Skip to main content

Government cannot be made responsible for the liability of a PSU

In Hindustan Cables Vs. Tapan Kumar Sarkar, the Calcutta High Court held that a company may be under the control of the Central Government. However, in law, it is a separate legal entity. The age old principle of law laid down in Saloman v. Saloman, (1897) still holds fort. A limited company has an independent personality in the eye of law and has an identity separate from its shareholders or Board of Directors. Even a wholly held subsidiary of a company has an independent entity separate from that of the holding company. The Central Government may be the only or single largest shareholder of a limited company, but still the company has a distinct entity and its rights and liabilities cannot be attributed to the Central Government. Government companies do not become agents of the Government so as to bind the Government for their acts, liabilities and obligations as held by the Hon’ble Apex Court in the case of Steel Authority of India Ltd. v. National Union Water Front Workers, (supra). In M/s. Electronics Corporation of India Ltd. v. Secretary, Revenue Department, Govt. of A.P., (supra), the Apex Court emphasised the clear distinction between a company and its shareholder even though the shareholder may be only one i.e. the Central Government or the State Government. In the case of State of Assam v. Barak Upatyaka D. U. Karmachari Sanstha (supra), the Supreme Court observed that a trade union representing the employees of a cooperative society cannot, by filing a writ petition, require the Government to bear and pay the salaries of the employees of the cooperative society, however pervasive the control of the State Government over such society.

The position in law is thus settled. Even if the Government is the sole shareholder of a company, the liabilities of the company cannot be said to be the liability of the Government. No doubt, the principle of ‘lifting of corporate veil’ has made an inroad into the concept of distinct legal entity of a limited company or corporation.

Comments

Post a Comment

Most viewed this month

Court approached in the early stages of arbitration will prevail in all other subsequent proceedings

In National Highway Authority of India v. Hindustan Steelworks Construction Limited, the Hon'ble Delhi High Court opined that once the parties have approached a certain court for relief under Act at earlier stages of disputes then it is same court that, parties must return to for all other subsequent proceedings. Language of Section 42 of Act is categorical and brooks no exception. In fact, the language used has the effect of jurisdiction of all courts since it states that once an application has been made in Part I of the Act then ―that Court alone shall have jurisdiction over arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in no other Court. Court holds that NHAI in present case cannot take advantage of Section 14 of the Limitation Act, 1963 for explaining inordinate delay in filing present petition under Section 34 of this Act in this Court.
Post a Comment
Read more

No Rebate For Stamp Duty Paid In Another State - Bombay HC

A three judge bench of the Hon'ble Bombay High Court (Bombay HC) in a recent judgment in the matter of Chief Controlling Revenue Authority, Maharashtra State, Pune and Superintendent of Stamp (Headquarters), Mumbai v Reliance Industries Limited, Mumbai and Reliance Petroleum Limited, Gujarat1 has held that orders in case of a scheme of arrangement under Section 391 to 394 of the Companies Act, 1956 (Act) involving different High Courts in multiple states, are separate instruments in themselves. Accordingly, stamp duty would be payable on all the orders (and consequently, all the states) without the benefit of remission, rebate or set-off.
Post a Comment
Read more

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more