HINDUSTAN STEEL WORKS CONSTRUCTION LTD. versus STATE OF KERALA AND ORS.

Citation: [1997] 3 S.C.R. 919 · Decided: 22-04-1997 · Supreme Court of India · Bench: G.N. RAY · Disposal: Dismissed

Judgment (excerpt)

HINDUSTAN STEEL WORKS CONSTRUCTION LTD. 
A 
v. 
STATE OF KERALA AND ORS. 
APRIL 22, 1997 
[G.N. RAY AND G.T. NANAVATI, JJ.) 
Kera la Constmction Workers Welfare Funds Act (Act No. 20 of 
1989)--S. 2(c) & (e}--StateAge11cy/establishment is a third amt of Govt. and 
it cannot avoid a statlltory obligation like the Welfare Fund Act protecting the 
interest and welfare of workers-Even when there is deep and pervasive control 
of Govt., and the agency is 'state' within the meaning of Anicle It, it ca1111ot 
be held to be a depwtment/establishme11t of the govt. i11 all cases--111 the 
instant case, the Legislature did not intend a11 exemption. 
Words & Phrases : 
'Establishment of a Govemment'-Mea11i11g of-Penai11s 011/y to estab-
lishments directly ntll by Govemment and not through its agency. 
B 
c 
D 
The simple question which arose in this appeal is whether th~ 
appellant who is a Central Government agency is liable to contribute to E 
the Workers Welfare Fund as part of the contractual terms. The Kerala 
High Court held that the appellant was liable to contribute, against which 
an appeal was filed before this Court. It was submitted that, the appellant 
was 'State' within the meaning of Article 12 of the Constitution, the term 
'construction work' in S. 2(e) of the Welfare Funds Act did not cover 
government or its establishments and that the appellant company was the 
F 
third arm of the government. The respondents argued that a Government 
company by definition need not be fully owned by the Government and 
therefore a claim for exemption is not justified, that the Statute is a 
beneficial legislation and has to be implemented, and the statute did not 
grant exemption to government agencies/instrumentalities. 
G 
Dismissing the Appeal, this Court 
HELD : 1. There is no reason to interfere with the impugned decision 
of the Kerala High Court. After giving careful consideration to the facts of 
the case and the respective contentions made by parties, it appears that the H 
919 
920 
SUPREME COURT REPORTS 
(1997) 3 S.C.R. 
A appellant company cannot be held to be a department of the Government. 
There may be deep and pervasive control of the Government over appellant 
company and the appellant company, on such account may be an in-
strumentality or agency of the Central Government and as such a 'State' 
within the meaning of Article 12 of the Constitution. Even though the 
appellant is an agency or instrumentality of the Central Government it 
B cannot be held to be a department or establishment of the government, in 
all cases. Such instrumentality or agency has been held to he a third arm 
of the government in Ajay Hasia's case but it should not be lost sight of that 
it was only in the context of enforcement of fundamental rights against the 
action of government and its instrumentalities or agencies it was held that 
C such agencies were the third arm of the government and they cannot avoid 
constitutional obligation. There is no question of enforcing any fundamen-
tal right in the instant case. On the contrary, the question of protecting the 
welfare of the employees vis-a-vis the instrumentality or agency of the 
Central Government under the Welfare Funds Act is to be kept in mind for 
the purpose of deciding the rival contentions of the parties.· 
D 
If clauses 2(c) and (e) of the Welfare l<'unds Act are taken into 
consideration, it will be quite apparent that the legislature has not intended 
to exclude the government company or the statutory corporations from the 
purview of the Welfare Funds Act. The decision in C.R. Raman's case is not 
E an authority for the proposition that an instrumentality or agency of the 
government is essentially a government department for all purposes and 
such instrumentality or agency will enjoy the same privilege and protection 
which any government or its establishment or department enjoys in rela-
tion to a statute. The establishment of a government only connotes in its 
F 
plain meaning, an establishment directly run by the government and not 
through the agency or instrumentality of the gcl\'ernment. The Welfare 
Funds Act is essentially an act to protect the interest of and welfare of the 
labourers. Unless expressly the instrumentality or agency of the govern-
ment is kept outside the purview of the said Act, it would not be proper to 
interpret the said Act in a wide amplitude by removing the corporate veil 
G so as to exclude such instrumentality or agency from the pur

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