THE MYSORE PAPER MILLS LTD. versus THE MYSORE PAPER MILLS OFFICERS ASSOCIATION AND ANR.

Citation: [2002] 1 S.C.R. 37 · Decided: 08-01-2002 · Supreme Court of India · Bench: G.B. PATTANAIK · Disposal: Dismissed

Judgment (excerpt)

J 
THE MYSORE PAPER MILLS LTD. 
v. 
THE MYSORE PAPER MILLS OFFICERS' 
ASSOCIATION AND ANR. 
JANUARY 8, 2002 
(G.B. PATTANAIK AND DORAISWAMY RAJU, JJ.) 
Constitution of India 
A 
B 
Article 12-State/Other authority-Meaning of-An Organisation may C 
be identified as an agent or instrumentality of the State/Other authority 
depending upon combination of one or more of relevant factors as to the 
essentiality and overwhelming nature of such factors in identifoing the real 
source of governing power-The State/Other authority, so defined, has a 
specific purpose and that is under Part III of the Constitution and not for D 
making it a Government or Department of the Government itself. 
Respondent, an employee of the appellant-company, has challenged his 
transfer as vitiated by malafides and illegality. Single Judge of the High Court 
granted stay of the transfer order. In the appeals filed by the appellant-
Company before the Division Bench of the High Court, the two grounds of E 
challenge were that the appellant-Company is not a 'State' and the Order of 
transfer was in accordance with the Contract of Service and i;ecessitated on 
account of exigencies etc. In certain earlier decisions by the Division Bench 
of the High Court, the appellant-Company was held to be not "State" within 
the meaning of Article 12. The Division Bench, therefore, referred the matter 
to a Full Bench for consideration of the main issue as to whether the appellant-
F 
Company was a State within the meaning of Article 12 of the Constitution. 
The Full Bench came to the conclusion that the appellant-Company was an 
authority and instrumentality or agency of the State, so as to attract Article 
12 of the Constitution oflndia. However, appeals against the order of Single 
Judge, were allowed on the ground that impugned order of transfer was not 
vitiated by malcfides or by any extraneous considerations and that the G 
respondents have no legal right to challenge the said order of transfer on 
administrative grounds. Hence these appeals. 
Dismissing the appeals, the Court 
HELD : I. Appellant-Company is a Government Company as envisaged H 
37 
38 
SUPREME COURT REPORTS 
[2002] I S.C.R. 
A in Section 617 attracting Section 619 of the Companies Act. More than 97% 
of the Share Capital has been constituted by the State Government and the 
c:::: 
financial institutions controlled by and belonging to the Government of India. 
.. 
It has been entrusted with important public duties obligating to undertake, 
permit and sponsor rural development and for social and economic welfare of 
c
B 
the people of rural areas by undertaking programmes to assist and promote 
activities for the growth of national economy. The State Government has deep 
and pervasive control of the appellant-Company and its day to day 
administration and consequently it is an instrumentality and agency of the 
State Government. [48-H; 49-A-C) 
c 
1.2. Appellant-Company being other authority is consequently State 
within the meaning of Article 12 of the Constitution of India. The said 
definition has a specific purpose that is under part III of the Constitution, and 
not for making it a Government or Department of the Government. This is 
the inevitable consequence of the other authorities being entities with 
independent status distinct from the State and this fact alone does not militate 
D against such entities or institutions being agency or instrumentalities to come 
under the net of Article 12 of the Constitution. The concept of instrumentality 
or agency of the Government is not to be confined to entities created under or 
which owes its origin to any particular statute or order but would really depend 
upon a combination of one or more of relevant factors depending upon the 
E essentiality and overwhelming nature of such factors in identifying the real 
source of governing power, if need be, by piercing the corporate veil of the 
entity concerned. [48-E-F-G) 
Steel Authority of India Ltd. & Ors. v. National Water front Workers & 
Ors., [2001 I 7 sec 1, followed. 
F 
VST Industries Ltd v. VST Industries Workers' Union & Anr., [20011 1 
sec 298, held in applicable. 
Praga Tools Corporation v. C.A. !manual & Ors., (1969) 1 Sec 585; 
~ 
Andi Mukta S.S.M. V.S.S. J.M.S. Trust v. V.R. Rudani, (1989) 2 691; Tekraj 
G Vasandi@ K.L. Basandhi v. Union of India & Ors., (1988) 1 SCC 236; Ajay 
Hasia & Ors. v. Khalid Mujib Sehravardi & Ors., [1981) 1SCC722; Ramana 
Daysram Shetty v. International

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