Full Judgment Text
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PETITIONER:
THE STATE TRADING CORPORATION OF INDIA LTD. & OTHERS
Vs.
RESPONDENT:
THE COMMERCIAL TAX OFFICER, VISAKHAPATNAM AND OTHERS
DATE OF JUDGMENT:
26/07/1963
BENCH:
SINHA, BHUVNESHWAR P.(CJ)
BENCH:
SINHA, BHUVNESHWAR P.(CJ)
DAS, S.K.
GAJENDRAGADKAR, P.B.
SARKAR, A.K.
WANCHOO, K.N.
HIDAYATULLAH, M.
GUPTA, K.C. DAS
SHAH, J.C.
AYYANGAR, N. RAJAGOPALA
CITATION:
1963 AIR 1811 1964 SCR (4) 89
CITATOR INFO :
R 1964 SC1451 (10)
R 1965 SC 40 (4,6,23)
F 1966 SC1436 (5)
R 1967 SC 295 (17)
OPN 1967 SC1318 (4)
RF 1970 SC 82 (5)
RF 1970 SC 564 (7)
R 1971 SC 870 (7,13)
RF 1973 SC 106 (11)
MV 1975 SC1331 (127,177)
R 1975 SC1737 (2)
R 1981 SC1368 (7)
RF 1983 SC 937 (12)
F 1988 SC1708 (13)
D 1989 SC1713 (10)
ACT:
Fundamental Right, Enforcement of-Corporation, if a citizen
entitled to claim fundamental rights-Constitution of India,
Arts. 19(1)(f) and (g), 32.
HEADNOTE:
The State Trading Corporation of India is a private limited
company registered under the Indian Companies Act, 1956,
with its head Office at Delhi and its entire capital is
contributed by the Government of India. The Sales-tax
Authorities of the States of Andhra Pradesh and Bihar sought
to assess the Corporation to sales tax under their
respective Sales Tax Acts and issued notices of demand. The
Corporation claiming to be an Indian citizen filed petitions
under Art. 32 of the Constitution for quashing the said
proceedings on the ground that they infringed its
fundamental rights under Art. 19(1) (f) and (g) of the
Constitution. Preliminary objections having been taken by
the respondents to the maintainability of the said
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petitions, the Constitution Bench hearing the matters
referred the two following questions for decision by the
special bench.
"(1) Whether the State Trading Corporation, a
company registered under the Indian Companies
Act, 1956, is a citizen within the meaning of
Art. 19 of the Constitution and can ask for
the enforcement of fundamental rights granted
to citizens under the said article; and (2)
whether the State Trading Corporation is,
notwithstanding the formality of incorporation
under the Indian Companies Act, 1956, in
substance, a department -,-id organ of the
Government of India with the entirety of its
capital contributed by Government; and can it
claim to enforce fundamental rights under Part
III of the Constitution against the State as
defined in Art. 12 thereof.
Held, (DAS GUPTA and SHAH JJ., dissenting) that the answer
to the first question must be in the negative.
Per SINHA, C. J., S. K. DAS, GAJENDRAGADKAR, SARKAR, WANCHoo
and Ayyangar JJ. There can be no citizens of India not
mentioned in Part 11 of the Constitution or by the
Citizenship Act, 1955. These provisions are wholly
exhaustive and contemplate only natural persons.
Part III of the Constitution makes a clear distinction
between fundamental rights available to "any person" and
those guaranteed
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to "all citizens", indicating thereby that under the
Constitution all citizens are persons but all persons are
not citizens
Part II of the Constitution relating to ’citizenship’ is
clearly inapplicable to juristic persons and the provisions
of the Citizenship Act, 1955, enacted by Parliament under
Art. 11 of the Constitution, show that such persons are
outside the purview of the Act.
It cannot therefore, be said that either Part II of the
Constitution or the Citizenship Act, 1955, confers the right
of citizenship or recognises as citizen any person other
than a natural person. They do not contemplate a
corporation as a citizen.
In none of the relevant decisions this Court gave its consi-
dered judgment on the present issues and the question now
raised are open questions.
Chiranjit Lal Chowdhuri v. Union of India [1950] S.C.R. 869,
Dwarkadas Srinivas of Bombay v. The Sholapur Spinning &
Weaving Co. Ltd. [1954] S.C.R. 674 and Bengal Immunity Co.
Ltd. v. State of Bihar, [1955] 2 S.C.R. 603, considered.
’Nationality’ and ’citizenship’ are not synonymous. A
corporation can claim nationality which is ordinarily
determined by the place of its incorporation. But while
nationality determines the civil rights of a natural or
artificial person, particularly with reference to
international law, citizenship is intimately connected with
civic rights under municipal law. All citizens are,
therefore, nationals of a particular State and enjoy full
political rights but all nationals are not citizens and do
not have full political rights.
It was not correct to say that the word ’citizen’ in Art. 5
was not as wide as in Art. 19 of the Constitution or that
Part II of the Constitution supplemented by the provisions
of the Citizenship Act, which deals with citizens,
deliberately left out of account citizenship in relation to
juristic persons. When the Constitution confers any
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particular right to be enjoyed by a citizen it uses the
words "any citizen" or "all citizens" in clear
contradistinction to those rights which are to be enjoyed by
all, whether citizens or aliens, natural or juristic
persons.
There is no reason to think that the word ’citizen’ in Art.
19 is used in a different sense from that in which it is
used in Part II of the Constitution.
Per HIDYATULLAH J.-Both the questions must be answered in
favour of the respondents.
Before independence there was no law of citizenship in
India. Under the British Nationality Act, 1948, Indians
became Commonwealth citizens or British subjects without
citizenship and were regarded as potential citizens of
India. The Indian Constitution made provision for
citizenship under which certain natural persons alone could
be citizens of India and the Citizenship Act, 1955, excluded
persons other than natural persons from citizenship.
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It is not correct to say that corporations were citizens
before the Constitution. They enjoyed only such privileges
under the municipal law which that law expressly conferred
on them.
The nature and personality of an incorporated company have
their origin in a fiction of law. This personality arises
from the moment of incorporation and from that date the
persons subscribing to the memorandum of association or
joining as members become a body corporate. But they cannot
be said to Pool their status and even if all of them are
citizens of India, the Company does not become a citizens of
India.
G. E. Rly. v. Turner, (1872) L. R. 8 Ch. App. 152,
Salomon V. Salomon & Co. (1897) A. C. 22 and Janson v.
Driefontein Consolidated Mines Ltd., (1902) A. C. 484,
referred to.
The seven freedoms guaranteed by Art. 19(1) arc for the
citizens of India. The Constitution in using the word
"person", a word of larger import, in some other places
makes its intention to exclude corporations clear.
Chiranjit Lal Chowdhuri v. Union of India, [1950] S.C.R.
869, explained.
The precedents of the Supreme Court of the United States
which hold that corporations are citizens of the State of
incorporation for purposes of federal jurisdiction cannot be
followed in India. The diversity of citizenship which has
led to such rulings does not exist in India. As a
corporation is a separate entity from its members, it is not
possible to pierce the veil of incorporation to determine
the citizenship of its members in order to give the
corporation the benefit of Art. 19.
The State Trading Corporation is not, therefore, a citizen
either by itself or as the aggregate of Indian citizens.
Its Indian nationality is not to be confused with
citizenship of natural persons and the word ’citizen’ in
Art’ 19(1) (f) and (g) can refer to no other than natural
persons. The State Trading Corporation is really a
department of Government behind the corporate veil.
Per DAS GUPTA J.-The first question must be answered in the
affirmative.
It has been repeatedly laid down by this Court that in
interpreting the Constitution a broad and a liberal and not
merely the grammatical view should be taken. A syllogistic
or mechanical approach has always to be avoided, more so
when interpreting the Constitution. The attempt should be
to reach the intention of the Constitution makers by
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examining the substance and give effect to that intention,
if possible.
So judged, it is clear that the Constitution makers when
they used the word ’citizen’ in Art. 19 had the intention
that at least a corporation constituted wholly by citizens
of India would get
102
the benefit of the fundamental rights enshrined in that
There is -nothing in the Constitution that stands in the
giving all citizens of India, whether forming a corporation
the benefit of Arts. 19(1) (f) and (g).
State of Bombay v. R. M. D. Chamarbaughwala, I.L.R. Bom.
680, Chiranjit Lal Chowdhuri v. Union of India, S.C.R. 869,
Express Newspapers (P) Ltd. v. Union of India, S.C.R. 12,
Bengal Immunity Co. v. State of Bihar, [1955] 2 S.C.R. 603
and Bombay Dyeing Manufacturing Co. Ltd. v. State of Bombay,
[1958] S.C.R. 112 2, referred to.
The first part of the second question should be answered in
the negative and the second part in the affirmative.
Per SHAH J.-In ascertaining the meaning of expressions used
in a vital document like the Constitution of a
nation,mechanical approach is impermissible. The
Constitution is the declaration of the will of the people
and should be interpreted liberally and not in a narrow or
doctrinaire spirit. Such interpretation should be in
accordance with the true purpose and intent as disclosed by
the phraseology understood in its natural signification in
the light of its setting and its dynamic character which is
intended to fulfill the aspirations of the people.
Citizenship means the members of a jural society investing
the holder with all the rights and privileges enjoyed by its
nationals and subjecting him to corresponding duties.
Nationality links a person to a State and ensures his rights
in international affairs. While a citizen is a national,
every national is not always a citizen.
Virginia L. Minor v. Reese Happersett, 21Wall. 162: 88 U.S.
627, referred to.
Under the English Common Law which formed the foundation of
the Indian jurisprudence, a company or a corporation
aggregate is a national of the State in which it is
incorporated and is clothed with a personality given by the
law of the land, capable of exercising rights arid entitled
to protection a broad.
Janson v. Driefontein Consolidated Mines Ltd. L. R. (1902)
A.C. 492, Attorney-General v. Jewish Colononization
Association, (1901) 1 K.B. 133, Generali v. Salim Cotran,
L.R. (1932) A.C. 288, Gasque v. Commissioner of Inland
Revenue, L.R. (1940) 2 K.B. 36 and Kuenigl v. Donnersmark,
L.R. (1955) 1 Q.B. 515, referred to.
So also in India a juridical person is capable of exercising
to the fullest extent a large majority of civil rights which
natural persons may exercise as citizens, its incapacity to
exercise other rights arises from the nature of its
personality and constitution and not from any special
restriction imposed upon it. The Constitution, as is
apparent from various other Articles, afforded the widest
protection to corporation as it did to natural persons.
Unless
103
therefore, the language or the scheme of the Constitution is
compulsive, it is impossible to put a limited connotation on
the expression ’citizen’ occurring in Art. 19(1).
To say that Arts. 5, 6 and 8 and the law made under Art. 11
are exhaustive and there can be no citizen except those
expressly covered thereby is to assume that there were no
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citizens in India before the Constitution, an assumption
which is not warranted either by the language of the
Constitution or the’ history of our national evolution. The
legislative history shows that British subjects of Indian
origin held the status of citizens in British India and
there was no statute before the Constitution which indicated
even indirectly that a corporation aggregate could not be a
citizen.
Although this Court did not make any definite expression of
opinion, it has consistently assumed that corporations
aggregate are entitled to claim protection under Art. 19(1)
as citizens.
Chiranjit Lal Chowdhuri v. Union of India. [1950] S.C.R.
869, Bengal Immunity Company Ltd. v. State of Bihar [1955] 2
S.C.R. 603, State of Bombay v. R. M. D. Chamarbaughwala,
[1957] S.C.R. 874 and State of West Bengal v. Union of
India, [1964] 1 S.C.R. 371, referred to.
In numerous cases in this Court it was assumed, without
contest, that a company is a citizen of India and competent
to enforce fundamental rights under Art. 19(1)(f) and (g) of
the Constitution.
Case law referred to.
In view of the fact that a company is invested with
important fundamental rights under various other Articles of
the Constitution and it is recognised as a person capable of
holding and disposing of property and carrying on business,
commerce and intercourse, it could not be held that the
expression ’citizen’ in Art. 19 was intended to be
restricted to a natural person.
A corporation is, however, distinct from its share-holders
and even if all the shareholders are Indian Citizens, its
claim to citizenship cannot be founded on that ground for
that would lead to anomalous results.
Salomon v. Salomon and Co. Ltd. L.R. (1897) A.C. 22, relied
on.
State of Bombay, v. R.M.D. Chamarbaugwala, I.L.R. [1955]
Bom. 680, disapproved.
The question whether a corporation is an agent or servant of
the State must be decided on the facts of each case. In the
absence of any statutory provision, a commercial corporation
acting on its behalf, even if it is controlled wholly or
partially by a Government department, will be presumed not
to be a servant or an agent of the State. where, however,
the corporation is performing in substance Governmental, and
not commercial, functions, an inference will readily be made
that it is an agent of the Government.
104
Tamlin v. Hannaford, L.R. (1950) 1 K. B. 18, referred to.
Bank Voor Handel En Scheepvaart N. V. v. Administrator. of
Hungarian Property, L.R. (1954) A.C. 584, held inapplicable.
There is no warrant for the proposition that a department or
an organ of the Union or the State, if it is a citizen,
cannot enforce fundamental rights against the State as
defined by Art. 12 of the Constitution.
JUDGMENT:
ORIGINAL JURISDICTION : Writ Petitions Nos. 202-204 of 1961.
Writ Petition under Art. 32 of the Constitution of India for
enforcement of Fundamental Rights.
M. C. Setalvad, G. S. Pathak, B. Parthasarthy, B. Dutta,
B. Dadachanji O. C. Mathur and Ravinder Narain, for the
Petitioners (in all the petitions).
D. Narasarj Advocate-General for the State of Andhra
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Pradesh and T. V. R. Tatachari, for the respondents (in
Petitions Nos. 202 and 203 of 1961).
V. K. Krishna Menon, Anil Kumar Gupta, R. K. Garg, D. P.
Singh, M. K. Ramamurthi and S. C. Agarwala, for the
respondents (in Petition No. 204 of 1961).
A. Ranganadham Chetty and A. V. Rangam, for Intervener No.
1. S. M. Sikri’, Advocate-General for the State of
Punjab and Gopal Singh, for Intervener No. 2.
B. Sen, M. K. Banner" and P. K. Bose, for Intervener No.
3.
J. M. Thakore, Advocate-General for the State of Gujarat and
K. L. Hathi, for Intervener No. 4.
G. C. Kasliwal, Advocate-General for the State of
Rajasthan, S. K. Kapur and K. K. lain, for Intervener No. 5.
July 26, 1963.-The judgment of Sinha C. J., S. K. Das,
Gajendragadakar, Sarkar, Wanchoo and Ayyangar JJ. was
delivered by Sinha, C. J. Hidayatullah J., delivered a sepa-
rate opinion. Das Gupta and Shah JJ. delivered separate
dissenting opinions.
SINHA C.J.-The following questions have been referred to the
Special Bench by the Constitution Bench before which these
cases came up for hearing :
(1) whether the State Trading Corporation, a
company registered under the Indian Companies
Act,
105
1956, is a citizen within the meaning of Art.
19 of the Constitution and can ask for the
enforcement of fundamental rights granted to
citizens under the said article, and
(2) whether the State Trading Corporation
is, notwithstanding the formality of
incorporation under the Indian Companies Act,
1956, in substance a department and organ of
the Government of India with the entirety of
its capital contributed by Government; and can
it claim to enforce fundamental rights under
Part III of the Constitution against the State
as defined in Art. 12 thereof.
The questions were raised by way of preliminary objections
to the maintainability of the Writ Petitions under Art. 32
of the Constitution.
As the whole case is not before us, it is necessary to state
only the following facts in order to appreciate how the
controversy arises. The State Trading Corporation of India
Ltd., and K. B. Lal, the then Additional Secretary, Ministry
of Commerce and Industries’ Government of India, moved this
Court under Art. 32 of the Constitution for quashing by a
writ of certiorari or any other appropriate writ, direction
or order, certain proceedings instituted by or under the
authority of the respondents,-(1) The Commercial Tax
Officer, Visakhapatnam ; (2) the State of Andhra Pradesh;
and (3) the Deputy Commissioner of Commercial Taxes,
Kakinada. Those proceedings related to assessments of sales
tax under the provisions of the Andhra Pradesh Sales Tax
Act. Writ Petitions 202 and 203 of 1961 are between the
parties aforesaid. In Writ Petition 204 of 1961, the
parties are the petitioners aforesaid against (1) the
Assistant Superintendent of Commercial Taxes, I/c Chaibasa
Sub-Circle, Bihar State; (2) the Deputy Commissioner of
Sales Tax, Bihar, Ranchi; and (3) the State of Bihar. Thus,
the petitioners are the same in all the three cases, but the
respondents are the State of Andhra Pradesh and its two
officers in the first two cases and the State of Bihar and
its two officers in the third case.
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The first petitioner is a private limited company registered
under the Indian Companies Act, 1956, with its head office
at New Delhi, in May, 1956. The second petitioner is a
shareholder in the first petitioner company. The
8-2 S. C. India/64
106
two petitioners claim to be Indian citizens as all its
shareholders are Indian citizens. Proceedings were taken
for assessment of sales tax, and in due course of those
proceedings demand notices were issued. It is not necessary
for the purposes of deciding the two points referred to us
to set out the details of the assessments or the grounds of
attack raised by the petitioners. It is enough to say that
the petitioners claim to be Indian citizens and contend that
their fundamental rights under Art. 19 of the Constitution
had been infringed as a result of the proceedings taken and
the demands for sales tax made by the appropriate
authorities. When the case was opened on behalf of the
petitioners in this Court, before the Constitution Bench,
counsel for the respondents raised the preliminary
objections which have taken the form now indicated in the
two questions, already set out. The Bench rightly pointed
out that those two questions were of great constitutional
importance and should, therefore, be placed before a larger
Bench for determination. Accordingly they referred the
matter to the Chief Justice and this larger Bench has been
constituted to determine those questions.
At the very outset of the arguments, we indicated that we
shall give our decision only on the preliminary questions
and that the decision of the controversies on their merits
will be left to the Constitution Bench.
Before dealing with the arguments at the Bar, it is
convenient to set out the relevant provisions of the Con-
stitution. Part III of the Constitution deals with Funda-
mental Rights. Some fundamental rights are available to
"any person", whereas other fundamental rights can be
available only to "all citizens". "Equality before the law"
or "equal protection of the laws" within the territory of
India is available to any person (Art. 14). The protection
against the enforcement of ex-post-facto laws or against
double-jeopardy or against compulsion of -self-incrimination
is available to all persons (Art. 20); so is the protection
of life and personal liberty under Art. 21 and protection
against arrest and detention in certain cases, under Art.
22. Similarly, freedom of conscience and free profession,
practice and propagation of religion is guaranteed to all
persons. Under Art. 27, no person shall be compelled to pay
;any taxes for the promotion and maintenance of any
107
particular religious denomination. All persons have been
guaranteed the freedom to attend or not to attend religious
instructions or religious worship in certain educational
institutions (Art. 28). And, finally, no person shall be
deprived of his property save by authority of law and no
property shall be compulsorily acquired or requisitioned
except in accordance with law, as contemplated by Art. 31.
These, in general terms, without going into the details of
the limitations and restrictions provided for by the
Constitution, are the fundamental rights which are available
to any person irrespective of whether he is a citizen of
India or an alien or whether a natural or an artificial
person. On the other hand, certain other fundamental rights
have been guaranteed by the Constitution only to citizens
and certain disabilities imposed upon the State with respect
to citizens only. Article 15 prohibits the State from
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discriminating against any citizen on grounds only of
religion, race, caste, etc., or from imposing any disability
in respect of certain matters referred to in the Article.
By Art. 16, equality of opportunity in matters of public
employment has been guaranteed to all citizens, subject to
reservations in favour of backward classes. There is an
absolute prohibition against all citizens of India from
accepting any tide from any foreign State, under Art. 18(2),
and no person who is not a citizen of India shall accept any
such tide without the consent of the President, while he
holds any office of profit or trust under the State [Art.
18(3)]. And then we come to Art. 19 with which we are
directly concerned in the present controversy. Under this
Article, all citizens have been guaranteed the right :-
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to form associations or unions;
(d) to move freely throughout the territory of India;
(e) to reside and settle in any part of the territory of
India;
(f) to acquire, hold and dispose of property; and
(g) to practice any profession, or to carry on any
occupation, trade or business.
Each one of these guaranteed rights under cls. (a) to (g) is
subject to the limitations or restrictions indicated in cls
108
(2) to 6) of the Article. of the rights guaranteed to all
citizens, those under cls. (a) to (e) aforesaid are parti-
cularly apposite to natural persons whereas the freedoms
under cls. (f) and (g) aforesaid may be equally enjoyed by
natural persons or by juristic persons. Art. 29(2) provides
that no citizen shall be denied admission into any
educational institution maintained by the State or State
said on grounds only of religion, race, caste, language or
any of them. This short resume of the fundamental rights
dealt with by Part III of the Constitution and guaranteed
either to ’any person’ or to ’all citizens’ leaves out of
account other rights or prohibitions which concern groups,
classes or associations of persons, with which we are not
immediately concerned. But irrespective of whether a person
is a citizen or a non-citizen or whether he is a natural
person or a juristic person, the right to move the Supreme
Court by appropriate proceedings for the enforcement of
their respective rights has been guaranteed by Art. 32.
It is clear on a consideration of the provisions of Part III
of the Constitution that the makers of the Constitution
deliberately and advisedly made a dear distinction between
fundamental rights available to ’any person’ and those
guaranteed to ’all citizens’. In other words, all citizens
are persons but all persons are not citizens, under the
Constitution.
The question next arises: What is the legal significance of
the term "citizen"? It has not been defined by the
Constitution. Part II of the Constitution deals with
’Citizenship’, at the commencement of the Constitution.
Part 11, in general terms, lays down that citizenship shall
be by birth, by descent, by migration and by registration.
Every person who has domicile in the territory of India
shall be a citizen of India, if he was born in the territory
of India or either of whose parents was so born or who has
been ordinarily resident in the territory of India for not
less than five years immediately preceding the commencement
of the Constitution (Art 5). Secondly, any person who has
migrated to the territory of India from the territory
included in Pakistan shall be deemed to be a citizen of
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India, if he satisfied the conditions laid down in Art. 6(a)
and 6(b) (i). Any
109
person who. does; not come within the purview of Art. 6(a),
and 6(b))(i), but who has. migrated to India and has been
registered, as, laid down in Art. 6(b)(ii), shall also, be
deemed to be a citizen of India. Similarly, a person of
Indian origin,. residing outside India, shall be deemed to.
be a citizen of India if he has been registered as such by
an accredited diplomatic or consular, representative of
India in the country where he has been residing (Art. 8).
Persons coming within the purview of Arts. 5, 6 & 8, as
aforesaid, may still not be citizens of India if they have
migrated from India to Pakistan, as laid down in Art. 7, or
if they have voluntarily acquired the citizenship of any
foreign State (Art. 9). Those, in short, are the provisions
of the Constitution in Part II relating to ’Citizenship?,
and they are clearly inapplicable to juristic persons. By
Art. 11, the Constitution has vested Parliament with the
power to regulate, by legislation, the rights to
citizenship. It was in exercise of the said: power that
Parliament has enacted the Citizenship Act (LVII of 1955).
It is absolutely clear on a reference to the provisions of
this statute that a juristic person is outside the purview
of the Act. This is an act providing for acqusition and
termination of Indian citizenship. The Constitution in Part
11, as already indicated, has determined who are Indian
citizens at the commencement of the Constitution. As the
Constitution does not lay down any provisions with respect
to acquisition of citizenship or its termination or other
matters relating to citizenship, after the commencement of
the Constitution, this law had to be enacted by way of
legislation supplementary to the provisions of the Consti-
tution as summarised above. The definition of the word
"person" in s. 2(1)(f) of this Act says that the word
"person" in the Act "does not include any company or
association or body of individuals, whether incorporatedor
not". Hence, all the subsequent provisions of the Act
relating to citizenship by birth (s. 3), citizenship by des-
cent (s. 4), citizenship by registration (s. 5), citizenship
by naturalisation (s. 6) and citizenship by incorporation:
of territory (s. 7) have nothing to do with a juristic
person. It is thus absolutely clear that neither the
provisions of the Constitution, Part II, nor of the
Citizenship Act aforesaid, either confer the right of
citizenship on, or
110
recognise as citizen, any person other than a natural
person. That appears to be the legal position, on an
examination of the relevant provisions of the Constitution
and the Citizenship Act. But it was contended that this
Court had expressed itself to the contrary in certain
decisions, and some of the High Courts have also taken a
contrary view’ which we may now proceed to consider. In,
what is now known as the first Sholapur case, Chiranjit Lal
Chowdhuri’ v. The Union of India(1), Mukherjea, J., speaking
for the majority of the Court, made the following
observations at page 898, which seem to countenance the
contention raised on behalf of the petitioners that funda-
mental rights are available to juristic persons also, as to
citizens :
"The fundamental rights guaranteed by the
Constitution are available not merely to
individual citizens but to corporate bodies as
well except where the language of the
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provision or the nature of the right compels
the inference that they are applicable only to
natural persons. An incorporated company,
therefore, can come up to this Court for
enforcement of its fundamental rights......"
Though the observations quoted above would seem to lend
countenance -to the contention raised on behalf of the
petitioners, they really do not determine the controversy
one way or the other. In that case, a shareholder of the
Sholapur Spinning and Weaving Company made an application
under Art. 32 of the Constitution for a declaration that the
Act impugned in that case was void, as also for the
enforcement of his fundamental rights by a writ of mandamus
against the Government,and the directors of the company,
restraining them from exercising any power under the Act.
It is not necessary to refer to the details of the
controversy in that case because it is plain that it was not
the company which was seeking the enforcement of its
fundamental rights, if any, but only a shareholder. As a
matter of fact, the company opposed the petition under Art.
32 of the Constitution. It is manifest that the
observations quoted above were purely obiter and did not
directly arise for decision of the Court.
Then we come to the second Sholapur case, reported
(1) [1950] S.C.R. 869.
111
as Dwarkadas Shriniwas of Bombay v. The Sholapur Spinning &
Weaving Co. Ltd.(1). In the first-Sholapur case, this Court
had been moved under Art. 32 of the Constitution by an
individual shareholder, as aforesaid, for enforcement of his
alleged fundamental rights. That petition, by majority
judgment, stood dismissed. The second case arose out of a
suit instituted by a preference shareholder, in a
representative capacity on behalf of himself -and other
preferential shareholders, for a declaration that the law
which had been impugned in the previous case was ultra
Vires. This Court held that the law impugned had autho-
rised, in effect, the deprivation of the property of the
company within the meaning of Art. 31 of the Constitution,
without compensation, and had thus violated the fundamental
rights of the company under Art. 31(2) of the Constitution.
It will thus -appear that the decision of this Court
proceeded on an examination of the provisions of Art. 31,
which is not confined to citizens only and has reference
also to the property of "any person". But there are
observations made in the course of the judgment which would
support the view propounded on behalf of the respondents.
At page 694, Mahajan J., while discussing the scope and
effect of the provisions of the Constitution in Part 111,
with particular reference to Arts. 19 and 31, made the
following observations :-
"In considering Article 31 it, is significant
to note that it deals with private property of
persons residing in the Union of India, while
Article 19 only deals with citizens defined in
Article 5 of the Constitution. It is thus
obvious that the scope of these two articles
cannot be the same as they cover different
fields. It cannot be seriously argued that so
far as citizens are concerned, freedoms
regarding enjoyment of property have been
granted in two articles of the Constitution,
while the protection to property qua all other
persons has been dealt with in Article 31
alone. If both articles covered the same
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ground, it was unnecessary to have two
articles on the same subject."
These observations would appear to support, the view that
Art. 31 has reference to property of "persons" and
(1) [1954] S.C.R. 674.
112
Art. 19 deals with fundamental rights of "citizens" as
described in Part II of the Constitution.
Bose J, in the course of his judgment, at page 732 observed
as follows:
"Article 19(1) (f) confers a certain
fundamental freedom on all citizens of India,
namely, the freedom to acquire, hold and
dispose of property. Article 31(1) is a sort
of corollary, namely, that after the property
has been acquired it cannot be taken away save
by authority of law. Article 31 is wider than
Article 19 because it applies to everyone and
is not restricted to citizens. But what
Article 19(1)(f) means is that whereas a law
can be passed to prevent persons who are not
citizens of India from acquiring and holding
property in this country no such restriction
can be placed on citizens. But in the absence
of such a law non-citizens can also acquire
property in India and if they do then they
cannot be deprived of it any more than
citizens, save by authority of law."
But it has got to be said that those observations, though
they may appear to support the contention raised on behalf
of the respondents, were not made directly with reference to
the question now before us, namely, whether a corporation
could claim the status of a citizen. That question did not
arise in that case also because the company, as such, was
not seeking any relief. Even if the company were interested
in seeking relief under Art. 31 of the Constitution, it
could do so without having the status of a citizen.
In the case of The Bengal Immunity Company Limited, v. The
State of Bihar,(1) the appellant company had moved the High
Court under Art. 226 of the Constitution for certain reliefs
against the provisions of the Bihar Sales Tax Act, but this
Court (per S.R. Das, Acting C.J. at page 618 and per
Venkatarama Ayyar J. at pages 765-766) left the question
open and granted relief to the company without deciding that
question. This case only serves the purpose of showing that
the question now before us was still an open one and that
this Court had, not given its
(1) [1955] 2 S.C.R. 603.
113
considered judgment on the issue now before us.
It is, therefore, not necessary to refer to certain deci-
sions‘ of the Madras, Bombay and Calcutta High ’Courts as
they cannot be decisive one way or the other in the absence
of a clear decision of this Court. We have, therefore, to
examine the legal position afresh on the footing that it is
still an open question.
On an examination of the relevant provisions of the
Constitution and the Citizenship Act aforesaid, we have as
already indicated, reached the conclusion that they do not
contemplate a corporation as a citizen. But Mr. Setalvad,
appearing on behalf of the petitioners, contended that Part
II of the Constitution relating to citizenship is not
relevant for our purposes because it does not define "a
citizen" nor does it deal with the totality of "citi-
zenship". It was further submitted that the same is the
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position with reference to the provisions of the Citizenship
Act. It is common ground, therefore, that the
constitutional and the statutory provisions discussed above
have no reference to juristic persons. But even so, it was
contended, we have to review the legal position in the light
of the preexisting law, i.e., the Common Law, which it was
claimed, was preserved by Art. 372 of the Constitution. In
this connection, reference was made to Halsbury’s Laws of
England, Vol. 6, 3rd Edition, pages 113-114, para 235, which
lays down that, on incorporation, a company is a legal
entity the nationality or domicile of which is determined by
its place of registration. Reference was also made to Vol.
9 of Halsbury’s Laws of England, page 19, paragraphs 29-30,
which say that the concept of nationality is applicable to
corporations and it depends upon the country of its
incorporation. A corporation incorporated in England has a
British nationality, irrespective of the nationality of its
members. So far as domicile is concerned, the place of
incorporation fixes its domicile, which clings to it
throughout its existence. In this connection, reference was
made to the case of Janson v. Driefontain Consolidated
Mines(1) for the proposition that a company may be regarded
as a national of the country where it was incorporated,
notwithstanding
(1) [1902] A.C.1,484, 497, 501, 505.
114
the nationality of its shareholders. It is -not necessary
to refer to other decisions, because the position is abso-
lutely clear that a corporation may claim a nationality
which ordinarily is determined by the place of its in-
corporation. But the question still remains whether "
nationality" and "citizenship" are interchangeable terms.
"Nationality" has. reference to the rural relationship which
may arise for consideration under international law. On the
other hand "citizenship" has reference to the jural
relationship " under municipal law. In other words,
nationality determines the civil rights of a person, natural
or artificial, particularly with reference to international
law, whereas citizenship is intimately connected with civic
rights under municipal law. Hence, all citizens are
nationals of a particular State, but all nationals may not
be citizens of the State. In other words, citizens, are
those persons who have full political rights as
distinguished, from nationals, who may not enjoy full
political rights and are still domiciled in that country
(vide P. Weis-Nationality and Statelessness in International
Law pp. 4-6; and Oppenheim’s International Law, Vol. 1, pp.
642, 644).
In our opinion, it is not correct to say, as was contended
on. behalf of the petitioners, that the expression "citizen"
in Art. 5 is not as -wide as the same expression used in
Art. 19 of the Constitution. One could understand the
argument that both the Constitution and the Citizenship Act
have not dealt with juristic persons at all, but it is more
difficult to accept the argument that the expression
"citizen" in Part 11 of the Constitution is not conterminous
with the same expression in Part III of the Constitution.
Part II of the Constitution, supplemented by the provisions
of the Citizenship Act (LVII of 1955) deals with "citizens"
and it is not correct to say that citizenship in relation to
juristic persons was deliberately left out of account so far
as the Constitution and the Citizenship Act were concerned.
On the other hand, the more reasonable view to take of the
provisions of the Constitution is to say that whenever any
particular right was to be enjoyed by a citizen of India,
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the Constitution takes care to use the expression "any
citizen" or "all citizens", in clear contradistinction to
those rights
115
which were to be enjoyed by all, irrespective of whether
they were citizens or aliens, or whether they were natural
persons or juristic persons On the analogy of the
Constitution of the United States of America, the equality
clause in Art. 14 was made available to "any person". On
the other hand, the protection against discrimination on
denominational grounds (Art. 15) and the equality of
opportunity in matters of public employment (Art. 16) were
deliberately made available only to citizens. In this
connection, reference may be made to the Constitution of the
United States of America(1)
"Corporations
Citizens of the United States within the
meaning of this article must be natural and
not artificial persons ; a corporate body is
not a citizen of the United States." (p. 965)
"Persons" defined
"Notwithstanding the historical controversy
that has been waged as to whether the framers
of the Fourteenth Amendment intended the word,
"persons" to mean only natural persons, or
whether the word, "persons" was substituted
for the word "citizen" with a view to
protecting corporations from oppressive State
legislation, the Supreme Court, as early as
the Granger cases, decided in 1877, upheld on
the merits various State laws without raising
any question as to the status of railway
corporation-plaintiffs to advance, due process
contentions. There is no doubt that a
corporation may not be deprived of its
property without due process of law ; and
although prior decisions have held that the
"liberty" guaranteed by the Fourteenth
Amendment is the liberty ’of natural, not
artificial, persons, nevertheless a newspaper
corporation was sustained, in 1936, in its
objection that a State law deprived it of
liberty of press. As to the natural persons
protected by the due process clause, these
include all human beings regardless, of race,
colour or citizenship." (p. 981)
We have already referred, in general terms, to those
Senate Document No. 170, 82d. Congress, Ed. Edward S.
Corwin,
116
provisions of the Constitution, Part III, which guarantee
certain rights to "all persons" and the other provisions of
the same part of the Constitution relating to fundamental
rights available to ’citizens’ only, and, therefore, it is
not necessary to recount all those provisions. It is enough
to say that the makers of the -Constitution were fully alive
to the distinction between the expressions "any person" and
"any citizen", and when the Constitution laid down the
freedoms contained in Art. 19(1)(a)-(g), as available to
"all citizens", it deliberately kept out all noncitizens.
In that context, non-citizens would include aliens and
artificial persons. In this connection, the following
statement in Private International Law by Martin Wolff is
quite apposite :-
"It is usual to speak of the nationality of
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legal per,sons, and thus to import something
that we predicate ,of natural persons into an
area in which it can be applied by analogy
only. Most of the effects of being an ’alien’
or a ’citizen’ of the State are inapplicable
in the field of corporations ; duties of
allegiance or military service, the franchise
and other political rights do not exist." (p.
308)
This apart, it is necessary to refer to another aspect ,of
the controversy. It was argued on behalf of the petitioners
that the distinction made by the Constitution between
"persons" and "citizens" is not the same thing as a
distinction between natural and juristic persons, and that
as "persons" would include all citizens and non-citizens,
natural and artificial persons, the makers of the Consti-
tution deliberately left artificial persons out of consi-
deration because it may be that the pre-existing law -was
left untouched. It is very difficult to accept the
contention that when the makers of the Constitution -were at
pains to lay down in exact terms the fundamental rights to
be enjoyed by "citizens" and those available to all
"persons", they did not think it necessary or advisable
clearly to indicate the classes of persons who would be
included within the expression " citizens". On the other
hand, there is clear indication in the provisions of Part
III of the Constitution itself that they were fully
cognizant of the provisions ,of the Constitution. of the
United States of America,
117
where the Fourteenth Amendment (s. 1) clearly brings out the
antithesis between the privileges or immunities of citizens
of the United States and life, liberty or property of any
person, besides laying down who are the citizens of the
United States. Section I aforesaid is in these terms and
brings out the distinction very clearly :-
"All persons born or naturalised in the United
States, and subject to the jurisdiction
thereof, are citizens of the United States and
of the State wherein they reside. No State
shall make or enforce any law which shall
abridge the privileges or immunities of
citizens of the United States ; nor shall any
State deprive any person of life, liberty, or
property, without due process of law ; nor
deny to any person within its jurisdiction the
equal protection of the laws."
The question may be looked at from another point of view.
Art. 19 lays down that "all citizens" shall have the right
to freedoms enumerated in cls. (a) to (g). Those freedoms,
each and all of them, are available to "all citizens". The
Article does not say that those freedoms, or only such of
them as may be appropriate to particular classes of
citizens, shall be available to them. If the Court were to
hold that a corporation is a citizen within the meaning of
Art. 19, then all the rights contained in cls. (a) to (g)
should be available to a corporation.. But clearly some of
them, particularly those contained in cls. (b), (d) and (e)
cannot possibly have any application to a corporation. It
is thus clear that the Tights of citizenship envisaged in
Art. 19 are not wholly appropriate to a corporate body. In
other words,, the rights of citizenship and the rights
flowing from the nationality or domicile of a corporation
are not conterminous. It would thus appear that the makers
of the Constitution had altogether left out of consideration
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juristic persons when they enacted Part II of the
Constitution relating to "citizenship", and made a clear
distinction between "persons" and "citizens" in Part III of
the Constitution. Part III, which proclaims fundamental
rights, was very accurately drafted, delimiting those rights
like freedoms of speech and expression, the right to.
118
assemble peaceably, the right to practise any profession,
etc., as belonging to "citizens" only and those more general
rights like the right to equality before the law, as
belonging to "all persons".
In view of what has been said above, it is not necessary to
refer to the controversy as to whether there were any
citizens of India before the advent of the Constitution. It
seems to us, in view of what we have said already as to the
distinction between citizenship and nationality, that corpo-
rations may have nationality in accordance with the country
of their incorporation; but that does not necessarily confer
citizenship on them. There is also no doubt in our mind
that Part 11 of the Constitution when it deals with citizen-
ship refers to natural persons only. This is further made
absolutely clear by the Citizenship Act which deals with
citizenship after the Constitution came into force and
confines it only to natural persons. We cannot accept the
argument that there can be citizens of this country who are
neither to be found within the four corners of Part II of
the Constitution or within the four corners of the
Citizenship Act. We are of opinion that these two
provisions must be exhaustive of the citizens of this
country, Part II dealing with citizens on the date the
Constitution came into force and the Citizenship Act
dealing with citizens thereafter. We must, therefore, hold
that these two provisions are completely exhaustive of the
citizens of this country and these citizens can only be
natural persons. The fact that corporations may be
nationals of the country for purposes of international law
will not make them citizens of this country for purposes of
municipal law or the Constitution. Nor do we think that the
word "citizen" used in Art. 19 of the Constitution was used
in a different sense from that in which it was used in Part
II of the Constitution. The first question, therefore, must
be answered in the negative.
In view of this answer, we do not consider it necessary to
answer the second question as that would have arisen only if
the first question had been answered in the affirmative.
Let the cases go back to the Bench for hearing on merits
with this opinion. Costs of the hearing before the special
Bench will be dealt with by the Bench which ulti-
119
mately hears and determines the controversy.
.lm15
HIDAYATULLAH J.-Two questions have been referred to this
Bench for opinion. They are :
(1) Whether the State Trading Corporation, a Company
registered under the Indian Companies Act, 1956, is a
citizen within the meaning of Article 19 of the Constitution
and can ask for the enforcement of fundamental rights
granted to citizens under the said Article ; and
(2) Whether the State Trading Corporation is not-
withstanding the formality of incorporation under the Indian
Companies Act 1956, in substance a department and organ of
the Government of India with the entirety of its capital
contributed by Government ; and can it claim to enforce fun-
damental rights under Part III of the Constitution against
the State as defined in Article 12 thereof ?
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The State Trading Corporation has been assessed to sales tax
by the Commercial Tax Officer, Vishakhapatnam and a demand
has been made upon it. By this petition under Article 32 of
the Constitution it challenges the demand on the ground
inter alia that the impugned order and the demand for the
tax infringe its fundamental rights which are guaranteed to
citizens by Art. 19 sub-clauses (f) and (g) and these sub-
clauses read :
Art. 19(1). All citizens shall have the right
(f) to acquire, hold and dispose of property;
(g) to practice any profession, or to carry on any occu-
pation, trade or business.
The State Trading Corporation claims to be a citizen for the
application of these sub-clauses, which fact being disputed
on the other side, has given rise to the two question,s
above set out. As the questions amply indicate, the share
capital of the State Trading Corporation is entirely
contributed :by the Central Government. The shares are held
by the President of India and two Secretaries to Government.
The State of Andhra Pradesh, therefore, denies that the
State Trading Corporation being an artificial person is a
citizen and consequently contends that Art. 19 is
inapplicable because the word ’citizen’ in the article
refers
120
to natural persons. Additionally, it contends that being a
department of Government, the State Trading Corporation
cannot claim protection of Art. 19 against an action of the
State.
Mr. Setalvad in formulating the grounds on which he rests
the claim of the State Trading Corporation to citizenship,
points out that the Constitution does not define the word
’citizen’, that Part 11 of the Constitution which deals with
citizenship is not material inasmuch as it is concerned with
natural persons only and is not exhaustive and that the
Citizenship Act (LVII of 1955) which provides for certain
matters relating to citizenship but defines the word
’person’ so as to exclude artificial persons like
corporations aggregate, cannot also be regarded as
exhaustive. He thus contends that corporations aggregate
which, according to him, were citizens before the
Constitution and the Citizenship Act, continue to enjoy the
privileges of citizens, one of which is the guarantee in
Article 19. In support of his submission that corporations
were and continue to be citizens, he relies upon the fact
that corporations possess a nationality and claims that in
this connection ’nationality’ and ’citizenship’ bear the
same meaning. He relies upon the observations of Mukherjea,
J. (as he then was), in Chiranjit Lal Chowdhuri v. The Union
of India(1) where the learned Judge observed obiter :
"The fundamental rights guaranteed by the Con-
stitution are available not merely to
individual citizens but to corporate bodies as
well except where the language of the
provision or the nature of the right compels
the inference that they are applicable only to
natural persons. An incorporated, company,
therefore, can come this Court for
enforcement of its fundamental rights and so
may the individual shareholders to enforce
their own ; but it would not be open to an
individual shareholder to complain of an Act
which affects the fundamental rights of the
company except to the extent that it
constitutes an infraction of his own rights as
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well."
Mr. Setalvad also refers to other cases in which, though the
point was not decided, several corporations claimed the
(1) [1950] S.C.R. 869, 898.
121
protection of Article 19 and no objection was raised.
Lastly, he contends that the word ’citizen’ should be
liberally construed to include a corporation aggregate which
consists of Indian citizens only. On the second question he
contends that a company has an existence which is
independent of its members and the State Trading Corporation
cannot be equated with the shareholders or the Government
since the corporate veil cannot be allowed to be pierced.
He points out that there are several States in our Republic
and there is a great danger of one. Government stifling the
trading activities of another Government either by law or
executive action against which Article 19 is the only
effective safeguard. He submits that it could not have been
intended that while every individual citizen should be
protected, a group of citizens, should by mere
incorporation, lose the benefits of the guarantee in Article
19.
We are dealing here with an incorporated company. The nature
of the personality of an incorporated company which arises
from a fiction of law, must be clearly under stood before we
proceed to. determine whether the word ’citizen’ used in the
Constitution generally or in Article 19 specially, covers an
incorporated company. Unlike an unincorporated company,
which has no separate existence and which the law does not
distinguish from its members an incorporated company has a
separate existence and the law recognises it as a legal
person separate and distinct from its members. This new
legal personality emerges from the moment of incorporation
and from that date the persons subscribing to the memorandum
of association and other persons Joining as members are
regarded as a body corporate or a corporation aggregate and
the new person begins to function as an entity. But the
members who form the incorporated company do not pool their
status or their personality. If all of them are citizens of
India the company does not become a citizen of India any
more than if all are married the company would be a married
person. The personality of the members has little to do
with the persona of the incorporated company. The persona
that comes into being is not the aggregate of the personae
either in law or in metaphor. The corporation really has no
physical existence ; it is a mere ’abstraction of law’ as
Lord Selborne described it in G. E. Rly. v.
9-2 S. C. India/64
122
Turner(1), or as Lord Macnaghten said in the well-known case
of Salomon v. Salomon & Co. (2) it is "at law a different
person altogether from the subscribers to the memorandum of
association." This distinction is brought home if one
remembers that a company cannot commit crimes like periury,
bigamy or capital murder’. This persona dicta being a
creature of a fiction, is protected by natural limitations
as pointed out by Palmer in his Company Law (20th edn.) p.
130 and which were tersely summed up by counsel in R. v.
City of London(3) when he asked "Can you hang its common
seal?". It is true that sometimes the law permits the
corporate veil to be lifted, but of that later.
There is a rule of English Law that a company or an
incorporated corporation has a nationality and this nationa-
lity is determined by the law of the country in which it is
incorporated. Mr. Setalvad thus begins his contention by
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citing certain obiter statements from Janson v. Driefontein
Consolidated Mines Ltd.(4) such as :
"I assume that the corporation...... was to
all intents and purposes in the position of a
natural born subject of the late South African
Republic." (Lord Macnaghten-p. 497)
"I think it must be taken that the respondent
company was technically an alien and became,
on the breaking out, of hostilities between
this country and South African Republic an
alien enemy". (Lord Davey-p. 498)
"The company must clearly be treated as a
subject of the Republic notwithstanding the
nationality of its shareholders."
(Lord Brampton-p. 501)
He contends that there is no difference between
’nationality’ and "citizenship" and the two words are syno-
nymous and relies upon the following passage from Weis on
Nationality and Statelessness in International Law (1956)
pp. 4-5-
"One of the terms frequently used synonymously
with nationality is citizenship.
Historically, this is correct for States with
the Roman conception of nationa-
(1) [1872] L.R. 8 Ch. App. 152. (2) [1897]
A.C. 22, 51.
(3) [1632] 8 St. Tr. 1087, 1138. (4 ) L.R. r
1902 1 A.C. 492.
123
lity, but not for States with the feudal
conception of nationality, where citizenship
is used to denote not political status but
membership of a local community. It has,
however, become usual to employ the term citi-
zen instead of subject in republican States-
including common law countries such as the
United States ; he who before was a ’subject
of the King’ is now a ’citizen of the State’ -
and in that sense and in those States the
terms ’nationality’ and ’citizenship’ must be
regarded as synonymous."
It is, therefore, contended somewhat syllogistically that
all incorporated corporations have the nationality of the
State under the laws of which they are incorporated, that
nationality is synonymous with citizenship and therefore
incorporated companies are citizens. From this it is but a
mere step, which is also taken, that incorporated companies
in India were and still are citizens and that the
Constitution and the Citizenship Act have nowhere deprived
than of this citizenship or of the right to protect them-
selves by invoking Article 19(1) (f) and (g). Alternatively
it is contended that if all the members of the Corporation
are Indian citizens then the Corporation as a whole must be
a citizen, for the whole cannot be different from its parts.
Both the arguments involve fallacies. The first assumes
that ’nationality’ of corporations and citizenship of
natural persons are the same concepts and caps it with the
fallacy of ignorantio elenchi which in English is called the
fallacy of irrelevant conclusion because instead of proving
that corporations are citizens, it is sought to be shown
that they ought to be citizens for the remedy is so good and
effective. The second involves the fallacy of petition
principle because it tends to beg the question and founds a
conclusion. on a basis that as much needs to be proved as
the conclusion itself. In my opinion, the State Trading
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Corporation cannot be said to be a citizen either by itself
or by taking it as the aggregate of citizens, that
nationality of a corporation is a different concept not to
be confused with citizenship of natural persons,that the
word "citizen" in Art. 19(1) sub-clauses (f) and (g) refers
to a natural person, that State Trading Corporation is
really a Department of Government behind the corporate veil
and that for all these
124
reasons the two questions must be answered in favour of the
objectors. I shall now make good these conclusions with
reasons.
Article 19 uses the word ’citizen’ while the word ’person’
is used in some other articles in Part III notably Art. 14
(creating equality before the law), Art. 21 (protection of
life and personal liberty). By Art. 367, (unless the
context otherwise requires) the General Clauses Act, 1897
applies to the interpretation of the Constitution. The word
’citizen’ is not defined in the Constitution or the General
Clauses Act but the word ’person’ is defined in the latter
to include ’any company or association or body of
individuals whether incorporated or not.’ The word"person"
therefore, conceivably bears this extended meaning at least
in some places in Part III of the Constitution. But it is
not necessary to determine where in the Constitution the
word ’person’ includes a company etc. because that word has
not been used in Article 19. The claim of corporations
aggregate, like the petitioner, to the benefits which Art.
19 gives, must depend on whether the word ’citizen’ which is
actually used can bear a similar enlarged meaning. Mr.
Setalvad is right in contending that use of the word
’person’ with an enlarged meaning in some places and of the
word ’citizen’ in other places does not by itself prove that
artificial persons are outside the meaning of the word
’citizen’. The contrast may not be between natural and
artificial persons so much as between citizens and non-
citizens, and it is possible that where the benefit is
intended to go to noncitizens, a word of wide meaning is
used and where the benefit is meant for citizens only the
word ’citizen’ is used. It is true that the word ’citizen’
cannot include an enemy or an alien while the more general
word ’person’ may but that does not answer the question
whether the word citizen’ can include a company or
association or body of individuals, to borrow the words of
the definition. The answer to that question must depend, as
already pointed out, on the connotation of the word
’citizen’ which must be found out.
In attempting to determine whether the word ’citizen’ in
Art. 19 denotes only a natural person or includes a company
etc., we must turn first to the Constitution to see if the
use of the word ’citizen’ or citizenship in any other
125
place bears the extended meaning or throws any light on this
problem. The word ’citizen’ is used in 29 places and the
word ’citizenship’ in 6 places. These words are also used
in headings to Chapters and marginal notes but these may be
ignored. It is worth inquiring if there is any place at all
other than Art. 19 where not only a natural person but also
an artificial person is meant. The word first occurs in the
preamble thus
"We the people of India having solemnly
resolved to secure to all its citizens
justice, social, economic and political
Liberty of throught, expression, belief, faith
and worship ;
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Equality of status and of opportunity; and to
promote among them all
Fraternity assuring the dignity of the
individual and the Nation," etc.
’Liberty of thought, expression, belief, faith and worship,
equality of status’ and ’dignity of the individual are
expressions appropriate to natural persons and not com-
panies, associations and other corporations aggregate and
the word ’citizen’ in the preamble refers to individuals for
whom the Constitution was being made. In this connection,
it must be remembered that a Constitution is a bond between
the citizens and the administration and regulates their
respective actions. It is as Ahrens defined it :
"L.’ ensemble des institutions et des lois fondamentales,
destine eargler l’action de l’administration et de tous les
cityens.
(Ahren : Course de Droit Naturel & C. iii p. 380) (The body
of institutions and fundamental law designed to regulate the
action of the Administration and all the citizens).
The preamble in solemn words sums up what is later provided
in the Constitution. ’Citizens’ in the preamble mean those
individuals who under the Constitution are guaranteed civic
rights in the body politic that is India and who can hold
public offices and elect their representatives to Parliament
and Assemblies of the people. They are persons who were
declared citizens on the inauguration of the Constitution
and those on whom the rights of citizens were conferred and
on whom they may
126
be conferred by law. of course the Constitution also con-
fers some rights on aliens and assists and protects them but
the guarantee in the preamble is to the citizens alone that
is individuals who enjoy full civic rights in the body
politic.
Then follows a special chapter entitled "Citizenship". That
part contains seven Articles. Art. 5 spoke at the com-
mencement of this Constitution. That article uses the word
’person’ but the context shows that only natural persons
were meant. Citizenship was conferred on every person who
had his domicile in the territory of India and
(a) who was born in the territory of India ; or
(b) either of whose parents was born in the territory of
India or
(c) who has been ordinarily resident in the territory of
India for not less than five years immediately preceding
such commencement.
The reference to the birth of the person or of Ms parents
clearly shows that only natural persons were meant because
corporations though born in a metaphorical sense do not have
parents. By the same token Art. 6 also refers to natural
persons. Articles 7, 8, 9 and 10 so clearly speak of a
natural person as to need no elaboration. That leaves Art.
11 which gives Parliament the power to make laws for the
acquisition and termination of citizenship, and all other
matters relating to citizenship. That article reaffirms the
power which is given to Parliament by Entry 17 of List I of
Schedule VII of the Constitution. As we shall see
presently, the Citizenship Act of 1955 expressly excludes
companies, etc. from its provisions. The power conferred by
Art. 11 or Entry No. 17 may give rise hereafter to the
question whether Parliament can invest corporations
institutions, trusts, funds, ships or aeroplanes with
citizenship but till Parliament does so there is nothing in
Part 11 to indicate that the words ’citizen’ and
’citizenship’ were used to include any of them.
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In the fourth part which is entitled ’Directive Principles’
the word ’citizen’ is used twice. In Art. 39 it is quali-
fied by the words ’men and women’ which addition tells its
own story. In Article 44 the State is asked to endeavour to
secure a uniform Civil Code for all citizens and the word
plainly means men and women because it is impos-
127
sible to think that the Constitution is thinking of a
uniform Civil Code for corporations. In the other parts of
the Constitution ’citizenship’ is a condition precedent for
some office, post or privilege. The President, the Vice-
President, the Governors, the Members of Parliament and the
Legislative Assemblies, the judges of the Supreme Court and
High Courts must be citizens. Members of Parliament and
Legislatures cease to be members if they cease to be
citizens of India or acquire the citizenship of other
countries. The words ’citizen’ and ’citizenship’ thus refer
to natural persons because these offices cannot be held by
corporations aggregate. Art. 326 says that every citizen 21
years in age has a vote. This means only a natural person.
There remains only Part III entitled ’Fundamental Rights’.
In Articles 15 and 16, the word clearly means a natural
person. The words religion, race, caste, sex, descent,
Place of birth and residence mark out a human being. In
Art. 18, which mentions titles, a natural person is again
meant because titles are ordinarily conferred on
individuals. In Art. 29(1), where citizens residing in the
territory of India having distinct language, script or
culture of their own have been given a right to preserve the
same, the word definitely refers to natural persons. In
Art. 29(2) entrance to educational institutions is
guaranteed to citizens and the entrant can only be a natural
person and not a corporation.
The above analysis shows that in 34 places, the words
citizen’ and ’citizenship’ refer to natural and not
artificial persons. The question is whether in the thirty-
fifth place the word is meant to include corporations
aggregate. For this purpose we must ascertain if there is
anything special which points to a different use of the
word. Sub-clauses (a) to (e) of Art. 19 contemplate natural
persons. The claim is that the word ’citizen’ must bear a
different meaning in respect of clauses (f) and (g) because
corporations acquire, hold and dispose of property and carry
on trade or business. It is argued that if several citizens
carry on business together as an incorporated company they
cannot lose the guarantee which is given to citizens, and we
are invited to give a meaning to the word which is wide
enough to include companies. It has been shown above that
the way in which the words ’citizen’ and ’citizenship’
128
have been used in the Constitution goes to show that such
was not the intention at least in 34 other places. It may
however be conceded that this is not decisive and if cor-
porations can possess citizenship there is no reason for not
interpreting the Constitution liberally to give them the
benefits of clauses (f) and (g) of Art. 19(1). For this
purpose it is necessary to find out what is meant by
’citizen and citizenship’ generally and to trace
historically the concept of citizenship to see if that
concept included at any time artificial persons like
corporations so that the word can be said to be intended to
bear such a meaning.
The word ’citizen’ which is used in Art. 19 of the
Constitution has not been defined. Its meaning in the
context of Art.. 19 must be found out. If it bore the same
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meaning as in the other parts of the Constitution, it would
mean a member, born or naturalised, of the State, on which
the Constitution or a law of Parliament confers citizenship.
Is there in law a citizenship of a group of persons who may
be all citizens or some of whom may be non-citizens? The
answer is that the word in its normal meaning does not admit
"bulk citizenship" which is the only way to describe it.
Salmond in an article on "Citizenship and Allegiance" 1901-
1902 Law Quarterly Review Part I pp. 270-82, says that the
word is derived from the Latin ’civitas’ and ’civis’. More
directly, of course, the root is in the French words
’citoyen’ or ’citeyen’. From the earliest times, the
concept of citizenship concerned natural persons and not
groups of persons. In ancient Greece, according to
Aristotle, the population of Attica was divided into groups
which were brotherhoods (phratriai) and of clans (gene).
Groups of brotherhoods formed tribes (phylai). The entire
citizen body was thus included in the tribes and
brotherhoods but the wealthy formed the clans. When
monarchy was abolished through the efforts of the clans, the
citizenship of the members of the brotherhoods was in name
only because they had no civic rights. Draconian reforms
created four classes according to wealth and Solon gave to
the four classes the right to act in a political capacity.
(ecclesia) and also in a judicial capacity (heliaia) and
thus earned the title ’the first champion of the people’.
But even under him, the concept of citizenship was immature.
The first recognition of citizenship came with Cleisthenes
129
under whose reforms there was a distribution of the popu-
lation on a geographical basis and an enfranchisement of
persons of pure or partial Athenian descent. Resident
foreigners had inter-married and though there was a partial
recognition of foreigners permanently settled domiciled in
Athens even from the days of Peisistratus there was no
recognition of the offsprings of mixed marriages as citi-
zens. These were added to the list of citizens because
citizenship no longer depended on membership of the
phratries. This state of affairs continued till -Pericles
abrogated the enlightened measure. He limited citizenship
to those of Athenian descent on both sides. Had he come
earlier some famous men of Athens like Themistocles would
have been barred from not only office but other civic
rights. It is not necessary to follow the history of Athens
further. It is reasonable to believe that all other States
in Greece except Sparta followed this kind of citizenship.
The Spartans had their own system of rule with two kings and
an elected council (gerusia) elected by the citizens which
was both advisory and judicial. There was also an assembly
of all citizens over twenty called the appella which elected
the magistrates and met monthly. The right of vote in the
election of the gerusia and membership of the appella was
open to those who were selected at the birth by the
spartiate. All children were inspected at birth by the
heads of the tribe and those who were sickly were exposed in
a ravine of Mt. Taygetus and of the others those that lived
all boys were taken away at the age of seven and trained as
citizens. All the Hellenic States followed Athens but Crete
perhaps was influenced by Sparta.
This is the earliest recognition of citizenship that we need
consider in Europe. The next to consider is the conception
of citizenship in Rome. The words ’civitas’ and ’civis’
were used in Roman Law to describe persons who had the
freedom of the city and who enjoyed all political and civic
privileges of Government. In this way were distinguished a
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slave (servus), an enemy (hostis) who had none of these
rights on the one hand and a foreigner (peregrinus)
particularly from a country with which Rome was on terms of
peaceful intercourse on the other, from citizens. Though by
Justinian’s time everyon
130
became a citizen, unless he was an unmanumitted slave, in
the time of Gaius citizenship was the privilege of Romans
and carried with it the right to vote (jus suffragii) and
the right to hold public office (jus honorum) the right to a
Roman marriage (jus connubium) and the right to legal
relations (’us commericum). The son of a Roman citizen was
also a Roman citizen irrespective of where he was born. The
peregrinus had no civic rights unless he belonged to a Latin
country. There were different laws for a long time for the
citizens and the latini and the peregrini. The first to be
given the status of citizens were the latini. Later all
free subjects were to be cives. The only peregrines who
were left were foreigners and barbarians and they had no
civic rights just as members of certain treacherous
communities (dediticii) and persons deprived of citizenship
(deportati) had none.
Thus both in Greece and Rome the idea of citizenship was
bound up with natural persons in whom certain civic rights
were considered to inhere and which marked them out from
others. Sometimes descent, sometimes the wealth, sometimes
the status, military or other, determined the privilege but
at no time was there a concept of citizenship of any but a
natural person. In Roman Law citizenship was transmitted by
birth to an offspring of a Roman citizen.
So far we have dealt with citizenship namely membership of
body politic with full civic rights. In the middle ages
this membership of the State began to carry a dual status :
one status was political and the other civil. The double
status came in Central Europe in the wake of Roman Law and
was partly due to the growth of feudal vassalage by which
what might have grown into nations composed of ’clans’
became divided into feudal Chieftanships. The feudal lord
did not concern himself with descent as such so long as his
follower held land or rendered service according to his
laws. Such laws did not apply to foreigners but if the
foreigners held lands or chattels or rendered service he was
equally bound. But the main reason was the impact of
international relations. An individual began to be viewed
in two capacities. Firstly, he was regarded as the subject
of a certain State
131
(a political status) and secondly as one entitled to certain
rights and privileges in his own State (a civil status).
Both arose from the bond to a particular State or territory
but it would be wrong to say that the word ’nationality’
describes the civil status. The word ’nationality’ whether
denoting an ethnic group or political membership of a State
is a word of much later origin. M. Cogordan (La Nationalite
p. 2) has given the origin of the word and in the
Dictionnaire de 1, Academie frans ais it appeared for the
first time in 1835. Even the Code Napoleon dealt with rules
concerning the status of Frenchmen abroad but did not
provide for the status of foreigners in France. The
recognition of nationality as a test of the law applicable
to an individual -followed the famous lecture by Mancini at
the University of Turin in 1851. The impact of
international relations added to the civic rights possessed
by a citizen by investing him with a policial status which
he could claim abroad. The word ’nationality’ itself has
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now come to acquire two distinct meanings political one by
which is indicated the membership of a State and the other
an ethnic one denoting membership of a nation. All this
time citizenship has also meant membership of a State but in
a municipal aspect. In this sense, the words ’national’ and
’citizen’ are not inter-’ changeable as has been sometimes
supposed. In the United States Public Law 414 (82nd
Congress, 2nd session) section 308 is entitled "Nationals
but not citizens of the United States at birth". According
to Weis Nationality and Citizens-hip p. 5:
"That the term American National has a wider meaning than
the United States citizen was recognised in Administrative
Decision No. V of the Mixed Claims Commission between the
United States and Germany ,’Decisions and Opinions Vol. I
pp. 18-19; Hackworth Digest of International Law, Vol. III
p. 5 Annual Digest, 1923-24, Case No. 100)."
Weis has given other examples of the disparate use of the
two words in the Constitution of the Netherlands, Honduras,
Nicaragua and Roumania. Even in the United States
Immigration and Nationality Act, 1952, the distinction is
preserved. This dual status which has caused all the
trouble in this case was summed up by Lord Westbury
132
in Udny v. Udny(1) by saying that the political status :
"May depend upon different laws in different
countries, wheras civil status is governed
universally by one single principle, namely
that of domicile, which is the criterion
established by law for purposes of determining
civil status. For it is on this basis that
the personal rights of the party, that is
to say, the law which determines his majority
or minority, his marriage, succession, testacy
or intestacy, must depend."
Thus, in the Middle ages, it was begun to be realised that
the legal personality of persons was composed of a political
status and a civil status. It was possible for a person to
have political status but not civil status, that is to say,
he could be a national but not a citizen but it was
difficult to imagine a citizen without political status.
This political status was determined according to two
different theories. One was the theory of descent (’us
sanguinis) and the other a theory of domicile (us soli).
The European countries applied the former and the Common Law
countries the latter to determine the status. We have
already seen that according to Roman Law the son of a Roman
citizen was also a Roman citizen and it did not matter where
he was born and this was the theory which was recognised in
Central Europe. In the Common Law countries (and 1 include
the United States of America) birth in the territory of the
King (us soli) determined political as well as civil status.
Descent from a citizen or subject outside the territory was
recognised statutorily. Statutes from the time of Edward
III recognised descent as one of the modes of acquisition of
political as well as civil status in England. In the United
States the principle of descent also was recognised
statutorily except in the case of children whose parents
though citizens had never resided in the States, but the
governing theory was birth in the territory of the States.
I have, I think, sufficiently explained that citizenship and
nationality are not entirely similar concepts though the
words are sometimes used interchangeably owing to the fact
that most citizens are also nationals and vice versa. But
strictly speaking citizenship:
(1) L.R. I H.L. S.C. 441.
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133
"is a term of municipal law, and denotes the
possession within the particular State of full
civil and political rights, subject to special
disqualification such as minority or sex. The
conditions on which citizenship is acquired
are regulated by municipal law."
J. B. Moore (Digest of International Law
Vol. III (1906) p. 273.)
The disqualifications of citizenship in the past and even
today are many and different from country to country. Some
of them which operate even today in several countries are:
minority, heresy, colour, lack of settled abode, insolvency,
infamy, treason, sex etc.
I have wondered what would have been the argument in this
case to support the claim of citizenship if our Constitution
had thought with Bluntschli (Die Lehre Vom modernen State,
i, p. 246) "die Politik ist Sache des Mannes."
It will thus be seen that the concepts of citizenship and
nationality have been influenced either by descent or by
birth in a particular place. Some countries like the Re-
publics of South America do not recognise descent because,
it is reasoned, to do so enables succeeding generations of
former citizens to claim the privileges of citizenship
irrespective of where they are born, while being outside the
territory they do not contribute to the country of which
they are citizens. Some countries recognise both the prin-
ciples but there are many differences in the approach to the
problem of descent. In some countries, citizenship is
confined to children born from a citizen-father resident
abroad and in others such descent is considered applicable
upto grandchildren. Thus certain statutes before the Act of
1914 conferred British citizenship and nationality upon
grand-children born abroad of natural born subjects, while
the French Naturalization Law (1889) gave recognition only
to children born in France of a father also born in France
and to children born abroad of a French father. The former
German law adhered only to the principle of descent but
later recognised marriage, naturalization etc. In Italy
long residence of the father and his domicile in Italy is
considered sufficient. Today nationality has assum-
*Politics is men’s concern.
134
ed enormous importance and the principles of dual nationa-
lity and statelessness cut across some of the former
theories and Cogordon’s statement "quc tout homme
doitposseder une nationalite*" is no longer true because of
many stateless persons.
It is not my intention to speak exhaustively about citi-
zenship and nationality. I have, I hope, sufficiently esta-
blished my point that citizenship and nationality from the
earliest times to date have been viewed as the attributes of
natural persons. We are not concerned however, with other
peoples or nations or States. We arc concerned only with
our laws ’on the subject. When the French Naturalization
Law of 1889 differed from the English law, Sir James
Ferguson stated on the advice of the law officers in
Parliament that if the English and the French laws differed
there was no help and each country was entitled to its own
laws. We have thus to see how our own citizenship has
evolved and who are the persons who are citizens and what
further arrangement exists for investing others with
citizenship.
As India was, for centuries, ruled by Britain we have
necessarily to examine the laws on the subject of citizen-
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ship and nationality before independence. There was no law
of citizenship in India. The Indian Naturalization Act was
merely supplemental to the Imperial Act and hardly needed.
I have already pointed out that the English Common Law
recognised the principle of jus soli but English Statute Law
(the Naturalization Act of 1870 in particular) recognising
descent conferred British nationality on persons,
(a) born in Great Britain or the Dominions (]’us soli)
(b) upto and including the second generation of descent
from natural born British subjects born abroad; and
(c) by naturalization, denization and resumption.
The statutes on the subject are collected by Clive Parry in
his Nationality and Citizenship Laws and need not be
referred to in detail here as we are really not concerned
with them except as the background of our laws. In 1914,
the British Nationality and Status of Aliens Act,
*Every person must posses a nationality.
135
1914 was passed which was later amended in 1943. The
definition of a natural-born British subject in that Act
shows the classes of persons who were regarded as British
subjects by birth. The word ’subject’ need not be con-
sidered in a sinister sense. It only meant a citizen though
the feudal concept of subjection seemed to persist in the
word. The Act of 1914 as amended in 1943 made one
significant departure and it was the limitation of British
nationality on birth to the first foreign-born generation.
The Act of 1914 as amended in 1943 ruled the field till the
British Nationality Act, 1948 was passed. By that time the
problem of British-born subjects underwent a cataclysmic
change along with the changes in the British Empire. A new
conception namely that of Commonwealth citizenship came to
be recognised but it was obvious that members of the
Commonwealth countries were about to enact their own
citizenship and nationality laws. The Act of 1948 did two
things with which we are concerned. It laid down rules by
which the status of British subjects was conferred on
persons who were citizens of certain countries named in the
Act. India was one of such countries. - This new
citizenship was Commonwealth citizenship. It also contained
transitional provisions and s. 12(4) provided:
S. 12(4) :-A person who was a British
subject immediately before the (late of the
commencement of this Act and does not become a
citizen of the United Kingdom and colonies by
virtue of any of the foregoing provisions of
this section shall on that date become such a
citizen unless-
(a) he is then a citizen of any country
mentioned in subsection (3) of section 1 of
this Act under a citizenship law having effect
in that country or a citizen of Eire ; or
(b) he is then potentially a citizen of any
country ,mentioned in sub-section (3) of
section I of this Act.
One of the Commonwealth countries (Canada) had already such
laws but others followed immediately afterwards. India
lagged behind and the citizenship laws came in the
Constitution and in the Act of 1955. During the period
between 1948 and 1950 Indian citizens were only
136
potentially so. They however enjoyed Commonwealth citi-
zenship which term was synonymous with British subject in
effect but ’was more appropriate to certain countries in
view of the attainment by them of full nationhood.’ Thus
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every Indian in British India by virtue of s. I of the
English Act of 1948 and every Indian in the Indian States as
a protected person enjoyed Commonwealth citizenship. of
course this citizenship was to continue till India enacted
its own citizenship laws and thereafter if there was a com-
mon clause preserving this citizenship and was to cease if
there was an express abrogation of Commonwealth citizenship.
Under the English Act of 1948, Indians became Commonwealth
citizens or British subjects without citizenship and were
regarded as potential citizens of India. The Indian
Constitution made provisions for citizenship on. the
inauguration of the Constitution but it was not a law for
the purpose of the British Nationality Act, 1948. It only
provided that certain natural persons were to be regarded as
citizens of India from January 26, 1950.
In so far as we are concerned this created a hiatus because
the scheme of Indian citizenship was not completely worked
out on 26th January, 1950. The Constitution no doubt
declared who were Indian citizens on that date but the
status of a British subject without citizenship which was
mellifluously called Commonwealth Citizenship "could not be
liquidated" unless there was a citizenship law as
contemplated by the English Act of 1948. As a result, in
the words of Clive Parry,
"Pending the completion of the scheme of Indian citizenship,
persons who were potentially citizens of India but are not
citizens thereof remained British subjects without
citizenship in the eyes of the United Kingdom."
No doubt in 1955, the Citizenship Act was enacted by the
Indian Parliament. Some writers think that even that is not
the citizenship law contemplated by the English Act of 1948.
Whether or not it fulfills the test, it is not necessary to
decide here because it does not affect the status of
corporations. Its provisions are applicable to ’persons’
and the definition of the word ’person’ in the Act expressly
excludes "any company or association or body of individuals,
whether incorporated or not."
137
I have attempted to establish that citizenship as viewed
from country to country and from one period of time to
another was concerned with natural persons. The manner of
acquisition of citizenship and/or nationality described by
me are admirably summed up by Mervyn Jones in his book
"British Nationality Law" at p. 9 in the form of a pedigree
which may be seen. It is enough to read the various
headings in the pedigree to realize that there is no room
for artificial persons there. From the point of view of Mr.
Setalvad’s argument this raises an intriguing situation. If
corporations possessed citizenship immediately before our
Constitution they would be citizens under the English Act of
1948, that is to say, British subjects without citizenship
or Commonwealth citizens and only potential citizens of
India. The Indian Constitution dealt with natural persons
and not artificial persons in its provisions dealing with
citizenship and the status of corporations was not disturbed
by those provisions. When the Citizenship Act was enacted
in 1955, it began to speak from January 26, 1950, ’and it
might have affected corporations but for the fact that it
excluded them. Thus if there was any citizenship which the
corporations enjoyed, it remained where it was. The
corporations, if at all, would thus be Commonwealth
citizens, not Indian citizens because no law has made them
Indian citizens. But I do not accept the basic argument
that corporations enjoyed citizenship even before, because
in the sense in which I have explained citizenship, there is
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no room for artificial persons.
The argument here repelled is sought to be supported by
referring to the rule of law under which corporations are
said to possess nationality. Nationality in this context is
not to be confused with the status of a citizen. What is
meant by that nationality may next be seen. Ordinarily
corporations are given recognition by law as persons who can
sue or be sued. Corporations also own property, carry on
business or trade. But it is not to be thought that
corporations have an access to courts as a matter of course.
The courts are open as a matter of course to natural persons
and not to ’intangible concepts’ like corporations. Unless
the law gives this right to corporations they cannot sue or
be sued. What the law does is to invest corpo
10-2 S. C. India/64
138
rations with a distinct personality and with a right to sue
and with a disability to be sued. Ordinarily such rights
and disabilities attach to ’persons’ but that word is given
an extended meaning to include corporations. In this way
the law invests an intangible body with a unity and
individuality and creates a legal person capable of suing or
being sued. Foreign corporations enjoy the same privilege
by a comity of nations and also sue and are sued. These
privileges which corporations share with natural persons do
not make them ’citizens’ entitled to every other privilege
which the municipal law gives, to citizens. In other words
corporations enjoy only such privileges under the municipal
law which that law expressly confers on them.
It is, of course, undeniable that corporations have an
existence in the eye of law. The law further regards that
corporations have a domicile and a residence. The law also
recognises that corporations have a nationality. What does
the law mean by that? The concept of the nationality of a
corporation is comparatively new and it was really developed
during the First World War. Nationality of corporations
becomes important when it is necessary to apply the
’nationality of claims’ principle before an international
tribunal or to give effect to law-making treaties applying
to ’nationals’. See Starke (An Introduction to
International Law 4th edn. p. 256). Starke has pointed ,out
that there is no unanimity of opinion regarding the tests to
be applied to ascertain the nationality of corporations.
Clive Parry does not recognise this nationality and calls it
quasi-nationality. I shall now explain in what sense the
word ’nationality’ is used in this connection.
There have been many theories about the nationality of
corporations which were again reconsidered during the First
World War. According to Hilton Young 22 Harvard Law Review
p. 2, there were four main theories at first. The first
theory viewed a corporation as the national of the State in
which its members or the majority of them or owning the
greater part of the capital, were nationals. This theory
considered the word ’corporation’ as ’a collective name for
the corporators’, the corporate veil being considered to be
of such gossamer texture as to hide almost nothing. This
theory of which the chief proponents were sommieres and
Morawetz was criticised on all hands
139
and particularly by Maitland and was abandoned as it made
nationality a matter of accident and liable to change day in
and day out. The second theory regarded nationality as
determined by the nationality of the State under which it
was created. The United States of America has adhered to it
but England may be said to have adopted this theory modified
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by considerations of domicile. The Germans call this theory
Grundungstheorie that is the theory of the place of birth.
The theory has great names behind it-Calvo, Fiore, Pineau,
Weiss etc. This theory is inadequate to cover corporations
which are not authorised by the State and has been modified
in the United States by evolving a theory of ’Implied
consent to extraterrestrial service’. The third theory
considers that a corporation acquires the nationality of the
place where its acts or any of its acts are performed. This
theory is rejected universally by lawyers but it was adopted
by businessmen in the Congress of Joint Stock Companies held
at Paris in 1889. Under this theory nationality can be
changed at will. Obviously enough difficulty is likely to
be felt in the event of simultaneous actions in different
countries. The fourth theory considers that corporations
are domiciled where they have a permanent home. This Theory
was influenced by Von Bar who considered that though
juristic persons could not be nationals either lure
sanguinis or jure soli, they could be nationals by domicile.
Chief Justice Taney summed up the thought by saying that "a
corporation must dwell in the place of its creation and
cannot migrate to another sovereignty". The Bank of Augusta
v. Erle (1). Domicile of a corporation has more foundations
than one. It may be fixed by the territory of the sovereign
which created it or by the charter or other constitutive
documents or by the place where the corporation discharges
its functions or by the bona fide centre of its
administrative business. These different concepts have led
to diverse theories.
English Law regarded nationality as dependent on domicile
and was at first content to regard a corporation as the
national of a State where it was incorporated. But a glance
at the history of the law of corporations shows
(1) [1839] 13 Pet. 519, 588-10 L. Ed. 274.
140
that there is a variation in this theme in later years. The
conception of domicile was adopted in the English Common Law
merely for purposes of jurisdiction and law. A
corporation’s domicile, it was held, depended upon where it
came into being and this domicile was not changeable though
Lord St. Leonards was of a contrary opinion in Carron Iron
Co. v. McLaren(1). Similarly it was held that a corporation
had a residence though it could change its residence and
even have more than one residence under certain laws. On
what then did nationality depend? According to English
Common Law a corporation incorporated under the English Law
had British nationality and it did not matter if its members
held a different nationality. A corporation which was not
of British nationality was an alien corporation. According
to the laws of many European countries particularly France,
nationality depended upon the siege social by which is meant
the seat or centre of control. Both these theories suffered
during the First World War. As regards the English Common
Law the leading case was Janson v. Driefontein (2). from
which I have already quoted certain extracts. In that case
it was decided that a company possessed the nationality of
the country under the laws of which it was incorporated and
that the nationality of the share-holders was not
determinative of the question. Once this nationality was
determined then the corporation received the treatment as a
national, as an alien, or as an enemy as the case was in
peace or in war. This view was revised in the First World
War. In Daimler Co. Ltd. v. Continental Tyre and Rubber
Co. (Great Britain Ltd. (3), all the shares of the
respondent company (except one) were held by a German
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company and all directors were Germans though the company
was incorporated in Great Britain. If the principle that
nationality follows incorporation applied, the respondent
company would have had a British nationality and it could
not change it. But the House of Lords applied the principle
of effective control to determine its nationality. In the
Court of Appeal the case was heard by the full Court and
(1) [1952] 5 H.L.C. 416.
(2) [1902] A.C. 484.
(3) [1916] 2 A.C. 307.
141
the above principle was held applicable (Buckley L. J.
dissenting). The majority view was confirmed by the full
judicial strength of the House of Lords by majority. Lords
Shaw and Parmoor considered that enemy character depended on
whether it was incorporated in an enemy country. The
majority (Lords Hatlsbury, Mersey, Kinnear, Atkinson, Parker
and Sumner) however, considered that it depended upon where
the effective control lay. Lord Parker summarized the law
in six propositions as under :
(1) A company incorporated in the United
Kingdom is a legal entity, a creation of law
with the status and capacity which the law
confers. It is not a natural person with mind
or conscience. To use the language of Buckley
L. J., "It can be neither loyal nor disloyal.
It can be neither friend nor enemy."
(2) Such a company can only act through
agents properly authorized, and so long as it
is carrying on business in this country
through agents so authorized and residing in
this or a friendly country, it is prima facie
to, be regarded as a friend, and all His
Majesty’s lieges may deal with it as such.
(3) Such a company may, however, assume an
enemy character. This will be the case if its
agents or the persons in de facto control of
its affairs, whether authorized or not, are
resident in an enemy country, or, wherever
resident, are adhering to the enemy or taking
instructions from or acting under the control
of enemies. A person knowingly dealing with
the company in such a case is trading with the
enemy.
(4) The character of individual shareholders
cannot of itself affect the character of the
company. This is admittedly so in times of
peace, during which every shareholder is at
liberty to exercise and enjoy such rights as
are by law incident to his status as
shareholder.
(5) In a similar way a company registered in
the, United Kingdom, but carrying on business
in a neutral country through agents properly
authori-
142
zed and resident here or in the neutral
country, is prima facie to be regarded as a
friend, but may, through its agents or persons
in de facto control of its affairs, assume an
enemy character.
(6) A company registered in the United
Kingdom but carrying on business in an enemy
country is to be regarded as an enemy.
The House of Lords case is regarded as an instance of
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judicial legislation on the subject of ’enemy character’ and
it undoubtedly was so. It is not as if this theory has been
universally accepted. It was criticised by Sir Arnold
Mcnair in 1923/24 British Year Book of International Law p.
44 and by Mr. Ralph A. Norem: American Journal of
International Law Vol. 24 p. 310.
We have seen that in the United States a corporation is a
domestic corporation of the State which incorporates it or
under the laws of which it is incorporated. Some of the
States have even laws to this effect. While other countries
were revising their attitude in Europe, the United States
adhered to this theory and the Supreme Court observed that
the Congress had definitely adopted the policy of
disregarding stock ownership as a test of enemy character.
In other words, in the United States there was no attempt to
look behind the corporate veil. We have also seen that
England drifted from the theory of domicile to the
continental theory of siege social. But France, Germany,
Italy and Belgium went a step further than before. The Cour
de Cassation departed from the principle of siege social in
Societe Conserve Lenzburg in which it was held that the
court was entitled "to go to the bottom of things and
ascertain whether a corporation was really French or not."
The French Minister of justice issued a circular in 1916
which stated the French approach to the question thus :
Les formes juridique dont la societe est revetue, le lieu de
son principal establissement, tous les indices auxquels
s’attache le droit prive pour determiner la nationalite
d’une societe, sont inoperants, alors qu’il s’agit defixer
au point de vue du droit public le caractre reel de cette
societe. Elle doit etre assimilee aux sujets de nationalite
ennemie des qne notoirement sa direction ou ses capitaux
sont en totalite ou en majeure partic
143
entre les mains de sujets ennemis, car, en pareil cas,
derriere la fiction du droit privi se dissimule vivante et
agissante la personnaliti ennemie elle-meme."
(The juridical forms in which the society is
dressed, the place of its principal office and
all the indicia on which Private Law fastens
to determine the nationality of a society, are
inoperative when one tries to fix from the
point of view of Public Law the real character
of this society. The society ’must be counted
among enemy nationals if manifestly its
direction or its capital wholly or in major
part is in enemy hands for in such a case
behind the fiction of the Private Law lurks
the active personality of an enemy.)
The Cour de Cassation justified the change by holding that
the corporation was a personne interposee under the cover of
which an enemy did business. The German attitude also
changed to Geschaftssitz from der Mittelpunkt des Geschaftes
i.e., to the "seat" of real control from the "centre of its
enterprise". The corporation was said to have its seat
where the "brain" was and not where it had its centre of
exploitation. The Italians also adopted the same test. The
Belgians framed a law which sums up the new theory in crisp
legal language (Act 172-Mai 23, 1913) :
"Toute societe dont le principal etablissement est en
Belgique est soumise a la loi belge bien que I’acte
constitutif ait ete passe en pays etranger. "
(Every society of which the principal establishment is in
Belgium is under the laws of Belgium, notwithstanding that
the incorporation took place in a foreign country.)
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In the Mixed Arbitral Tribunals which followed the First
World War there were some cases which were decided on the
theory of control but many others were decided on the theory
of domicile depending upon the composition of the Tribunal.
There are indeed many other tests which I have not mentioned
such as the test of beneficial interest, or of substantial
ownership or of responsibility which it is not necessary to
describe here.
It would not be wrong to say that the control theory is also
losing ground and there is a great support for the theory
that the juridical life of the corporation must ulti-
144
mately fix its nationality. It is also to be noticed that
Herr Marburg and M. Mazeaud two noted thinkers have pointed
out that all this law is not so much to fix the nationality
of a corporation but its enemy character. Many writers
(including Dicey, Cheshire, Foote and Farnsworth) have also
pointed out that the conception of the nationality of a
corporation is important only in war and it has significance
not so much in Municipal Law as in Public International Law.
During times of peace the domicile of a corporation which,
as Lord Westbury pointed out, is an idea of law creating a
relationship between an individual and a particular country
is allowed to operate a fiction. A corporation resembles a
natural person in the matter of domicile except that an
individual can choose his domicile but a corporation’s
domicile is tied to its place of birth. The law of the
country of its birth gives it such rights as it considers
practicable and foreign corporations share in those rights
subject to any special provisions. In times of war these
rules and the rule of corporate entity give way and public
policy dictated by the consideration whether the resources
of the corporation are likely to be used for enemy purposes
determines the issue. Thus in the Daimler case the fons et
origo of the control theory"-
"The acts of a company’s organs, its directors, managers,
secretary and so forth, functioning within the scope of
their authority are regarded as the company’s
acts. . . . " (1)
The operatives are regarded as the ’brain’ of the cor-
poration and where the brain functions the corporation is
held to function. During times of peace a corporation may
own property, do business because the Municipal law
expressly permits that all this can be done and foreign
corporations also obtain the benefit of such laws either
because of provisions of the Municipal law or by a comity of
nations. In times of war all this changes. The law of
nationality is thus a law to determine the enemy character
and not a law recognising nationality either in a political
or municipal sense. There may be some analogy between an
individual and a corporation but as Mr. Vaughan Williams
said (49 L.Q.R. 334) in an article which has been of great
assistance to me, it is not necessary ’to ride
(1) [1916] 2 A.C. 307, 340.
145
the analogy to death.’ The English Law was summed up by
Mervyn Jones (British Nationality Law, Revised Edn.
"A corporation is a juridical person, but
could not be a subject at Common Law, because
allegiance, being essentially a personal bond,
was a conception limited in its application to
individuals. Nor have corporations been
recognised as statutory British subjects or as
citizens of the United Kingdom and colonies."
Oppenheim also points out (International Law,,
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Lauterpacht Edition) p. 642 n. 3-
"The nationality of corporations is mainly a
matter of Private International Law, and
considerations of Public policy have a
decisive influence upon the attitude of every
State with regard to it."
Citizenship depends upon Municipal Law and the
same learned author says (ibid p. 643) :
"It is not for International Law but for
Municipal Law to determine, who is, and who is
not, to be considered a subject."
Hyde in his International Law Vol. 2 (2nd
Edn.) 1066 also says:
"Citizenship as distinct from nationality, is
a creature solely of domestic law. It refers
to rights which a State sees fit to confer
upon certain individuals who are also its
nationals."
But perhaps the most practical argument
against the recognition of corporations as
citizens comes from M. Niboyet (who, as Mr.
Vaughan Williams points out) observed in his
Manual of Private International Law that in
computing the total number of citizens of a
country we do not add to the number of
physical persons the number ,of corporations
of that nationality. Indeed Lord Atkinson
(and all who formed the majority except Lord
Halsbury) was of opinion in the Daimler case
that-
"The question of the residence of the company
apart, I do not think that the legal entity,
the company, can be so completely identified
with its share-holders, or the majority of
them, as to make their nationality its
nationality."(1)
We have only two laws on the subject of citizenship -:and
none on the subject of the nationality of corporations. (1)
(1) [1916] 2 A.C. 327.
146
The fundamental law provides only for natural persons. where
it enacts rules for determining citizenship and the
Citizenship Act excludes corporations. The chapter on fun-
damental rights does not altogether ignore corporations as
did the American Constitution. In places the word ’person’
is used which attracts the definition in the General Clauses
Act and in others the word ’citizen’. The word ’citizen’
could have been defined specially for Article 19(1) (f) and
(g) but it is not. There is nothing which can justify us in
giving a special meaning to the word "citizen" for purposes
of clauses (f) and (g). The fact that corporations are
regarded in some circumstances as possessing nationality
does not make them citizens. As Mr. Menon rightly pointed
out ships and aircraft also possess nationality in
International Law but it cannot be claimed that they possess
citizenship in Municipal Law.
Which corporations should be regarded as possessing Indian
Nationality is a question to be answered when it arises.
Whether the provisions of the Companies Act dealing with
foreign companies furnish any assistance in this behalf must
also be left unanswered. It is sufficient to say that even
if it be established that a corporation, possesses Indian
Nationality this has not the result which is contended for
namely that all or any of the citizens rights arise. It may
be admitted that the State Trading Corporation which is
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incorporated in India is not a foreign company under the
Companies Act. If we were to lift the veil of incorporation
it will be found that the entire capital is subscribed by
the Government of India, that the share-holders are the
President of India and two Secretaries to Government, in
their official capacities and that its management is a
governmental function for the benefit of the nation. It may
be conceded that it possesses Indian Nationality in an ideal
sense and that there is also no possibility of its acquiring
an enemy character. But even so it is not a ’national’ that
is to say an individual who is a part of our nation. When
we count Indian nationals, for purposes of census we do not
count the corporations as nationals. The argument is not
one what advanced by dropping the word ’citizen’ and using
the word ’national’. No doubt the existence of corporations
as entities is recognised but the entity obtains only such
rights as the law
147
confers on it. This entity cannot claim other rights as a
matter of course or by standing side by side with citizens.
This entity cannot aspire to hold a. public office or to
membership of Parliament or the Legislatures or to franchise
or to entry into educational institutions. This is because
it is not a citizen in the true sense of the term and
because its ’nationality’ though of consequence in Public or
Private International Law, in treaties, in conventions and
in protocols, is of no consequence in Municipal Law except
to the extent that the Municipal Law says so.
This is not to say that corporations have not been given any
protection under our Constitution. Unlike the Constitution
of the United States of America our Constitution does not
overlook corporations. The General Clauses Act is
applicable to interpret the Constitution and that Act, as
has been pointed out already, defines ’person’ as including
corporations. The following articles of the Constitution
employ the word ’person’ which applies equally to
individuals and to corporations etc.
Art. 14 Equality before the law.
Art. 20 Protection in respect of convictions for
offences.
Art. 27 Freedom as to payment of taxes for promotion of
any particular religion.
Art. 31 Compulsory acquisition of property.
The seven freedoms guaranteed by Art. 19(1) are for
’citizens’. It was easy to say that the word ’citizen’
included corporations etc. of Indian Nationality for
purposes of any of the clauses of Art. 19(1) but it has not
been so said. It is to be noticed that in the third part
the Constitution defines ’the State’, ’the law’, ’laws in
force’, ’estate’ and rights’. The expression ’law in force’
is defined twice and differently. Can it be said that the
word ’citizen’ was purposely left vague so that a broad and
liberal spirit could enter the interpretation? What a
chance to take. It must have been well-known that an
attempt by the Supreme Court of the United States to give an
artificial meaning to the word ’citizen’ has been regarded
on all hands as Constitution making. It is easy to see that
our Constitution was circumspect enough to use a word of
larger import (person) in some places but not in others.
The intention may well have been that the seven freedoms
148
shall guarantee the rights of individuals whom the body
politic recognised as ’citizens’ and not the rights of
abstractions like corporations. The observations of Chief
Justice Mukherjea quoted earlier mean that a corporation is
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protected only where the language admits the inclusion of
corporations otherwise only individuals are meant.
It is however argued that in the United States the Supreme
Court has held that the word ’citizen’ includes
corporations. Reference was also made to the Constitutions
of some minor countries where corporations are expressly
mentioned. It is not necessary to refer to these Constitu-
tions because no inspiration can be drawn from them to
rewrite our Constitution. As Willis. said (and he is not
alone in this) of the position in the United States that the
rights and liabilities of corporations "have been worked out
under and through the judge-made United States Con-
stitution". Perhaps this was forced upon the Supreme Court
by the diversity of citizenship existing in the United
States but it may be noted that the word ’citizen’ has not
been held to include corporations in other articles. Since
this precedent was strongly relied upon I shall briefly
refer to it.
The Constitution of the United States of America overlooked
corporations and this has made the language intractable in
places. The Supreme Court has supplied this want by
’judicial legislation’. How this was done may be explained.
I have already referred to the dictum of Chief justice Taney
and to the attitude of the Congress and the Supreme Court on
the subject of nationality of corporations. There is a
fixed view that nationality follows incorporation and is
unalterable. This geographical theory coupled with dual
citizenship of the State and United States has led to some
difficulties. Corporations were always regarded as the
citizens of the State of incorporation but not of the United
States. The citizenship of the State has been accepted for
purpose of exercise of the Judicial power of the United
States.
The following provisions of the Constitution of the United
States may be read at this stage :
Art. I Sec. 8. "Congress shall have
power........ to establish an uniform Rule of
Naturalization."
Art. III Sec. 1. "The judicial Power of the
United States,
149
shall be vested in one Supreme Court, and in
such inferior Courts as the Congress may from
time to time ordain and establish
Art. III Sec. 2. "The judicial Power shall
extend to controversies between a State and
Citizens of another State ; between Citizens
of different States ; between Citizens of the
same State claiming Lands under Grants of
different States, and between a State, or the
Citizens thereof, and foreign States, Citizens
or Subjects."
Art. IV Sec. 2 The citizens of each State
shall be entitled to all Privileges and
Immunities of Citizens in the several States."
Amendment XIV Sec. I "All persons born or
naturalized in the United States, and subject
to the jurisdiction thereof, are citizens of
the United, States and of the State wherein
they reside. No State shall make or enforce
any law which shall abridge the privileges or
immunities of citizens of the United States ;
nor shall any State deprive any person of
life, liberty or property, without due process
of law ; nor deny to any person within its
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jurisdiction the equal protection of the
laws."
The Supreme Court has held that a corporation is the citizen
of the State of incorporation for purposes of federal
Jurisdiction on the ground of diversity of citizenship.
Though Art. I sec. 8 and Amendment XIV refer to natural
persons the word ’citizen’ was given a larger meaning for
purposes of controversies between citizens of different
States over which federal courts alone have jurisdiction.
The jurisdiction of the national courts could not be invoked
if the defendant was a corporation but the Supreme Court has
by slow stages created a fictional jurisdiction. The
development of the law has had an interesting course.
Rather than describe it in my own words 1 quote a small
passage from Willis, Constitutional Law of the United States
(p. 850) :-
"At first a corporation was not regarded as a
citizen for any purpose and it could not get
into or be taken into the federal courts on
the ground of diversity of citizenship. Then
a case arose where all of the stockholders of
the corporation were citizens of the
150
same State where the corporation was
incorporated and the plaintiff was a citizen
of another State, and it was held that the
Court would look behind the corporate veil to
the stockholders and give the federal courts
Jurisdiction because of the diversity of
citizenship thus found. In a later case some
of the stockholders were not citizens of the
State where the corporation was incorporated
but of the state in which the opposing
litigant was a citizen. To avoid robbing the
federal courts of their jurisdiction, the
Court held that for purposes of diversity of
citizenship all of the stockholders of a
corporation would be conclusively presumed to
be citizens of the chartering state. This
rule, however, had to be modified later so as
to make an exception in the case of a
stockholder plaintiff. Now it is believed
that the courts have come to the position that
the corporation is itself a citizen of the
state of its incorporation for the purposes of
diversity of citizenship."
The following extract from St. Louis & San
Francisco Ramawy Co. v. James(1) sums up the
position so far as the Supreme Court is
concerned
"There is an indisputable legal presumption
that a State corporation, when sued or suing
in a circuit court of the United States, is
composed of citizens of the State which
created it........ That doctrine began, as we
have seen, in the assumption that State
corporations were composed of citizens of the
State which created them ; but such assumption
was one of fact, and was the subject of
allegation and traverse, and thus the
jurisdiction of the Federal courts might be
defeated. Then after a long contest in this
court, it was settled that the presumption of
citizenship is one of law, not to be defeated
by allegation or evidence to the contrary.
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There we are content to leave it."
States have, however, begun to destroy the presumption which
is thus erected by requiring a corporation as a condition to
doing business there to incorporate in the State. This can
be done because the Supreme Court
(1) [1896] 161 U.S. 545, 562, 563.
151
has rejected the claim of corporations to citizenship for
purposes of the privileges and immunities clauses quoted
above. As Corwin pointed out in The Constitution and what
it means today 11th edn. p. 166 :
"Nor does the term ’citizens’ include
corporations. Thus a corporation chartered
elsewhere may enter a State to engage in local
business only on such terms as the State
chooses to lay down, provided these do not
deprive the corporation of its rights under
the Constitution-of its right, for instance,
to engage in interstate commerce, or to appeal
to the national courts or, once it has been
admitted into a State, to receive equal
treatment with corporations chartered by the
latter."
It remains to point out that corporations have been held to
be ’persons’ within the Fourteenth Amendment and are
entitled to equal protection of the laws. But a foreign
corporation as Corwin points out (at p. 268) is entitled to
equal treatment with the corporations chartered by a State
if there is submission to the Jurisdiction of the State.
The Nationality Act of 1940 declared that for the purpose of
that Act a ’national’ meant a person owing personal
allegiance to a State in the United States. Corporations
were thus not included because in the words of Buckley L.J.
a corporation cannot be loyal or disloyal. For
international purposes a corporation is treated as a
national if subjected to illegal treatment in an
international aspect by a foreign power. The position of
corporations is protected in treaties as for example the
treaties between Great Britain and the United States of 1783
and 1794 and the treaty of Guadalupe Hidalgo between the
United States and Mexico. Other examples are found in Hyde
and international documents. Similarly treaties of commerce
are construed to include corporations within expressions
denoting natural persons. But even in international sphere
corporations are not on a par with natural persons or
nationals. As Hyde points out:
"........ at least in a technical sense, a
corporation is not, for many purposes to be
deemed a national of the State to which its
life is due, and lacks many privileges
152
that enure to a natural person........
The question is whether the precedent of the
United States Supreme Court should be
followed. Apart from the fact that this
involves a conscious effort at judicial
legislation, I am of opinion that such a
spirit of libre recherche scientifique is
hardly justified in India in view of the fol-
lowing considerations --
(a) We have a single citizenship and there
is no citizenship of the States to create
diversity ;
(b) We have only one set of courts and not
two with separate jurisdiction ;
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(c) Our Constitution has not completely
overlooked corporations and some of the
fundamental rights are prima facie guaranteed
to corporations as well ;
(d) Members of a corporation who are
citizens can enforce the rights under Art.
19(1) (f) and (g). Even if corporations may
not be able to do so directly, the members who
are citizens by enforcing their personal
rights can effectively benefit the
corporation. The only persons who are not
able to do so are non-citizens whether as
individuals or as members of a corporation ;
(e) There has never been a recognition of a
corporation as a citizen ; and
(f) Unless a presumption juris et de jure is
raised that corporations whether composed of
citizens only or of non-citizens only or of
citizens and noncitizens are citizens of
India, every time an inquiry will have to be
made into their composition and there is no
discernible principle on which the citizenship
can be based when there is diversity of
citizenship in the composition of the
corporation.
I am, therefore, of opinion that the State Trading
Corporation cannot be regarded as citizen for the purpose of
enforcing rights under Art. 19(1)(f) and (g).
The next question is whether the State Trading Corporation
is a department or organ of Government notwithstanding the
formality of incorporation. On behalf of the Corporation it
is contended that if the corporate veil is pierced one sees
that the right to invoke Art.
153
19(1)(f) and (g) is being claimed by three persons who are
admittedly citizens of India namely the President of India
and the two secretaries. The contention on the other side is
that the corporate veil cannot be pierced at all and that if
it is, then behind that veil there is the Government of
India.
It is quite clear that none of the shareholders holds his
share or shares for his personal beneficial enjoyment. None
of them has paid for the shares held in his name. The
administration of the affairs of the corporation though
technically a company, is a concern of the Government of
India. The legal and beneficial ownership of the
corporation vests in the Government of India. Now there are
not two veils so to speak, so that by lifting the first one
sees the shareholders and by lifting the other the
Government of India. There is but one veil and if it is at
all to be lifted, it must be lifted right off. What one
would see on lifting the veil may be described in the words
of Martin Wolff (Private International Law, 1945 p. 56) as
follows :-
"It occurs frequently that a state creates e.g., for a
commercial purpose, a separate legal entity, in law distinct
from the state, but in fact, if the veil of personality is
pierced, identical with it. Examples are........ notably
many companies under state control, the state possessing all
or practically all the Shares in that company."
If the corporation is to be regarded as a separate entity
from its members and not merely as an association of
individuals, it is not permissible to tear the veil aside.
Corporations in which the State owns the stock do not, in
the United States, benefit from the immunity of the State.
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It is because of these difficulties that the Supreme Court
of the United States settled the question of federal
jurisdiction in the face of diversity of citizenship by
making an irrebuttable presumption of law that the
stockholders of a corporation incorporated in a State are
citizens of that State and the corporation is thus also a
citizen of that State. There is a fiction upon a fiction.
I do not think that it is permissible under our laws to
raise such an irrebuttable presump
11-2 S. C. India/64
154
tion of Indian citizenship in respect of every member of a
corporation in India and it is obvious that if no such
presumption can be raised the citizenship of corporations
raises an issue of fact. Can we say that if all the
corporators arc found to be Indian citizens then we must
hold that the corporation is an Indian citizen? Such a view
was held in an early case by the Supreme Court of the United
States-see Bank of the United States v. Deveaux(1). In that
case Chief Justice Marshal, while recognising that a
corporation aggregate was certainly not a citizen because it
was an ’invisible’, ’intangible’ and ’ artificial’ being,
held that since the Constitution dealt with matters
generally and not in detail, and the general purpose and
object of the law of incorporation showed that such an
artificial person was to have corporeal qualities, a
corporation had the character of a citizen if those that
composed it had that character. In the Daimler case (op-
cit. sup.) Lord Parker seemed to be of the opinion that this
was the established law in the United States but Farnsworth
(The Residence and Domicile of Corporations p. 311) supports
Dr. Schuster (The Nationality of Trading Corporations 2
Grotius Society (1916) at p. 195) in the view that Lord
Parker’s statement was inaccurate. Farnsworth has also
quoted from Garner’s International Law in the World War Vol.
I p. 227 where the opinion of the Federal Judge in Fritz-
Schultz Jr. Co. v. Raines & Co. (2) is quoted with approval
:-
"In upholding the right to bring the action
the Court expressed the opinion that the
authority in the case of United States v.
Deveaux has been much limited, if not
overruled, by subsequent cases and that ’at
the present time the courts of this country
are entirely wedded to the doctrine that the
corporators of a corporation are conclusively
presumed to be citizens of the same State as
the corporation’. The statements of Lord
Reading and Lord Parker in the Daimler case,
that the Supreme Court had laid down the
principle that a court may look behind the
corporate name to ascertain the character of
the indivi-
(1) (1809) 5 Cranch 61 : 3 L. Ed. 38. (2)
(1917) 166 N.Y. S. 567.
155
duals comprising it, was, said Justice Lehman,
obviously not accurate."
I have earlier quoted from St. Louis & San Francisco Railway
Co., v. James (cit. sup.) which also supports Dr. Schuster’s
view.
In my judgment it is not possible to pierce the veil of
incorporation in our country to determine the citizenship of
the members and then to give the corporation the benefit of
Art. 19. If we did pierce the 1 and saw that the
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corporation was identical with Government there would be
difficulty in giving, relief unless we held that the State
can be its own citizen. Nor is it possible to raise an
irrebuttable presumption about the citizenship of the
members. I have given detailed reasons already in answer to
the first question posed for our decision. If we go by the
corporate entity then we must hold that Art. 19 applies to
natural persons. On that subject I have said a great deal
but what I have said sums up to the following passage from
Ducat v. Chicago (1) quoted by Farnsworth (op. cit.) at p.
310 and approved by the United States Supreme Court :-
"The term citizen can be correctly understood
in no other sense than that in which it was
understood in common acceptation when the
Constitution was adopted, and as it is
universally explained by writers on
government, without exception. A citizen is
of the genus homo, inhabiting, and having
certain rights in some State or
district........ these privileges attach to
him in every State into which he may enter, as
to a human being-as a person with faculties to
appreciate them, and enjoy them, and not to an
intangibility, a mere legal entity, an
invisible artificial being, but to a man, made
in God’s image."
It is not necessary to refer to the earlier cases of this
court. The point was not raised in this form before and
,even the observations of Mukherjea J. (as he then was) were
obiter. In most cases an individual member also joined the
corporation in the petition for the enforcement of
fundamental rights (as is the case here also) and this Court
was content to leave the matter there. Joseph Kur-
(1) (1868) 48 111. 172.
156
villa Vellukunnel v. Reserve Bank of India(1) was heard by
this Court in which the Palai Bank Ltd. was a party along
with others. No objection was raised about the competency
of the Palai Bank to claim the benefit of Art. 19. The main
case (there were two heard together) was an appeal from a
decision of Raman Nayar J. in proceedings for the winding up
of the Palai Bank [I.L.R. (1961) Kerala 166]. It was an
action properly brought against the Palai Bank under the
Banking Companies Act. The main question in this Court was
whether a section of the Banking Companies Act which enabled
the Reserve Bank to decide whether a banking company
deserved to be wound up was ultra vires in as much as it
took away the right of the court to decide this matter. It
was held by majority that there was no flaw in the law and
that it was for Parliament to say at what stage in a
particular case, the judicial process should begin and not
for the courts who come into the picture from the stage the
judicial process commences under the law. This point could
be decided in an appeal in which beside the corporation
there were other interested parties.
Lastly, I have no cause for anxiety about Corporations in
general and companies in which the States own all or the
majority of the shares in particular. They are amply
protected under our Constitution. There can be no
discrimination, no taxation without authority of law, no
curbs involving freedom of trade, commerce or intercourse
and no compulsory acquisition of property. There is
sufficient guarantee there and if more is needed then any
member (if citizen) is free to invoke Art. 19(1) (f) and (g)
and there is no doubt that the corporation in most cases
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will share the benefit. We need not be apprehensive that
corporations are at the mercy of State Governments.
For these reasons my answers to the question posed are
against the State Trading Corporation.
DAS GUPTA J.-I think the State Trading Corporation of India
is entitled to fundamental rights under Art.
(1) [1962] Supp. 3 S.C.R. 632.
157
19(1)(f) and (g) of the Constitution as citizen of India.
The petitioner bases its claim to these fundamental rights
on the fact that all its members are citizens. That this is
so is not disputed by the respondent. But the respondent
resists the claim on the legal basis that the Corporation is
not a natural person but only an artificial person forming a
distinct entity from the natural persons who are its
members. According to the respondent no artificial person
is a citizen of India either under the Constitution or under
the Citizenship Act which was passed in 1955 in accordance
with the Constitution. The respondent also contends that it
would be a mistake to confuse nationality with citizenship
and while it is correct that the present petitioner having
been incorporated in India under the Indian Companies Act is
a national of India it would be wholly erroneous to think
that it also became on such incorporation a citizen of
India. The fact that it is a national of India puts it in
no better position that any other person, natural or
artificial, which is not a citizen of India in the matter of
fundamental rights.
While creating fundamental rights "the people of India"
created some which they conferred on all persons (Arts. 14,
20, 21, 22, 23, 24, 25, 26, 27, 28 and 30); but some were
created that were conferred only on citizens and were denied
to others. Among those conferred on citizens only are the
fundamental rights created by Arts. 15, 16, 19 and 29. The
word "citizen" was not, however defined in the Constitution
and so we have not got a key that is provided by a clear
definition, to the minds of those who framed the Constitu-
tion, on the question whether they intended to exclude cor-
porations as such from the fundamental rights conferred on
citizens. The respondent points out that immediately before
dealing with the question of fundamental rights, the Consti-
tution deals with question of citizenship in seven Articles,
viz., Arts. 5 to 11. There is force in the respondent’s
contention that these articles do not appear to contemplate
any artificial person, like a corporation, being in its
capacity of corporation, a citizen of India. Article 5, the
first and the main article dealing with the question makes
persons, (1) born in the territory of India, or (2) born of
parents one or both of whom were born in the territory of
India, or (3) persons who have been ordinarily residents in
the territory of
158
for not less than 5 years preceding the commencement of the
Constitution, citizens of India. Article 6 and 7 deal with
the cases of certain persons who have migrated to India from
Pakistan, while Art. 8 deals with the question of rights of
citizenship of persons of Indian origin residing outside
India. Article 9 lays down that inspite of Arts. 5, 6 or 8
a person who has voluntarily acquired the citizenship of any
foreign State shall not be a citizen of India. Article 10
embodies the provisions of continuity of citizenship
"subject to the provisions of any law that may be made by
Parliament"; Article 11 makes an express provision that
Parliament would be competent to make any provision with
respect to acquisition and termination of citizenship and
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all other matters relating to citizenship.
I agree with the contention raised on behalf of the res-
pondent that it is not reasonably possible to read into
these articles of the Constitution any intention that an
artificial person might also be a citizen. We also find
that the Citizenship Act, 1955, which was enacted by
Parliament in exercise of the powers preserved to it by Art.
11 of the Constitution, expressly excludes from its benefit
"any company or association or body of individuals, whether
incorporated or not." A Corporation is not a citizen under
the Citizenship Act, 1955, nor is a corporation as such a
Citizen under the constitutional provisions on question of
citizenship. From this it seems an easy step to say : Arts.
5 to 11 do not make the corporation a citizen; the
Citizenship Act does not make the corporation a citizen
there is no other Indian law that makes the corporation a
citizens; and so the problem is solved : corporation is not
citizen for the purpose of fundamental rights.
That" according to the respondent, should end the search for
light. I am unable Lo agree. After all it is a
constitution that we are interpreting and it has again and
again been laid down that those on whom falls this task have
to take a broad and liberal view of what has been provided
and should not rest content with the mere grammarians’ role.
If, as is undoubtedly true, a syllogistic or mechanical
approach of construction and interpretation of statutes
should always be avoided, it is even more important when we
construe a Constitution that we should not proceed
mechanically but try to reach the intention of the
159
Constitution-makers by examining the substance of the thing
and to give effect to that intention, if possible-.
There was some discussion at the Bar as to whether there
were citizens of India, even before the Constitution. It
will serve no useful purpose, in my opinion, to enter into
that controversy. For, I am inclined to think that the
Constitution in dealing with the matter of citizenship bad
no intention to keep any former citizenship alive. If that
had been intended a suitable provision would have been made
to make that clear. In the absence of any provision to that
effect it is difficult to hold that citizenship as might
have existed in pre-Constitution India continued even after
the Constitution.
Nor do I find it possible to agree that because a company
incorporated in India would be a national of India it would
necessarily be a citizen of India. Nationality and ci-
tizenship are not identical; and it has been rightly said
that while every citizen will be a national, every national
is not necessarily a citizen.
We are still left with the question whether the framers of
the Constitution when conferring some fundamental rights on
citizens only intended-that citizens forming themselves into
a corporation would cease to enjoy these rights. The
peculiar position that results from the strict ’legalistic
approach to the problem can be best shown by means of an
illustration.
A, a citizen of India, whether under the Constitution or
under the Citizenship Act is entitled to the fundamental
right to acquire, hold and dispose of property under Art. 19
of the Constitution. When A engages with another such
citizen, B, in business the two can still come to the courts
to claim the benefit of the same fundamental right. The
position remains the same if A and B join more persons
without incorporating themselves into a company : even if
the number is seven or more they can still join in the same
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application and come to the court jointly for enforcement of
their fundamental right under Art. 19 when they are jointly
engaged in the same business. For, in all these cases the
claim of each to the fundamental right cannot be in law
defeated by the fact that several other citizens have joined
him in making a similar claim for themselves. As soon as,
however, two or more persons who are in their
160
own right citizens of India form themselves into a private
company, or seven or more persons, each of whom is a citizen
in his own right, form a public incorporated company, they
are faced with the proposition that the company not being a
citizen, it is excluded from the right which they could have
claimed.
It is well known that many years before 1950 when the
Constitution came into force much of the trade and industry
of this country was being carried on by corporations. Most
of these corporations were and are composed of persons who
are clearly citizens of India under the provisions of the
Constitution. The obvious effect of the strictly legalistic
approach that a corporation being an artificial person
cannot be a citizen for the purpose of any of the
fundamental rights even when all its members are citizens of
India would thus be to deny a considerable part-if not the
major part of Indian industry and commerce (using the word
"Indian" to mean ’carried on by Indian citizens’) the va-
luable protection of the fundamental rights under Art.
19(1)(f) and (g). No doubt the mere fact that the effect is
inconvenient or even regrettable can be no justification for
a forced construction of a constitutional provision. But it
is permissible, nay proper, often to consider the effect of
proposed construction to find an answer to the question was
that the intention of the Constitution makers?
What do we find here? In Art. 19(1)(f) and (g) the
Constitution-makers are creating a right intended to be of
great benefit to industry and trade. They decide to
restrict this benefit to only citizens of India. They are
aware that much if not most-of the trade and industry
carried on by Indian citizens are carried on by them, after
forming themselves into corporations. They know equally
well that corporations are in law distinct entities from
their members and so the ’State’ naturally anxious to extend
the domain where the restriction of fundamental right on its
powers does not operate, may well argue that corporations
even though composed entirely of citizens are not entitled
to fundamental rights. The concern of the Constitution
makers to improve the economic condition of the country is
writ large over the Constitution’s many provisions. The
question has reasonably been asked : why then did not the
Constitution-makers distinctly provide that corpora-
161
tions composed of Indian citizens will be deemed to be
citizens for at least the fundamental rights under Art.
19(1) (f) and (g) ? The mystery disappears, however, if we
credit the Constitution-makers with the further knowledge
that in the United States of America when somewhat similar
questions had arisen regarding the character of corporations
composed of citizens of a particular State the courts had
not hesitated to apply the process of what has been called
"tearing the veil" and granted to a corporation composed of
citizens of a State some of the rights of a citizen of that
State, inspite of the fact that the corporation as such is
an artificial person distinct from its members. Is it not
reasonable to think that the makers of our Constitution
trusted that courts in India would also not hesitate to
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apply a similar process of going under the surface and
looking at the composition of the corporation, in deciding
whether the corporation is entitled to fundamental rights?
In my judgment the answer to the question must be in the
affirmative. Indeed I would go further and say that to take
another view is an insult to the intelligence and
understanding of those who drafted the Constitution.
I am thus clearly of opinion that the Constitution makers
when they used the word "citizen" in Art. 19 intended that
at least a corporation of which all the members were
citizens of India would get the benefit of the fundamental
rights enshrined in that Article. The legal position that
the corporation is a distinct entity from its members does
not appear to me to create any real difficulty in the way of
giving effect to this intention. The proposition, viz.,
that the corporation is a distinct legal entity from its
members is too well established to require discusion. I see
no reason however why the charm of this legal learning
should so hold us captives as to blind us to the great rule
of interpretation of giving effect to the intention of those
who made the law unless the words make that impossible. I
can find nothing in the words of the Constitution that stand
in the way of giving effect to the intention of the
Constitution-makers of giving all. citizens of India,
whether forming into a corporation or not, the benefit of
the fundamental rights under Art. 19(1) (f) and (g). Whether
the Constitution-makers also
162
intended that a corporation of which the major portion of
the interest was held by citizens of India would also get
the benefits of the rights, it is unnecessary for the pur-
pose of this case to investigate.
This view of the law was taken, and in my opinion rightly,
by the Bombay High Court in The State of Bombay v. R.M.D.
Chamarbaughuala(1). It is of interest also to mention that
in this view of the law it is possible to appreciate what
was said by way of dicta by Mr. justice Mukherjea (as he
then was) in Chiranjit Lal Choudhuri’
v. The Union of India & ors.(2) :
"The fundamental rights guaranteed by the Constitution are
available not merely to individual citizens but to corporate
bodies as well except where the language of the provision or
the nature of the right compels the inference that they are
applicable only to natural persons. An incorporated
company, therefore, can come up to this Court for
enforcement of its fundamental rights......."
In that case the Court had to consider an allegation of
infringement of the fundamental rights not only under Arts.
31 and 14 but also under Art. 19(1) (f). While the observa-
tions of Mr. Justice Mukherjea may not perhaps be regarded
as a considered decision on the question now before us, it
is not unreasonable to think that his Lordship felt no
difficulty about extending the fundamental rights under Art.
19(1)(f) to the Sholapur Spinning and Weaving Company, the
share-holders of which were Indian citizens.
It is proper to mention this connection that in the 13
years that have rolled by since the Constitution came into
force there have been many cases in which this Court as also
the High Courts have given companies of which the members
were Indian citizens the benefit of fundamental rights,
special to citizens. In some of these cases the question
was sometimes raised whether or not a corporation was a
citizen for the purpose of the fundamental rights but that
was left unanswered. Among the cases in which relief
claimed on fundamental rights, specially conferred on
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citizens has been granted to corporations may be mentioned:
The Express Newspapers (Private) Ltd., v. Union of
(1) I.L.R. [1955] Bom. 680.
(2) [1950] S.C.R. 869.
163
India(1); The Bengal Immunity Co., v. State of Bihar(2); The
Bombay Dyeing & Manufacturing Co., Ltd., v. State of
Bombay(3).
In my judgment, therefore, the first question referred to
this Special Bench should be answered in the affirmative.
On the other question that has been referred, I agree with
the conclusion of my learned brother Shah J. that the State
Trading Corporation is not in substance a department and
organ of the Government of India. As I entirely agree with
the reasoning on which he has based this conclusion, I do
not propose to discuss the matter further.
For the reasons mentioned above I would answer the two
questions referred to this Special Bench thus:-
(1) The State Trading Corporation, so long as it consists
wholly of citizens of India, can ask for enforcement of the
fundamental rights granted to citizens under Art. 19(1) (f)
and (g) of the Constitution;
(2) The State Trading Corporation is not a department or
organ orthe Government of India and can claim to enforce the
fundamental rights under Part III of the Constitution
against the State as defined in Art. 12 thereof.
SHAH J.-Or. May 18, 1956, the State Trading Corporation of
India Ltd.-hereinafter called ’the Company’ was incorporated
as a Private Limited Company under the Indian Companies Act,
1956, with an authorised capital of Rs. 5 crores divided
into five hundred thousand shares of Rs. 1.00 each. Ninety
eight per cent of the subscribed capital which. was
contributed out of the funds of the Government of India
stood registered in the name of the President of India and
the remaining two per cent in the names of two joint
Secretaries in the Ministry of commerce & Industries. On
February 12 1961, the Commercial Tax Officer, Vishakhapatnam
assessed the Company in the sum of Rs. 5,79,198.17 nP. to
sales tax in respect of certain transactions and issued a
notice demanding payment of the amount. The Company and Mr.
K. B. Lall, Joint Secretary, Ministry of Commerce &
Industries then petitioned this Court for a writ quashing
the order of the Commercial Tax Officer and the notice
(1) [1959] S.C.R. 12.
(2) [1955] (2) S.C.R. 603.
(3) [1958] S.C.R. 1122.
164
of demand on the plea that the assessment order and the
notice of demand infringed the fundamental rights of the
petitioners, amongst others, under Art. 19(1)(f) and (g).
At the hearing of the petition; counsel for the Commercial
Tax Officer and the State of Andhra Pradesh submitted that
the petition was not maintainable because the Company was
not a ’citizen’ within the meaning of Art. 19 of the Con-
stitution, and in any event the Company being "an organ,
department or instrumentality" of the Government of India
was incompetent to enforce any fundamental right against the
State of Andhra Pradesh. The Court thereupon referred the
following questions to a larger Bench
"(1) Whether the State Trading Corporation a
Company registered under the Indian Companies
Act 1956 is a citizen within the meaning of
Art. 19 of the Constitution and can ask for
the enforcement of fundamental rights granted
to citizens under the said article; and (2)
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Whether the State Trading Corporation is
notwithstanding the formality of incorporation
under the Indian Companies Act 1956 in
substance a department and organ of the
Government of India with the entirety of its
capital contributed by Government and can it
claim to enforce fundamental rights under Part
III of the Constitution against the State as
defined in Art. 12 thereof ?"
We are not at this stage concerned to deal with any right
which the second petitioner K. B. Lall may have, to maintain
the petition, for the questions deal only with the right of
the Company to set up the protection of Art. 19(1)(f) & (g)
of the Constitution.
Article 19 guarantees certain basic freedoms in favour of
Citizens : it provides that -
"(1) All citizens shall have the right-
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to form associations or unions;
(d) to move freely throughout the territory of India-,
(e) to reside and settle in any part of the territory of
India;
(f) to acquire, hold and dispose of property; and
(g) to practise any profession, or to carry on any occu-
pation, trade or business."
165
The fundamental freedoms (exercise whereof is by cls. (2) to
(6) subject to certain restrictions) being expressly gua-
ranteed to citizens, the question which presents itself at
the threshold is whether the Company can claim to be a
citizen and on that basis claim protection of the freedoms
to acquire, hold and dispose of property, and to carry on
any trade, occupation or business. The plea that a Company
incorporated under the Indian Companies Act is not a
’citizen’ within the meaning of Art. 19 of the Constitution
is advanced principally on two grounds:
(1) That prior to January 26, 1950, there
was no law relating to citizenship in force in
India and by Arts. 5 to 10 of the Constitution
only natural persons were for the first time
declared citizens. Under the provisions of
the Citizenship Act, 1955, only natural
persons may claim rights of citizenship since
the commencement of the Constitution. The
Company which came into existence after the
promulgation of the Constitution not being a
citizen under the Citizenship Act, 1955, is
therefore incompetent to enforce the rights
claimed by it, for Arts. 5 to 11 constitute an
exhaustive code relating to citizenship in
India, and an artificial person not being of
the classes enumerated in Arts. 5, 6 & 8, nor
under the Citizenship Act, 1955 (enacted in
exercise of powers under Art. 11), the claim
of the Company to citizenship must stand
rejected; and (2) Citizenship postulates
allegiance to the State of which a person
claims to be a citizen and involves a duty to
serve when called upon in the Civil
Administration, and in the defence forces in
the maintenance of peace or defence of the
State in an emergency, and an artificial
person being incapable of owing allegiance and
of rendering these services cannot be regarded
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as citizen. This argument is based on what is
called the traditional concept of citizenship.
Counsel for the Company submits that citizenship is the
status which a person endowed with full civil and political
rights in a State possesses under its municipal law, and
such rights inhere the status of natural and artificial per-
sons alike.
In determining the content of the expression ’citizen’ used
in Art. 19, which is defined neither in the Constitution
166
nor in the General Clauses Act, it may, in the first
instance, be useful to consider the scheme under which the
diverse fundamental rights are declared and guaranteed by
Part III of the Constitution and the extent of protection
afforded against infringement of those fundamental rights.
The Constitution in declaring the fundamental rights uses
different expressions to denote the beneficiaries of
different rights. By Arts. 14, 20(1), (2) & (3), 21, 22(1),
(2) & (4), 25(1), 27, 28(3) and 31 certain fundamental
rights are declared in favour of persons By Arts. 16(1) &
(2), 26(1) & (2), 19(1) and 29(2) citizens are the
recipients of fundamental rights guaranteed thereby.
Certain fundamental rights are declared in favour of groups
such as denominations, sections, minorities or institutions
e.g. Arts. 26, 29(1), 30(1) and 30(2): these would in the
very nature of things be groups of individuals. By certain
other Articles prohibitions are declared e.g. 17, 23(1), and
24 and 28(1) for removal of evils, such as untouchability,
traffic in human beings, forced labour, employment of
children in hazardous employment, and against imparting of
religious instructions in educational institutions. The
expression ’citizen’ used in Ch. III has undoubtedly
narrower connotation than ’person’. By Art. 367 of the
Constitution read with s. 3(42) of the General Clauses Act a
"person" includes any company or association or body of
individuals whether incorporated or not. By declaring
rights in favour of persons, it may at first sight appear
that it was intended to confer those rights upon persons
artificial as well as natural. But this presumption is not
in fact uniformly true. In Arts. 25(1), 28(3) and probably
Art. 20(3) by the use of the expression "person" having
regard to the character of the right conferred natural
persons only could be the beneficiaries of the rights
declared thereby. By Art. 15(1) & (2) prohibitions are Im-
posed against the State in making discrimination between
citizens on the ground of religion, race, caste, sex or
place of birth- cls. (1) & (2) of Art. 16 declare equality
of opportunity to citizens in matters of public employment,
and Art. 18(2) imposes restrictions on citizens against
acceptance of titles from any foreign State. In these
Articles, the expression citizen may refer only to a natural
person. But that cannot be decisive of the meaning of the
expression ’citizen" in Art. 19. In ascertaining the
meaning of expres-
167
sions used in a vital document like the Constitution of a
nation, a mechanical approach would be impermissible. The
Constitution is but the declaration of the will of the
people, and must be interpreted liberally, and not in any
narrow or doctrinaire spirit. It must be interpreted
according to its true purpose and intent as disclosed by the
phraseology in its natural signification in the light of its
setting and its dynamic character which is intended to
fulfill the aspirations of the people. There can be little
doubt that an artificial person like a Corporation is
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capable of exercising rights conferred by cls. (a), (c), (f)
and (g) of Art. 19(1) and the right to hold property and the
right to carry on trade or business are two rights of vital
importance vested in artificial persons and a substantial
segment of trade and business in India and abroad is carried
on through corporate activity. On the view that only a
natural person having certain attributes under the municipal
law may be a citizen, the rights conferred by Art. 14
(equality before the law and equal protection of the laws),
Art. 27 (freedom from payment of taxes for promotion of any
particular religion or religious denomination), Art. 20(1) &
(2) (bar against retrospective operation of penal statutes,
and rule against double jeopardy) and Art. 31 (bar against
deprivation of property otherwise than by authority of law)
are guaranteed even in the case of artificial persons, but
some of the most cherished rights i.e. right to acquire,
hold and dispose of property, and to carry on trade or
business of artificial persons may not be Protected against
executive or legislative action. Was it intended by the
Constituent Assembly when declaring the freedoms under Art.
19 to make a deliberate departure, and in respect ,of rights
declared under Art. 19 to restrict the enforcement thereof
against action of the law makers or the executive ,only in
favour of natural persons and not in favour of artificial
persons;)
It is in this background we may turn to the question
whether, the declaration of citizenship under Arts. 5, 6 & 8
of the Constitution, and the Citizenship Act, 1955, was to
be exhaustive; or merely to deal with the rights of natural
persons. It may be necessary first to have a true concept
of -citizenship and to ascertain whether the common law of
England which formed the foundation of the Indian juris-
prudence, attributed to artificial persons prior to the
Cons-
168
titution the status of citizens or ’subjects’ as it was
usual to call them in a monarchical form of Government.
Waite C.J. in Virginia L. Miner v. Reese Happersett(1)
observed :
"There cannot be a nation without a people.
The very idea of a political community, such
as a nation is,, implies an association of
persons for the promotion of their general
welfare. Each one of the persons associated
becomes a member of the nation formed by the
association. He owes it allegiance and is
entitled to its protection. Allegiance, and
protection are, in this connection, reciprocal
obligations. The one is a compensation for
the other allegiance for protection and pro-
tection for allegiance.
For convenience it has been found necessary to
give a name to this membership. The object is
to designate by a title the person and the
relation he bears to the nation. For this
purpose the words "subject", "inhabitant" and
"citizen" have been used, and the choice
between them is sometimes made to depend upon
the form of the government. Citizen is now
more commonly employed, however, and as it has
been considered better suited to the
description of one living under a republican
government, it was adopted by nearly all of
the States upon their separation from Great
Britain, and was afterwards adopted in the
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Articles of Confederation and in the
Constitution of the United States. When used
in this sense it is understood as conveying
the idea of membership of a, nation, and
nothing more."
In the Digest of International Law (J. B.
Moore) Vol. III,, 1906 Edn. at p. 273, it is
stated:
"Citizenship, strictly speaking’ is a term of
municipal’ law, and denotes the possession
within the particular state of full civil and
political rights, subject to special
disqualification, such as minority or sex.
The condition’s on which citizenship is
acquired are regulated by, municipal law."
In Oppenheim’s International Law (Lauterpacht)
Vol. 1’. p. 644 it is stated:
(1) 21 Wall. 162 :88 U.S. 627.
169
"In the United States of America, while the
expressions ’citizenship’ and ’nationality’
are often used interchangeably, the term
’citizen’ is, as a rule, employed to designate
persons endowed with full political and
personal rights within the United States,
while some persons-such as those belonging to
territories and possessions which are not
among the States forming the Union-are
described as ’nationals’. They owe allegiance
to the United States and are United States
nationals in the contemplation of Inter-
national Law; they do not possess full rights
of citizenship in the United States In the
British Commonwealth of Nations it is the
citizenship of the individual States of the
Commonwealth which is primarily of importance
for International Law, while the quality of a
’British subject’ or ’Commonwealth citizen’ is
probably relevant only as a matter of the
Municipal Law of the countries concerned."
Citizenship and nationality emphasize different facets of a
single concept of association with or membership of a
political community. The form and content of the asso-
ciation have varied in their historical evolution with the
complexion of the governmental machinery, but in essence
they denote the relation which a person bears to the sove-
reign authority. Citizenship is the relation that a person
bears to the State in its national or municipal aspect;
nationality appertains to the domain of International Law,
and represents the political status of a person, by virtue
of which he owes allegiance to a particular sovereign
authority. ’Citizen’ and ’national’ are frequently used as
interchangeable terms, but the two terms are not synonymous.
Citizenship in most societies is the highest political
status in the State, it is employed to denote persons
endowed with full political and civil rights. There are in
some States nationals who though owing allegiance, lack
citizenship such as those belong to colonial possessions
which are not included within the metropolitan territory,
and (lo not participate in the Government. Even in States
where association of nationals in the governmental machinery
does not exist or is too tenuous to be effective, the
national endowed with capacity to exercise personal and
political.
12-2 S. C. India 64
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170
rights may be called a citizen. Again there may be citizens
even in States having a form of government, which permits an
effective association of its citizens with the administra-
tion, who do not participate in the government, or who by
reason of sex, minority or personal disqualification are
incompetent or are unable to participate. Citizenship is
therefore membership of a jural society investing the holder
with all the rights and privileges which are normally
enjoyed by its nationals, and subjecting him to
corresponding duties; nationality is the link between a
person and a State, ensuring that effect be given to his
rights in international affairs. Every citizen is a
national, but every national is not always a citizen. The
tie which binds the national and the citizen is the tie of
allegiance to the State; it arises by birth, naturalisation
or otherwise in a political society which is called a State,
Kingdom or Empire.
Under the English common law, a company or a corporation
aggregate is regarded as possessing attributes which would
make it a national of the State in which it was incorporated
and the incapacity of a corporation aggregate to discharge
obligations such as performance of military or civil
service, or to exercise franchise, has not been held to be a
bar to the recognition of its status as a national of the
State of its incorporation. This is reflected in the
judicial decisions that public corporations aggregate are
nationals of the country of incorporation, irrespective of
the nationality of the share-holders. The English Statute
Law did not regulate the nationality of Corporations, but
the decisions of the highest tribunals regarded them for
certain purposes as capable of possessing all the attributes
of nationality. In Janson v. Driefontain Consolidated Mines
Ltd.(1) the House of Lords regarded a company registered
under the laws of the South African Republic as a national
of that State. The observations of Lord Macnaghten at p.
497, of Lord Davey at p. 498, of Lord Barmpton p. 501 and of
Lord Lindley at p. 505 proceed on the view that the Company
concerned in that case was a national of the Republic of
South Africa and the question as to the validity of the
contract of insurance by British underwriters against cap-
(1) L.R. (1902) A.C. 494.
171
ture during transit to the United Kingdom by the foreign
State before declaration of war was valid. Similarly
Attorney General v. Jewish Colonization Association(1) was
decided on the footing that a public Corporation is ,capable
of nationality, and in General v. Selim Cotrap(2) it was
accepted that a public Corporation has the attributes of
nationality. In Gasque v. Commissioners of Inland
Revenue(3) Macnaughten J., observed :
"But by analogy with a natural person the
attributes of residence, domicile and
nationality can be given, and are, I think,
given by the law of England to a body
corporate. It is not disputed that a
company formed under the compaines Acts, has
British nationality, though, unlike a natural
person, it cannot change its nationality."
In Kuenigi v. Donnersmarck(4) it was held that
a company incorporated under the laws of
England and registered in England and so
having an English domicile, and by analogy,
British nationality, did not cease by English
law to be an English company subject to
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English law merely because it was under enemy
control. Mc. Nair J. observed at p. 535:
’I think that it is also clear that, in so far
as nationality can by analogy be supplied to a
juristic person, its nationality is determined
in an inalienable manner by the laws of the
country from which it derives its
personality."
The personality of a Corporation aggregate therefore springs
from the laws of the country in which it is incorporated,
and upon that personality is impressed the nationality of
that country, for the Corporation is by virtue of the law
incorporating it capable of exercising rights, is subject to
obligations and by common acceptance is entitled to claim
protection in international affairs of the State of its
incorporation.
If a Corporation aggregate is a national, can it be regarded
as a citizen? According to our law a juridical person may
normally exercise all civil rights except those which from
the nature of its constitution or of the rights, cannot be
exercised or enforced by the Corporation. A
(1) [1901] 1 K.B. 123.
(2) L.R. (1932) A.C. 288.
(3) L.R. [1940] 2 K.B. 80.
(4) L.R. [1955] 1 Q.B. 515.
172
juridical person may acquire, hold and dispose of property,
carry on trade or business, take up residence within the
territory and form associations. It is also liable to
discharge obligations which the nature of its incorporation
permits. There are no special restrictions placed upon its
activity and upon exercise of its rights in its corporate
character. It is capable of exercising to the fullest
extent a large majority of civil rights which natural
persons may exercise as citizens, its incapacity to exercise
others arises from the nature of its personality and
constitution and not from any special restriction imposed
upon it. Undoubtedly franchise cannot be exercised by the
Corporations but the capacity to exercise franchise is not a
sine qua non of citizenship. The State normally affords to
Corporations protection as to its nationals abroad and
recognises its corporate character with capacity to exercise
rights within the realm. In the matter of protection, the
law makes no distinction between natural persons and
artificial persons like corporations. Was it then intended
by the Constitution which afforded protection of the widest
amplitude in favour of Corporations as well as natural
persons against discrimination under Art. 14, against
deprivation of property under Art. 31(1), against compulsory
acquisition or, requisition of property for purposes not
public and without payment of compensation under Art. 31(2),
against imposition of taxes the proceeds of which are
specifically appropriated for payment of expenses for
maintenance of a particular religion or religious denomina-
tion under Art. 27, against being subjected to taxation
without authority of law under Art. 265, and to the freedom
of trade, commerce and intercourse, subject only to the
provisions of Part XIII, still did not guarantee the right
to carry on business of trade, to acquire, hold, and dispose
of property and the right to form associations. or the right
to take up residence of its choice within the territory ?
Unless the language or the scheme of the Constitution is so
compulsive, it would be difficult to reach that conclusion,
on any predilection as to a limited connotation of the
expression citizen occurring in Art. 19(1). It may he
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remembered that Constitutional practice is not inconsistent
with the recognition of artificial persons as citizens. The
Constitution of the United States of Maxico 1917, of El
Salvador 1950, and of the Spanish People
173
do recognise the status of Corporations as citizens. It was
also not disputed at the Bar and could not reasonably be
disputed that it was open to the Constitution-makers, and
the Parliament of India to make express provisions declaring
artificial persons as citizens of India.
But it is urged that the intention of the Constitution-
makers was not to recognise the corporate character of a
Company as a citizen. It is said that the provisions of
Arts. 5, 6 and 8 and the law made under Art. 11 in matters
post-constitutional, are exhaustive of the conferral of the
right of citizenship and there can be no citizen who does
not satisfy the prescribed requirements. A necessary corol-
lary of that thesis is that there were no citizens in India
before the Constitution-natural or artificial-and it was by
the Constitution and the Citizenship Act, 1955, that only
natural persons are made citizens and no one else.
To examine the validity of this assumption, it is necessary
to examine carefully the relevant provisions of the
Constitution and the material provisions which preceded the
Constitution. It must be conceded that persons mentioned in
Arts. 5(1), 5(b), 6 and 8 are natural persons and the
expression ’person’ in the context of those provisions does
not include artificial persons. Clause (c) of Art. 5 refers
to persons resident within the territory of India for not
less than five years, and it may be presumed that this
clause was also intended to apply to natural persons. Simi-
larly by the definition contained in s. 2(f) of the
Citizenship Act, 1955, the Act is made applicable only to
natural persons. But the assumption that there were in
India prior to January 26, 1950, no citizens, and
citizenship rights were conferred for the first time by the
Constitution is not warranted either by the language used in
the Constitution, or the history of our national evolution.
The status of British Indians prior to 1947 was governed by
the British Nationality and Status of Aliens Act, 1914.
They were regarded as British subjects, and entitled in
British India to such rights and privileges as were accorded
to British nationals in India. Their status as British
subjects was analogous to the status of citizens of a
republic. They exercised civil rights, and such political
rights as the form of Government permitted. If a citizen is
a national who under the law of the state is entitled to
enforce full civil and political rights,
174
British Indian subjects prior to the Constitution had within
the territory of British India that quality of rights which
would go to make them citizens. Similarly the subjects of
the Indian States had the rights of citizenship within their
own States, and those rights were not affected by the stand-
still and merger agreements of their rulers with the Domi-
nion of India. The thesis being merely to establish the
existence of rights which were analogous to rights of citi-
zenship prior to the enactment of the Constitution, it is
unnecessary to enter upon a detailed examination of the con-
stitutional developments which took place between August
1947, and the 26th of November, 1949, which culminated in
the setting up of the Republic of India by the erstwhile
British Indian subjects and the subjects of the Indian
States. It may be sufficient to observe that before the
Indian Independence Act, 1947, the Legislature was invested
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with the power to confer upon foreigners rights as British
Indians by naturalization, and had also sought to invest the
Government of the day with power to deny entry into India to
foreigners or even of nationals of British possessions.
Part II of the British Nationality & Status of Aliens Act,
1914, relating to the naturalization of aliens was not
extended to British India, though Parts I & III were
intended to apply to all territories which formed part of
the British empire subject to the provisions of s. 26 of the
Act which preserved the power of Colonial or Dominion
Governments and Legislatures to legislate on the subject of
nationality and to safeguard the validity of laws passed by
them relative to the treatment of different classes of
British subjects. Under the Act of 1914 the place of birth
within the British empire was determinative of British
nationality, but power was reserved to the Dominions and the
Colonies by legislation to make provision for naturalization
restricted to their territory. ’the British Indian
legislature in 1926 enacted the Indian Naturalization Act,
1926, which enabled the local Governments to grant
certificates of naturalization to persons applying in that
behalf and satisfying the local Government on matters
specified therein. Power was also reserved to revoke the
certificates of naturalization. The Legislature also
enacted the Immigration into India Act, III of 1924, which
authorised the Central Government to make rules for the
purpose of securing that persons not being of Indian ori-
175
gin, domiciled in any British Possession, shall have no
greater rights and privileges, as regards entry into and
residence in British India than are accorded by the law and
administration of such possession to persons of Indian
domicile. The effect of these statutory provisions was-
subject to certain exceptions to recognize the right of
British subjects in India and to approximate them to the
rights of citizenship, to grant such rights by
naturalization and to restrict immigration into India. The
British Nationality Act, 1948, was enacted after the Indian
Independence Act, 1947, and was not incorporated in the
stream of the statute law in India. The effect of that Act
was to create a new statutory concept of citizenship of the
various constituent units of the British Commonwealth and to
provide for a dual citizenship of the country in which the
local community resided within the units and of the
Commonwealth. The concept of allegiance which was the
foundation of the status of a subject, was excluded from the
rules governing local citizen-Acts by various Dominions and
till the enactment of such Acts accorded to the citizens
potential or actual of any Dominion (which expression
included India) the status of Commonwealth citizen. In
relation to this citizenship, allegiance to the British
Crown was not a condition.
This brief review of the legislative history is sufficient
to destroy the assumption that the status of citizenship was
not recognized under the common law operative in India prior
to January 26, 1950, for, in my judgment, British subjects
of Indian origin held for all purposes the status in British
India of citizens. That status arose by birth and could
also be conferred by naturalization.
If a natural person could be a citizen prior to November 26,
1949 (the day on which by Art. 394, Arts. 5 to 9 came into
force), there is no reason to suppose that artificial
persons who were nationals of the British Empire and who
could claim the protection abroad could not claim rights of
citizenship within the territory of India, when they were in
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fact exercising all the rights and privileges which natural
persons who were citizens exercised, except those which by
their incorporation they could not exercise. There was
before the Constitution no statute which indicated even in-
directly that a Corporation aggregate could not be a
citizen.
176
At the time when the Constitution of the United States of
America was proclaimed, no citizenship laws were enacted,
but rights of citizenship were recognized under diverse
provisions of the Constitution of the United States. The
American Constitution recognised even without any express
statute law, citizenship of States, and also of the Union.
Under the Constitution of the United States of America, the
expression "citizen" has been given different meanings under
diverse Articles. In some clauses the expression "citizen"
meant only natural persons, in others it included artificial
persons like Corporations. Though Constitution as
originally proclaimed was silent upon the subject,
corporations were regarded as citizens of the State of their
incorporation for the purpose of federal Jurisdiction.
Initially no corporation was regarded according to the
decisions of the Court in the United States as a citizen
within the meaning of Art. 3 s. 2 : The Bank of the United
States v. Deveaux et(1). But this view was modified in a
later case : The Louisville, Cincinnati & Charleston
Railroad Company v. Thomas W. Letson (2 ). This case arose
on the interpretation of-’ the "diversity clause" in Art. 3
s. 2. In neither of these cases was the capacity of
corporations to be citizens of the State in which they were
incorporated, denied. For the purpose of the 14th Amendment
which prohibits a State from making or enforcing any law
which abridged privileges or immunities of citizens of the
United States, an individual alone was regarded as a citizen
: Orient Insurance Company v. Robert E. Daggs(3) and Bankers
Trust Company v. Texas & Pacific Railway(4). In cases
arising under Art. 4 s. 2 it was also held that a
corporation could not be regarded as a citizen of a State
other than the State of its incorporation. In Paul v.
Firginia(5) Field J. delivering the opinion of the Court
observed at p. 359.
"But in no case which has come under our
observation, either in the State or Federal
Courts, has a corporation been considered a
citizen within the meaning of that provision
of the Constitution which declares that the
citizens of each State shall be entitled to
all the
(1) 3 L.Ed. 38. (2) 11 L.Ed. 353.
(3) 172 U.S. 552. (4) 241 U.S. 295.
(5) 75 U.S. 357.
177
privileges and immunities of citizens of the
several States."
The learned judge however made it clear that
he was restricting the observations only to
the claim of citizenship made by a Corporation
in a State other than the State which
incorporated it.On p. 360 he observed :
"......a grant of corporate existence is a
grant of special privileges to the
corporators, enabling them to act for certain
designated purposes as a single individual,
and exempting them (unless otherwise specially
provided) from individual liability. The
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corporation being the mere creation of local
law, can have no legal existence beyond the
limits of the sovereignty where created.
Having no absolute right of recognition in
other States, but depending for such
recognition and the enforcement of its
contracts upon their assent, it follows, as a
matter of course, that such assent may be
granted upon such terms and conditions as
those States may think proper to impose."
It may be noticed that corporations have been regarded as
persons within the meaning of the 14th Amendment and
therefore they cannot be deprived of their property or
rights without due process of law : Smyth v. Ames(1) and
Kentucky Finance Corporation v. Paramount Auto Exchange
Corporation(2). Our Constitution has not accepted the
doctrine of due process as a test for protection of funda-
mental freedoms, but has sought to effectuate protection of
those freedoms by the 19tb Article.
In this Court there has been no definite expression of
opinion about the rights of corporations aggregate to en-
force the fundamental freedoms under Art. 19 of the Cons-
titution, though it seems to have been consistently assumed
that corporations aggregate are entitled to claim protection
of the Courts against violation of fundamental freedoms
enumerated in Art. 19(1). In Chiranjit Lal Chowdhuri’ v.
The Union of India(1), Mukherjea J., observed
"The fundamenal rights guaranteed by the Cons-
(1) 169 U.S. 466. (2 ) 262 U.S.
544.
(3) [1950] S.C.R. 869, 893.
178
titution are available not merely to
individual citizens but to corporate bodies as
well except where the language of the
provision or the nature of the right compels
the inference that they are applicable only to
natural persons. An incorporated company,
therefore, can come up to this court for
enforcement of its fundamental rights and so
may the individual shareholders to enforce
their own, but it would not be open to an
individual shareholder to complain of an Act
which affects the fundamental rights of the
company except to the extent that it
constitutes an infraction of his own rights as
well."
In that case an individual shareholder petitioned this Court
for the issue of a writ declaring that the Sholapur Spinning
and Weaving Company (Emergency Provisions.) Act (XXVIII of
1950) which enacted that the managing agents of the Company
stood dismissed and the Directors automatically vacated
their office, and which authorised the Government to appoint
new Directors and restricted the rights of shareholders in
the matter of voting and appointment of Directors, passing
resolutions and applying for winding up and which further
authorised the Government to modify the Indian Companies Act
was ultma vires the legislative authority of Parliament, in
that it infringed the fundamental rights of the shareholders
and the action taken thereunder infringed the shareholders’
fundamental rights under Arts. 19(1)(f), 31 and 14 of the
Constitution. The Court in that case dismissed the petition
holding that the fundamental rights of the petitioner under
Art. 31(1) & (2), 19(1)(f) and 14 were not infringed. The
observations of Mukherjea J., cannot be regarded as an
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expression of a considered opinion of the Court holding that
all fundamental rights are enforceable by individual
citizens as well as corporate bodies. The question was
mooted in two later cases: The Bengal Immunity Company Ltd
v. The State of Bihar(1) and The State of Bombay v. R.M.D.
Chamarbauguvala(2). It may be pointed out that the High
Court of Bombay in The State of Bombay v. R.M.D. Chamar-
baugwala(3) held that an application at the instance of a
corporation alleging infringement of a fundamental right
(1) [1955] 2 S.C.R. 603. (2) [1957] S.C.R. 874.
(3) I.L.R. [1955] Bom. 680.
179
to carry on business was maintainable. Again in The State of
West Bengal v. The Union of India(1) Sinha C.J., in
delivering the judgment of the majority observed :
"The fundamental rights are primarily for the protection of
rights of individuals and Corporations enforceable against
executive and legislative action of a governmental agency.
It may be pointed out that there have been scores of cases
in this Court in which it has been assumed without contest
that a company is a citizen, and competent to enforce fun-
damental rights under Art. 19(1) (f) & (g) of the Constitu-
tion, I propose only to set out a short illustrative list of
cases picked up at random :
(1) [1955] I. S. C. R. 752 Bijay Cotton Mills Ltd. v.
State of Ajmer.
(2) [1959] S. C. R. 1 Messrs Kasturi and Sons (Pri-
vate) Ltd. v. Shri N. Saliva-
teeswaran.
(3) [1959] S. C. R. 12 Express Newspapers (Private)
Ltd. v. Union of India.
(4) [1960] 2 S. C. R. 408 Messrs Fedco (P) Ltd. & Ano-
ther v. S. M. Bilgram".
(5) [1960] 3 S. C. R. 328 ... M/S Hathisingh Manufactur-
ing Co. Ltd. v.
Union of India.
(6) [1961] 1 S. C. R. 379 Tata Iron & Steel Co. Ltd.
v. S. R. Sarkar.
(7) A. I. R. 1963 S.C. 548 State Trading Corporation of
India Ltd. v. The State of
Mysore.
There have arisen a number of cases in the High Courts in
which conflicting views have been expressed. In the
Narasaraopeta Electric Corporation Ltd. v. The State of
Madras(2) the Madras High Court held that Art. 19(1) (f)
applies only to citizens and a company incorporated under
the Indian Companies Act does not satisfy the requirements
of the definition of citizen in Art. 5. This case reached
the Supreme Court in Rajahmundry Electric Supply Corporation
Ltd. v. A Nageswara Rao(3), but the question whether the
fundamental right could be enforced by a company was, it
appears, not raised. In Jupiter General Insurance Company
Ltd. v. Rajgojalan(4), it was held by the Punjab
(1) [1964] 1 S.C.R. 371. (2) A.I.R. 1951 Mad. 979.
( 3) [1955] 2 S.C.R. 1066. (4) I.L.R. [1952] Punjab 1.
180
High Court that a company cannot raise the question that an
impugned legislation takes away or abridges the rights
conferred by Art. 19(1)(f) & (g) of the Constitution,
because a company is not a citizen. In Amrita Bazar Patrika
Ltd. v. Board of High School and Intermediate Education
U.P.(1) a single judge of the Allahabad High Court held that
Art. 5 applied to natural-born persons and not to artificial
persons and hence a corporation is not a citizen within the
meaning of Art. 19. But the Rajasthan High Court in
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Maharaja Kishangarh Mills Ltd. v. State of Rajasthan (2)
assumed that the question whether a corporation was a
citizen for the purpose of Art. 19 was generally decided in
Chairanjitlal Chowdhur’s case(3) and held that a corporation
was entitled to raise by a petition under Art. 226 a plea of
a breach of a fundamental right under Art. 19. Authorities
in the Calcutta High Court appear to be somewhat
conflicting. In Everett Orient Line Incorporated v. Jasjit
Singh(4) it was held that the rights conferred by Art. 19
being granted only to citizens, non-citizens could not
enforce such rights and the Company incorporated in India
not being a citizen could not challenge the validity of ss.
52-A and 167(12-A) of the Sea Customs Act on the ground that
those provisions infringed Art. 19(1)(g) of the
Constitution. The same view was affirmed in Cherry Holsery
Mills Ltd. v. S. K. Ghose(5). It was held in that case that
a company was not entitled to enforce the fundamental rights
granted under Art. 19, which are available only to citizens.
But it was held in M/s T. D. Kumar and Brothers Private Ltd.
v. Iron and Steel Controller(6) that a corporation
ordinarily resident in India for a period exceeding five
years prior to the commencement of the Constitution being a
person was a citizen within the provisions of Art. 5(c) of
the Constitution and entitled to enforce fundamental rights
under Art. 19(1), but a company incorporated after January
26, 1950, will not be regarded as a citizen., for the
Citizenship Act expressly excludes artificial persons from
the benefit of citizenship rights. In recording this
conclusion the earlier judgment of the Calcutta
(1) A.I.R. 195) All. 595. (2) I.L.R. [1953] Raj. 363.
(3) [1950] S.C.R. 869, 893. (4) A.I.R. 1959 Cal. 237.
(5) A.I.R. 1959 Cal. 397. (6) A.I.R. 1961 Cal. 258.
181
High Court in Liberty Cinema v. The Commissioner, Cor-
Poration of Calcutta(1) was referred to, and it was pointed
out that in the group of cases which were then heard relief
was granted to petitioners some of whom were corporations
claiming that their fundamental rights were infringed.
In The State of Bombay v. R.M.D. Chamarbaugtvala(2) in
considering whether a company incorporated under the Indian
Companies Act prior to the Constitution could claim
protection of its fundamental rights under Art. 19(1)(g),
Chagla C.J., speaking for the Court observed
".......can it be said in the first place that
a corporation can ever be under any cir-
cumstances a citizen, and if it can be so
said, ’What must be the constitution of the
corporation before it could be said that it is
a citizen? "Citizen" has not been defined by
the Constitution and the only provision which
is relevant is the provision contained in Art.
5. But that article only deals with the
citizenship at the commencement of the
Constitution and it lays down who was a
citizen at the commencement of the
Constitution. although domicile is a question
of private international law, rights and
acquisition of citizenship is a creation of
municipal law and it is only Parliament by
municipal law that can determine who is a
citizen. It would be perfectly competent to
Parliament by legislation to provide that a
corporation satisfying certain conditions
should be deemed to be a citizen for the
purpose of Art. 19(1) but Parliament has not
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done so. But the very curious anomaly that
arises is that when we turn to some of the
provisions of Art. 19(1) it is impossible to
contend that it could ever have been the
intention of the Constituent Assembly that the
rights guaranteed by those provisions were not
to apply to corporations but only to
individual citizens. Take two of the rights
guarantied under Art. 19(1)(f) and (g). Can
it be suggested that a corporation which, let
us
(1) A.I.R. 1959 Cal. 45.
(2) I.L.R. [1955] Bom. 680.
182
assume, is Indian in every sense of its term-
its shareholders are Indians, its directors
are Indians, its capital is Indian-that such a
corporation should not have the right under
cl. (f) to acquire, hold and dispose of
property, or under cl. (g) to practise any
occupation, trade or business?"
In The Assam Company Ltd. v. The State of As-
sam(1) the High Court of Assam proceeded to
consider the claim for protection of
fundamental rights under Art. 19(1)(f) on the
assumption that a corporation could seek to
enforce those rights.
In Reserve Bank of India v. Palai Central Bank
Ltd.(2) Raman Nayar J. observed :
"Many of the rights in Art. 19(1) and, in
particular those in clauses (f) and (g)
thereof, are capable of. enjoyment by
companies. Our Constitution-makers could not
have been unaware of the existence of legal
persons. By Article 19(1)(c) they gave all
"citizens the right to form associations and
unions, and it could not have been their
intention that the corporate bodies so formed
by citizens, should be denied the rights
guaranteed to the individual citizens, in
particular that the agencies through which a
substantial portion of their business is
conducted by the citizens of this country and
a considerable portion of their property held,
should not have the protection of clauses (f)
and (g).
That would mean a denial of the fundamental
rights to property and occupation not merely
to companies but to all corporate bodies even
though they may be Indian in every sense of
the term, their members Indian, directors
Indian, and capital Indian,a denial which
virtually amounts to a denial of those
fundamental rights to the citizens who
(though, of course, different persons) really
constitute those bodies."
The Palai Central Bank’s case(2) was carried to this Court
in appeal, and the Court entered upon an exhaustive
discussion of the complicated questions raised
(1) A.I.R. 1953 Assam 177. (2) I.L.R. [1961] Kerala 166.
183
therein, instead of disposing of the appeal on the limited
ground that the Palai Bank was not a citizen and could not
claim any fundamental rights under Art. 19(1)(f) and (g) :
Joseph Kuruvilla Vellukunnel v. Reserve Bank of India(1).
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It was submitted that he alone can be a citizen who can take
an oath of allegiance to the State because the bond of
citizenship arises by virtue of the allegiance which the
citizen bears to the State. Municipal laws of various
States do insist upon an oath of allegiance being taken on
naturalisation, but the actual swearing of an oath of
allegiance is not one of the conditions which go to make or
constitute the right of citizenship. Children of Indian
citizens become citizens by their birth and taking of oath
or even capacity to swear an oath of allegiance is not
predicated as a condition of citizenship. If allegiance may
be presumed from birth and the requirement of taking a
formal oath of allegiance is not a condition of citizenship
the law proceeding upon a presumption of allegiance in
respect of natural persons, I see no reason why such a
presumption of allegiance may not be made in respect of
artificial persons like corporations.
It was also submitted that corporations are incapable of
rendering military service, or to assist in the maintenance
of peace when called upon to serve the State. But that
again, in my view, is not a ground on which the rights of
citizenship could be denied. Incapacity to render service
may arise on account of diverse causes such as infancy,
physical or mental incapacity, and such incapacity in the
case of a natural person will not deprive him of the rights
of citizenship. By reason of their constitution, artificial
persons are incapable of rendering service-military or
civil but that may not by itself be a ground for holding
that they cannot be citizens. If the corporations or
artificial persons can be regarded as nationals of the State
where they are incorporated and if they are permitted to
exercise the various functions for which they are
constituted and no prohibition is imposed upon them in the
enforcement of the rights similar to those which are
enforceable by natural per
(1) A.I.R. 1962 S.C. 1371.
184
sons who are citizens, notwithstanding the special character
of the corporations and their incapacity to perform duties
or to exercise such other rights which natural persons may
possess, it will not be a ground for depriving them of the
rights of citizenship for enforcing the fundamental rights
under Art. 19.
Two views are presented before us as to the meaning of the
expression "citizen" used in Art. 19(1). On the one hand it
is said that a citizen is a person natural or artificial who
is entitled to all the rights which are capable of being
enjoyed by the citizens under the municipal law as distin-
guished from persons who are aliens or persons who arc not
competent to exercise such rights. The distinction, accord-
ing to this view, springs from the capacity to exercise the
rights-whether the body which exercises the rights is a
natural person or an artificial person. The other view is
that citizens are only natural persons who being national
and not aliens are under the municipal law competent to
exercise all the rights which the State permits. This view
proceeds on the assumption that an artificial person can
never be a citizen and it is only the natural persons who
can be citizens. But having regard to the privileges and
duties of nationals competent by the municipal law to exer-
cise full political and civil rights, and also having regard
to the fact that companies invested with important fun-
damental rights like equality before law, protection against
taking of property without authority of law, protection
against acquisition of property without payment of
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compensation or without public purpose, protection from
imposition of taxes for sectional purposes, and also having
regard to the fact that the companies are persons by their
constitution and by the recognition afforded to them are
competent to hold property and a dispose of property and to
carry on trade, business, vocation or occupation and are
protected from levy of taxes without authority of. law and
are guaranteed the freedom of trade, commerce and inter-
course it would be difficult to hold that the expression
citizen" used in Art. 19 was intended to have a restricted
meaning of one who is a natural person.
The alternative argument submitted by Mr. Setalvad based
upon the decision of the Bombay High Court in The
185
State of Bombay v. R.M.D. Chamarbaugwala(1) need not then be
considered in any detail. Chagla, C.J., in delivering the
judgment of the Court relying upon a number of cases which
arose under Art. 3 s. 2 of the Constitution of the United
States of America expressed the view that it was open to the
Court "to tear the corporate veil" and to look behind it and
if all the shareholders of the corporation are found to be
citizens, the corporation should not be denied the
fundamental rights which each of the shareholders has under
Art. 19(1)(g) of the Constitution. In reaching that
conclusion the learned Chief justice relied upon the obser-
vation made by Mukherjea J., in Chiranjit Lal Chowdhury’s
case(2) which have already been set out. I am however
unable to agree with the principle enunciated by the learned
Chief justice. A corporation is distinct from the
shareholders who constitute it. The theory of corporate
existence independent of shareholders, and its capacity to
exercise rights has been built on Salomon v. Saloman and.
Company Ltd.(3). The rights and obligations of the company
are different from the rights and obligations of the
shareholders. By action taken against the company, the
shareholders may be indirectly affected because their in-
terest in the capital of the company is reduced. But action
taken against the company does not directly affect the
shareholders. The company in holding its property and
carrying on its business is not the agent of the
shareholders. Mukherjea J. in Chiranjit Lal Chowdhury’s
case (2) pointed out the difference in the passage already
quoted between the rights of the company and the
shareholders. Even if a company consists of shareholders
who are all Indian citizens, the company has still a
distinct personality and an infringement of the rights of
the company alone will not furnish a cause of action to the
share holders. The doctrine of what is called ripping open
the Corporate veil was evolved by American jurists in
dealing with cases under the "diversity of jurisdiction"
clause to enable companies constituted within one State to
have recourse to the Federal Courts in respect of disputes
arising in other States as citizens. If the company is not
a citizen it would be difficult to found a claim upon this
doctrine attributing status of
(1) I.L.R. [1955] Bom. 680. (2) [1950] S.C.R. 869, 893.
(3) L.R. (1897) A.C. 22.
13-2 S. C. India/64
186
citizenship to the company relying upon the status of its
shareholders and thereby to enforce rights of the share-
holders as if they were the fundamental rights of the Com-
pany. In enforcing the rights of the shareholders, as if
they were the rights of the company as envisaged by Chagla
C.J. numerous practical difficulties may arise. Suppose in
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the case of a company a substantial number of shareholders
though not the majority are aliens, would it be -possible
for the Court to attribute right of citizenship to the com-
pany relying upon the citizenship of some of its members so
as to enable it to enforce fundamental rights under Art. 19?
Similarly in a case where a company incorporated in India
may have a majority of its shareholders aliens. Would it be
possible for the Court to enter upon an enquiry and to deny
the rights of citizenship notwithstanding the place of its
incorporation, because a majority of its members are aliens?
The shareholding may vary from time to time : to-day the
shareholding of aliens may exceed the shareholding of
citizens and the next day the position may be revised. Can
it be said that the company goes on changing its
citizenship, according as the shareholding fluctuates
between nationals and aliens? If the place of incorporation
and the centre of management of its affairs do not confer
right of citizenship upon the company, it would be
impossible to project the citizenship of the shareholders
upon the company so as to enable it to claim this reflected
right and on that basis to claim relief for breach of
fundamental rights.
The first part of the second question raises what is
essentially a question of fact. The State Trading Corpora-
tion was, on the date of the petition, functioning under the
direct supervision of the Government of India, the share-
holding was in the names of the President and two Secreta-
ries to the Government and its entire subscribed capital was
contributed by the Government of India. But it is a com-
mercial body, incorporated as the Memorandum of Association
indicates to organise and undertake trade generally with
State Trading countries as well as other countries in
commodities entrusted to it for such purpose by the Union
Government from time to time and to undertake purchase, sale
and transport of such commodities in India or any where else
in the world and to do various acts for that pur-
187
pose. The Articles of Association make minute provisions
for sale and transfer of shares, calling of general
meetings, procedure for the general meetings, voting by
members, Board of Directors and their powers, the issue of
dividend, maintenance of accounts and capitalisation of
profits. The State Trading Corporation has been constituted
not by any special statute or charter but under the Indian
Companies Act as a Private Limited Company. It may be wound
up by order of a competent Court. Though it functions under
the supervision of the Government of India and its Dire-
ctors; it is not concerned with performance of any govern-
mental functions. Its functions being commercial, it cannot
be regarded as either a department or an organ of the
Government of India. It is a circumstance of accident that
on the date of its incorporation and thereafter its entire
share-holding was held by the President and the two Secre-
taries to the Government of India.
Strong reliance was sought to be placed upon the decision of
the House of Lords in Bank Voor Handel En Scheepvasrt N.V.
v. Administration of Hungarian Property(1) in support of the
contention that the State Trading Corporation, which is the
first petitioner in this case, was merely an agent of the
Government of India. That was a case in which after the
invasion of Holland in 1940, certain stocks of gold
belonging to a Dutch banking corporation in London were
transferred to the Custodian of Enemy Property, who sold the
same and invested and reinvested the proceeds. These
investments were subsequently transferred to the
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Administrator of Enemy Property in the erroneous belief that
they were the property of a Hungarian national. After the
termination of hostilities the Bank obtained judgment for
recovery of the proceeds of sale, together with interest or
other profits earned thereon. During the management of the
Custodian, tax was paid to the British Treasury on the
income received by him by the sale of the stocks of gold but
the Bank claimed that it was entitled to recover a sum
equivalent to an amount assessed on the Custodian as tax in
respect of the income of the invested proceeds of sale and
paid by him. The House of Lords by a majority held that if
the Custodian had asserted Crown
(1) L.R. (1954). 584.
188
immunity, he would not have been obliged to pay tax on the
income, for the Custodian was a servant or agent of the
Crown and under the ’trading with the enemy legislation’ the
Crown had sufficient interest to enable it to invoke im-
munity from tax if it chose to do so even if the Crown had
no beneficial interest in the income. The principle of that
case, in my judgment, has no application in the present
case. The Custodian who was constituted a Corporation sole
was regarded by the House of Lords as entitled in the
circumstances of the case to Crown immunity from payment of
income-tax.
The question whether the corporation either sole or
aggregate is an agent or servant of the State must depend
upon the facts of each case. In the absence of any
statutory provision a commercial corporation acting on its
own behalf, even if it is controlled wholly or partially by
a Government Department, will be presumed not to be a
servant or an agent of the State. The fact that a Minister
appoints the members of the Corporation and is entitled to
call for information and to supervise the conduct of the
business, does not make the Corporation an agent of the
Government. Where, however, the Corporation is performing
in substance governmental, and not commercial functions an
inference that it is an agent of the Government may readily
be made.
In Tamlin v. Hannaford(1) a house had vested by the
operation of the Transport Act, 1947, in the British Trans-
port Commission and the question arose whether the house
could be regarded as owned by the Crown and administered by
the British Transport Commission as Crown’s agent. Denning
L.J., pointed out that the Minister of Transport had
extensive powers over the British Transport Commission. The
Minister had powers as great as those of a man who holding
all the shares in a private company possesses. He appointed
the Directors i.e. the Members of the Commission and fixed
their remuneration. They were bound to give him the
information he wanted, he was entrusted with power to give
directions of a general nature, in matters which appeared to
him to affect the national interest, as to which he was the
sole judge and the Commissioners were bound to obey him.
Notwithstanding these great powers
(1) L.R. (1950) 1 K.B 18.
189
the Corporation could not be regarded as an agent of the
Minister any more than the Company is the agent of the
share-holders or even of the sole shareholder. Denning
L.J., observed :
"In the eye of the law, the corporation is its
own master and is answerable as fully as any
other person or corporation. It is not the
Crown and has none of the immunities or
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privileges of the Crown. Its servants are not
civil servants, and its property is not Crown
property. It is as much bound by Acts of
Parliament as any other subject of the King.
It is, of course, a public authority and its
purposes, no doubt, are public purposes, but
it is not a government department nor do its
powers fall within the province of
government."
The assumption underlying the second question that a
department and organ of the Union or the State even if it is
entitled to be called a citizen cannot claim to, enforce
fundamental rights under Part III of the Constitution
against the "State" as defined in Art. 12 thereof needs to
be examined. Assuming that the State Trading Corporation is
a department or organ of the Government of India, it is not
still seeking to enforce any fundamental rights against the
Union of India; it is seeking to enforce its rights against
the State of Andhra Pradesh. By Art. 12 of the Constitution
the Union as well as the State of Andhra Pradesh are States.
Assuming that the State Trading Corporation be regarded as
’the State’ within the meaning of Art. 12 of the Constitu-
tion, if it be regarded as a citizen there is nothing in
Art. 19 which prohibits enforcement by the citizen of the
fundamental rights vested in it. For the application of
Art. 19, two conditions are necessary-(1) that the claimant
to the protection of the right must be a citizen and (2)
that the right infringed must be one of the fundamental
freedoms mentioned in Art. 19 If these two conditions are
fulfilled, the citizen would, in my judgment, be entitled
subject to the restrictions imposed by the Article to
enforce the rights against their infringement by action
executive or legislative by any Government or the
Legislature of the Union or the State and all local or other
authorities within the territory of India or under the
control of the Government of India. There is no warrant for
restricting the enforcement of these rights on :some
implication that an agent or servant of the State if he
190
or it be a citizen cannot enforce the fundamental rights
against another body which can be regarded also as a State
within the meaning of Art. 12 of the Constitution.
In my view, therefore, the first question should be answered
in the affirmative, and the first part of the second
question in the negative. The answer to the second part of
the second question will be as follows : even if the State
Trading Corporation be regarded as a department or organ of
the Government of India, it will, if it be a citizen
competent to enforce fundamental rights under Part III of
the Constitution against the State as defined in Art. 12 of
the Constitution.