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Writ Petitions against Public Sector Enterprises

In common law, a Writ is a formal written order issued by a body with administrative or judicial jurisdiction. In modern usage, this body is generally the Court. Writ Petition is a Petition in a Court seeking issuance of such a Writ against some natural or legal entity directing them to act or stop them from acting in a particular manner. There are various kinds of Writs, but we are mainly concerned with Writ of Prohibition and Writ of Mandamus in Commercial matters.

Under Indian Constitution, both natural and juristic persons like a Company can file a Writ Petition under Article 226 in the High Court and under Article 32 in the Supreme Court for violation of one’s fundamental rights. Now these fundamental rights are enforceable only against Central and State Governments and all local and ‘Other Authorities’ under the Control of the Government as coming within Article 12. It cannot generally be enforced against private persons or entities. The cases where such Petitions can be filed against private entities have been dealt with later in this Article. Incidentally, Writ Petitions cannot be filed seeking enforcement of ‘Directive Principles’ of State Policy given in Part IV of the Constitution, as these are non-justiciable in nature.

The term ‘Other Authorities’ has been widely interpreted by the judiciary in a number of cases. In one of the first cases relating to ‘Other Authorities’ , Ramana Dayaram Shetty Vs International Airport Authority of India (IAAI) and Ors 1979 AIR 1628 , Hon’ble Mr Justice P N Bhagwati dealt with the question as to when does such a Corporation become an instrumentality or Agency of the Government. It was held that while it is not possible to make an exhaustive list and have a cut and dried formula, but following principles may be applied to determine the same, namely:

  1. One thing is clear that if the entire share capital of the corporation is held by the Government it would go a long way towards indicating that the corporation is an instrumentality or agency of the Government;

  2. Where financial assistance of the State is so much as to meet almost the entire expenditure of the corporation it would afford some indication of the corporation being impregnated with governmental character.

  3. It may also be a relevant factor, whether the corporation enjoys monopoly status which is State conferred or State protected;

  4. Existence of "deep and pervasive State control" may afford an indication that the corporation is a State agency or instrumentality;

  5. If the functions of the corporation are of public importance and closely related to governmental functions it would be a relevant factor in classifying the corporation as an instrumentality or agency of the Government;

  6. Specifically, if a department of a Government is transferred to a corporation it would be a strong factor supportive of this inference of the corporation being an instrumentality or agency of the Government. Accordingly, IAAI was held to be State under Article 12. Relief to Petitioner, was however, denied for delay, laches and other ground

Similarly, in the case of a Government Company, namely Bharat Petroleum Corporation Ltd (BPCL) post nationalization of Burmah Shell, in 1981 AIR SC 212 Som Prakash Rekhi Vs Union of India & Anr, Hon’ble Mr Justice V.R. Krishna Iyer, held with 2:1 majority that Government Companies like BPCL are State within the meaning of Article 12 and a Writ against them would be maintainable. It was noted that the core fact is that the Central Government through Sec 7 of Acquisition Act chose to transfer its own property to its own off spring. Therefore, Burmah Shell, though a Government Company, is but an alter ego of the Central Government. Juristic veil worn for certain legal purposes cannot obliterate the true character of the entity for purposes of constitutional law.

However, not all Government Companies are State. In case of Maruti Udyog Ltd (which was Government Company at the relevant time, with Government and Suzuki shareholding at 60:40), Delhi High Court Division Bench ( AIR 1992 Delhi 145 P B Ghayalod Vs Maruti Udyog Ltd) noted that Joint Venture Agreement dated 2.10.1984 between Government of India and Suzuki provided that all major decision with respect to management and operation of the Respondent shall be made in consultation with and concurrence of Suzuki. There was no monopoly, no function closely related to government function nor is the company financed fully by Government. One of the Director nominated by Suzuki is also Joint Managing Director of the Company. As such, there was no deep and pervasive State Control. Maruti was held to not to be an Authority within the meaning of Article 12. On the other hand, in a matter related to tender for running Duty Free Shops ( Flemingo Duty Free Shops Private Ltd Vs UoI and Ors), Mumbai International Airports Ltd (MIAL), where the shareholding of Government was only 26% , was considered amendable to Writ Petition based on the terms of the Operation, Management and Development Agreement (OMDA) , monopoly status and public nature of the function and special government like rights given for evicting unauthorized occupants of airport land.

Writ was also held to be maintainable in Contractual and tender matters. In 1990 AIR SC 1031 Mahabir Auto Stores & Ors Vs Indian Oil Corporation & Ors, it was held that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in action by State instrumentality in dealing with the citizens.  Such action can be questioned in proceedings under Article 226 or Article 32 of the Constitution. Similarly, Hon’ble Supreme Court had held that departure from tender notice is not possible. If the Government has chosen to tender, it must abide by the result of that. (AIR 1986 SC 1527 Harminder Singh Vs UOI).

The powers available to Hon’ble Supreme Court and High Courts under Article 32 and Article 226 respectively are vast and there are no fetters. In appropriate cases, Writ Petition has been held to be maintainable even if Agreement has Arbitration Clause as an alternative remedy is ‘ rule of discretion’ and not ‘compulsion’ . It was held that in spite of availability of alternative remedy, High Court may still exercise its writ jurisdiction where the Petitioner seeks enforcement of any of the fundamental rights, where there is failure of natural justice or where vires of an Act is challenged ( AIR 2003 SC 2120 Harbanslal Sahnia and Anr Vs Indian Oil Corporation and Ors) . PSUs can also file Writ Petitions against other PSUs or State Authorities. Mechanism of prior clearance of ‘Committee of Disputes’ earlier constituted based on orders of Hon’ble Supreme Court was subsequently recalled and mechanism discontinued in 2011 by another decision of the Hon’ble Supreme Court ( 2011 AIR SCW 3466 Electronics Corporation Vs Union of India ).

Coming to cases where Writ Petitions are usually held to not to be maintainable are where disputed questions requiring investigation or detailed evidence are involved. (AIR 1992 SC 1018 State of Rajasthan Vs Bhawani Singh and Ors ) . Courts also do not interfere in the wisdom and advisability of economic policies of the Government, unless policy is contrary to statutory provisions or the constitution ( AIR 2002 SC 350 Balco Employees Union Vs UOI and Ors)

Hon’ble Supreme Court in AIR 2004 SC 1467 Spl Director and Anr Vs Mohd Ghulam Ghouse & Anr deprecated the practice of entertaining Writ Petitions questioning legality of show cause notice stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. Hon’ble Court held that Petitioner should invariably be directed to respond to show cause notice and take all stands highlighted in Writ Petition. Similarly, where remedy by way of Appeal is available, Writ Petition is normally held to be inappropriate. ( AIR 1992 SC 2218 Union of India Vs Cottage Art Emporium) . Writ Petition is also not entertained against administrative orders or transfers and postings unless shown to be malafide or be in violation of statutory provisions prohibiting such transfer or posting.

As seen from the above analysis, Writ Petition is a very potent legal process for challenging a wrong and preferred mode of litigants for expeditious remedy. However, it is only available against Government and other instrumentalities of Government and for certain matters. It is not available against all entities and for all matters.

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