4 S.C.R. THE STATE TRADING CORPORATION OF INDIA LTD. & OTHERS v. THE COMMERCIAL TAX OFFICER, VISAKHA- PATNAM AND OTHERS (.B. P. SINHA, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, A. K. SARKAR, K. N. WANcHoo, M. HmAYATULLAH, K. C.
DAs GUPTA, J. C. SHAH and N. RAJAGOPALA AYYANGAR JJ.J Fundamental Right, Enforcement of-Corporation, if a citizen entitled to claim fundamental rights-Constitution of India, Arts. 19(1)(f) and (g), 32.
The State Trading Corporation of India is a private lirnited com· pany registered under the Indian Co1npanies Act, 1956, with its he.ad Office at Delhi and its entire capital is contributed by the Govern· ment 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 i\cts and issued notices of demand. Thi'.: 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 petitions, the Constitution Bench hearing the matters referred the t\vo 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 Cor- poration is, not\vithstanding 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 c.an 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 S1NHA, C. J., S. K. DAs, GAJENDRAGADKAR, SARKAR, WANCHOO and Ayyangar JJ. There can be no citizens of India not mentioned in Part II of tho Constitution or by the Citizenship Act, 1955.
These provisions are wholly exhaustive and contem- plate only natural persons. Part III of the Constitution makes a clear distinction betwcc:n fundamental rights available to "any person" and those guaranteed /uly, 26.
The Stat< Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. [1964] to "all citizens", indicating thereby that under the Constitution all c1t1.zens 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 Citizen· ship Act, 1955, enacted by Parliament under Art. 11 of the Con- stitution, show that such persons are outside the purview of the Act.
It cannot therefore, be said that either Part II of the ConSti· tution or the Citizenship Act, 1955, confers the right of citizen· ship 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 corpo- ration can claim nationality which is ordinarily determifled by the plac.e of it.5 incorporation. But while nationality detennines
the civil right.5 of a natural or artificial person, particularly wit.i. 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 arc 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 Citi- zenship
Act, which deals \vith citizens, deliberately left out of account citizenship in relation to JUnsttc persons. f When the Constitution confers any particular right to be enjoyed f 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 alien!!, natural or juristic persons. There i.5 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.
..l Per HrDYATULLAH J.-Both the questions must be ans\vered in favour of the respondent!!. Before inOependence there was no law of citizenship in India. Under the British Nationality Act, 1948, Indians became Com- monwealth citizens or British subjects without citizenship and were regarded as JX>!ential citizens of India. The Indian Constitution made provision for citizenship under which certain natural per~ sons alone could be citizens of India and the Citizenship Act, r
1955, excluded persons other than natural persons from citizenship .. 4 S.C.R. 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 subscrib~ ing to the memorandum of association or joining as members becon1e 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 Con- solidated Mines Ltd., (1902) A. C. 484, referred to.
The seven freedoms guaranteed by Art. 19(1) are for the citizens of India. The Constitution in using the \Vord "person", a \Vord 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 \.vhich hold that corporations are citizens of the State of incorpo- ration 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 1nembers, 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 per~ 'r
sons and the word 'citizen' in Art. 19(1) (£) 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 affirn1ative. r It has been repeatedly laid down by this Court that in inter- preting 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 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 The State
Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer,
Visakflapatnam and Others. [1964] the benefit of the fundamental rights enshrined in that Article. There is nothing in the Constitution that stands i:i the way of giving all citizens of India, whether forming a corporation or not, the benefit of Arts. 19(1) (£) and (g).
State of Bombay v. R. M. D. Chamarbaughwala, I.L.R. [1955] Born. 680, Chiranjit Lal Chowdhuri v. Union of India, [1950] S.C.R. 869, Express Newspapers (P) Ltd. v. Union of India, [1959] 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 Bom- bay, [1958] S.C.R. 1122, 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, a mechani· cal approach is impermissible.
The Constitution is the declara· tion 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 dis- closed by the phraseology understood in its . natural signific.ation in the light of its setting and its dynamic character which is in- tended to fulfil 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, 21 Wal!. 162: 88 U.S. 627, referred to.
Under the English Common Law which formed the founda- tion of the Indian jurisprudence, a company or a corporation aggre- gate 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 and entitled to protection abroad.
Janson v. Driefontein Consolidated Mines Ltd. L. R. (1902) A.C. 492, Attorney-General v. fewish Colononization Association .. (1901) 1 K.B. 133, Generali v. Salim Cotran, L.R. (1932) A.G. 288, Gasque v. Commissioner of Inland Revenue, L.R, (1940) 2 K.B. :30 and Kuenigl v. Donnersmark, L.R. (1955) 1 Q.B. 515, referred to.
So also in India a juridical person is c.apable of exerc1s1ng to the fullest extent a large majority of civil rights which natural persons may exercise as citizens, its inc.apacity to exercise other rights arises from the nature of its personality and constitution and not from any special restriction imposed upon it. The Constitu- tion, as is apparent from various other Articles, aff6rded the widest protection to corporation as it did to natural persons.
Unless 4 S.C.R. therefore, the language or the scheme of the Constitution is com- pulsive, it is impossible to put a limited connotation on the ex~ pression '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 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 sub- jects 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 pr?tection 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 Constitu- tion and it is recognised as a person capable of holding and dis- posing of property and carrying on business, commerce and in- tercourse, 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 £hare"-holders and even if all the share-holders are Indian Citizens, its claim to citizen- ship ·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, l.L.R. [1955] Born. 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, fun- _. ctions, an inference will readily be made that it is an agent of the Government.
The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, V isak hapatnam and Others. The State Trading Corpo- ration of India Ltd. 6· Others. v. The Commer-
cial Tax Officer Visakhapatnam and Others. Sinha C. f. [1964] 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 i!I no warrant for the proposition that a department or an organ of the Union or the State, if it is a citizen, cannot en- force fundamental rights against the State as defined by Art. 12 of the Con!titution.
ORIGINAL JuR1so1cT10N : \Vrit Petitions Nos. 202-204 of 1%1. 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, 0. C. Mathur and f?.avinder Narain, for the Petitioners (in all the petitions). D. Narasarju, Advocate-General for the State of Andhra Pradesh and T. V. R. T atachari, for the respon-
dents (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 In- tervener No. 1. S. M. Sikri, Advocate-General for the State of Punjab and Gopal Singh, for Intervener No. 2. B. Sen, M. K. Bannerji and P. K. Bose, for Intervener
No. 3. /. M. T hakore, 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. Jain, 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 re- ferred to the Special Bench by the Constitution Bench be- fore which these cases came up for hearing : (1) whether the State Trading Corporation, a com-
pany registered under the Indian Companies Act, t ~ S.C.R. 1956, is a citizen within the meaning of Art. 19 of the Constitution and can ask for the enforce- ment 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 Gov- ernment; 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 Com-
mercial 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 1%1, the parties are the petitioners aforesaid against (1) the Assistant Superintendent of Commercial Taxes,
I/c Chaibasa Sub-Circle, Bihar State; (2) the Depmy 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.
The first petitioner is a private limited company re- gistered under the Indian Companies Act, 1956, with its h~d office at New Delhi, in May, 1956. The second peti- tioner is a shareholder in the first petitioner company. The 8-2 S. C. India/64
The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Sinha C. /. .The State Trading Corpo- ·. ration of India Ltd .. & Others.
v. The Commer- cial Tax Officer, V isak hapatnam and Others. Sinha C. /. [1%4] two petitioners claim to be Indian citizens as all its share- holders are Indian citizens. Proceedings were taken for
assessment of sales tax, and in due course of those proceed- ings 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 py 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 objec-
tions 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 im- portance 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 tl1at
we shall give our decision only on the prelinlinary ques- tions and that die 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 die 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 die 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, prac- ;tice 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 4 S.C.R. 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 avail- able 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 discriminating against any citizen on grounds
on! y 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 title from any foreign State, under Art. 18(2), and no person who is not a citizen of India shall
accept any such title 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; (£) to acquire, hold and dispose of property; and
(g) to practise any profession, or to carry on any occupation, trade or business. Each one of these guranteed rights under els. (a) to (g) is subject to the limitations or restrictions indicated in ck. The State
Trading Corpo- rtJtion of India Ltd. & Others. v. The Commer· cial Tax Officer, Visakhapatnam Mid Others. Sinha C. /. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer-
cial Tax Officer, Visak. hapatnam and Others. Sinha C. f. (1964] (2) to ( 6) of the Article. Of the rights guaranteed to all citizens, those under els. (a) to ( e) aforesaid are parti- cularly apposite to natural persons whereas the freedoms
under els. ( f) and (g) aforesaid may be equally enjoyed by natural persons or by juristic persons. Art. 29(2) pro- vides that no citizen shall be denied admission into any educational institution maintained by the State or State-
aid 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 ac- count 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 clear distinction bet- ween fundamental rights available to 'any person' and those guaranteed to 'all citizens'. In other words, :di
citizens are persons but all persons are not citizens, under the Constitution. The question next arises: What is the legal signi- ficance 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 II, 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 im- mediately preceding the commencement of the Constitu- tion (Art. 5). Secondly, any person who has migrated to the territory of India from the territory included in Pakis- tan shall be deemed to be a citizen of India, if he satisfied the conditions laid down in Art. 6(a) and 6(b) (i). Any
f 4 s,c.R. IO') 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
he 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 (L VII of 1955). It is ab- solutely 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 acquisition and termina- tion of Indian citizenship. The Constitution in Part II,
as already indicated, has determined who are Indian citi- zens at the commencement of the Constitution. As the Constitution does not lay down any provisions with res- pect 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(l}(f} of this Act says that the word
"person" in the Act "does not include any company or association or body of individuals, whether incorporated or 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 The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Sinha C. f.
The State Trading Corpo- ration of India Ltd. & Others. The Commer- cial Tax Officer, Visakhapatnam and Others. Sinha C. /. [1%4] 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 Citi- zenship 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 con-
trary view, which we may now proce.ed to consider. In, what is now known as the first Sholapur case, Chiranjit Lal Chowdhuri v. The Union of India('), 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 Consti-
tution 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 fun- damental 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 con- troversy 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 declac ration 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. 4 S.C.R. 111 ' as Dwarkadas Shrinivas of Bombay v. The Sholapur Spin-
ning & Weaving Co. Ltd.('). In the first Sholapur case, this Court had been moved under Art. 32 of the Constitu- tion by an individual shareholder, as aforesaid, for enforce- ment 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 ultm vires. This Court held that the law impugned had authe>- rised, in effect, the deprivation of the property of the com- pany within the meaning of Art. 31 of the Constitution,
without compensation, and had thus violated the funda- mental 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 res-
pondents. At page 694, Mahajan J., while discussing the scope and effect of the provisions of the Constitution in Part III, 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 can- not be the same as they cover different fields. It can- not be seriously argued that so far as citizens are con- cerned, freedoms regarding enjoyment of property
have been granted in two articles of the Consti- tution, while the protection to property qua all other persons has been dealt with in Article 31 alone. If both articles covered the same 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.
The State Trading Corpo- rtllion of Indio Ltd. & Others. v. The Commer- cial Tax Officer, V isak hapatnam and Others. Sinha C. f. 1963 – The State Trading Corp.a. ration of {n.t/il!.
Ltd. lit Others. v. The Commer- rial Tax Officer, Visal(hapatnam and Others. Sinha C. f. [1%4] Art. 19 deals with fundamental Fights. of "citizens" as described in Part II of the Constitution.
Bose J., in the course of his judgment, at page 732 ob- served 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 restric-
ted to citizens. But what Article 19(1)(£) means is that whereas a law can be passed to prevent per- sons who are not citizens of India from acquiring and holding property in this country no such restric-
tion can be placed on citizens. But in the ab- sence of such a law non-citizens can also acquire property in ~ndia and if they do then they cannot be deprived of it any more than citizens, save by autho-
rity of law." But it has got to be said that those observations, though they may appear to support the contention raised on be- half 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 com- pany, 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 Limi-
ted v. The State of Bihar,(') the appellant company had moved the High Court under Art. 226 of the Constitu- tion for certain reliefs against the provisions of the Bihar Sales Tax Act, but this Court (per S.R. Das, Acting C.f. at page 618 and per Venkatarama Ayyar f. 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. 4 S.C.R. .considered judgment on the issue now before us. lt 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 ab- sence 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. Setal- vad, 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 position with reference to the provisions of the Citi-
"Zenship Act. It is common ground, therefore, that the constitutioml 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 pre-existing 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 incorpora- tion, a company is a legal entity the nationality or domi- cile 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 na-
tionality, 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 exis- tence. In this connection, reference was made to the case
of fanS'On v. Driefontain Consolidated Mines(') for the proposition that a company may be regarded as a national of the country where it was incorporated, notwithstanding ( 1 ) [1902] AC. 484, 497, 501, 505.
The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, V isak hapatnam and Others. Sinha C. /. The State Trading Corpo- ration of India Ltd. & Others.
r. ' The Commer: cial Tax Officer, Visakhapatnam and Others. Sinha C. /. [1%4) 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 jural 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 per-
son, natural or artificial, particularly with reference to international law, whereas citizenship is intimately con- nected 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 en- joy 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 Inter- national 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 Citizen- ship Act have not dealt with juristic persons at all, but it is more difficult to accept the argument that the expres-
sion "citizen" in Part II of the Constitution is not conter- minous with the same expression in Part III of the Constitution. Part II of the Constitution, supplemen- ted 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 de- liberately left 'Out of account so far as the Constitu- tion and the Citizenship Act were concerned.
On the other hand, the more reasonable view to take of the provi- sions of the Constitution is to say that whenever any par- ticular right was to be enjoyed by a citizen of India, the Constitution takes care to use the expression "any citizen" or "all citizens", in clear contradistinction to those rights r
' I 4 S.C.R. which were to be enjoyed by all, irrespective of whether they were citizens or aliens, or whether they were na- tural 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 m matters of public
employment (Art. 16) were deliberately made avail- able only to citizens. In this connection, reference may be made to the Constitution of the United States of Ame- rica(') "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 Four- teenth 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 1s no · doubt that a corporation may not be deprived of its property
without due process of law ; and although pnor decisions have held that the "liberty" guaranteed by the Fourteenth Amendment 1s the liberty of natural, not artificial, persons, nevertheless a news-
paper corporation was sustained, in 1936, in its objec- tion that a State law deprived it of lib~rty of press. As to the natural persons protected by the due pro- cess clause, these include all human beings regardless
of race, colour or citizenship." (p. 981) We have already referred, in general terms, to those· ( 1) Senate Document No. 170, 82d. Congress, Ed. Edward S. Corwin· The State Trading Corpo-
ration of I ndi• Ltd. & Others. v. The Commer· cial Tax Officer, V isak hapatnam and Others. Sinha C. f. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tar Officer,
Visak hapatnam and Others. Sinha C. ]. [1%4] provmons 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 avail- able to "all citizens'', it deliberately kept out all non- citizens. In that context, non-citizens would include
aliens and artificial persons. In this connection, the fol- lowing statement in Private International Law by Martin Wolff is quite apposite :- "It is usual to speak of the nationality of legal per-
sons, and thus to import something tbat we predicate of natural persons into an area in which it can be ap- plied 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 mili-
tary 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 peti-
tioners that the distinction made by the Constitution bet- ween "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 funda- mental rights to be enjoyed by "citizens" and those
available to all "persons", they did not think it neces- sary or advisable clearly to indicate the classes of per- sons who would be included within the expression "citizens". On the other hand, there is clear indica-
tion 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, r ., , 4 S.C.R.
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 1 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 citi- zens 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 immuni- ties of citizens of the United States ; nor shall any State deprive any person of life, liberty, or proper-
ty, 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 els. (a) to (g). Those freedoms, each and all of them, are available to "all citi- zens". 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 els. (a) to (g) should be available to a corporation.
But clearly some of them, particularly those contained in els. (b), ( d) and ( e) cannot possibly have any ap- plication to a corporation. It is thus clear that the rights 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 consi- deration 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 funda-
mental rights, was very accurately drafted, delimiting those rights like freedoms of speech and expression, the right to The State Trading Corpo- ration of India Ltd. & Others. v.
The Commer- cial Tax Officer, V isakhapatnam and Others. Sinha C. f. l963 The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others.
Sinha C. /. [1964] assemble peaceably, the right to practise any profession, etc., as belonging to "citizens" only and those more gene- ral 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 II 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 citi- zens 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 on! y if the first question had been answered in the affir- mative. Let the cases go back to the Bench for hearing on merits with this opinion. Costs of the hearing before the
.~pecial Bench will :be dealt with by the Bench which ulti- -1 4 S.C.R. mately hears and determines the controversy. HmAYATULLAH J.-Two questions have been referred to this Bench for opinion. They are :
(1) Whether the State Tracling Corporation, a Com- pany registered under the Indian Companies Act, 1956, is a citizen within the meaning of Article 19 of the Constitution and can ask for the enforce-
ment 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? 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 alla 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 clispose of property; (g) to practise 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 ques- tions 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 Gov- ernment. The State of Andhra Pradesh, therefore, denies that the State Trading Corporation being :in artificial per- son is a citizen and consequently contends that Art. 19 is inapplicable because the word 'citizen' in the article refers The State
Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatul/ah f. The State Trading Corpo- ration of India Ltd. & Others. v.
The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatullah /. [1964] to natural persons. Additionally, it contends that being a department of Government, the State Trading Corporation
cannot claim protection of Arl 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 citizen- ship, points out that the Constitution does not define the: word 'citizen', that Part II 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 (L VII 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 t<>
him, were citizens before the Constitution and the Citizen- ship 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(') 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 lan- guage of the provision or the nature of the right com- pels the inference that they are applicable only to natural persons. An incorporated company, therefore,
can come up to this Court for enforcement of its funda- mental 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." 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. r 4 S.C.R. protection of Article 19 and no objection was raised. Lastly, he contends that the word 'citizen' should be liberally con- strued 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 sh~reholders 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 stilling the trading activities of another Government either by law or executive act10n against which Article 19 is the only effective safe- guard. 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 un-
incorporated 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 per- sona 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
·The State Tradjng Corpo- ratjon of India Ltd. & Others. ·v. The Commer- cial Tax 0 fficer, Visakhapatnam and Others . Hidayatullah /. The State Trading Cor('O- fation of f ndia Ltd. & Otliers.
The Commer- .cial Tax Officer, Visak,l•apatnam and Others. Hidayatullah J. [1964] Turner('); or as Lord Macnaghten said in the weli-knowri case of Salomon v. Salomon & Co. ( 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 li~e perjury, bigamy or capital murder.
This persona ficta being a creature of a fiction, is protected by natural limitations as pointed out by Palmer in his Com- pany Law (20th edn.) p. 130 and which were tersely sum- med up by counsel in R. v. City of London(') 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 citing certain obiter statement:S. from Janson v. Driefon- tein Consolidated Mines Ltd.(') such as :
"l assume that the corporation …… was to all in- tents and purposes in the position of a natural bor~ subject of the late South African Republic." '(Lord Macnaghten-p. 497) "I think it must be taken' that the respondent com-
pany was technically an alieri 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- "0ne of the terms frequently used synonymously with nationality is citizenship. Historically, this is cor- rect for States with the Roman conception of nationa-
( 1 ) [1872] L.R, 8 Ch. App. 152. ( 3 ) [1632] 8 St. Tr. 1087, 1138. ( 2 ) [1897] A.C. 22, 51. (') L.R. [1902] A.C. 492. 4 S.C.R. 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 regard-
ed 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 there- fore incorporated companies are citizens. From this it is but a mere step, which is also taken, that incorporated com- panies in India were and still are citizens and that the
Constitution and the Citizenship Act have nowhere depriv- ed them of this citizenship or of the right to protect them- selves by invoking Article 19(1) (f) and (g). Alterna- tively it is contended that if all the members of the Corpo– . ration 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 cor- porations 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 petitio principii 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 Corporation can- not be said to be a citizen either by itself or by taking it as the aggre~;ate of citizens, that nationalitv of a corpo– ration is a different concept not to be confused. with citizen- ship of natunl personc.that the word "citizen" in Art. 19(1) sub-clauses (£) and (g) refers to a natural person, that
State Trading Corporation is really a Department of Gov- ernment behind the corporate veil and that for all these The State Trading Corpo- ration of India Ltd. & Others. v. The Commer-
cial Tax Officer, Visakhapatnam and Othert. Hidayatullah /. The State 'Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Ta:r Officer, Visakh,1painam and Others. Hid«yat11ll1h /.
[1964) 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 (protec- tion 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 arti- ficial persons are outside the meaning of the word 'citizen'. The contrast may not be between natural and artificial per- sons so much as between citizens and non-{'.itizens, and it is possible that where the benefit is intended to go to non- citizens, 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 ::mswer to that question must depend, as already pointed out, on the connotation of the word 'citizen' which mus[
be found out. In attempting to determine whether the word 'citizen' in Art. 19 denotes only a natural person or includes a com- pany etc., we must turn first to the Constitution to see
if the use of the word 'citizen' or 'citizenship' in any other -f S.C.R. 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 it~; citizens Justice, social, economic and political ;
Liberty of throught, expression, belief, faith and wor- ship: Equality of status and of opportunity; and to promote among them all Fraternity assuring the dignity of the individual and
the Nation," etc. 'Libaty of thought, expression, belief, faith and wor- ~hip, equality of status' and 'dignity of the individual are expressions appropriate to natural persons and not com-
panies, associatiops and other corporations aggregate and the word 'citizen' in the preamble refers to individuals for whom the Constitution was being made. In this con- nection, it must he remembered that a Constitution is a
bond between the citizens and the adminstration and regu- lates their respective actions. It is as Ahrens defined it : '"L.' ensemh.'e des institutions et des lois fondame11- tales, destine earg!er /'action de /'administration et de taus les cityens.
(Ahrcn : Caurs·: de Droit Nature/ fr C. iii p. 380) (The bodv of imtitutions and fundamental law design- ed 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 represen-
tatives to Parliament and Assemblies of the people. They are persons who were declared citizens on the in- auguration of the Constitution and those on whom the rights of citizens were conferred and on whom they may
The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatullah f. The State Trading Corpo- ration of India Ltd. & Others.
v. The Commer~ cial Tax Otfice1", V isak hapatnam and Othei-s. Hidayatullah f. SUPREME .COURT REPORT~ .• -. ,. (' ' ''·' . [19q4J ,_· be conferred by law. Of course the Constitution also CO!l· fers some rights on aliens and assists ·and- protects therti 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 his
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 tbe Constitution. As we shall
. see presently, the Citizenship Act of 1955 expressly ex- cludes 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 citizen- ship but till Parliament does so there is nothing in Part II to indicate that the words 'citizen' and 'citizenship' were used to include any of them.
In the fourth part which is entitled 'Directive Princi- ples' 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 endeavoljr to secure a uniform Civil Code for all citizens and the
'_'l'Ord plainly means men and ·women because it is imp~ r l SUPR.~~EC,O\JRT REPORTS sible to think that the Constitution is thinking of a uniform Civil Code for corporations. In the other parts of the Con- stitution 'citizenship' is a condition precedent for some
office, post or privilege. The President, the Vice-President, the Governors, the Members of Parliament and the Legis- lative Assemblies, the Judges of the Surreme 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 per- sons 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 cor- poration.
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 corpurations 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 mean- ing in respect of clauses (£) 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' The State Trading Corpo- ration of India Ltd. & Others. v. The Commer-
cial Tax Officer, Visakhapatnam and Others. Hidayatullah /. 1%3 The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax 0 Ifie er, Visakhapatnam and Others.
Hidayatullah f. (1964] 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 con- cept 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 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 Quartely Review Part I pp. 270-82, says
that the worrl 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 brotherhoo<ls formed tribes (phylai). The entire citizen body was thus included in the tribes and brotherhoods but
the wealthy formed the clans. When monarchy was abo" lished 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 creat- ed 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 — . . -.. – 4 S.c.R. . SUPREME COURT REroRTS ·-·-~– .-r–~ —
under wh~~ rcfomfs there was a distribution of th~ PoPU· ·. Iation on a geographical basis and .an enfranchisement of.·_ .. •, persons of pure _or partial Athenian desecnt. ; Resident _. Tr;t:/'t:.Po- forcigners had inter-married and though there was ·a partial. rati4rs of Jndill
recognition of foreigners.perman.ently settled (domiciled) -Ltd. & Oth<r1. in "Athens_ even from the days of Peisisiratus 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 . phratriu. This state of ·affairs· continued till Pericles abro- …. The Comm<r- dal T"" 0 ffic<r• Visakhapatnam. – ad Oth<r1.
gated the enlightened measure. He limited citizenship to Hidayatullah f. 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 iri Greece except Sparta followed this kind of citizen- • ship. The Spartans had their own system of rule with two – kings and an elected council (gerusia) elected by the citi- – zens 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 mem- bership 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 arid 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 'civil were used in Roman Law to describe persons who had thC freedom of the city and who enjoyed all " political and civic privileges of Government. In this way were distinguished a slave (servus), an enemy (hostis)
who had none of these rights on the one hand and a fore- – igner (peregrinus) particularly – from a country with which Rome was on terms of peaceful intercourse on the other; from citizens. Though by Justinian's time everyonci _ The State
Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax 0 fficer Visakhapatnam and Others. H idayatullah f. Ji t '. ·, '. '": . · .. ' – '.' ' . ' ·. ·-:' ! • :./"'"':
[1%4] became a citizen, unless he was an unmanumitted slave, in· the time of Gaius citizenship was i:he·· privilege 'of Romans and carried with it the right to vote (jus sufjragii) and "the right to hold public office (jus honorum) the right to a Roman marriage (jus connubium) and the right
to legal relations (jus 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 dif-
ferent laws for a long time for the citizens and the latini and the peregrini. The first to be given the status of citi- zens 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 mem- bers of certain treacherous communities (dediticii) and per- sons 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 con,sidered 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 mem-
bership 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 Cenrtal 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 Chi~ftainships. 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 l 4 s,q.R
S:tJfREME <;:QURT RJ;.PORTS (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 /, Ac.."demi e friwi 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 appli- cable 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 posses- sed by a citizen by investing him with a policial status
which he could claim abroad. The word 'nationality' itself has now come to acquire two distinct meanings- a 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 Nationa- lity and Citizenship 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. 1 pp. 18-i9; Hack- worth 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 distinc- tion is preserved. This dual status which has caused all
the trouble in this case was summed up by Lord Westbury 1.963 The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatullah /.
The State Trading Corf'<>- ration of India Ltd. & Others. The Commer- . cial Tax Officer, Visakhapatnam and Others. Hidayaturlah /. [1964] in Udny v. Udny(') by saying that the political status:
"May depend upon different laws in different count- ries, wheras civil status is governed universally by one single principle, namely that of domicile, which is the criterion established by law for purposes of determin-
ing civil status. For it is on this basis that the per- sonal rights of the party, that is to say, the law which determines his majority or minority, his marriage, suc- cession, 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 (jus sanguinis) and the other a theory of domicile (jus soli). The European
countries applied the former and the Common Law coun- tries 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 I inclnde the.United States of America) birth in the terri- ' tory of the King (jus 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 D\1ited 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. 4 S.C.R. "is a term of municipal law, and denotes the posses- sion within the particular State of full civil and political rights, subject to special disqualification such as min<>- rity 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 coun-
tries 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 Lehri: Vom modernen Statt, i, p. 246) "die Politik ist Sache ies 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 irres- pective 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 grand-children. 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 Pren.ch 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. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, V isakhapatnam
and Others. Hidayatullah /. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax 0 fficer, Visakhapatnam and Others. Hidayatullah f. [1964] ed enormous importance and the principles of dual nationa- lity and statelessness cut across some of the former theories and Cogordon's statement "que tout homme doitposseder
une nationalite*" is no longer true because of many state- less 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 attri- butes of natural persons. We are not concerned however, with other peoples or nations or States. We are con- cerned ·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- ship and nationality before independence. There was no .law of citizenship in India. The Indian Naturalization
Att 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 nationa- lity on persons, (a) born in Great Britain or the Dominions (jus soli) ( b) up to and including the second generation of des-
cent 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 Natioaaiity and Citizenship Laws and need
not be referred to in detail here as we are really not con- cerned with them except as the background of our laws. In 1914, the British Nationalityand Status of Aliens Act, ·*Every person must posses a nationality.
l … ; 4 S.C.R. 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 paseed. By that time the problem of British-born subjects underwent a cata-
clysmic change along with the changes in the British Empire. A new conception namely that of Common- wealth 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 citi-
zens of certain countries named in the Act. India was one of such conntries. This new citizenship was Common- wealth citizenship. It also contained transitional provi- sions and s. 12 ( 4) provided:
S. 12( 4) :-A person who was a British subject im- mediately 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 fore-
going provisions of this section shall on that date become such a citizen unless- ( a) he is then a citizen of any country mentioned in sub-section (3) of section 1 of this Act under a citizen-
ship law having effect in that country or :i citizen of Eire ; or ( b) he is then potentially a citizen of any country mentioned in sub-section (3) of section 1 of this Act. One of the Commonwealth countries (Canada) had
already such laws, but others followed immediately after- wards. 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
The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visak,hapatnam and Others. Hidayatullah f. The State Trading Corpo- ration of India Ltd. & Others.
v. The Commer- cial Tax 0 fficer, V isak hapatnam and Others. Hidayatul/11!i /. [1%4] 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 every Indian in British India by virtue of s. 1 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 citizen-
ship. Under the English Act of 1948, Indians became Com- monwealth 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 4 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 com- pletely worked out on 26th January, 1950. The Constitu- tion no doubt declared who were Indian citizens on that date bnt the status of a British subject without citizenship which was mellifluously called Commonwealth Citizenship
"could not be liquidated" upless 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 the scheme of Indian
citizenship, persons who were potentially citizens of India but are not citizens thereof remained British sub- jects without citizenship in the eyes of the United K. d 1ng on1. 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 fulfils 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 indivi-
rluals, ·whether incorporated or not." l. y r 4 S.C.R. 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 with- out citizenship or Commonwealth citizens and only poten- tial 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 Citizen- ship 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 re- mained where it was. The corporations, if at all, would thus be Commonwealth citizens, not Indian citizens ~ecause 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 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 per- sons and not to 'intangible concepts' like corporations. Unless the law gives this right to corporations they can-
not sue or be sued. What the law does is to invest corp<>- 10–2 S. C. India/64 The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, · Visakhapatnam
and Others. Hidayatullah f. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatullah /. [1964] 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 privi- lege 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 muni- cipal law which that law expressely 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 inter- national 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 corpora- tions. 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 Har-
-vard 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 col-
lective 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
y r 4 S.C.R. 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 nationa-
lity 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 by considerations of domicile. The
Germans c_all this theory Griindungstheorie that is the theory of the place of birth. The theory has great names behind it-Calvo, Fiore, Pineau, \Veiss etc. This theory is inadequate to cover corporations which are not autho-
rised by the State and has been modified in the United States by evolving a theory of 'implied consent to extra- territorial service'. The third theory considers that a cor- poration 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 busi- nessmen 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 iure sanguinis or iure 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 (' ). Domicile of a corporation has more foundations t~an 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 corpora- tion 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
(') [1839] 13 Pet. 519, 588-10 L. Ed. 274. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatullah f. The State
Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, V isak hapatnam and Others. Hidayatullah /. [1964] 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('). 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 nationa- lity depend? According to English Common Law a cor- poration 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 com- pany possessed the nationality of the country under the laws of which it was incorporated and that the nationa- lity 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. ('), all the shares of the res.Pondent com- pany (except one) were held by a German company and
all directors were Germans though the company was in- corporated in Great Britain. If the principle that nationa- lity 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.
( 3 ) [1916] 2 A.G. 307. (2) [1902] A.G. 484. II 4 S.C.R. the above principle was held applicable (Buckley L. f. 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 Halsbury, Me11Sey, Kin- near, 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 he 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 know- ingly ·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 en- joy 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 a,uthori- The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax 0 fficer,
Visak hapatnam and Others. Hidayatullah /. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatullah /. [1964]
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 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 Interna- tional Law p. 44 and by Mr. Ralph A. Norem: American
fournal 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 charac- ter.
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, Ger- many, Italy and Belgium went a step further than before. The Gour 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 ~pproach to the
question thus : Les fonnes juridique dont la societe est revetue, le lieu de son principal etablissement, taus les indices auxquels s' attache le droit prive pour determiner la nationalite d'une societe, sont inoperants, alors qu'il
s'agit de fixer au point de vue du droit public le caractre reel de cette soc Mt e. Elle do it etre assimilee aux sujets de nationalite ennemie des qne notoirement sa direction ou ses capitaux sont en totalite ou en majeure partic
r 4 S.C.R. entre !es mains de sujets ennemis, car, en pareil cas, derriere la fiction du droit prive se dissimule vivante et agissante la personnalite ennemie elle-meme." (The juridical forms in which the society is dressed,
the place of its principtl 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 capi- tal 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 atti-
tude also changed to Geschaftssi~z 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 socii!te dont le principal etablissement est en
Belgique est soumise a la loi beige bien que l' acte constitutif ait ete passe en pays etranger." (Every society of which the principal establishment is in Belgium is under the laws of Belgium, notwith-
standing tl1at the incorporation took place in a foreign country.) In the Mixed Arbitral Tribunals which followed the First World War there were some cases which were decid- ed on the theory of control but many odiers were decided
on the theory of domicile depending upon die 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 die control theory is also losing ground and there is a great support for the theory that the juridical life of the corporation must ulti- The State
Trading C orpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Ot!ters. Hidayatullah J. 1963' The State Trading Corpo- ration of India Ltd. & Others.
v. The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatullah f. [1964] 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 parti- cular country is allowed to operate a fiction. A corpora-
tion 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 con- siders 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, mana- gers, secretary and so forth, functioning within the scope of their authority are regarded as the company's
,, (') acts …. 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 charac- ter and not a law recognising nationality either in a politi- cal or municipal sense. There may be some analogy bet-
ween 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.
f r 4 S.C.R. ·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 citi-
zens of the United Kingdom and colonies." ·Oppenheim also points out (International Law, Lauter- pacht 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 atti- tude 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 con- sidered a subject." Hyde in his International Law Vol. 2 (2nd Edn.) . p. 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) ob- served 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 Hals bury)
· was of opinion in the Dai!l'ller 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) [ 1916] 2 A.C. 307, 327.
The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax 0 fficer, Visakhapatnam and Others. Hidayatullah f. The State Trading Corpo- ration of India Ltd. & Others.
v. The Comn1er~ cial Tax Officer, Visakhapatnam and Others. Hidayatullah f. [1964} 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 pur- poses of clauses (f) and (g). The fact that corporations
are regarded in some circumstances as possessing nationa- lity does not make them citizens. As Mr. Menon rightly pointed out ships and aircraft also possess nationality in Internat,jonal 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 citizenship rights arise. It may be admitted that the State Trading
Corporation which is 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 mana- gement 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 'natiunal'. No doubt the existence of corporations as entities is recog- nised but· the entity obtains only such rights as the law· r
4 S.C.R. 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 mem- bership 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 pro- tocols, is of no comequence 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 Consti-
tution 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 includ- ing corporations. The following articles of the Constitu-
tion 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 promo- tion 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' inclu- ded 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 pur- posely 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 The State Trading Corpo-
ration of India Ltd. & Others. v. The Comrner~ cial Tax Officer, Visakhapatnam and Others. Hidayatullah f. The State Trading Corpo- ration of India Ltd. & Others. v. The Conimer- cial Tax Officer,
Visakhapatnam and Others. Hidayatullah f. [1964] 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 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 over- looked corporations and this has made the language intrac- table in places. The Supreme Court has supplied this want by 'judicial legislation'. How this was done may be ex-
plained. 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 incorpora-
tion 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 accept- ed 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 esta- blish an uniform Rule of Naturalization."
Art. Ill Sec. 1. "The judicial Power of the United States, i- 4 S.C.R. 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, Citi- zens 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. 1 "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the ::itate wherein they resi<le. No State shall make or en-
force any law which shall abridge the privileges or im- munities of citizens 0£ the United States ; nor shall any State deprive any person of life, liberty or proper- ty, without due process of law ; nor deny to any
person within its 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 citizen- ship. 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 ju- risdiction. The development of the law has had an inter- esting course. Rather than describe it in my own words I quote a small passage from Willis, Constitutional
Law of the United States (p. 850) :- "At first a corporation was not regarded as a citi- zen for any purpose and it could not get into or be taken into the federal courts on the ground of diver-
sity of citizenship. Then a case arose where all of the stockholders of the corporation were citizens of the The State Trading Corpo- ration of India Ltd. & Others. v. The Commer-
cial Tax Officer, V isak hapatnam and Others. Hidayatullah f. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. H idayatullah J.
[1964] 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 cor- porate veil to the stockholders and give the federal
courts jurisdiction because of the diversity of citizen- ship thus found. In a later case some of the stock- holders 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 citi- zenship all of the stockholders of a corporation would
be conclusively presumed to be citizens of the charter- ing 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 corpo- ration is itself a citizen of the state of its incor- poration for the purposes of diversity of citizenship." The following extract from St. Louis & San Fran-
cisco Railawy Co. v. James(') 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 Fe- deral courts might be defeated. Then after a long
contest in this co1,1rt, it was settled that the presumption of citizenship is one of law, not to be defeated by allegation or evidence to the contrary. 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. r 4 S.C.R. has rejected the claim of corporations to citizenship for purposes of the privileges and immunities clauses quoted above. As Corwin pointed out in The Constitu-
tion 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 re- ceive 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 enti- tled to equal treatment with the corporations charter- ed by a State if there is submission to the jurisdiction
of the State. The Nationality Act of 1940 declared that for the pur- pose 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 dis- loyal. 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 exam- ples are found in Hyde and international documents. Similarly treaties of commerce are construed to include corporations within expressions denoting natural persom. 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 The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer Visakhapatnam' and Others. Hidayatullah f.
-. —- ,-~-,.; '/–::' ~"": '' ', '' ',_ ~ _->…..~ ·;,.. .. [1964) -1963 that enure to a natural person … ; .. " The-question is· whether the precedent of the United ·"' The State
b f ll ed f Trading Corpr/c ·states Supreme Court should e o ow . Apart ram the ration of India fact that this involves a conscious effort at judicial legisla- Ltd. & Other.<. 1 tion, I ·am of opiniqri th'at such a spirit of libre recherche v. ·
. scientifique is hardly justified in India in view of the fol- The Commer- lowing considerations :- cial Tar Officer, · … (a) We. have a single citizenship and there is no citi- Visakhapatnam – –
and Others. _ zenship–of the States to create diversity ; Hidayatullah ]. (b) We have only- one set of courts and not two with separate jurisdiction ; . ( c) -Our· Constitution has not completely overlooked 'r7 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 enfor- ,.-, ' cing their personal rights can effectively benefit r 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 corpora- tion· as· a citizen ; and – (0 Unless a presumption juris et de jure is raised that corporations whether composed of citizens
only or of non-citizens only or of citizens anci-0on-':o- citizens ·are citizens of India, ·every time an inquiry_ will have to be made into· their com-_ po-<ition and there is 110 discernihle principle
. on which the — citizenship can be based when there is diversity of citizenship in the composition of the corporation. _I arn, therefore, of opinion that the. State Trading Corporation cannot be regarded as citizeµ for the purpose _ of enforcing rights under Art. 19(1)(f) and (g).
_ : The next question is whether the State Trading Cor- poration is a uepartment or organ of Government · not- — withstanding the formality of incorporation. On behalf ·of the · Corp0ration it is contended that if the corporate .-eil is pierced one sees that ·the right to invoke Art.
I …. 4 S.C.R. 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 enjoy-
ment. None of them has paid for the shares held in his name. The administration of the affaill! of the cor- poration though technically a company, is a concern of the Government of India. The legal and beneficial own-
ership of the corporation vests in the Government of In- dia. Now there are not two veils so to speak, so that by lifting the first one sees the shareholders and by lift- ing the other the Government of India.
There is but one veil and if it is at all to be lifted, it must be lift- ed right off. What one would see on lifting the veil may be described in the words of Martin Wolff (Private Inter-
national 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 corn pan y ."
If the corporation is to be regarded as a separate entity from its members and not merely as an associa- tion 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. It is because of these difliculties that the Sup- reme Court of the United States settled the question of federal jurisdiction in the face of diversity of citizen-
ship 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 's thus also a citizen of that State.
There is a fiction .1pon a fiction. I do not think that it is permissible mder our laws to raise such an irrebuttable presump- 11-2 S. C. India/64 The State Trading Corpo- ration of I ndi1J
Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatullah /. 1%3 The State T."ading, Corpo- . ~ation of India l;J. & Others. v. The, Commer- cial Tax Officer,
Visakhapatnam and Others. Hidayatullah /. [1964] 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 cor-
porations raises an issue of fact. Can we say that if all the corporators are 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. Deveau¥('). 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 show .. ed 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 Cor- porations p. 311) supports Dr. Schuster (The Nationa- lity of Trading Corporations 2 Grotius Society (1916) at p. 195) in the view that Lord Parker's statement
was inaccurate. Farnsworth ha! also quoted from Gar- ner's International Law in the World War Vol. I p. 227 where the opinion of the Federal Judge in Fritz- Schultz fr. Co. v. Raines & Co. (2)
is quoted with ap- proval:- "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 en- tirely wedded to the doctrine that the corporators of a corporation are conclusively presumed to be citi-
zens of the same State as the corporation'. The state- ments of Lord Reading and Lord Parker in the Daimler case, that the SuP.reme Court had laid down the principle that a court may look behind the corpo-
rate name to ascertain the character of the indivi- (1) (1809) 5 Cranch 61 : 3 L. Ed. 38. e) (1917) 166 N.Y. S. 567. 4 S.C.R. duals comprising it, was, said Justice Lehman, ob- viously not accurate."
I have earlier quoted from St. Louis & San Francisco Railway Co., v. fames (cit. sup.) which also supports Dr. Schuster's view. [n my judgment it is not possible to pierce the veil
of incorporation in our country to determine the citi- zenship of the members and then to give the corpo- ration the benefit of Art. 19. If we did pierce the veil and saw that the corporation was identical with Go-
vernment 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 deci- sion. If we go by the corporate entity then we must hold that A.rt. 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 adop- ted, 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 privi- leges attach to him in every State into which he may enter, as to a human being-as a person with facul-
ties 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 enforcemem
of fundamental rights (as is the case here also) and this Court was content to leave the matter there. Joseph Kur- (') (1868) 48 Ill. 172. The State Trading Corpo· ration of India
Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Hidayatullah f, The Stat<: Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tar Officer,
Visakhapatnam and Others. Hidayatullah /. Das Gupta/. [1964] villa Vellukunnel v. Reserve Bank of India(') 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 bem:- fit 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 Com- panies 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 vzres m as much as it took away the right of the court to decide this mat-
ter. It was held by majority that there was no flaw in the law and that it was for Parliament to say ar what stage m a particular case, the judicial process should begin and not ' for the courts who come mro
the picture from the stage the judicial process com- mences 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 Corpora- tions 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 in- tercourse 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 corpora- tion in most cases 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. 'I S.C.R. 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 res- pondent resists the claim on the legal basis that the Corpo- ration 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 in- corporation a citizen of India. The fact that it is a na- tional of India puts it in no better position that any othe1 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 Constitu- tion ang 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 conten- tion 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, (I)
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) per- sons who have been ordinarily residents in the territory of The State
Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tar Officer, Visakhapatnam and Others. Das Gupta J, The State Trading Corpo- ration of India I.td. & Others. v. The Commer-
cial Tax Officer, Visakhapatnam and Others. Das Gupta /. [1964} for not less than 5 years preceding the commencement of the 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 inspire 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 all other matters relating to citizenship.
I agree with the contention raised on behalf of the res- popdent 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 Citi- zenship Act, 1955, which was enacted by Parliament in exer- cise of the powers preserved to it by Art. 11 of the Consti- tution, 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 Citizen- ship Act, 1955, nor is a corporation as such a citizen under the constitutional provisions on the 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 citizen; and so the pro- blem is solved : corporation is not a citizen for the purpose of fundamental rights.
That, according to the respondent, should end the search for light. I am unable to 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 gram- marians' 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 impor- tant when we construe a Constitution that we should not proceed mechanically but try to reach the intention of the The State
Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, V isakhapatnam and Others. Das Gupta /. [1%4] 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 com- pany, 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 ma- jor 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(l)(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(l)(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 tllat 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 ilie restriction of fundamental right on its powers does not operate, may well argue iliat corporations even iliough composed entirely of citizens are not entitled to fundamental rights. The concern of the Constitution-
makers to imporve 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 iliat corpora-
4 S.C.R. tions composed of Indian citizens will be deemed to be citizens for at least the fundamental rights under Art. 19(1) (£) 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 par- ticular 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 dis- tinct from its members. Is it not reasonable to th.ink that the makers of our Constitution trusted that courts in India would also not hesitate to 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. l 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 mem- bers 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 diffi- culty 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 Tlie State Trading Corpo-
ration of India Ltd. & Othm. v. The Commer- cial Tax 0 fficer, Visakhapatnam and Others. Das Gupta /. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tar Officer,
Visak hapatnam and Others. Das Gupta /. 162 . [19641 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 Bom- bay v. R.M.D. Chamarbaughwala('). It is of interest also to mention that in this view of the law it is possible to
appreciate what was said by way ol dicta by Mr. Justice Mukherjea (as he then was) in Chiraniit Lal Choudhuri v. The Union of India & ors.(") : "The fundamental rights guaranteed by tlie Constitu-
tion 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 in-
corporated 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. 31and14 but also under Art. 19(1) (£). While the observa·
tions of Mr. Justice Mukherjea may riot perhaps be regard- ed as a considered decision on the question now before ns, 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 in 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 hut that was left unanswered. Among the cases in which relief· claimed on fundamental rights, specially conferred on citizens has been granted to corporations may be mentioned: The Express Newspapers (Private) Ltd., v. Union of
( 1) I.L.R. [1955] Born. 680. (2) [1950] S.C.R. 869. 4 S.C.R. SCPREME COURT REPORTS India('); The Bengal Immunity Co., v. St:ite of Bihar( 2 ); The Bombay Dyeing & Manufacturing Co., Ltd., v. State of
Bombay('). 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 con-
sists 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 of the Government of India and can claim to enforce the fundame•1tal rights under Part III of the Constitution against the State as defined in Art. 12 thereof. SHAH J.-On May 18, 1956, the State Trading Corpo-
ration of India Ltd.-hereinafter called 'the Company' was incorporated as a Private Limited Company under the Indian Companies Act, 1956, with an authorised capi- tal of Rs. 5 crores divided into five hundred thousand
shares of Rs. 100 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
(') [19591 S.C.R. 12. (S) [1958] S.C.R. 1122. ( 2) [1955] (2) S.C.R. 603. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Ta:c Officer, Visakhapatnam and Others.
Das G11pta J. Shah /. 1%3 The State Tradint Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax 0 fficer, V isak hapatnam and Others. Shah /. [1964] 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 Coun thereupon referred the followipg questions to a larger Bench :
"(1) Whether the State Trading Corporation a Com- pany registered under the Indian Companies Act 1956 is a citizen within the meaning of Art. 19 of the Consti- tution and can ask for the enforcement of fundamental
rights granted to citizens under the said article; and (2) Whether the State Trading Corporation is notwith- standing 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 main- tain 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." …. -i– 4 S.C.R. The fundamental freedoms (exercise whereof is by els. (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 t 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 incorpora- ted 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 exis- tance after the promulgation of the Constitution not
being a citizen under the Citizenship Act, 1955, is there- fore 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 Administra- tion, 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 as citizen. This argument is based on what is called
the traditional concept of citizenship. Counsel for the Company submits that citizenship i£ the status which a person endowed wicli full civil and poli- tical 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 The State Trading Corpo- ration of India Ltd. & Others. v. The Commer-
cial Tar Officer, Visak hapatnam and Others. Shah ]. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visak hapatnam and Others. Shah ]. [1%4]
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 dif- ferent 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 fun- damental rights guaranteed thereby. Certain fundamental rights are declared in favour of groups such as denomina-
tions, 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 prohibi- tions are declared e.g. 17, 23(1), and 24 and 28(1) for remo- val of evils, such as untouchability, traffic in human beings, forced labour, employment of children in hazardous employ- ment, and against imparting of religious instructions in edu- cational 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 presum- ption is not in fact uniformly true. In Arts. 25(1), 28(3) and probably Art. 20(3) by the use of the expression "per- son" 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; els. (I) & (2) of Art. 16 declare equality of oppor- tunity 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 expres- sion citizen may refer only to a natural persori. But that cannot be decisive
of the meaning of the expression "citizen" in Art. 19. In ascertaining the meaning of expn:s- 4 S.C.R. 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 dy- namic character which is intended to fulfil the aspirations of the people. There can be little doubt that an artificial person like a Corporation is capable of exercising rights conferred by els. (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 attri-
butes under the municipal law may be a citizen, the rights conf.~rred 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 operati0n 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 protec- ted 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 r' It is in this background we may turn to the question whether, the declaration of citizenship under Arts. 5, G & 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- The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Shah /.
The Staie Trading Corpo- ration of lndU. Lui. l!r Others. v. The Commer- dal Ta:r Officer, V isak hapatnam and Others. Shah /. [1964] 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 Happer- sett(') 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 associa- ted becomes a member of the nation formed by the association. He owes it allegiance and is entitled to i~s protection. Allegiance, and protect10n are, in this con-
nection, reciprocal obligations. The one is a compen- sation 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 con- sidered 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 Arti- cles of Confederation and in the Constitution of the
United States. When used in this sense it is under- stood as conveying the idea of membership of a. nation, and nothing more." In the Digest of lnternatiortal 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 condi–
tions on which citizenship is acquired are regulated by· municipal law." In Oppenheim's International Law (Lauterpacht) Vol. I: p. 644 it is stated: ( 1 ) 21 Wall. 162 : 88 U.S. 627.
4 S.C.R. "In the United States of America, while the ex- pressions 'citizenship' and 'nationality' are often used interchangeably, the term 'citizen' is, as a rule, em- ployed to designate persons endowed with full poli-
tical and personal rights within the United States, while some persons-such as those belonging to terri- tories and possessions which are not among the States forming the Union-are described as 'nationals'. They
owe allegiance to the United States and are Uni- ted States nationals in the contemplation of Inter- national Law; they do not possess full rights of citizenship in the United States
In the British Commonewealth of Nations it is the citizenship of the individual States of the Common- wealth which is primarily of importance for Interna- tional 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 con- cerned." 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; nationa- lity appertains to the domain of International Law, and re- presents 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 interchan- geable 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 do not participate in the Government. Even in States where asso-
ciation of nationals in the governmental machinery does not exist or is too tenuous to be effective, the national en- dowed with capacity to exercise personal and political 12-2 S. C. India/64
The Sta~ Trading Corpo- ration of lntlia Ltd. & Otflers. v. The Commer- cial Tax Officer, V isak hapatnam and Others. Shah /. The State Trading Corpo- ration of India Ltd. & Others.
v. The Commer- cial Tax Officer, V isak hapatnam and Others. Shah ]. [19641 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 aggre- gate 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 nationa- lity 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 nation- ality. In Janson v. Driefontain Consolidated Mines Ltd.(') 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 Com- pany 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- (') L.R. (1902) A.C. 494.
.J f 4 S.C.R. ture during transit to the United Kingdom by the foreign State before declaration of war was valid. Similarly Attorney General v. Jewish Colonization Association(') was decided on the footing that a public Corporation is
capable of nationality, and in Generali v. Selim Cotrap(2 ) it was accepted that a public Corporation has the attributes of nationality. In Gasque v. Commissioners of Inland Revenue(') 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 nation- ality, though, unlike a natural person, it cannot change its nationality." In Kuenigi v. Donnersmarck(') it was held that a company
incorporated under the laws of England and registered in England and so having an English domicile, and by ana- logy, British nationality, did not cease by English law to be an English company subject to English law merely because
iL was under enemy control. Mc. Nair J. observed at p. 535: 'I think that it is also clear that, in so far as nationa- lity can by analogy be supplied to a juristic person, its nationality is d!;termined 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 incor- porated, and upon that personality is impressed the nationa- lity of that country, for the Corporation is by virtue of the law i°:cor~orating 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 re- garded as a citizen? According to our law a juridical per- son. 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 ) [1901] 1 K.B. 123. (2) L.R. (1932) A.C. 288. ) L.R. [1940] 2 K.B. 80.
(') L.R. (1955] 1 Q.B. 515. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer· cial Tax Officer, Visak hapatnam and Others. Shah /. The State Trading Corpo- ration of India
Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Shah /. [1%4] juridical person may acquire, hold and dispose of property, carry on trade or business, take up residence within the terri- tory and form associations. It is also liable to discharge obli- gations which the nature of its incorporation permits. There are no special restrictions placed upo!1 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 res- triction 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 nation- als abroad and recognises i.ts corporate character with capa- city 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 compul-
sory 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 with- out 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 conclu- sion, on any predilection as to a limited connotation of
the expression citizen occurring in Art. 19(1). It may be remembered that Constitutional practice is not inconsis- tent with the recognition of artificial persons a~ c!ti- zens. The Constitution of the United States of Max1co
1917, of El Salvador 1950, and of the Spanish People r 4 S.C.R. 17.3 do recognise the status of Corporations as citizens. It was also not disputed at the Bar and could not reason-
ably be disputed that it was open to the Constitution- makers, and the Parliament of India to make express provi- sions 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 neces- sary to examine carefully the relevant provisions of the Constitution and the material provisions which preceded
the Constitution. It must be conceded that persons men- tioned 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 per- sons. 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 war- ranted 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 Nationa- lity 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 In- dia. 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 per-
mitted. If a citizen is a national who under the law of the state is entitled to enforce full civil and political rights, The State Trading Corpo- ration of India Ltd. 1!1 Others.
v. The Commer- cial Tax Officer, Visakhapatnam and Others. Shah /. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others.
Shah /. ·174 [1964] 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 Inde- pendence Act, 1947, the Legislature was invested with the
power to confer upon foreigners rights as British Indians by naturalization, and had also sought to invest the Go- vernment 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 Le-
gislatures 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 re- served to the Dominions and the Colonies by legislation to make provision for naturalization restricted to their terri- tory. The British Indian legislature in 1926 enacted the In- dian Naturalization Act, 1926, which enabled the local Go- vernments to grant certificates of naturalization to persons applying in that behalf and satisfying the local Govern-
ment 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- . … 4 S.C.R. gin, domiciled in any British Possession, shall have no greater rights and privileges, as regards entry into and resi- dence in British India than are accorded by the law and ad- ministration of such possession to persons of Indian domicile. The effect of these statutory provisions was-subject to cer- tain 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 immi- gration into India. The British Nationality Act, 1948, was enacted after the Indian Independence Act, 1947, and wa!
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, citi-
zenship 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 sub- ject, was excluded from the rules governing local citizen- ship. The Act contemplated the passing of Citizenship
Acts by various Dominions and till the enactment of such Acts accorded to the citizens potential or actual of any Do- minion (which expression included India) the status of Commonwealth citizen. In relation to this citizenship, alle- giance 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 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. The State
Trading Corpa- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visak hapatnam and Others. Shah /. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer-
cial Tax Officer, V isak hapatnam and Others. Shah f. [1964] At the time when the Constitution of the United States of America was proclaimed, no citizenship laws were en- acted, but rights of citizenship were recognized under di- verse 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 expres- sion "citizen" meant only natural persons, in others it in- cluded artificial persons like Corporations. Though Cons-
titution 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 ac-
cording 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('). But this view was modified in a later
case : The Louisville, Cincinnati & Charleston Railroad Company y. Thomas W. Letson('). This case arose on the interpreta- tion 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 lnsu- :rance Company v. Robert E. Daggs(') 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. Virginia(') Field J. deli- vering 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 corpora- tion 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. 4 S.C.R. privileges and immunities of citizens of the several
States." The learned judge however made it clear that he was res- tricting the observations only to the claim of citizenship made. by a Corporation in a State other than the State which incCt'"porated 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 indi- vidual, and exempting them (unless otherwise specially
provided) from individual liability. The 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 enforce- ment 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(') and Ken-
tucky 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 19th 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 protec- tion of the Courts against violation of fundamental free- doms enumerated in Art. 19(1). In Chiranjit Lal Chow-
dhuri v. The Union of India('), 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. The State
Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, V isakhapatnam and Others. Shah f. – 1963 The State Trading Corpo' ration of India Ltd. & Others. v.
The Commer- cial Tax Officer, Visakhapatnam and Others. Shah /. [1%4] titution are available not merely to individual citizens but to corJ;Jorate bodies as well except where the lan-
guage of the provision or the nature of the right com- pels the inference that they are applicable only to natu- ral persons. An incorporated company, therefore, can come up to this court for enforcement of its fundamen-
tal rights and so may the individual shareholders to en- force their own, but it would not be open to an indivi- dual 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 automa- tically vacated their office, and which authorised the Gov- ernment 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 mo– dify the Indian Companies Act was ultra vires the legisla- tive authority of Parliament, in that it infringed the funda– mental rights of the shareholders and the action taken there– under 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 funda-· mental rights of the petitioner under Art. 31(1) & (2), 19(l)(f) and 14 were not infringed. The observations of Mukherjea J., cannot be regarded as an expression of a
considered opinion of the Court holding that all fund:i- mental 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(') and The State of Bombay v. R.M.D. Chamar- baugwala('). It may be pointed out that the High Court of Bombay in The State of Bombay v. R.M.D. Chamar- baugwalia(') held that an application at the instance of a· corporation alleging infringement of a fundamental right·
(') [1955] 2 S.C.R. 603. (2) [1957] S.C.R. 874. (') l.L.R. [1955] Born. 680. r 4 S.C.R. to carry on business was maintainable . Again in The State of West Bengal v. The Union of India(') Sinha C.J., in
delivering the judgment of the majority observed : "The fundamental rights are primarily for the protec- tion of rights of individuals and Corporations enfor- ceable against executive and legislative action of a gov-
n ernmenta 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] 1. S. C.R. 752 (2) [1959] S. C.R. l (3) [1959] S. C.R. 12 (4) [1960] 2 S. C.R. 408 (5) [1960] 3 S. C.R. 528 (6) [1961] 1 S. C.R. 379 (7) A. I. R. 1963 S.C. 548 Bijay Cotton Mills Ltd. v.
State of Ajmer. Messrs Kasturi and Sons (Pri- vate) Ltd. v. Shri N. Saliva- teesy.,raran. Express Newspapers (Private) Ltd. v. Union of India. Messrs Fedco (P) Ltd. & Ano- ther v.
S. M. Bilgrami. M/S Hathisingh Manufactur- ing Co. Ltd. v. Union of India. Tata Iron & Steel Co. Ltd. v. S. R. Sarkar. 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)(£)
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 Corpora-
tion Ltd. v. A Nageswara Rao('), but the question whether the fundamental right could be enforced by a company was, it appears, not raised. In fupiter General Insurance Com- pany Ltd. v. Rajgojalan(4), it was held by the Punjab
( 1 ) [1964] I S.C.R. 371. (2 ) A.LR. 1951 Mad. 979. (') [1955] 2 S.C.R. 1066. (') I.LR. [1952] Punjab I. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer,
V isak hapatnam and Others. Shah f. The State Trading Corpo- ration of India Ltd. & Others. v •• The Commer- cial Tax Officer, J!isakhapatnam .and Others. Shah ]. (1964] 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 A mrita Bazar Patri- ka Ltd. v. Board of High School and Intermediate Educa-
tion U.P.(') 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 Maharaja Kishangarh Mills Ltd. v. State of Rajasthan(') assumed that the question whether a corpo- ration was a citizen for the purpose of Art. 19 was gener- ally decided in Chairanjitlal Chowdhuri's case(") 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. fasjit 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 Hoisery Mills Ltd. v. S. K. Chose('). 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 citi-
zens. But it was held in M / s T. D. Kumar l!lnd Brothers Private Ltd. v. Iron and Steel Controller(") that a corpo- ration 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 funda- mental rights under Art. 19(1), but a company incorpora- ted after J;muary 26, 1950, will not be regarded as a citi- zen, for the Citizenship Act expressly excludes artificial persons from the benefit of citizenship rights. In record- ing this conclusion the earlier judgment of the Calcutta
( 1 ) A.LR. 1955 All. 595. ( 3 ) [1950] S.C.R. 869, 893. (') A.LR. 1959 Cal. 397. ( 2 ) LL.R. [1953] Raj. 363. ( 4) A.LR. 1959 Cal. 237. (') A.LR. 1961 Cal. 258. r ….. – l ,j .,.
4 S.C.R. High Court in Liberty Cinema v. The Commissioner, Cor- poration of Calcutta(') 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 fundamen- tal rights were infringed. In The State of Bombay v. RM.D. Chamarbaug- wala(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(l)(g), Chagla C.J., speaking for the Court ob- served: . 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 citizen- ship 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 deter-
mine 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 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 con- tend 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 on! y to individual citizens. Take two of the rights guaranteed under Art. 19(1)(£) and (g). Can
it be suggested that a corporation which, let us ( 1) A.LR. 1959 Cal. 45. (2) I.L.R. [ 1955] Born. 680. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax 0 fficer,
Visakhapatnam and Others. Shah f. The State Trading C orpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Shah T. [19641 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, hole\ and dispose of property, or under cl. (g) to prac-
tise any occupation, trade or business?" In The Assam Company Ltd. v. The State of As .. sam (') 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 particu-
lar 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 cor- porate bodies so formed by citizens, should be de- nied the rights guaranteed to the individual citi-
zens, 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(') was carried to this Court in appeal, and the Court entered upon an ex- haustive discussion of the complicated questions raised
(') A.LR. 1953 Assam 177. (2) I.L.R. [1961] Kerala 166. 4 S.C.R. therein, instead of disposing of the appeal on the limi- ted ground that the Palai Bank was not a citizen and could not claim any fundamental rights under Art.
19(1)(f) and (g): foseph Kuruvilla Vellukunnel v. Reserve Bank of India('). 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 alleg-
giance is not predicated as a condition of citizenship. If allegiance may be presumed from birth and the require- ment of taking a formal oath of allegiance is not a condi- tion 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 mainten- ance 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 ser-
vice 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 per- sons 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 pro- hibition is imposed upon them in the enforcement of the
rights similar to those which are enforceable by natural per- (1) A.LR. 1962 S.C. 1371. The State Trading Corpo- ration of India Ltd. & Others. v. T lte Commer- cial Tax Officer, Virakhapatnam
and Othert. Shah /. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer· cial Tax Officer, Visakhapatnam and Others. Shah ]. [1964] 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 are 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, pro– tection against acquisition of property without payment of compensation or without public purpose, protection from
imposition of taxes for sectional purposes, and also having regard to the fact that the compaines are persons by their constitution and by the recognition afforded to them are competent to hold property and to dispose of property and
to carry on trade, business, vocation or occupation and are Jirotected from levy of taxes without authority of law anrl aie 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
4 S.C.R. 18'5 State of Bombay v. R.M.D. Chramarbaugwala(') need not then be considered in any detail. Chagla, C.J., in deliver- ing 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 wa8 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 ha8
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 Chowdhu- ry's case(') which have already been set out. I am how-
ever 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 com- pany 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 ac- tion 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 (') point-
ed out the difference in the passage already quoted bet- ween 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 w~at is called ripping open the Corporate veil was evol- ved by American jurists in dealing with cases under the "diversity of jurisdiction" clause to enable companies consti- tuted within one State to have recourse to the Federal
Courts in respect of disputes arising in other States as citi- zens. If the company is not a citizen it would be difficult to found a claim upon this doctrine attributing the status <Ji ( 1) l.L.R. [1955] Born. 680. (2) [1950] S.C.R. 869, 893.
( 3) L.R. (1897) A.C. 22. 13'-2 S. C. India/64 The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Shah f. The State
Trading Corpo- ration of India Ltd. & Others. v. The Commer· cial Tax Officer, Visakhapatnam and Others. Shah /. [1964] 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 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 mem-
bers so as to enable it to enforce fundamental rights un- der Art. 19? Similarly in a case where a company incor- porated 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 notwith- standing 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 share- holding 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 citizen- ship 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 Asso-
ciation indicates to organise and undertake trade generally with State Trading countries as well as other countires 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- .+ – 4 S.C.R. 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 can- not 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.
The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. 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 Pro- perty(') in support of the contention that the State Trad- ing 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 cor- poration in London were transferred to the Custodian of Enemy Property, who sold the same and invested and re-
invested the proceeds. These investments were subsequent! y transferred to the Administrator of Enemy Property in the erroneous belief that they were the property of a Hungarian national. After the termination of hostilities the Bank obta- in~d i;idgment for recovery of the proceeds of sale, together with mterest 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) LR. (1954) 584.
Shah ]. The State Trading Corpo- ration of India Ltd. & Others. v. The Commer- cial Tax Officer, Visakhapatnam and Others. Shah /. [1964) 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 pay- ment 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 be-
half, even if it is controlled wholly or partially by a Govern- ment 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 infor- mation 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(') 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 Commis- sion. 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 Com-
mission 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. 4 S.C.R. 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 corpo- ration. It is not the Crown and has none of the immu- nities or 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 examin- ed. Assuming that the State Trading Corporation is a de-
partment 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 fundamen- tal rights vested in it. For the apllication of Art. 19, two con- ditions are necessary-( 1) that the claimant to the protection of the right must be a citizen and (2) that the right infrin- ged 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 Gov- ernment 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 The State
Trading Corpo· ration of India Ltd. & Others. v. The Commer· cial Tax Officer, Visakhapatnam and Others. Shah f. The- State Trading Corpo· ration of India Ltd. & Others. v. The Commer·
cial Tax Officer, Visakhapatnam and Others. Shah /. July, 30. [1%4] 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 se- cond 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 depart- ment Q[ organ of the Government of India, it will, if it be a citizen competent to enforce fundamental rights un- der Part III of the Constitution against the State as defined in Art. 12 of the Constitution.
BENGAL NAGPUR COTTON MILLS 11. BOARD OF REVENUE, MADHYA PRADESH & ORS . . (A. K. SARKAR, M. HrnAYATULLAH AND J. C. SHAH JJ.) Octroi duty-Agreement-Exempted by former State-Liabi· lity to pay Octroi duty-Merger of State-If Municipality can levy after merger.
The Ruler of the former State of Nandgaon established a mill called Central Provinces Mills Ltd. A firm purchased the said mill and changed its name to Bengal Nagpur Cotton Mills Ltd.
The ruler and the appellant company entered into an agreement on March 1, 1943. By this agreement the appellant company was exempred from liability to pay octroi dury to the State or to the municipality of the area.
The ruler bound himself in considera- tion of certain advantages promised to him Py the mill. In conse- quence of the said agreement neither the ruler nor the municipality collected octroi from _the company.
On December 31, 1947, the State merged with the State of Madhya Pradesh. On September 20, 1952, the Municipal Committee passed a resolution stating therein that this committee would levy octroi duty on the appel~ !ant company as the Darbar Agreement of 1943 was not binding on this committee.
The appellant challenged this resolution in a petition under Art. 226 and Art. 227 of the Constitution before the High Court. The High Court dismissed the application and hence the appeal has been filed in this Court.
Held (i) that the agreement of 1943 cannot be regarded as la\v as it is in the shape of a contract between both the parties.