001-SLLR-SLLR-1982-1-WIJETUNGA-v.-INSURANCE-CORPORATION-AND-ANOTHER.pdf
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Wijetunga v. Insurance Corporation
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WIJETUNGA
v.INSURANCE CORPORATION AND ANOTHER
SUPREME COURT.
SHABVANANDA, A.C.J., COLIN-THOME. J. AND SOZA, J.
S. C. APPLICATION No. 87/82.
NOVEMBER 11 AND 15. 1982.
Application to the Supreme Court under Article 126 and Article 17 of theConstitution-Fundamental rights of freedom of speech and expression includingpublication and freedom to join a Trade Union under Article 14 (1) (a) and 14 (1) Id}of the Constitution-Does alleged violation of these rights by the InsuranceCorporation amount to infringement by executive or administrative action ?
The petitioner was an employee of the Insurance Corporation of Sri Lanka andOrganising Secretary of the Insurance Employees' Union, a trade union registeredunder the Trade Union Ordinance. On a decision of the Committee of the Union tolaunch a poster campaign in order to focus attention on the grievances of theemployees the members of the Union including the petitioner had put up posterswhich the Insurance Corporation alleged were obnoxious and calculated to inotedisaffection and indiscipline among its employees and to bring its Chairman intodisrepute. Charges were framed against the petitioner for putting up such postersand he was found guilty at a domestic inquiry ; by way of punishment his incrementsfor two years were suspended and he was warned and transferred from the HeadOffice at Colombo to the Regional Office of the Corporation at Batticaloa. Thispunishment the petitioner alleged was an infringement of his fundamental rights offreedom of speech and expression including publication and of the freedom tojoin atrade union guaranteed to him by Article 14 (1) (a) and 14 (1) (d) of theConstitution.
The Insurance Corporation (1st respondent) while justifying the punishmentimposed on the petitioner took the preliminary objection that his application wasmisconceived on the ground that its action did not amount to * executive oradministrative action ' in respect of which only the jurisdiction vested in theSupreme Court by Article 126 of the Constitution could be invoked by an aggrievedperson.
Held
Article 126 read with Article 17 entitles a person to apply for relief to theSupreme Court only where his fundamental rights guaranteed by Chapter 3 of theConstitution have been infringed by executive or administrative action of the State.Private conduct abridging fundamental rights does not attract the jurisdiction of theSupreme Court vested in it by Article 126.
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In the context of fundamental rights the * State " includes every repository ofstate power. The expression * executive or administrative action * embracesexecutive action of the State or its instrumentalities exercising Governmentfunctions. When private individuals or groups are endowed by the State with poweror functions governmental in nature, they become agencies or instrumentalities ofthe State subject' to the constitutional inhibitions imposed on the State. Thedecisive auestion is. what is the involvement of the State in the activity of the partyconcerned ?
Whether a Corporation should be accorded the status of a department ofGovernment or not depends on its constitution, its powers, duties and activities andmust be judged in the light of the following :
(a) First the incorporation of the Body though not determinative is of somesignificance as an indication by Parliament of its intention to create a legalentity with a personality of its own. distinct from the State.
(£>) Secondly the degree of control exercised by the Minister on the functioning ofthe Corporation is a very relevant factor. A complete dependence on himmarks it as really a Governmental body, while comparative freedom to pursueits administration is an element negativing the intention to constitute it agovernment agency.
(c) Third is the degree of dependence of the Corporation on the Government forits financial needs.
The various sections of the Insurance Corporation Act. No. 2 of 1961conspicuously contain no direct indication that the Corporation is a Department ofGovernment. It carries on a commercial activity. Its powers do not identify it withthe Government and in some respects preclude identification with the Government.The object and purpose of the statute was the creation of an autonomous publicbody carrying on its business activity, free from ministerial control except as tobroad lines of policy.
The question whether the Insurance Corporation is a servant of the Stateultimately depends on the degree of control which the State through its Ministerscan exercise over it in the performance of its duties. Even if the Minister has thepower to interfere with it, there is nothing in the statute which makes the acts ofadministration his as distinct from those of the Corporation ; it is true the Ministerappoints its members and the Corporation in the exercise of its powers and theperformance of its duties, is subject to the general or special directions of theMinister. But these even when taken together do not outweigh the fact that the Actconfers on the Corporation powers which are given to it to be exercised at its owndiscretion and in its own name.
Whether we apply the functional test or the Government control test, theInsurance Corporation cannot be identified with the Government. It cannot beregarded as its alter ego or organ of the State. Hence its action cannot bedesignated ' executive or administrative action * which alone attracts Articles 17and 126 of the Constitution.
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Wijelunga v. Insurance Corporation (Sharvananda. A C J )
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Cases referred to
Pet era v. University Grants Commission S.C. No. 57/90 S.C. Minutes of4 8 1980
Narayanasamy v. Knshnamoorthy A I.R. [1958] Madras 343.
(31 Tamlm v Hannaford (1950] 1 K.B. 181. 1949 2 All ER. 327.329.
8.8 C v Johns (19641 1 AIIE.R 923..
<5) Mersey Docks & Harbour Board Trustees v. Gibbs (1966). L.R.■ 1 H.L. 93.
Metropolitan Meat Industry Board v. Sh.eedy (1927) A. C. 890. 905.
Bank Voor Handel v. Administrator of- Hungarian Properties [1954] A.C. 584.(19541 1 AIIE R. 969.
Ceylon Bank Employees' Union v. Yatawara [1962] 64 NLR 49
Trendtex Trading Corporation v. Central Bank(1977) 1 AIIE.R. 881MO) Oahanayake v de Silva [1978/79] 1 S L R 41.
til) Kameshwar Prasad v State of Bihar AIR [1962] S.C. 1167.
The First National City Bankv. Commissioner of Income Tax. Bombay City AIR
[1961] S C 812.
Balakotaiah v. Union ol India AIR [1958] S.C. 232.
APPLICATION under Article 1 26 of the Constitution
Fan Mustapha with Chula Boange anr) N.M. Saheed for petitioner.
K Kanag-lswaran with Miss Kalyarit Silva for 1st respondent.
Sun Ramapala. Acting Senior State Counsel, for 2nd respondent…
November 29. 1982.Cur. aor. vult.
SHARVANANDA, a.c.j. „
This is an application made to this Court by the petitioner who is ah'employee of the 1st respondent, the Insurance Corporation of SpLanka, for relief under Article 126 of the Constitution. He allegesthat his fundamental rights of freedom of speech and expressibnincluding publication and of his freedom to join a trade tihib'n;'assured to him by Article 14 (1) (a) and 14.11). fflf).’of theConstitution have been infringed by the Insufaffce Corporation. "
The petitioner complains that the Corporation has suspenp^d hisincrements and has warned him and transferred him to Batticaloa.in breach of his fundamental rights.guaranteed tq him by Article 14
(a) and/or 14 (1) (d) of the Constitution on the allegations that
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he had put up posters in violation of the rules of discipline and codeof Conduct of the employees of the Corporation, and had also putup obnoxious posters with the intention of bringing into disreputethe Chairman of the Insurance Corporation. The petitioner is theOrganising Secretary of the Insurance Employees Union, a tradeunion registered under the Trade Union Ordinance. He states thatthe Committee of the Union, in the exercise of their right of tradeunion activity, had decided to launch a poster campaign in order tofocus attention on the grievances of the employees and inpursuance of the said decision of the Trade Union, members of theUnion had put up posters.
The 1st respondent, the Insurance Corporation of Sri Lanka, is aCorporation established by the Insurance Corporation Act No. 2 of1961. It is a body corporate having perpetual succession and acommon seal and entitled to sue and be sued in its name viz: " TheInsurance Corporation of Ceylon ".
The 1st respondent by affidavit filed by its Personal Manager hasaverred that large posters had been put in the premises of the 1 strespondent, carrying slogans which were obnoxious and calculatedto incite fellow workers to disaffection and indiscipline and that thepetitioner participated in putting up the said posters. He furtherstated that charges were framed against the petitioner for puttingup such posters and the petitioner was found guilty as charged at adomestic inquiry and that the Corporation had, by way ofpunishment, suspended his increments for a period of two yearsand transferred him out of the Head Office in Colombo to theRegional Office of the Corporation at Batticaloa.
The 1st respondent has, while justifying the punishment imposedon the petitioner, taken objection, in limine, that the petitioner'sapplication under Article 126 of the Constitution wasmisconceived, on the ground that its action did not savour of' executive or administrative action ' in respect of which only thejurisdiction vested in the Suprme Court by Article 126 of theConstitution could be invoked by an aggrieved person.
Since the objection goes to the root question of the jurisdiction ofthis. Court, it is necessary to examine its validity.
SCWijetunga v. Insurance Corporation (Sharvananda. A. C.J.)5
Article 126 read with Article 17 entitles a person .to apply to theSupreme Court only in respect of the infringement or imminentinfringement by ' executive or administrative action " of thefundamental rights to which such person is entitled under theprovisions of Chap.3 of the Constitution. The jurisdiction of. theSupreme Court to grant relief against any infringement or imminentinfringement of the fundamental rights recognised by Chap. 3 of theConstitution is limited to cases of such infringement by ' executiveor administrative action '. Private conduct abridging individualrights does not attract the jurisdiction of this Court vested in itUnder Article 1 26. In this connection I would reiterate what I said inPerera v. University Grants Commission (1).
v ■ " Constitutional guarantees of fundamental rights are directedagainst the State and its organs. Only infringement or imminentinfringement by executive or administrative action of anyfundamental right or language right can form the subject matterof a complaint under Article 126 of the Constitution. Thewrongful act of any individual, unsupported by State authority issimply a private wrong. Only if it is sanctioned by the State ordone by the State authority, does it constitute a matter forcomplaint.under. Article 126. Fundamental rights operate onlybetween individuals and the State. In the context of fundamentalrights the' State ' includes, every repository of State power. Theexpression " executive or administrative action ' embracesexecutive action of the State or its agencies or instrumentalitiesexercising Governmental functions. It refers to exertion of Sta epower in all its forms ".
Therefore individual invasion of individual rights does not comewithin the remedial protection afforded by Article 126.
The Constitution protects fundamental rights by imposingrestrictions or obligations on the Government. Article 4 (d) of theConstitution enjoins that" the fundamental rights which are by theConstitution declared and recognised, shall be respected, securedand advanced by all organs of Government, and shall not beabridged, restricted or denied, save in the manner and to the extenthereinafter provided ". All organs of Government are mandated torespect the fundamental rights referred to in Chap.3 of theConstitution and are prohibited from infringing same. Action by the
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organs of the Government alone constitutes the executive oradministrative action-that is a sine qua non or basic to proceedingsunder Article 126.
The term1 executive action " comprehends official actions of all •Government Officers. Difficult problems arise when the label issought to be affixed to the conduct of private individuals with whomGovernment is sofnPhow involved who allegedly exerciseGovernment authority. Delegation of a State function to a party maymake the party s action the action of the Government and thusmake the State responsible for such action. The decisive questionis what is the involvement of the State in the activity of the partyconcerned. When private individuals or groups are endowed by theState with power or functions, governmental in nature, theybecome agencies or instrumentalities, of. the State subject to theconstitutional inhibitions of thp State. The inquiry is whether thereis a sufficiently close nexus bptvyeen the State and the action of theagencies, that is challenged, so that the action of the agencies mayfairly be treated as tpat of the State itself Thus the relevantquestion is. what is the .relationship between the particularCpcRQra.tion whose, acts.are challenged and the State? Is it aDepartment of. Government.,or, servant,, or instrumentality of theState ? Whether the Corporation should-be accorded the status of adepartment of government or not must-depend on its Constitution,its powers,, duties and activities These are the basic factors to beconsidered. One must see whether the Corporation is undergovernment control or exercises governmental functions. Fordetermining thq integral relationship between the Slate ,and theCorporation W# have to jXamine the provisions qf th$ ^statute bywhich the Corporation has been established. If the statute in termsanswers the question, there is no need for further inquiries, but inthe absence of such)StatxJrOiY'decl^af I6hf br provision the intentionof Parkartient has te be gathered frdfh the provisions of the statuteconstituting the GorporatiohO-TheseproViSiohs have to’be judged inthe light of the following : •r-
First.the incorporation of ?he^o^othough not determinativeis of some significance as. an' indication of Parliament of itsintention to create a legal entity with a personality of its own,distinct from the State.
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Secondly the degree of control exercised by the Minister over
the functioning of the Corporation isa.very relevant factor. Acomplete dependence on him marks it, as really aGovernmental body, while comparative freedom to pursue itsadministration is treated as an element negativing -intentionto constitute it a Government agdncy.' r '‘ ’ V 5,e 1
Third is the degree ofdependence of the Corporation on theGovernment for its financial heeds.
Vide-Narayanasamy v. Krishnamoorthy (2).
The question whether the Insurance Corporation of Sri Lanka is oris not virtually a department of the State 6r 'a 'seWafit theGovernment would be dependent on the provislOffS of theInsurance Corporation Act No. 2 of 1961. Hen.ce.<wenhaye toanalyse them to determine the nature of its. functions'; the precisedegree of control exercised by the Government over it and whetherthe amount of control establishes the identity of the Corporation aspart of the Government.
The' preamble to the Act states, inter alia, that it is an Act toprovide for the establishment of an Insurance Corporation, forcarrying on exclusively the business of life insurance and carryingon in addition insurance business of every other description.Section 2 of the Act provides that the Corporation:shall consist offive members appointed by the Minister, one'6f whom shall bedesignated, Chairman of the Corporation. Any member of theCorporation may be removed from .office by the,,Minister, if theMinister considers that it is expedient to remove such person frorioffice.
Section 5 provides for the' fbrictibfts bf the Corporation'. It statesthat the Corporation 'sh'all carry"‘on Insurance business of everydescription, including the business of insuring, inter alia—
any property Of-the Crown or of any-Corporation the entiretyof whose capital is provided by the Government-
(i) Head of any Government Department or any such
Corporation as aforesaid, against any loss caused to suchHead in his official capacity or to suchXorpoVatioh by the' fraud of any employee of the Corporation;
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(ii) in respect of any liability which may be incurred by theCrown or such Corporation in consequence of the deathof or bodily injury to, any employee of the Corporation.
The Secretary to the Treasury or the Head of any GovernmentDepartment on behalf of the Government against any losswhich may be insured by the Government as a result of failureof any Government Servant dr any Public Servant, employee inthe department to repay any loan to him by the Government.
Section 6 enumerates the powers of the Corporation-
fa) The Corporation has power to acquire and dispose of anymovable and immovable property.
Reinsure with any Insurer any liability arising out of any policyof Insurance issued by the Corporation.
' To accept reinsurance of any liability arising out of any policy
of insurance issued by any other insurer.
To transact such other business as may seem to theCorporation to be capable of being conveniently carried on inconnection with the Insurance business carried on by theCorporation and to be conducive directly or indirectly torender profitable the latter business.
To invest the moneys of the Corporation in such manner asmay be determined by the Corporation with the approval ofthe Minister.
To establish and maintain a Provident Fund for the personsemployed in the Corporation anci to make contributions to
such fund.
To do all other things which in the opinion of the Corporationare necessary to facilitate the proper carrying on of itsbusiness.
To borrow money for the purposes of the Corporation in suchmanner and upon such security as .the Corporation maydetermine with the approval of the Minister.
According to section 7, the Corporation has power to appointsuch officers and servants as may be necessary for the purpose ofthe Corporation, and to exercise disciplinary control of and dismiss
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Wijetunga v. Insurance Corporation (Sharvananda. A. C. J.)
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any officer or servant of the Corporation, provided that theCorporation shall not dismiss without the approval of the Ministerany officer or servant who has been, appointed to the staff of theCorporation from the Public Service.
Section 8 provides that in the exercise of its powers and theperformance of its duties the Corporation shail be subject to andact in accordance with such general or special directions as theMinister may issue from time to time.
Section 17 provides that the initial capital of the Corporation shallbe twenty million rupees and that the amount of the initial capitalshall be paid to the Corporation out of the Consolidated .Fund ofCeylon, in such instalments as the Minister of Finance may inconsultation with the Minister determine. It also provides that theCorporation could increase its capital with the approval of theMinister.
Section 18 provides that the Corporation shall have its own Fund,into which all the moneys of the Corporation shall be paid and ou: ofwhich all sums of money required for the discharge of the tiabiliiesof the Corporation shall be paid out.
Section 21 provides that the accounts shall be audited by anauditor appointed by the Permanent Secretary to the Ministry.Section 23 requires the Corporation to transmit the Auditor'sReport with the profit and loss account and the balance sheet towhich the report relates and a statement of the Corporation'sactivities, to the Minister, who shall cause copies thereof to be laidbefore Parliament.
Section 26 provides that the net annual profit of the Corporationfor each financial year may be applied to such purposes as may bedetermined by the Corporation with the approval of the Minister.
Section 27 states that the profits of the Corporation shall beexempt from income tax.
The Insurance Corporation being a Public Corporation within themeaning of 'Public Corporation' as defined by Article 170 of theConstitution, its accounts are required by Article 154 to be audited
*-y tiio Auditor-General.
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The totality of'the legislation represents the intention andobjectives of those whb created and moulded the Corporation forthe performanceoflts cdnteitiplSted function of insurance. Thevarious sections of the Act conspicuously contain no directindication tfiat the-Corporation is a Department of Government. Ontfte..otj?ec,Jt$pd theue are very many indications which deny it thatstatus. It carrier on a commercial activity. Its very name, has acommercial ring. Its powers do not identify it with the Governmentand in some respect preclude identification with the Government.
Section 5 which provides for the Corporation insuring the.property of the State and of Heads of Government Departmentsagainsfany loss caused to such Heads in their official calcify or inrespect' of any liability which may be incurred by the Crown etc.,affords an instance of explicit differentiation between the role andpersonality of the Corporation on the one hand and government onthe other. The Corporation carries on business on its own accountand not on behalf of the State, even though according to section33A of the Act, all liabilities of the Corporation, arising out ofpolicies issued by the Corporation are guaranteed by theGovernment.
It is a matter of significance that the Corporation employs its ownservants and officers and exercises disciplinary control over them.Its servants and officers do not belong to the Public Service.
By this legislation Life Insurance became a nationalised businessand private enterprise was excluded from this field. Though theGovernment nationalised the business, it did not desire to conductthe business itself and assume the responsibility for its day-to-dayadministration. For this purpose Parliament created an autonomousCorporation whilst reserving sufficient power to control and guideits general policy in the Government. The object and purpose of thestatute was the creation of an autonomous public body carrying onits business activity free from Ministerial control, except as to broadlines of policy – It was this freedom that was sought to be achievedby the creation of a separate legal entity in the form of a statutoryCorporation. The consequence was to remove the Corporationfrom its character as a Government Department. ;fn thesecircumstances it cannot be regarded as. either a GovernmentDepartment or a servant or agent of the' Government so as to beidentified with the Government.
SCWijetunga v. Insurance Corporation (Sharvananda, A. C. J.)11
Where the employer is a department of the Government noquestion of a separate legal , entity .arises. The question/hovyevdrbecomes different when the, business is carried bnthyoiigh aseparate legal, person e..g. Statutory Gofpo.ratjons, because in Sucha case the employee is a servant of a legal entity other than theGovernment….
During the 19th century the idea that the traditional functions ofthe State consisted merely of the maintenance of law and order andadministration of justice within its boundaries gave way to what wasdesignated as its secondary non-traditional functionsjundertaking ofactivities which are part of social service, the provision to itscitizens of economic security and well being. Though at one timethese beneficient activities were treated as though they’wereunessential functions of the State, in post-war times they have-over-shadowed what might be termed purely police functions of theState with the result that the State is now emerging as the potent’instrument of national welfare, a transformation from a poliCe' to a;welfare state entailing a great increase in the departments-ofgovernment. Attempts to confine the services of the Government cothose .provided in the 19th century have become out of date. Thisextension of governmental activity has resulted in the widening ofthe province of government. Article 27 of the Constitution whichembodies a directive principle of State policy reflects this changequalitywise in the concept of State functions. It is in pursuance ofthis new ideology that Governments have sponsored measures ofnationalisation. The object of every measure of nationalisation is tobring a particular undertaking under public control. It would havebeen easy for the legislature to have brought the ownership or theassets of the nationalised industries within the extended arm of theState and to have created new Government Departments for theiradministration. But, for good reasons; actual ownership in thenationalised undertakings has not been vested in the State butbeen vested in public corporations. Under the scheme ofcommercial nationalisation statutory Corporations have been set upas separate legal entities to run the nationalised industries oncommercial basis on their own account and-not on behalf of theGovernment.
The State Industrial Corporations Act No; 49 of 1957 enablesthe establishment of Corporations with capital provided by the
r' -ipnt for setting up arid carrying on industrial undrrta,',P'rs.
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on a commercial footing. Each Corporation so founded is a legalperson separate from its.members and from the Minister. Each.ofthe Corporations is charged with the duty of running its undertakingin an efficient manner so as to balance its income with theoutgoing. In every case there is statutory provision bringing each ofthem under the surveillance of the Government through aresponsible Minister who is empowered to give directions of ageneral character to the Corporation (vide section 31 of the StateIndustrial Corporations Act).
The keynote therefore of all the modern measures ofnationalisation has been indirect control of nationalisedCorporations rather than direct control through a governmentdepartment. The reason for the choice of the national Corporationsrather than the Government Department as an instrument forrunning the national industries may be traced to businesssexpedience guided by private-enterprise motive. The Corporationso established is an independent legal entity having independentlegal existence. In that set up it cannot be said to be a departmentof the State or its agent or organ.
Legislation is not required to empower government to carry on abusiness. It can do so in the exercise of its executive power. If theGovernment carries on such business or involves itself to asignificant extent in the carrying on of such business that activityCan be designated State activity bearing the stamp of executiveaction. For the purpose of constitutional constraints a distinctionhowever has to be borne in mind between the government itselfcarrying on business through any of its departments andgovernment delegating the carrying on of such business to aseparate independent legal entity. When government carries onbusiness by itself such business activity assumes the nature ofexecutive action but where such business is carried on by anindependent legal entity such as a Public Corporation on its ownaccount, free from the operative control of any Minister or Stateofficial, such activity cannot be stamped 'executive action'. Article15 (5) (a) of the Constitution provides that reasonable restrictionson the exercise and operation of the fundamental right to engage inany lawful trade or business could be prescribed in the interests of'the carrying on by the State, a State agency or a PublicCorporation of any trade, business, industry, service or enterprisewhether to the exclusion, complete or partial, of r v '^
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otherwise.* When Government takes up e business or trade it doesthat in the exercise of its executivte'power. But it does not followthat whatever be the instrument or agency through which thegovernment may carry on business or trade, that should beidentified with the government. The grouping together of theentities-the State, State agency and Public Corporation, in Article15 (5) (a) is not by itself sufficient to treat a Public Corporation asan arm of the State or as a State agency. We have to examine theConstitution, powers and attributes of such an establishment to seewhether it is a department or agency of the Government. Thecarrying on of a trade by a Public Corporation does not ipso factorender the commercial function of the Corporation a governmentalaction. When a business is carried on by a department of thegovernment as in the case of the Marketing Department or theRailway the employees thereof hold under the government and notunder any separate juristic entity. The reason is obvious. When theemployer is a department of the Government, no question of aseparate legal entity arises. The question however becomesdifferent, when the business is carried on through a separate legalperson, e.g., statutory corporation, or a company, because in sucha case the employee is a servant of a legal entity other’than theGovernment and is not a servant of the State.
Prof. Griffith and Street in their "Principles of Administrative Law"4th Edition, at page 259-260, discussing the constitutional statusof "Public Corporations * observe-'The.Courts when called upon todecide whether any public body set up by statute in the lasthundred years are agencies of the Crown, have found the statutesthemselves singularly unhelpful and have refused,to lay downdefinite criteria. The Court of Appeal decided inI 'Tamlin v.Hannaford (3) that the Transport Commission was not the agent ofthe Crown, and therefore it may be-assumed that none of the1,nationalised industries is an agent of the Crown. (The BritishBroadcasting Corporation, which is established by Royal Charter, isnot entitled to Crown immunities because it is not an agent of theexecutive government. B.B.C. v. Johns, (4). It may be said thatthere are several criteria which from time to time the Judges havethought relevant. These include
Is the body performing a task formerly carried on by private
enterprise ? (Mercy Docks & Harbour Board Trustees v. Gibbs (5)
-Per Blackburn, J.) To what extent is it subject to Ministerial
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,,Controlfqr example, hgs it independent discretionary powers ?^Metropolitan Meat Industry Bg§rd v. Sheedy (6) – per Viscount. Haldane).
Must it consult -a Minister before it acts ? Can a Minister givedirections ?
Is its function one whichti:ha's: 'Historically been regarded asgovernmental ?
Is it incorporated ?
Is it subject to government audit ?
Is itS authdhty general or local ?js it a mere domestic body ?
Is execution against its property allowed ?
Jhe ,main“cj?i$edon' now seems to be whether the body isperforming a function analogous to'that performed by the Crownservants and under some degree of control by a Minister of the
C|ro.yyn–6aoA Voor Handel v. Administrator of HungarianPropertieslJ).
InJSank Voor Handel v. Administrator of Hungarian Properties(supra) the question in issue was the status of the Custodian ofEnemy Property, was he a servant’of the Crown entitled to taxexemption. Lord,Reid in the course of his judgment stated-
"In my judgment the question whether the custodian is aservant of the Grown depends on the degree of control which theCrown- through its Ministers can exercise over him in the" performance of his duties. The fact that a statute has authorised- his appointment is, I think immaterial, but the definition in thestatute of his rights, duties and obligations is highly important.'
And Lord Asquith at page 991 stated who could for the purpose ofthe exemption, be considered to be a servant or agent of theCrown-
"The Court will lean against including in any of the exemptedcategories an aggregation, of commercial undertakings, broughtunder some degree of public statutory control; and they will (ifthe other requirements are satisfied) lean in favour of exemption; for persons or bodies who were merely Ministerial instruments ofthe Crown's will, lacking in themselves any discretion orinitiative.'
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In Metropolitan Meat'lhtitis'iry Board v. Sheedy(supra) – Viscount Haldafid'said': 'Their Lordships agree with theview taken by the leaiVied Judge in th'e Cburt below'that no moreare the appellant Board constituted under the Act of.. 1915.servants of the Crown to such' ah' extent as to bring thefn withinthe principle of the prerogative.'They are a body withdiscretionary poWers of their own. Eve'n if a Minister of the Crownhas the power to interfere with them, there is nothing in thestatute whreh make’s the acts of 'administration his asdistinguished from: theirs. That they were incorporated does notmatter. It is also true that the Governor appoints their membersand can vetb-Certain of their aciiohs. Blit these provisions, evenwhen taken together, do ridt' outweigh the fact that the'Act ofT9 15 confers on the appellant body wide powers, which aregiven to it to be exercised at its own discretion and withoutconsulting the direct representatives of the Crown."
Thus the questiorfwhether the Insurance Corporation is a Servantof the State ultimately depends on the degrefe of control which theState through its Ministers can exercise over it in the bferformanceof its-duties. €ven if-the Minister has'tbe power to ihtefere with it,there is nothing in the statute which, makes-tfie-acts cfadministration his as distinct from that of the GoTporation, it is truethat the Minister appoints its members and-the Corporation; in theexercise of its powers and the performance of it duties, is subject tothe general or special')directions of the Minister. But these evenwhen taken together,dC/pot,outweigh the fact that the Apt conferson the Corporation pqyvec&.vyhich are given to it to. be exercised atits own discretion,and)1ip ;iits1name.
In Tamlin v. Mantiaford (supra) Denning, LrJ:, delivering thejudgment of the Court of Appeal held that the BritisTf TransportCommission whicf?,ryyas. a Corporation established under theTransport Actsof 194.7 yyas not a. servant or ageqt)<ofthe Crown.
The basis PfTfis' hdlding'Was : "When PaffiaflTent intends thqjanew eCfTpOration'ShbiSd'act on behalf of the fcrd^vh, it as a rule saysso expressly, as it didf in the’case of the Cehtral Lind Board and; theTown and Country Piarirfihg Act 1947…. In the absence of suchexpress provision th%hpfbper inference lh the case at any rate of acommercial corporation is that it acts on its own behalf, even
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’Though it is controlled by a Government Department." Describingthe Ministerial control of the Commission he pointed out: "TheMinister is given powers over this corporation which are as great asthose possessed by a man who holds all the shares in a private
companyIt is the Minister who appoints the directors – the
members of the Commission – and fixes their remuneration. Theymust give him any information he wants, and lest they should notprove amenable to his suggestion as to the policy they shouldadopt, Tie is given power to give directions of general nature onmatters which appear to him to affect national interest, as to whichhe is the sole judge and they are then bound to obey. These aregreat powers, but still we cannot regard the Corporation as beinghis agent.. .In the eye of the law the Corporation is its own
master It is not the Crown and has none of the immunities or
privileges of the Crown. Its servants are riot civil servants and itsproperty is not Crown property. It is as much bound by acts ofParliament as any other subject of the King. It is, of course, a publicauthority and its purposes, no doubt, are public purposes, but it isnot a government department, nor do its powers fall within theprovince of government."
In the Ceylon Bank Employees Union v. Yatawara (8) Sansoni. J..following Denning, L.J’s, above statement of the law, held that theBank of Ceylon, though all of its ordinary shares had been vested inthe Government, by virtue of section 2 of the Finance Act 65 of1961, was not a government department.
In Trendtex Trading Corporation v. Central Bank (9) LordDenning states that there is no satisfactory test to discover whethera body like the Central Bank of Nigeria was an "alter ego or organ ofthe Government of Nigeria* except that of looking into the functionsand control of the organisation. "I would look through to all theevidence to say whether the organisation was under Governmentcontrol and exercised governmental functions."
In Dahanayake v. De Silva (10) Samarakoon, J., held that thePetroleum Corporation which was established by Act No. 28 of1961, was an agent of the State. His process of reasoning was asfollows :" It is a legal hybrid bred by the Government to enable it toengage in a commercial business – tailor-made to suit its style ofbusiness. It is a Government creation clothed with juristicpersonality so as to give it an aura of independence.but in reality it isjust a business house doing only the State's business for and on
sc
Wijetunga v. Insurance Corporation (Sharvananda. A. C. J.)
17
behalf of the State. Such a legal entity carrying on monopolisticcommercial transactions for the State must necessarily be trteAgent of the State ". While observing that petroleum has ceased tobe a mere consumer item of private trade and was now the concernof government at both national and international level, he said thatthe Petroleum Corporation was created for the purpose of providingthis essential service. Discussing the control exercised by theMinister over the Corporation he said-
' Most significant is the fact that the Minister has the power tofix prices at which petroleum products shall be sold and alsoprescribe other conditions of sale (section 66). In short theCorporation does not act like other Corporations who engage inbusiness. Its business is mainly, if not wholly, controlled by theMinister and therefore the State. It does not have theindependence in matters of business which is enjoyed by thecompanies formed under the Companies Ordinance. It is a wellknown fact that this is a monopoly business acquired by the Statewhich is also compelled to subsidise some part of its business forthe welfare of the community '.
Since the provision of petroleum was an essential service and theMinister's control of the Corporation's activity was all pervasive, thePetroleum Corporation was held to be an agent of the State. Thecharacter of the Insurance Corporation differs in material respectsfrom that of the Petroleum Corporation. It was not created Operform and does not perform any such essential service to thecommunity as the Petroleum Corporation. It is a legal entity createdto carry on a commercial activity, namely. Insurance. It does notpurport to carry on this business on behalf of the State and theextent Of the control exercised by the Minister over its operation isnot so far reaching and is insufficient to make it the servant or agentof the State.
Whether we apply the functional test or the governmental-controltest, the Insurance Corporation cannot be identified with theGovernment. It cannot be regarded as its * alter ego ' or organ ofthe State. Hence its action cannot be designated * executive ofadministrative action which only attracts Articles 17 and 126 ofthe Constitution.
Counsel for the petitioners referred to the judgment of this Courtin Perera v. The University Grants Commission (supra) and statedthat the University. Grants Commission established by the1'Universities Act No. 16 of 1978 had rightly been held to be an
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, Sri Lanka Law Reports
[1982] 1 S.L.R
organ or delegate of;,the Government for the purpose of treating itsaction in the-.rpatter of admission of students to the Universities, as' executive or administrative action "..within the meaning of Article126 of the Constitution. He submitted that by parity of reasoningthe'Insurance Corporation also should be considered an organ ordelegate. pf;4he Government. I cannot agree with that submission.The concern and involvement of. the State in the activity of theUniversity Commission are far more extensive than in that of theCorporation. Further, a very important governmental function, suchas University.education, had been delegated to the Commission,with th>e'State-bearing the financial burden of running theUniversities., The Constitutional status, of the UniversityComrn.issioojica.priot be approximated to that of the InsuranceCorporation. •.
It was contended by counsel that "executive or administrativeaction" cannot be equated to an act of an organ of Government. Insupport of the submission reference was made to certainjudgments of the, Indian Supreme Court reported in A.I.R. 1962.
S.C. 1167 (11). A.I.R.. 1962, S.C. 812 (12). A,I R 1958, S.C.232. (13). In considering the persuasiveness of {h,ps.e: judgmentsthe wide definition of "State' contained in Article 12 of the IndianConstitution has to be borne in mind. The "State" is defined there toinclude "the Governrrfeht, Parliament of India and the Governmentand legislature of each of’the States and all local or other authoritieswithin the territory or under thexontrof of Government of India". Inthe perspective of such a wide definition it'cah be appreciated that"executive, adrronistration action’ will notbfe'confined to actions ofthe organs of thegovernment. On the basis of- the Indian definitionof the 'State”, executive’Or administrative action" embraces actionsof authorities besides, Jthe "State" in our.Constitution. There is nowarrant for inrjppjtipg Jhejodian concept of "State-Faction based asit is on theirvvide definition of 'State' into our Constitutional Law.
I uphold the>preliminary objection raised by counsel for the 1strespondent. In view of the above conclusion it is not necessary togo into.the factual merits of petitioner’s complaint.
The"’application is'therefore refused. No Order is made as tocostS)
COLIN-THOME, J.-l agreeSOZA, J.-l agree.
Preliminary objection upheld and application dismissed.