WHETHER COMPANIES HAVE FUNDAMENTAL RIGHTS OR NOT. BY - C THIRUVIKRAM
WHETHER COMPANIES HAVE FUNDAMENTAL
RIGHTS OR NOT.
AUTHORED BY - C
THIRUVIKRAM
ABSTRACT:
A Corporate body is an
independent legal entity that is fully separate from its parent company. A
corporate body can sue someone or can be sued in its unique name. These companies
are manmade and not natural entities. The major challenge is that whether these
bodies are safeguarded under the fundamental rights of the Indian constitution.
Fundamental rights are also available but they are only specified only for the
people of India.
This research is classified
into 3 parts and they are:
1)
Fundamental rights specified only for the citizens of India.
2)
Judicial precedents as set by Indian Courts interpreting the
constitution that will a company be entitled with fundamental rights.
3)
Last is the comparative study on the status of companies in
relation with availability of fundamental rights to them in the countries of
Europe and United States.
Therefore,
this research overviews the fundamental rights available to the companies in
the case study point of view.
INTRODUCTION:
According to section 6 of
companies act, 1956, a company is a separate legal entity which is considered
as an artificial person. There are few other popular people who defined the
term company which are as follows:
(i)
Lord Justice Lindley defined it as, “a company is an
association of many persons who contribute money worth to common stock and
employed in some trade or business and who share profits and losses therefrom.
The basic investment for a company is called as the Capital. The person who
contributes to it pertains are members. The proportion of capital which is
known to be as capital. The share invested in the company is always
transferable but the right to transfer is more or less restricted.”
There are few kinds of
company which is registered in the ministry of corporate affairs which are as
follows:
·
According to section 2(71), a company of voluntary
association with several members with a separate legal entity whose liability
is limited with their shares is known as a public company.
·
According to section 2(68) accompany with a minimum paid
up share capital of ? 1 lakh or more is known as a private company. Therefore,
a company restricts a company from transfer of shares and prevent public from
taking up the shares.
·
According to section 2(62) defines one-person company,
furthermore, members of the company are nothing more than subscribers to its
memorandum of association or its shareholders. This type of company is called
as sole-proprietorship.
FUNDAMENTAL RIGHTS WHICH ARE GUARANTEED
TO THE CITIZENS OF INDIA AS PER THE CONSTITUTION OF INDIA:
Part III of Constitution
of India deals with fundamental right guaranteed to its citizens which are
covered in articles 12 to 35 of Constitution of India. But article 12 and 13 deals
with title and extent of the fundamental rights of Indian Constitution.
Therefore, rights are
specified only from article 14 of Constitution of India.
RELATED JUDICIAL PRECEDENTS WHICH SHOW THAT THE COMPANIES AND
OTHER ARTIFICIAL PERSONS HAVE FUNDAMENTAL RIGHTS: aspect of Article 19(1)(a), and the lack of explicit d
1)
Dwarakadas Srinivas vs Sholapur spinning and weaving
Co. Ltd:
Dwarkadas Srinivas v.
Sholapur Spinning and Weaving Co. Ltd., the Sholapur Spinning and Weaving Co. The
government was able to seize the Sholapur Spinning and Weaving Company's
property thanks to the Act of 1950. The Act's lack of compensation raised the question
of whether it was void. Since the government did not purchase the property, it
argued that Article 31 Clause (2), which provided for compensation, did not
apply because only Clause (1) applied, and that any law that was authorized was
adequate to deny someone their property rights. Clause (1) permits any property
deprivation that is permitted by law. According to clause (2), the learned
Chief Justice would assume that its limiting power is accurate. The Sholapur
Spinning and Weaving Company Act of 1950 was said invalid by the Supreme Court.
The
esteemed Chief Justice would assert that the restrictive authority in question
is validated by clause (2). The Supreme Court determined that the Sholapur
Spinning and Weaving Company Act of 1950 was unconstitutional. It is essential
to interpret Article 31, clauses distinct
category was deemed inconsequential.
(1) and (2) in
conjunction. Consequently, in instances of property deprivation, even in the
absence of state acquisition, clause (2) is applicable, thereby necessitating
the payment of compensation.
(1) Authorized
by law; (Article 31 clause 1)
(2) It was
required for a public purpose; (Article 31 Clause 2)
(3) Subject to
payment of compensation.
1)
State Trading corporation vs Commercial Tax Officers:
The judgment of Hon’ble Justices Sinha, S. K. Das, Gajendragadakar,
Sarkar, Wanchoo, and Ayyangar was delivered by B.P Sinha. The court for this
case had elucidated the applicability of Part III of the Constitution. The
court stated that Part III, which deals with Fundamental Rights, of which some
are available to “any person” and some rights are available only for “all
citizens”. The fundamental rights available to any person regardless of whether
they are citizens or an artificial person are: Article 14, 20, 21, 26, 27, 28,
29, and 31. The fundamental rights specified to citizens of India are Article
15, 16, 18, 19. The 19th article contains 7 divided laws:
1.
Freedom of speech
and expression
2.
Freedom to assemble
peacefully without arms
3.
Freedom to form associations
or unions
4.
Freedom to move independently
throughout India
5.
Freedom to reside in
any part of India
6.
Freedom to acquire
and dispose of property
7.
Freedom to practice
any profession, or to carry any occupation, trade or business.
The court stated that clauses (a) to (e) are only applicable to citizens
whereas clauses (f) and (g) can be enjoyed by natural persons as well as
juristic. The constitution makes a clear view that all citizens are persons but
all persons are not citizens.
The court stated that the term ‘citizenship’ has not been defined in the
Constitution. Part II of the Constitution addresses the topic citizenship. The
court while stating all the necessary provisions of Part II of the Constitution
noted that these rights within Part II were inapplicable to juristic persons.
Juristic persons are also outside the purview of the Citizenship Act of 1955
enacted by the Parliament by power of Article 11. In the Act, Section 2 (1) (f)
states that the word ‘person’ does not include ‘any company or association or
body of individuals whether incorporator or not’. Thus, any subsequent
provisions of the Act relating to citizenship will not be applicable to
juristic persons.
The court on examining the relevant provisions of the Constitution and
the Citizenship Act, 1955 regarding the present case concluded that the
corporation cannot be considered a ‘citizen’. It was stated that corporations
may have nationality in accordance with the country of incorporation but that
does not confer upon them the right of citizenship. The court held that Part II
of the Constitution and the Citizenship Act,1955 was exclusive to a natural
person only. The court consequently provided a negative response to the initial
question of the matter. The court didn’t consider it necessary to answer the
second question as that would only It would be likely if the initial question
received a positive response. It was decided that the case should go back to
the bench with the present opinion of the court.
Justice Hidayatullah articulated a perspective on the case that diverged
from the prevailing majority opinion. He disagreed with the contention of Mr.
Setalvad, counsel for the petitioner, and stated that the Corporation having
the nationality of the country would not make the Corporation a citizen.
He analysed the reference to the word ‘citizen’ with Article 19 and
stated that the clauses (a) to (e) within the Article are applicable solely to
natural persons. He analysed the procedure of citizenship of various countries
namely Rome, Europe, Greece, and concluded that they were all concerned with
natural persons. He stated that there was no room for artificial persons in the
Citizenship Act, 1955. It was stated that a corporation being a separate entity
from its members, it would be impossible to look through the veil of
incorporation to determine the citizenship of the members of the corporation
are required to ensure compliance with Article 19 to secure its advantages. He
thus also opined that the State Trading Corporation cannot be regarded as a
citizen for enforcing rights under Article 19 (f) and (g). Coming to the second
question, he stated that Corporations in which the States own all or the
majority of the shares, in particular, are protected by the Constitution. There
is sufficient guarantee provided that there will no discrimination, no taxation
without authority, etc. He stated that there was no need to be apprehensive
that corporations are at the mercy of State Governments. Thus, Justice
Hidayatullah answered both the questions in the negative.
Justice Das Gupta and Justice JJ Shah gave an opinion that disagrees the
law. Justice Das Gupta asserted that the response to the initial inquiry should
be affirmative. He stated that the Constitution has to be interpreted liberally
and not grammatically. He stated that the Constitution makers when using the
word ‘citizen’ under Article 19 had the intention, that a corporation
comprising of all Indian citizens would get the benefit of Fundamental Rights.
He stated that all citizens including a corporation would have the benefit of
Article 19 (f) and (g). In his view, the State Trading Corporation was not a
department of the Government. He asserts that the initial segment of the second
question should be addressed negatively, whereas the subsequent portion ought
to be responded to affirmatively.
Justice J.J Shah stated that interpreting the Constitution in a
mechanical approach was impermissible. He stated that a juridical person is
also capable of exercising civil rights which are exercised by natural persons.
Its incapacity to exercise other rights arises from its personality and
constitution and it’s not due to any restriction imposed on it. It is
impossible to interpret the term ‘citizen’ in Article 19 in a limited
connotation and it cannot be restricted to natural persons. Regarding the
second question, he stated that to determine whether a company is an agent of
the state or not would depend on the facts of the case. He stated that a
company performing commercial function whether controlled wholly or partially
by the Government would be presumed to not be an agent of the State. On the
other hand, a corporation performing governmental functions and not commercial
will be presumed to be an agent of the Government. He stated that if the State
Trading Corporation is recognized as ‘State’ within the meaning of Article 12,
the corporation can enforce Fundamental Rights Under Article 19. Consequently,
he asserts that the initial question ought to be responded to in the
affirmative, while the first segment of the second question should be addressed
negatively, and the subsequent segment in the Affirmative.
Justice Das
Gupta and Justice J.J Shah gave an
opinion that
disagrees the law
Justice Das Gupta approved the
answer for the first question. He stated that the Constitution has to be
interpreted liberally and not grammatically. He stated that the Constitution
makers when using the word ‘citizen’ under Article 19 had the intention, that a
corporation comprising of all Indian citizens would get the benefit of
Fundamental Rights. He stated that all citizens including a corporation would
have the benefit of Article 19 (f) and (g). In his view, the State Trading
Corporation was not a department of the Government. According to him the second
question should be disagreed while the next part should be agreed.
Justice J.J Shah stated that interpreting the Constitution in a
mechanical approach was impermissible. He stated that a juridical person is
also capable of exercising civil rights which are exercised by natural persons.
Its incapacity to exercise other rights arises from its personality and
constitution and it’s not due to any restriction imposed on it. It is
impossible to interpret the term ‘citizen’ in Article 19 in a limited
connotation and it cannot be restricted to natural persons. Regarding the
second question, he stated that to determine whether a company is an agent of
the state or not would depend on the facts of the case. He stated that a
company performing commercial function whether controlled wholly or partially
by the Government would be presumed to not be an agent of the State. On the
other hand, a corporation performing governmental functions and not commercial
will be presumed to be an agent of the Government. He stated that if the State
Trading Corporation is recognized as ‘State’ within the meaning of Article 12,
the corporation can enforce Fundamental Rights Under Article 19. Consequently,
he asserts that the initial question ought to be responded to in the
affirmative, while the first segment of the second question should be addressed
negatively, and the subsequent segment in the Affirmative.
Bank nationalisation case:
Two major facts were said by
Supreme Court in its verdict. Those principles were –
- No shareholder or director can claim his or her fundamental rights
on behalf of the company unless and until his or her own rights are being
affected by the same.
- The concept of THE EFFECT TEST [6] was taken into account.
(A) European Scenario:
The beginning of the 17th Century saw the emergence of chartered
companies as modern corporation in Europe. The East Indian Company was the profitable
company of that time. The Convention was signed in Italy on 4 November 1950 and
entered into force on 3 September 1953.[1]
The case of OAO Neftyanaya
Kompaniya Yukos v. Russia serves as a quintessential illustration of the
European Court's acknowledgment of the fundamental rights of corporations as
enshrined in the European Convention on Human Rights. In this case,
Yuko Oil Company filed a complaint in against the Russian state complaining
that the Russian authorities had hit it with a series of tax, prevented them
from paying. The company alleged that the Russian authorities had violated
Article 6 (the right to a fair trial), Article 14 (the general prohibition on
783 International Journal of Law Management & Humanities discrimination),
Article 18 (protection against a state when it misuses its power) of the
European Convention on Human Rights. The European Court stated that the Russian
State had violated the company right to a fair trial provided in Article 6 and
the right to protection of property, contained in Article 1 of Protocol 1. It can
be concluded that fundamental rights are appropriately acknowledged for
companies, despite their classification as artificial entities due to
their legal status.
(B) American Scenario:
After the Civil War (1861-1865)
there was a competitive rush between states to attract business, so there was a
transition where state issued a legal document for start of a company to evolute
corporate powers who claimed rights with equal to that of individuals. The
Equal Protection Clause came during the same year. The first section of the
14th Amendment to the United States Constitution articulates that:
Any individual born within the
borders of the United States is considered a citizen of the country. No State
is permitted to enact or enforce any legislation that would diminish the
privileges and immunities of United States citizens; nor may any State deprive
any individual of The phrase emphasizes that no individual shall be deprived of
their life, liberty, or property without the appropriate legal procedures being
followed, nor shall any person within the jurisdiction be denied equal
protection under the law, as established in the case of Santra Clara County v.
Southern Pacific Railroad were brought before United States Supreme Court where
the court reported that Fourteenth Amendment equal protection clause granted
constitutional protections to corporations as well as to natural persons.
In a series of judgments of the
United Supreme held companies are entitled to the due process guarantees of the
14th Correction, the Court in another case extended the Sixth Amendment’s
birthright to a jury trial in a felonious case to pots, in yet another case the
Court extended the free peroration clause of the First emendations to pots. The
Supreme Court in recent Citizen’s United v. Federal Election Commission 40
refused Bipartisan Campaign Reform Act’s proscriptions against pots and
couplings and held the act transgressed the First Amendment birthrights of
campaigners who elevate private plutocrat. Then the situation is settled in
America as companies are entitled to indigenous birthrights meant indeed for
subjects under the Bill of birthrights.
CONCLUSION-
After a detailed exploration of my content, I've learned is Commercial
bodies are important for nation’s frugality. They aren't only important for
artificial evolution but also give employment purposes. Major portion of our
diurnal lives are told by some or the other commercial exertion. It is
important to realize that if a commercial body when at fault for not performing
its duties can be held shamefaced and penalized under colourful ordinances like
in tort, Indian Penal Code, the Companies Act, etc it's also important that
similar bodies have abecedarian birthrights pivotal for its own proper
functioning. Like it had formerly been bandied above how the Hundred- First
report of the Law Commission of India reflected the significance of birthright
of independence of peroration and expression to a review company. If commercial
bodies are anticipated to achieve their duties tallying to the law for the
interest of others also at the same time their birthrights and interest should
also be protected. As we've discerned that abecedarian birthrights of the
commercial bodies are defended in other countries like United States and
nations in Europe, therefore the same should be followed in India too. conservation of Abecedarian birthrights of
commercial realities is essential for the excrescency of the society. These
artificial persons thus should be treated as a citizen so that they can mileage
similar introductory birthrights.
perfection between artificial and natural person cannot be removed fully
but at least similar introductory birthrights which are essential for the
process and evolution of these commercial bodies should be granted to
them. before there was a huge clash
descrying Composition 19 (f) and Composition 31 as they weren't handed to
artificial realities, however now they're accessible to them in the shape of
indigenous birthright. In the same expressway either the Abecedarian
birthrights which are essential for commercial bodies should be made accessible
to them, by esteeming these bodies as citizen or similar birthrights should be
made accessible to them as indigenous birthrights.