UNIVERSITY OF PETROLEUM & ENERGY STUDIES

SCHOOL OF LEGAL STUDIES

BCOM.,LLB(HONS.)

SEMESTER V

ACADEMIC YEAR: 2015-2020

PROJECT –1

FOR

Administrative Law

Under the Supervision of: Mr. Himanshu Dhandharia

Name - Saumya Jain

Course - BCom. LLB
Roll no - 107
SAP ID – 500047843
 Statutory Public Corporations
A statutory corporation is a corporation created by statute. Their precise nature varies by
jurisdiction thus they might be ordinary companies/corporations owned by a government with or
without other shareholders, or they might be a body without shareholders which is controlled by
national or sub-national government to the (in some cases minimal) extent provided for in the
creating legislation.

Statutory Corporation are public enterprises brought into existence by a Special Act of the
Parliament. The Act defines its powers and functions, rules and regulations governing its
employees and its relationship with government departments.
This is a corporate body created by the legislature with defined powers and functions and is
financially independent with a clear control over a specified area or a particular type of commercial
activity. It is a corporate person and has the capacity of acting in its own name. Statutory
corporations therefore have the power of the government and considerable amount of operating
flexibility of private enterprises. Few are

 Airports Authority of India (www.aai.aero/)

 Damodar Valley corporation (www.dvcindia.org/)
 National Highways Authority of India (www.nhai.org/)
 Central Warehousing Corporation (cewacor.nic.in/)
 Inland Waterways Authority of India (www.iwai.gov.in/)
 Food Corporation of India (fciweb.nic.in/)
 National Human Rights Commission (www.nhrc.nic.in/)

There are some basic features or characteristics of a statutory corporation:

1. Generally financed by the central or state government.

2. May borrow funds from the public and govt. organization through statutory sources.
3. They have separate legal entity.
4. They have to frame their own policies & procedures within the scope of state legislature.
5. Providing better services to public & make adequate profit.
6. They are autonomous in their functioning thus they enjoy operation flexibility.
7. They can recruit & appoint their employee with their service condition, since they are
corporate body.
8. They have to follow the special statute strictly.
A statutory corporation is a corporation created by statute. Their precise nature varies by
jurisdiction thus they might be ordinary companies/corporations owned by a government with or
without other shareholders, or they might be a body without shareholders which is controlled by
national or sub-national government to the (in some cases minimal) extent provided for in the
creating legislation.
For E.g. RBI (reserve bank of india), State Bank of India, Life Insurance Corporation, Unit Trust
of India, Employees State Insurance Corporation, Oil and Natural Gas Corporation etc. are some
examples of statutory corporations.

The Act or statute defines its objectives, powers an functions. A public corporation seeks to
combine the flexibility of private enterprise with public ownership and accountability. “a public
Corporation is an organization that is clothed with the power of the government, but is possessed
of the flexibility and initiative of private enterprise. A public corporation enjoys internal autonomy
as there is no Parliamentary interference in its day-to-day working. Therefore, it can be run in a
businesslike manner. There is “a high degree of freedom, boldness and enterprise in the
management of undertakings and circumspection which is considered typical of government
departments”

The main features of Statutory Corporation :

1. Establishment: -A public corporation is established under a special act of parliament or state Legislature.
The act lists out details in respect of powers, privileges and area of activities of the corporation.

2. Autonomy: -It enjoys autonomous powers in respect of expansion and major administrative decisions.
However, approval of the government may be required in case of major policy changes.

3. Objective: -It works on profit objective, and as such its activities are commercial in nature.
4. Decision-Making: -There is quick decision making as compared to departmental form, as it does not have
to consult government officials in respect of decision-making.

5. Administration: -The Administration is undertaken by Board of Directors nominated by the Government.

6. Answerability: -It is answerable to the Parliament as regards to its activities.

7. Capital Contribution: -Its capital is wholly owned and subscribed by the Government. The public are not
the shareholders of this type of organization as compared to that of Government Company.

8. Borrowing Power: -Although its capital is contributed only by the Government, yet it can borrow funds
from the public. This means public can be the lenders or creditors of this type of organization.

Major Differences between Public Corporation and Government

Departmental Undertaking

Public Corporation:

1. it is an instrument of the Government. It is also called statutory corporation.

2. It is a purely commercial.

3. It is an autonomous body.

4. Examples:
ONGC, RTC, LIC, FCI, Damodar Valley Corporation, Air India, etc

5. There are two different basic concepts in the management of public corporations, viz. autonomy
and accountability.
6. The structure of the public corporation cannot be amended by Government itself. The structure
of the public corporation can be altered only by Parliament.

7. It has its own independent administration.

8. It is a separate juristic person. It can sue and can be sued.

9. For tortious liability, it is held liable. Article 300 does not apply.

10. Section 123 (Privilege of Communications of State Affairs) of Evidence does not apply to
public corporations.

11. Article 299 does not apply to public corporations.

12. The labor problems between the employees and public corporations shall be settled by way of
Industrial Tribunals and Labour Courts.

13. Industrial Employment Standing Orders Act, 1946 shall apply to the public corporations.

14. The employees are not civil servants.

Government Departmental Undertaking:

1. It is purely government; it is also called as Government Company.

2. It does not possess commercial qualities.

3. It is not an autonomous body. It is purely under the control of the Government and Minister
concerned.

4. Examples: Railways, Postal & Telegraphs etc.

5. These two concepts are not seen in Government Departmental undertakings
.
6. The articles of association of Government Company can be amended by the Government
without any reference to Parliament.

7. It is a part of executive.

8. It is not a juristic person. It can sue or can be sued on the name of the Minister or Secretary
concerned.

9. For tortious liability, Article 300 applies. The’ Government can claim Crown Privilege in certain
cases.

10. Section 123 (Privilege of Communications of State Affairs) of Evidence Act can be invoked
by Government Departments.

11. Article 299 (Contractual liability) of the Government also applies to Government Departmental
undertakings.

12. The labor problems between the employees and Government Departmental Undertakings shall
be solved only by Central Administrative Tribunals and State Administrative Tribunals.

13. Industrial Employment Standing Orders Act, 1946 does not apply to the Government
Departmental Undertakings.

14. The employees are civil servants.

Public Corporations in India

A public corporation as a form of public enterprise was developed in the second half of 20th
century. W.A. Robson calls it “the most important invention of the 20th century in the sphere of
government institutions.” Herbert Morrison views it as “a combination of public ownership,
public accountability and business management for public ends. In fact, it is clothed with the
power of government but possesses the flexibility and initiative of a private enterprise.”

Some of the important public corporation established by the Union government are:

(1) Reserve Bank of India (1935)

(2) Damodar Valley Corporation (1948)

(3) Industrial Finance Corporation of India (1948)

(4) Indian Airlines Corporation (1953)

(5) Air India International (1953)

(6) State Bank of India (1955)

(7) Life Insurance Corporation of India (1956)

(8) Central Warehousing Corporation (1957)

(9) Oil and Natural Gas Commission (1959)

(10) Food Corporation of India (1964)

Some of the important public corporations established by state governments are:
(1) State Financial Corporations

(2) State Road Transport Corporations

(3) State Land Mortgage Banks

(4) State Electricity Boards

A public corporation is wholly owned by state, that is, its entire capital is provided by the government. It
is created by a special law of legislature which may be enacted by Central or state governments. This
special statute defines its objectives, powers, duties and privileges and also prescribes the form of
management and its relationship to the government departments as a corporate body.

It is a separate entity for legal purposes and can sue and be sued, enter into contracts and acquire property
in its corporate name. It is usually independently financed except for appropriations to provide capital or
to cover losses. It obtains its funds from borrowing which may be from the treasury or from the public
and from revenues derived from the sale of its goods and services. It is authorized to use and reuse its
revenues.

The public corporation are generally exempt from regulatory and prohibitory statutes applicable to the
expenditure of public funds and are not subject to budget, accounting and audit procedures which are
applicable to non-corporate agencies. The employees of corporate bodies are not civil servants. They are
recruited and remunerated under terms and conditions which are determined by the corporation itself.

More significantly corporation enjoys functional autonomy and is not subject to direct control of the head
of the department in its normal operations. Except for the formal policy directions issued to it by a
minister, it is guided by the statute which created it. It is managed by a board of directors appointed by
the government. One of the directors is appointed to function as the chairman of the board.

A public corporation form of organization facilitates autonomy in its day-to-day administration and
provides freedom from political influences and partisan considerations. It provides for a healthy mix of
commercial efficiency of a private enterprise with public accountability of a government department and
provides freedom from unsuitable rules, regulations and controls of the government.

The corporation pattern facilitates a high degree of financial flexibility and personal mobility and serves
as a valuable instrument for social control of economic life. But the critics maintain that it is inherently
rigid and ill-suited to meet the requirements of changing times because the changes in its structure or
procedure can be affected only by a statutory amendment. This fact gives rise to the problems of
reconciling administrative autonomy with public accountability.
Naturally this does not facilitate clear distinction between the “matters of policy” and “matters of day-to-
day administration”. The corporations place significant political power in the hands of a small
unrepresentative and a self-perpetuating group which controls and manages it. In actual practice they do
not facilitate flexibility and autonomy in both financial and administrative aspects.

The ministries in India look upon the corporation as their wings or branches and issue orders and
directions in a similar way. The Estimates Committees (Second Lok Sabha) in its eightieth report observed
that no well-defined principles had been followed in determining the form of organisation of public
undertakings.

The committee suggested that wholly owned government undertakings should ordinarily be organised in
the form of statutory corporations. The departmental management was found justified for special reasons
like defence, strategic or security needs or for purposes of economic control and the company form should
have been an exception for organisations of specific nature.

The Krishna Menon Committee Report on State Undertakings in India found the weaker side of
corporation form in the departmental methods of purchase of raw materials and sale of products. Their
permanent staff has been subject to rules and regulations applicable to civil servants. Putting of cash
receipts into government account has resulted in tardy procedures of arranging funds, and sanctions for
expenditure.

The system of accounting and audit has been cumbersome and dilatory. Still the public corporation as an
organisational device for the administration of public undertakings, has won acclaim both in India and
abroad. In Britain, most of the nationalized industries like British Broadcasting Corporation, British
Overseas Airways Corporation, Overseas Food Corporation, etc., have been organized as public
corporations. Countries like France, Canada, Italy, and the United States have also adopted this form of
organisation for their public enterprises. Independent India has followed this pattern.

The Damodar Valley Corporation, Indian Airlines Corporation, Air India, Life Insurance Corporation,
Central Warehousing Corporation, Food Corporation of India, Industrial Finance Corporation, etc., are the
well known examples in point. In addition, state governments have set up their own corporations, the
most important of which are the electricity board and the state roadways transport corporation. The
Public Corporations form IS acceptable to all political parties, right as well as left, as appropriate
instruments for operating nationally owned undertakings.

The Study Team on Public Sector Undertakings of ARC examined the entire issue in depth and observed:
“The departmental form is one that is generally regarded suitable only for undertakings that provide
services affecting the totality of the community. The undertakings that require a high degree of freedom,
boldness and enterprise in management must be free from the circumspection and cumbersome, time-
consuming and vexatious procedures of departmental administration.

Both the company form and the Public Corporation form can provide for this flexibility and autonomy. It
is not, therefore, possible to prescribe one of these forms as applicable for all types of undertakings and
under all circumstances. We therefore, recommend that the government should adopt the form of Public
Corporation as the general rule for the industrial and commercial undertakings in the public sector in
India.”

The Administrative Reforms Commission itself in its report of 1968 recommended that:

(1) Undertakings which are predominantly trading concerns or areas of business, may have the
company form of organisation.

(2) Development agencies should, be run as statutory corporations or as departmental

undertakings.

(3) Statutory corporations should be adopted in the industrial and manufacturing fields.

(4) A government company form of organisation may be adopted for projects to encourage private
participation.

The government’s decision on these recommendations was: “For certain enterprises providing
public utilities which are primarily intended to develop the basic infrastructure facilities, the
statutory corporation form of management may be preferable. For other enterprises including those
operating in the monopolistic field but where the commercial aspect is predominant, the present
form of a company may allow more flexibility. The government, therefore, does not consider that
this form of statutory corporation should in general be adopted for public enterprises”. The
government has thus decided to continue with its earlier policy of supporting the company form
of organisation for state undertakings.

The internal autonomy was asserted in:

(1) Policy matters,

(2) Day-to-day routine operations,

(3) Personnel policies and service conditions, and

(4) Commercial audit.

Similarly, ministerial control was resisted and limited powers of the concerned minister were
haltingly accepted. The government has the authority to frame rules and regulations to facilitate
the working of these enterprises. It can prescribe forms, lay down procedures and even prescribe
the activities to be undertaken.

The government stands empowered to appoint the chairman and members of the board of
management and the managing director. In addition, it retains the power of approval of
appointment to posts carrying salaries above a certain limit. The government can institute enquiries
into the working of a corporation.
The government can remove from office any member of the management board under certain
conditions. The government can supercede a board if a particular board of management fails to
carry out the purposes for which it was created or if it fails to carry out the directives issued by the
government.

Similarly the power of issuing directives is the most important power which is exercised by a
minister. A sub-clause of the same clause lays down that, if any dispute arises between the Central
government and the corporation, the decision of the Central government shall be final and binding.

The financial powers of the minister were narrowed down to advice, sanction and prior approval.
Ministers are authorized to appoint a financial adviser on the governing board of a corporation.
Such adviser can exercise a sort of veto over affecting expenditure and the financial policy of the
government. The sanction of the government is necessary to sanction capital expenditure above a
certain amount, and for matters connected with borrowings, investments, securities, distribution
of profits, etc.

The approval of the government is required about the forms for maintaining the accounts of the
enterprise and for their audit. Usually, the audit of accounts is done by the auditors appointed by
the government. The government also controls the fixation of prices of goods produced by the
enterprises as well as the quantum and rate of payment for services rendered.

The relationship between ministers and public undertakings has not worked smoothly. The
ministers usually issue clear directives in writing as they are supposed to do and take responsibility
for such directives before the Parliament. They have also chosen to depend upon influence and
secure compliance of their wishes through informal means like appointment of officials and non-
officials as chairman and members of governing boards; deputizing serving government officers
to executive posts in public undertakings

Statutory Authority
A statutory authority is a body set up by law which is authorized to enact legislation on behalf
of the relevant country or state. They are typically found in countries which are governed by
a British style of parliamentary democracy such as the UK and British Commonwealth countries
like Canada, Australia, New Zealand and India.

The goals and objectives of a statutory authority are typically set out in the originating act or in
subsequent governmental guidance or instruction. Its senior management are chosen by the
relevant government (State or Federal) and will work closely with its associated ministry or
ministries.

Sukhdev Singh & Ors. Vs. Bhagatram Sardar Singh Raghuvanshi and another
In Sukhdev Singh & Ors. Vs. Bhagatram Sardar Singh Raghuvanshi and another (supra), question
arose whether Oil and Natural Gas Commission, the Industrial Finance Corporation and Life
Insurance Corporation are 'authorities' within the meaning of Article 12. The case was decided by
a majority of 4:1. A.N. Ray, CJ speaking for himself and on behalf of Y.V. Chandrachud and A.C.
Gupta, JJ. held that all the three were statutory Corporations, i.e., given birth by Statutes. The
circumstance that these statutory bodies were required to carry on some activities of the nature of
trade or commerce did not make any difference. The Life Insurance Corporation is (i) an agency
of the Government (ii) carrying on the exclusive business of Life Insurance (i.e. in monopoly), and
(iii) each and every provision of the Statute creating it showed in no uncertain terms that
the Corporation is the voice and the hands of the Central Government. The Industrial
Financial Corporation is in effect managed and controlled by the Central Government, citizens
cannot be its shareholder. ONGC (i) is owned by the Government, (ii) is a statutory body and not
a company and (iii) has the exclusive privilege of extracting petroleum. Each of the three,
respectively under the three Acts under which they are created, enjoy power to do certain acts and
to issue directions obstruction in or breach whereof is punishable as an offence. These distinguish
them from a mere company incorporated under the Indian Companies Act. The common features
of the three are (i) rules and regulations framed by them have the force of law, (ii) the employees
have a statutory status, and (iii) they are entitled to declaration of being in employment when the
dismissal or removal is in contravention of statutory provisions. The learned Chief Justice added,
by way of abundant caution, that these provisions did not however make the employees as servants
of the Union or the State though the three statutory bodies are authorities within the meaning
of Article 12 of the Constitution.