is the protection of life and personal liberty under Art. 21 and protection against arrest and detention in certain cases, under Art.

22. Similarly, freedom of conscience and free profession, practice and propagation of religion is guaranteed to all persons. Under Art. 27, no person shall be compelled to pay; any taxes for the promotion and maintenance of any 107 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 (Art. 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 Art. 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 Art. 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 tide from any foreign State, under Art. 18(2), and no person who is not a citizen of India shall accept any such tide without the consent of the President, while he holds any office of profit or trust under the State [Art. 18(3)]. And then we come to Art. 19 with which we are directly concerned in the present controversy. Under this Article, all citizens have been guaranteed the right :(a) to freedom of speech and expression;

(b) to assemble peaceably and without arms;

(d) to move freely throughout the territory of India;

(e) to reside and settle in any part of the territory of India;

(f) to acquire, hold and dispose of property; and (g) to practice any profession, or to carry on any occupation, trade or business.

Each one of these guaranteed rights under cls. (a) to (g) is subject to the limitations or restrictions indicated in cls 108 (2) to 6) of the Article. of the rights guaranteed to all citizens, those under cls. (a) to (e) aforesaid are particularly apposite to natural persons whereas the freedoms under cls. (f) and (g) aforesaid may be equally enjoyed by natural persons or by juristic persons. Art. 29(2) provides that no citizen shall be denied admission into any educational institution maintained by the State or State said 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 Art. 32.

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 dear 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.

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 11, in general terms, lays down that citizenship shall be by birth, by descent, by migration and by registration.

Every person who has 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 was 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 (Art 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 Art. 6(a) and 6(b) (i). Any 109 person who. does; not come within the purview of Art. 6(a), and 6(b))(i), but who has. migrated to India and has been registered, as, laid down in Art. 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 (Art. 8).

Persons coming within the purview of Arts. 5, 6 & 8, as aforesaid, may still not be citizens of India if they have migrated from India to Pakistan, as laid down in Art. 7, or if they have voluntarily acquired the citizenship of any foreign State (Art. 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 Art. 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 acqusition and termination of Indian citizenship. The Constitution in Part 11, 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 s. 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 (s. 3), citizenship by descent (s. 4), citizenship by registration (s. 5), citizenship by naturalisation (s. 6) and citizenship by incorporation:

of territory (s. 7) have nothing to do with a juristic person. 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 110 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. But it was contended that this Court had expressed itself to the contrary in certain decisions, and some of the High Courts have also taken a contrary view' which we may now proceed to consider. In, what is now known as the first Sholapur case, Chiranjit Lal Chowdhuri' v. The Union of India(1), Mukherjea, J., speaking for the majority of the Court, made the following observations at page 898, which seem to countenance the contention raised on behalf of the petitioners that fundamental rights are available to juristic persons also, as to citizens :

"The fundamental rights guaranteed by the Constitution are available not merely to individual citizens but to corporate bodies as well except where the language of the provision or the nature of the right compels the inference that they are applicable only to natural persons. An incorporated company, therefore, can come up to this Court for enforcement of its fundamental rights......" Though the observations quoted above would seem to lend countenance -to the contention raised on behalf of the petitioners, they really do not determine the controversy one way or the other. In that case, a shareholder of the Sholapur Spinning and Weaving Company made an application under Art. 32 of the Constitution for a declaration that the Act impugned in that case was void, as also for the enforcement of his fundamental rights by a writ of mandamus against the Government, and the directors of the company, restraining them from exercising any power under the Act.

It is not necessary to refer to the details of the controversy in that case because it is plain that it was not the company which was seeking the enforcement of its fundamental rights, if any, but only a shareholder. As a matter of fact, the company opposed the petition under Art.

32 of the Constitution. It is manifest that the observations quoted above were purely obiter and did not directly arise for decision of the Court.

Then we come to the second Sholapur case, reported (1) [1950] S.C.R. 869.

111 as Dwarkadas Shriniwas of Bombay v. The Sholapur Spinning & Weaving Co. Ltd.(1). In the first-Sholapur case, this Court had been moved under Art. 32 of the Constitution by an individual shareholder, as aforesaid, for enforcement of his alleged fundamental rights. That petition, by majority judgment, stood dismissed. The second case arose out of a suit instituted by a preference shareholder, in a representative capacity on behalf of himself -and other preferential shareholders, for a declaration that the law which had been impugned in the previous case was ultra Vires. This Court held that the law impugned had authorised, in effect, the deprivation of the property of the company within the meaning of Art. 31 of the Constitution, without compensation, and had thus violated the fundamental rights of the company under Art. 31(2) of the Constitution.

It will thus -appear that the decision of this Court proceeded on an examination of the provisions of Art. 31, which is not confined to citizens only and has reference also to the property of "any person". But there are observations made in the course of the judgment which would support the view propounded on behalf of the respondents.

At page 694, Mahajan J., while discussing the scope and effect of the provisions of the Constitution in Part 111, with particular reference to Arts. 19 and 31, made the following observations :"In considering Article 31 it, is significant to note that it deals with private property of persons residing in the Union of India, while Article 19 only deals with citizens defined in Article 5 of the Constitution. It is thus obvious that the scope of these two articles cannot be the same as they cover different fields. It cannot be seriously argued that so far as citizens are concerned, freedoms regarding enjoyment of property have been granted in two articles of the Constitution, while the protection to property qua all other persons has been dealt with in Article 31 alone. If both articles covered the same ground, it was unnecessary to have two articles on the same subject." These observations would appear to support, the view that Art. 31 has reference to property of "persons" and (1) [1954] S.C.R. 674.

112 Art. 19 deals with fundamental rights of "citizens" as described in Part II of the Constitution.

Bose J, in the course of his judgment, at page 732 observed as follows:

"Article 19(1) (f) confers a certain fundamental freedom on all citizens of India, namely, the freedom to acquire, hold and dispose of property. Article 31(1) is a sort of corollary, namely, that after the property has been acquired it cannot be taken away save by authority of law. Article 31 is wider than Article 19 because it applies to everyone and is not restricted to citizens. But what Article 19(1)(f) means is that whereas a law can be passed to prevent persons who are not citizens of India from acquiring and holding property in this country no such restriction can be placed on citizens. But in the absence of such a law non-citizens can also acquire property in India and if they do then they cannot be deprived of it any more than citizens, save by authority of law." But it has got to be said that those observations, though they may appear to support the contention raised on behalf of the respondents, were not made directly with reference to the question now before us, namely, whether a corporation could claim the status of a citizen. That question did not arise in that case also because the company, as such, was not seeking any relief. Even if the company were interested in seeking relief under Art. 31 of the Constitution, it could do so without having the status of a citizen.

In the case of The Bengal Immunity Company Limited, v. The State of Bihar,(1) the appellant company had moved the High Court under Art. 226 of the Constitution for certain reliefs against the provisions of the Bihar Sales Tax Act, but this Court (per S.R. Das, Acting C.J. at page 618 and per Venkatarama Ayyar J. at pages 765-766) left the question open and granted relief to the company without deciding that question. This case only serves the purpose of showing that the question now before us was still an open one and that this Court had, not given its (1) [1955] 2 S.C.R. 603.

113 considered judgment on the issue now before us.

It is, therefore, not necessary to refer to certain decisions` of the Madras, Bombay and Calcutta High 'Courts as they cannot be decisive one way or the other in the absence of a clear decision of this Court. We have, therefore, to examine the legal position afresh on the footing that it is still an open question.

On an examination of the relevant provisions of the Constitution and the Citizenship Act aforesaid, we have as already indicated, 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 preexisting law, i.e., the Common Law, which it was claimed, was preserved by Art. 372 of the Constitution. In this connection, reference was made to Halsbury's Laws of England, Vol. 6, 3rd Edition, pages 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, page 19, paragraphs 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. In this connection, reference was made to the case of Janson v. Driefontain Consolidated Mines(1) for the proposition that a company may be regarded as a national of the country where it was incorporated, notwithstanding (1) [1902] A.C.1,484, 497, 501, 505.

114 the nationality of its shareholders. 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 rural 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 (vide P. Weis-Nationality and Statelessness in International Law pp. 4-6; and Oppenheim's International Law, Vol. 1, pp.

642, 644).

In our opinion, it is not correct to say, as was contended on. behalf of the petitioners, that the expression "citizen" in Art. 5 is not as -wide as the same expression used in Art. 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 11 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 115 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 Art. 14 was made available to "any person". On the other hand, the protection against discrimination on denominational grounds (Art. 15) and the equality of opportunity in matters of public employment (Art. 16) were deliberately made available only to citizens. In this connection, reference may be made to the Constitution of the United States of America(1) "Corporations Citizens of the United States within the meaning of this article must be natural and not artificial persons ; a corporate body is not a citizen of the United States." (p. 965) "Persons" defined "Notwithstanding the historical controversy that has been waged as to whether the framers of the Fourteenth Amendment intended the word, "persons" to mean only natural persons, or whether the word, "persons" was substituted for the word "citizen" with a view to protecting corporations from oppressive State legislation, the Supreme Court, as early as the Granger cases, decided in 1877, upheld on the merits various State laws without raising any question as to the status of railway corporation-plaintiffs to advance, due process contentions. There is no doubt that a corporation may not be deprived of its property without due process of law ; and although prior decisions have held that the "liberty" guaranteed by the Fourteenth Amendment is the liberty 'of natural, not artificial, persons, nevertheless a newspaper corporation was sustained, in 1936, in its objection that a State law deprived it of liberty of press. As to the natural persons protected by the due process clause, these include all human beings regardless, of race, colour or citizenship." (p. 981) We have already referred, in general terms, to those Senate Document No. 170, 82d. Congress, Ed. Edward S.

Corwin, 116 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 'citizens' 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 "any person" and "any citizen", and when the Constitution laid down the freedoms contained in Art. 19(1)(a)-(g), as available to "all citizens", it deliberately kept out all noncitizens.

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) 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 " citizens". 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, 117 where the Fourteenth Amendment (s. 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 I aforesaid is in these terms and brings out the distinction very clearly :"All persons born or naturalised 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." The question may be looked at from another point of view.

Art. 19 lays down that "all citizens" shall have the right to freedoms enumerated in cls. (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 Art. 19, then all the rights contained in cls. (a) to (g) should be available to a corporation.. But clearly some of them, particularly those contained in cls. (b), (d) and (e) cannot possibly have any application to a corporation. It is thus clear that the Tights of citizenship envisaged in Art. 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.

118 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".

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 their incorporation; but that does not necessarily confer citizenship on them. There is also no doubt in our mind that Part 11 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 Art. 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.

In view of this answer, we do not consider it necessary to answer the second question as that would have arisen only if the first question had been answered in the affirmative.

Let the cases go back to the Bench for hearing on merits with this opinion. Costs of the hearing before the special Bench will be dealt with by the Bench which ultimately hears and determines the controversy.

.lm15 HIDAYATULLAH J.-Two questions have been referred to this Bench for opinion. They are :

(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 ? The State Trading Corporation has been assessed to sales tax by the Commercial Tax Officer, Vishakhapatnam and a demand has been made upon it. By this petition under Article 32 of the Constitution it challenges the demand on the ground inter alia that the impugned order and the demand for the tax infringe its fundamental rights which are guaranteed to citizens by Art. 19 sub-clauses (f) and (g) and these sub clauses read :

Art. 19(1). All citizens shall have the right (f) to acquire, hold and dispose of property;

(g) to practice any profession, or to carry on any occupation, trade or business.

The State Trading Corporation claims to be a citizen for the application of these sub-clauses, which fact being disputed on the other side, has given rise to the two questions above set out. As the questions amply indicate, the share capital of the State Trading Corporation is entirely contributed :by the Central Government. The shares are held by the President of India and two Secretaries to Government.

The State of Andhra Pradesh, therefore, denies that the State Trading Corporation being an artificial person is a citizen and consequently contends that Art. 19 is inapplicable because the word 'citizen' in the article refers 120 to natural persons. Additionally, it contends that being a department of Government, the State Trading Corporation cannot claim protection of Art. 19 against an action of the State.

Mr. Setalvad in formulating the grounds on which he rests the claim of the State Trading Corporation to citizenship, points out that the Constitution does not define the word 'citizen', that Part 11 of the Constitution which deals with citizenship is not material inasmuch as it is concerned with natural persons only and is not exhaustive and that the Citizenship Act (LVII of 1955) which provides for certain matters relating to citizenship but defines the word 'person' so as to exclude artificial persons like corporations aggregate, cannot also be regarded as exhaustive. He thus contends that corporations aggregate which, according to him, were citizens before the Constitution and the Citizenship Act, continue to enjoy the privileges of citizens, one of which is the guarantee in Article 19. In support of his submission that corporations were and continue to be citizens, he relies upon the fact that corporations possess a nationality and claims that in this connection 'nationality' and 'citizenship' bear the same meaning. He relies upon the observations of Mukherjea, J. (as he then was), in Chiranjit Lal Chowdhuri v. The Union of India(1) where the learned Judge observed obiter :

"The fundamental rights guaranteed by the Constitution are available not merely to individual citizens but to corporate bodies as well except where the language of the provision or the nature of the right compels the inference that they are applicable only to natural persons. An incorporated, company, therefore, can come this Court for enforcement of its fundamental rights and so may the individual shareholders to enforce their own ; but it would not be open to an individual shareholder to complain of an Act which affects the fundamental rights of the company except to the extent that it constitutes an infraction of his own rights as well." Mr. Setalvad also refers to other cases in which, though the point was not decided, several corporations claimed the (1) [1950] S.C.R. 869, 898.

121 protection of Article 19 and no objection was raised.

Lastly, he contends that the word 'citizen' should be liberally construed to include a corporation aggregate which consists of Indian citizens only. On the second question he contends that a company has an existence which is independent of its members and the State Trading Corporation cannot be equated with the shareholders or the Government since the corporate veil cannot be allowed to be pierced.

He points out that there are several States in our Republic and there is a great danger of one. Government stifling the trading activities of another Government either by law or executive action against which Article 19 is the only effective safeguard. He submits that it could not have been intended that while every individual citizen should be protected, a group of citizens, should by mere incorporation, lose the benefits of the guarantee in Article 19.

We are dealing here with an incorporated company. The nature of the personality of an incorporated company which arises from a fiction of law, must be clearly under stood before we proceed to. determine whether the word 'citizen' used in the Constitution generally or in Article 19 specially, covers an incorporated company. Unlike an unincorporated company, which has no separate existence and which the law does not distinguish from its members an incorporated company has a separate existence and the law recognises it as a legal person separate and distinct from its members. This new legal personality emerges from the moment of incorporation and from that date the persons subscribing to the memorandum of association and other persons Joining as members are regarded as a body corporate or a corporation aggregate and the new person begins to function as an entity. But the members who form the incorporated company do not pool their status or their personality. If all of them are citizens of India the company does not become a citizen of India any more than if all are married the company would be a married person. The personality of the members has little to do with the persona of the incorporated company. The persona that comes into being is not the aggregate of the personae either in law or in metaphor. The corporation really has no physical existence ; it is a mere 'abstraction of law' as Lord Selborne described it in G. E. Rly. v. 9-2 S. C. India/64 122 Turner(1), or as Lord Macnaghten said in the well-known case of Salomon v. Salomon & Co. (2) it is "at law a different person altogether from the subscribers to the memorandum of association." This distinction is brought home if one remembers that a company cannot commit crimes like periury, bigamy or capital murder'. This persona dicta being a creature of a fiction, is protected by natural limitations as pointed out by Palmer in his Company Law (20th edn.) p. 130 and which were tersely summed up by counsel in R. v. City of London(3) when he asked "Can you hang its common seal?". It is true that sometimes the law permits the corporate veil to be lifted, but of that later.

There is a rule of English Law that a company or an incorporated corporation has a nationality and this nationality is determined by the law of the country in which it is incorporated. Mr. Setalvad thus begins his contention by citing certain obiter statements from Janson v. Driefontein Consolidated Mines Ltd.(4) such as :

"I assume that the corporation...... was to all intents and purposes in the position of a natural born subject of the late South African Republic." (Lord Macnaghten-p. 497) "I think it must be taken that the respondent company was technically an alien and became, on the breaking out, of hostilities between this country and South African Republic an alien enemy". (Lord Davey-p. 498) "The company must clearly be treated as a subject of the Republic notwithstanding the nationality of its shareholders." (Lord Brampton-p. 501) He contends that there is no difference between 'nationality' and "citizenship" and the two words are synonymous and relies upon the following passage from Weis on Nationality and Statelessness in International Law (1956) pp. 4-5"One of the terms frequently used synonymously with nationality is citizenship.

Historically, this is correct for States with the Roman conception of nationa(1) [1872] L.R. 8 Ch. App. 152. (2) [1897] A.C. 22, 51.

(3) [1632] 8 St. Tr. 1087, 1138. (4 ) L.R. r 1902 1 A.C. 492.

123 lity, but not for States with the feudal conception of nationality, where citizenship is used to denote not political status but membership of a local community. It has, however, become usual to employ the term citizen instead of subject in republican Statesincluding common law countries such as the United States ; he who before was a 'subject of the King' is now a 'citizen of the State' and in that sense and in those States the terms 'nationality' and 'citizenship' must be regarded as synonymous." It is, therefore, contended somewhat syllogistically that all incorporated corporations have the nationality of the State under the laws of which they are incorporated, that nationality is synonymous with citizenship and therefore incorporated companies are citizens. From this it is but a mere step, which is also taken, that incorporated companies in India were and still are citizens and that the Constitution and the Citizenship Act have nowhere deprived than of this citizenship or of the right to protect themselves by invoking Article 19(1) (f) and (g). Alternatively it is contended that if all the members of the Corporation are Indian citizens then the Corporation as a whole must be a citizen, for the whole cannot be different from its parts.

Both the arguments involve fallacies. The first assumes that 'nationality' of corporations and citizenship of natural persons are the same concepts and caps it with the fallacy of ignorantio elenchi which in English is called the fallacy of irrelevant conclusion because instead of proving that corporations are citizens, it is sought to be shown that they ought to be citizens for the remedy is so good and effective. The second involves the fallacy of petition principle because it tends to beg the question and founds a conclusion. on a basis that as much needs to be proved as the conclusion itself. In my opinion, the State Trading Corporation cannot be said to be a citizen either by itself or by taking it as the aggregate of citizens, that nationality of a corporation is a different concept not to be confused with citizenship of natural persons,that the word "citizen" in Art. 19(1) sub-clauses (f) and (g) refers to a natural person, that State Trading Corporation is really a Department of Government behind the corporate veil and that for all these 124 reasons the two questions must be answered in favour of the objectors. I shall now make good these conclusions with reasons.

Article 19 uses the word 'citizen' while the word 'person' is used in some other articles in Part III notably Art. 14 (creating equality before the law), Art. 21 (protection of life and personal liberty). By Art. 367, (unless the context otherwise requires) the General Clauses Act, 1897 applies to the interpretation of the Constitution. The word 'citizen' is not defined in the Constitution or the General Clauses Act but the word 'person' is defined in the latter to include 'any company or association or body of individuals whether incorporated or not.' The word"person" therefore, conceivably bears this extended meaning at least in some places in Part III of the Constitution. But it is not necessary to determine where in the Constitution the word 'person' includes a company etc. because that word has not been used in Article 19. The claim of corporations aggregate, like the petitioner, to the benefits which Art.

19 gives, must depend on whether the word 'citizen' which is actually used can bear a similar enlarged meaning. Mr. Setalvad is right in contending that use of the word 'person' with an enlarged meaning in some places and of the word 'citizen' in other places does not by itself prove that artificial persons are outside the meaning of the word 'citizen'. The contrast may not be between natural and artificial persons so much as between citizens and noncitizens, and it is possible that where the benefit is intended to go to noncitizens, a word of wide meaning is used and where the benefit is meant for citizens only the word 'citizen' is used. It is true that the word 'citizen' cannot include an enemy or an alien while the more general word 'person' may but that does not answer the question whether the word citizen' can include a company or association or body of individuals, to borrow the words of the definition. The answer to that question must depend, as already pointed out, on the connotation of the word 'citizen' which must be found out.

In attempting to determine whether the word 'citizen' in Art. 19 denotes only a natural person or includes a company etc., we must turn first to the Constitution to see if the use of the word 'citizen' or citizenship in any other 125 place bears the extended meaning or throws any light on this problem. The word 'citizen' is used in 29 places and the word 'citizenship' in 6 places. These words are also used in headings to Chapters and marginal notes but these may be ignored. It is worth inquiring if there is any place at all other than Art. 19 where not only a natural person but also an artificial person is meant. The word first occurs in the preamble thus "We the people of India having solemnly resolved to secure to all its citizens justice, social, economic and political Liberty of through, expression, belief, faith and worship ;

Equality of status and of opportunity; and to promote among them all Fraternity assuring the dignity of the individual and the Nation," etc.

'Liberty of thought, expression, belief, faith and worship, equality of status' and 'dignity of the individual are expressions appropriate to natural persons and not companies, associations and other corporations aggregate and the word 'citizen' in the preamble refers to individuals for whom the Constitution was being made. In this connection, it must be remembered that a Constitution is a bond between the citizens and the administration and regulates their respective actions. It is as Ahrens defined it :

"L.' ensemble des institutions et des lois fondamentales, destine eargler l'action de l'administration et de tous les cityens.

(Ahren : Course de Droit Naturel & C. iii p. 380) (The body of institutions and fundamental law designed to regulate the action of the Administration and all the citizens).

The preamble in solemn words sums up what is later provided in the Constitution. 'Citizens' in the preamble mean those individuals who under the Constitution are guaranteed civic rights