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PETITIONER:

SHRI AKLU RAM MAHTO

Vs.

RESPONDENT:

SHRI RAJENDRA MAHTO

DATE OF JUDGMENT: 01/04/1999

BENCH:

Sujata V.Manohar, K.Venkataswami,

JUDGMENT:

Mrs. Sujata V. Manohar, J.

These appeals have been filed under Section 116A of

the Representation of the People Act, 1951. In January 1995

the Election Commission of India issued a notification for

election, inter alia, to the Legislative Assembly of the

State of Bihar. The last date for filing nomination papers

for Bokaro Assembly Constituency No.279 was 23.1.1995. The

appellant and the respondents in the two appeals filed their

nomination papers from the Bokaro Assembly Constituency.

Scrutiny of nomination papers took place on 24.1.1995. The

nominations of the respondents in the two appeals were

rejected on the ground that the respondents Rajendra Mahto

and Ashok Kumar Srivastava were Managing agents of Bokaro

Steel Plant belonging to the Steel Authority of India Ltd.

Hence they were disqualified under Section 10 of the

Representation of the People Act, 1951.

At the election, the appellant was elected from the

Bokaro Assembly Constituency. The two respondents filed

separate election petitions challenging the election of the

appellant on the ground that their nomination papers were

improperly rejected. They have succeeded in the election

petitions before the High Court. The High Court has set

aside the election of the appellant on the ground that the

nomination papers of the two respondents were wrongly

rejected. The appellant has filed the present appeals from

the decision of the High Court in the two election

petitions.

The respondent-Rajendra Mahto (in Civil Appeal No.7538

of 1997) was working as a Khalashi in the Bokaro Steel Plant

of the Steel Authority of India Ltd. at the material time.

This is a Level-III post in the said plant. The

respondent-Ashok Kumar Srivastava ( in Civil Appeal No.7644

of 1997) was working as a Meter Reader in the Bokaro Steel

Plant of the Steel Authority of India Ltd. This is Level

VII post. The Steel Authority of India Ltd. is a company

in which the entire share holding is held by the Union

Government. Section 10 of the Representation of the People

Act, 1951 provides as follows:-

"Disqualification for office under Government

company.- A person shall be disqualified if, and for so long

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as, he is a managing agent, manager or secretary of any

company or corporation (other than a co-operative society)

in the capital of which the appropriate Government has not

less than twenty-five per cent share."

The Returning Officer for 279-Bokaro Legislative

Assembly Constituency in his order has held the nomination

papers filed by Rajendra Mahto and Ashok Kumar Srivastava

invalid on the ground that the two respondents are employees

of the Bokaro Steel Plant and they are the managing agents

of the Bokaro Steel Plant. Hence they are disqualified

under Section 10 of the Representation of Peoples Act, 1951.

The order of the Returning Officer is, on the face of

it, unsustainable. Rajendra Mahto who was at the post of a

Khalashi which is at level L-III in the gradation of

workers, is holding a non- executive post. Ashok Kumar

Srivastava who was working as a Meter Reader was working at

level L-VII. Both these posts are non-executive posts.

Section 10 disqualifies only the Managing Agent, Secretary

or Manager of any company, in the capital of which the

appropriate Government has not less than 25% share holding.

Obviously, neither of them is either Secretary or Manager.

A Managing Agent is a person who has been entrusted with the

management of the whole or substantially the whole of the

affairs of a company. Managing agencies have been abolished

with effect from 3rd of April, 1970 by reason of the

Companies Act being amended by Act XVII of 1969. The

Companies Act contains the following definition of a

Managing Agent under Section 2(25) of the Companies Act,

1956:-

"2(25)- "Managing agent" means any individual, firm or

body corporate entitled, subject to the provisions of this

Act, to the management of the whole, or substantially the

whole, of the affairs of a company by virtue of an agreement

with the company, or by virtue of its memorandum or article

of association, and includes any individual, firm or body

corporate occupying the position of a managing agent, by

whatever name called;

Explanation I - For the purposes of this Act,

references to "managing agent" shall be construed as

references to any individual, firm, or body corporate who,

or which, was, at any time before the 3rd day of April,

1970, the managing agent of any company;

Explanation II - For the removal of doubts, it is

hereby declared that notwithstanding anything contained in

section 6 of the Companies (Amendment) Act, 1969, this

clause shall remain, and shall be deemed always to have

remained, in force."

Quite clearly, neither of the respondents is in-charge

of the affairs of Bokaro Steel Plant and cannot be

considered as Managing Agent of the Bokaro Steel Plant. The

rejection of the nomination papers of the two respondents

was, therefore, wholly erroneous.

The appellant, however, contended in the election

petition that even if Section 10 of the Representation of

the People Act, 1951 may not be attracted, the provisions of

Article 191 of the Constitution are applicable to the two

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respondents and hence their nomination paper was rightly

rejected. Under Article 191(1)(a) it is provided as

follows:-

"Article 191 - (1) A person shall be disqualified for

being chosen as, and for being, a member of the Legislative

Assembly or Legislative Council of a State -

(a) If he holds any office of profit under the

Government of India or the government of any State specified

in the First Schedule, other than an office declared by the

Legislature of the State by law not to disqualify its

holders."

Can either of the two respondents be considered as

holding any office of profit under the Government of India?

In the case of Gurugobinda Basu v. Sankari Prasad Ghosal

and Ors. (1964 (4) SCR 311) the Court after examining

earlier authorities enumerated various factors which enter

into the determination of the question whether a person

holds an office of profit under the Government. He holds an

office of profit under the Government if the Government is:

(1) the appointing authority; (2) the authority vested with

power to terminate the appointment; (3) the authority which

determines the remuneration; (4) the source from which the

remuneration is paid and (5) the authority vested with power

to control the manner in which the duties of office are

discharged. All factors need not be present. Whether

stress will be laid on one factor or the other will depend

on the facts of each case. But where several elements are

present in a given case then the officer in question holds

the office under the authority so empowered. This Court

pointed out that the Constitution itself makes a distinction

between "the holder of an office of profit under the

Government" and "the holder of a post or service under the

Government" (See Articles 309 and 314). The Constitution

has also made a distinction between "the holder of an office

of profit under the Government" and "the holder of an office

of profit under a local or other authority subject to the

control of the Government" (See Article 58(2) and 66(4). In

Gurugobinda Basu's case (Supra), the appellant was a

chartered accountant. He was a partner of a firm of

auditors. This firm acted as auditors of two companies

amongst others. One of the companies was wholly owned by

the Union of India and the second company was wholly owned

by the West Bengal Government. The Court was required to

consider whether the chartered accountant could be said to

hold an office of profit under the Government. In this

context this Court said that an office of profit under the

Government need not imply that the person holding the office

should be in the service of the Government. There need not

be any relationship of master and servant. However, in that

case the chartered accountant was appointed as an auditor of

the two companies by the Central Government; he was

removable by the Central Government; the Comptroller and

Auditor General of India exercised full control over him and

his remuneration was fixed by the Central Government

although it was paid by the companies concerned. In this

situation the Court said that he was holding an office of

profit under the Government.

The same test was reiterated by this Court in the case

of D.R. Gurushanthappa v. Abdul Khuddus Anwar and Ors.

(AIR 1969 SC 744). The tests spelt out in Gurugobinda

Basu's case (Supra) were relied upon in this case. This

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Court further said that an indirect control by the

Government of the company in which the office of profit was

held was not contemplated under Article 191. In the case of

Gurushanthappa (Supra) a Government undertaking was

transferred to a company registered under Companies Act.

The shares of the company were held by the Government. The

candidate was working as a Superintendent in the company.

The power to appoint and dismiss an employee working as

Superintendent did not vest in the Government. The power to

control and give directions as to the manner in which duties

of office were to be performed by that workman also did not

vest in the Government. Even the power to determine the

question of remuneration payable to the workman was not

vested in the Government. In these circumstances, the

indirect control exerciseable by the Government because of

its power to appoint Directors and to give general

directions to the company could not make the post of

Superintendent, Safety Engineering Department of the company

an office of profit under the Government.

The Court dealt with Article 191(a) of the

Constitution along with Section 10 of the Representation of

the People Act, 1951. It said that the disqualification

laid down under Article 191(1)(a) of the Constitution is not

intended to apply to the holder of an office of profit of a

company under the control of the Government. It is Section

10 of the Representation of People Act, 1951, which deals

with the holding of an office of profit in a company in the

capital of which the Government has not less than 25%

shares. Otherwise this section will be redundant. Also,

Parliament when passing the Act did not consider it

necessary to disqualify every person holding an office of

profit under a Government Company. It limited the

disqualification to persons holding the office of Managing

Agent, Manager or Secretary of such a company. Therefore,

the fact that the entire share capital in a company is owned

by the Government does not obliterate the distinction

between Article 191(1)(a) of the Constitution and Section 10

of the Representation of the People Act, 1951.

However, in the later case of Biharilal Dobray v.

Roshan Lal Dobray (1984 (1) SCC 551) (at page 569) this

Court said that even though the incorporation of a body

corporate may suggest that the statute intended it to be a

statutory corporation independent of the Government, it is

not conclusive on the question whether it is really so

independent. Sometimes the form may be that of a body

corporate independent of the Government. But in substance

it may be just the alter ego of the Government itself. The

true test of determination of the said question depends upon

the degree of control the Government has over it, the extent

of control exercised by several other bodies or committees

over it and their composition, the degree of its dependence

on Government for its financial needs and its functional

aspect, namely, whether the body is discharging any

important governmental function or just some function which

is merely optional for the Government. In Biharilal Dobray

a teacher who was employed by the Board of Basic Education

under the U.P. Basic Education Act, 1972 was considered as

holding an office of profit under the State on the ground

that the U.P. Basic Education Act discharged an important

responsibility of the Government to provide primary

education in the State. The Act enabled the State

Government to take over all basic schools which were being

run by the local bodies in the State and to manage them as

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provided under the Act; as also to administer all matters

pertaining to the entire basic education in the State

through the Board. The teachers and other employees were to

be appointed in accordance with Rules by officers who were

themselves appointed by the Government. The disciplinary

proceedings in respect of the employees were subject to the

final decision of the State Government. In these

circumstances, the post of a teacher under the U.P. Basic

Education Act was an office of profit under the Government.

In the case of Satrucharla Chandrasekhar Raju v.

Vyricherla Pradeep Kumar Dev and Anr. (1992 (4) SCC 404),

however, the post of a teacher of a school run by the

Integrated Tribal Development Agency (ITDA) which was a

registered society, was held not to be an office of profit

under the Government. The Government by its order had

directed that all the educational institutions in the ITDA

shall be brought under the unified control of the education

department. The Government accorded sanction for creation

of posts and funds for meeting the expenditure. The project

officer of the ITDA who was also the District Collector

alone appointed teachers and had the power to remove them.

The Court said that the degree and extent of control of the

Government had to be examined on the facts of each case.

Although Government had some control over the ITDA, it was a

registered society having its own constitution. The project

officer and not the Government had the power to appoint and

remove teachers. The whole scheme was set up for the

welfare of tribals and it was entrusted to ITDA, an

authority by itself, subject to the control of the

Government in certain respects just like any other local

authority. Therefore, taking a practical view it could not

be said that the teacher was holding an office of profit

under the Government.

We need not examine more authorities, since the

principles for applying Article 191(1)(a) appear to be well

settled.

The appellant, however, relied upon State of Gujarat

and Anr. etc. v. Raman Lal Keshav Lal Soni and Ors. etc.

(1983 (2) SCC 33) which was a decision of a Constitution

Bench of this Court. This decision was not concerned with

Article 191(1)(a). This Court, however, was required to

decide whether ex-municipal employees who were allotted to

the Panchayat Service of the State Government had the status

of Government servants. The Court examined the provisions

of the Gujarat Panchayats Act, 1961 and held that the

panchayat service constituted under Section 203 of the

Gujarat Panchayats Act is a civil service of the State and

the members of the service are Government servants. We fail

to see how this judgment can be applied to the facts of the

present case.

The Bokaro Steel Plant is under the management and

control of the Steel Authority of India Ltd. This is a

company incorporated under the Companies Act. Undoubtedly,

its shares are owned by the Central Government. The

Chairman and the Board of Directors are appointed by the

President of India. However, the appointment and removal of

workers in Bokaro Steel Plant is under the control of the

Steel Authority of India Ltd. Their remuneration is also

determined by the Steel Authority of India Ltd. The

functions discharged by the Steel Authority of India Ltd.

or by the Bokaro Steel Plant cannot be considered as

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essential functions of the Government. Amongst the objects

of the Steel Authority of India Ltd. set out in the

Memorandum of Association are to carry on in India or

elsewhere the trade or business of manufacturing,

prospecting, raising, operating, buying, selling, importing,

exporting, purchasing or otherwise dealing in iron and steel

of all qualities, grades and types. These objects also

include rendering consultancy services to promote and

organise an integrated and efficient development of iron and

steel industry and to act as an agent of the

Government/public sector financial institutions in the

manner set out in the Objects clause. In this context a

worker holding the post of a Khalashi or a Meter Reader is

not subject to the control of the Central Government nor is

the power of his appointment or removal exercised by the

Central Government. Control over his work is exercised not

by the Government, but by the Steel Authority of India Ltd.

The respondents cannot, therefore, be considered as holding

an office of profit under the Central Government.

The High Court, therefore, was right in holding that

the nomination papers of the two respondents were wrongly

rejected and hence the election of the appellant was

required to be set aside under Section 100 of the

Representation of the People Act, 1951. In the premises the

appeals are dismissed with costs.