Introduction

• This case basically deals with Article 12 of Constitution of India, 1950 which define the ambit of the State.
• The court observed that a statutory company Indian Petroleum Corporation should be considered as a state under Article 12.
• Since Fundamental Rights provide for the security of citizens’ sets of rights in relation with speech, expression, religion, against exploitation, education, language, culture, and constitutional remedies; the term ‘State’ has been used in a wider context to include all such agencies, actions of whose can be challenged in the Supreme Court if they violate the any of these fundamental rights affirmed by Part III of the Constitution of India.

Facts

• The petitioner worked as a clerk under Burmah Shell Oil Storage Ltd.
• The petitioner sought retirement on reaching the age of 50 years and qualified to receive the pension and other benefits under the rule framed by the company.
• He retired on 1st April 1973, along with other benefits under the scheme for retirement, such as the Employee Provident Fund (EPF) and gratuity.
• He was entitled to receive Rs. 165.99 per month as pension and paid Rs. 86 per month as supplementary retirement benefits (ex gratia) for 13 months, which was later stopped.
• The central government took Burmah Shell Oil Storage Ltd. over by enacting the Burmah Shell (Acquisition of Undertakings in India) Act, 1976. The company became a subsidiary under the existing Bharat Petroleum Ltd.
• On 25th September 1975, Burmah Shell issued a letter informing the petitioner that out of his pension of Rs. 165.99, two deductions were made, one for the EPF payment and the other for payment of gratuity. With this, the pension payable to him was shown as Rs. 40.05.
• The monthly supplementary retirement benefit of Rs. 86/- was also cut off, though it was at the discretion of the employer and is liable to be stopped.
• Aggrieved by this measure, the petitioner directly petitioned before the Supreme Court under Article 32 of the Constitution of India.

Issue Involved

• Whether Bharat Petroleum Corporation Ltd., a statutory corporation, was an “authority” in the ambit of the “State” under Article 12?
• Whether is it justified in the public interest, if not legal, to deduct the petitioner’s pension in the name of giving gratuity and EPF?

Observations

• The bench, though, had a dissenting opinion from Justice Pathak, however, unanimously allowed the appeal of the petitioner and agreed to provide him with relief.
• Justice Krishna Iyer held that two things are essential for the test of the State:
  • Discharging function or doing business as the proxy of the state by wearing the corporation mask
  • An element of ability to affect legal relations by virtue of power vested in it by law.
• Bharat Petroleum Corporation was held to be a “State” within the meaning of Article 12.
• The expression ‘other authority’ is not confined only to statutory corporations alone but also to a non-statutory body like government company, a registered society, or bodies which have some nexus with the government.
• These corporations are representatives of government departments, who would have otherwise carried on the same task, and hence fall under the ambit of “State” mentioned in Article 12 of the Constitution of India.
• Gratuity and provident funds have two different roots. Payment of both should be independent of the other, and any mutual deductions in an employee’s overall social security benefits are never a complete benefit.

Conclusion

• This case clearly envisages two important rulings- one in the constitutional law field and another for the social justice of employees.
• The Supreme Court clarifies that social security allowances to employees after retirement must be interpreted liberally to promote maximum social justice to the working sections of society. It must prevent any bifurcation and should not mislead with tactful and confusing financial modes.
• From the constitutional law point-of-view, the court rightly points out that PSUs are the key to establish a welfare state, the organs and integral part of the state itself, and hence also within Article 12 of the Constitution of India.

Notes

Article 12 of Constitution of India deals with meaning of State provided unless the context otherwise requires, the State includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.