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Background
The State Trading Corporation of India[1] is a private limited company incorporated under the Indian Companies Act, 1956, with its headquarters in Delhi and the Government of India contributing its entire capital. The Sales Tax Authorities of Andhra Pradesh and Bihar released notices of demand to assess the Corporation to sales tax under their respective Sales Tax Acts. The Corporation, claiming to be an Indian citizen, filed petitions under Article 32 of the Constitution seeking to get the proceedings quashed on the grounds that they violated its constitutional rights under Article 19(1)(f) and (g) of the Constitution. State Trading Corporation sought relief, in the form of appropriate writs or directions, against various agencies of State Governments on account of Sales Tax assessed against the Corporation.
The petition was filed under Article 32 of the Constitution of India, which empowers the Supreme Court “to issue directions or orders or writs. Appropriate for the enforcement of fundamental rights.”
The Corporation contested the claims saying that it is a Government company, hence a department of the same.
Issues
“(1) Whether the State Trading Corporation, a company incorporated under the Indian Companies Act, 1956, is a citizen within the scope of Article 19 of the Constitution, and therefore has the right to demand the enforcement of fundamental rights guaranteed to people under that article; and
(2) whether the State Trading Company is, in substance, a department or organ of the Government of India with the entirety of its capital contributed by the Government; and whether it can claim to enact constitutional rights under Part III of the Constitution against the State as specified in Art. 12 thereof, notwithstanding the formality of incorporation under the Indian Companies Act, 1956.
Judgement
Held, that the answer to the first question must be in the negative.
There can be no Indian nationals who aren’t mentioned in Part 11 of the Constitution or the Citizenship Act of 1955. These laws are all-inclusive and only apply to natural persons.
Part III of the Constitution clearly distinguishes between constitutional rights applicable to “every individual” and those granted to “all people,” implying that all citizens are individuals but not all persons are citizens under the Constitution. Part II of the Constitution, which deals with “citizenship,” is expressly inapplicable to juristic individuals, and the terms of the Citizenship Act, 1955, passed by Parliament under Article 11 of the Constitution, demonstrate that they are not covered by the Act.
As a result, neither Part II of the Constitution nor the Citizenship Act of 1955 can be used to claim that any individual other than a natural person has the right to citizenship or that any person other than a natural person is a citizen. A organisation is not considered an individual by them.
The Court has not given its opinion on the current issues in any of the related decisions, so the issues are still available.
Referring to Chiranjit Lal Chowdhuri v. Union of India[2], Dwarkadas Srinivas of Bombay v. The Sholapur Spinning & Weaving Co. Ltd.[3] and Bengal Immunity Co. Ltd. v. State of Bihar[4] the Court held that the words “nationality” and “citizenship” are not interchangeable. A corporation’s nationality is usually determined by the country in which it was established. However, although nationality defines a natural or artificial person’s civil-rights, especially under international law, citizenship is inextricably linked to civic rights under municipal law. As a result, all residents are nationals of a specific state and have full political rights, while all nationals are not citizens and do not have full political rights.
It was wrong to claim that the word “citizen” in Art. 5 was not as expansive as it was in Art. 19 of the Constitution, or that Part II of the Constitution, which deals with persons, deliberately avoided citizenship in the case of juristic people. The words “every citizen” or “all people” are used in contrast to rights that are to be exercised by all, whether citizens or foreigners, natural or juristic individuals, where the Constitution confers a certain privilege on an individual.
There’s no reason to believe that the term “citizen” in Art.19 has a different meaning than it does in Part II of the Constitution.
Both questions must be answered in the respondents’ favour.
Prior to independence, India had no citizenship laws. Under the British Nationality Act of 1948, Indians were considered prospective residents of India whether they were Commonwealth natives or British subjects without citizenship. The Indian Constitution created a citizenship scheme under which only natural persons could become citizens of India, and the Citizenship Act of 1955 made it illegal for someone who was not a natural person to become a citizen of India.
It is false to assert that corporations were individuals before the Constitution was written. They only had privileges under local law that were specifically given to them.
The meaning and personality of an incorporated corporation are the product of legal fiction. The citizens who sign the memorandum of understanding or join as members become a body corporate on that day, and this personality appears at the time of incorporation. They cannot, though, be considered to have pooled their rank because, despite the fact that they are all Indian residents, the Company would not become one.
Referring to G. E. Rly. v. Turner[5], Salomon v. Salomon & Co.[6] and Janson v. Driefontein Consolidated Mines Ltd[7]., the seven freedoms guaranteed by Art. 19 the Court held that the Constitution in using the word “person”, a word of larger import, in some other places makes its intention to exclude corporations clear.
The Supreme Court of the United States’ precedents holding that corporations are citizens of the state of incorporation for federal jurisdictional purposes cannot be applicable in India, according to the case Chiranjit Lal Chowdhuri v. Union of India. The heterogeneity of citizenship that has led to such decisions does not occur in India. Since an organisation is separate from its members, it is not possible to pierce the veil of incorporation to determine the citizenship of its members in order to give the company the benefit of Art. 19.
As a result, neither the State Trading Corporation nor India as a whole are citizens.
The Supreme Court of the United States’ precedents holding that corporations are citizens of the state of incorporation for federal jurisdictional purposes cannot be applicable in India, according to the case Chiranjit Lal Chowdhuri v. Union of India. The heterogeneity of citizenship that has led to such decisions does not occur in India. Since an organisation is separate from its members, it is not possible to pierce the veil of incorporation to determine the citizenship of its members in order to give the company the benefit of Art. 19.
As a result, neither the State Trading Corporation nor India as a whole are citizens.
As a result, it is clear that when the Constitution makers used the word “citizen” in Art. 19, they intended for at least a corporation formed entirely by citizens of India to benefit from the fundamental rights enshrined in that There is nothing in the Constitution that prevents all citizens of India, if forming a corporation, from benefiting from Arts. 19(1) (f) (g).
The second question’s first part should be replied in the negative, while the second part should be answered in the affirmative. Citizenship entails the members of a legal community bestowing upon the holder all of the rights and freedoms enjoyed by the citizens, as well as imposing corresponding obligations. A person’s nationality binds them to a country and protects their interests in foreign relations. A resident is a national, but not every national is a citizen.
The second question’s first part should be replied in the negative, while the second part should be answered in the affirmative. Citizenship entails the members of a legal community bestowing upon the holder all of the rights and freedoms enjoyed by the citizens, as well as imposing corresponding obligations. A person’s nationality binds them to a country and protects their interests in foreign relations. A resident is a national, but not every national is a citizen.
Despite the fact that the Court did not express a firm opinion, it has repeatedly assumed that companies as a whole are entitled to seek rights as individuals under Art. 19(1).
In order to ascertain if the term “citizen” in Art. 19 refers only to a natural individual or even to a corporation or other legal entity, we must first look to the Constitution to see whether the word “citizen” or “citizenship” in some other context has the same broad sense or sheds some light on the issue. The word ‘citizen’ appears 29 times, while the word ‘citizenship’ appears 6 times.
These terms can also be used in chapter headings and marginal notes, but these can be overlooked. It’s worth asking if there’s anywhere else in the Bible except Poetry. 19 where both a normal and an artificial being is meant. “We, the people of India, have solemnly resolved to secure to all its citizens justice, social, economic, and political liberty of speech, religion, religion, and worship; equality of status and opportunity; and to foster among them all fraternity assuring the integrity of the person and the Nation,” and so on.
‘Liberty of speech, language, religion, religion, and worship, freedom of status, and independence of the individual’ are terms appropriate to natural citizens, not businesses, unions, or other corporations collectively, and the term ‘citizen’ in the preamble applies to the people by which the Constitution was written. In this regard, it is important to note that a Constitution is a contract between people and government that governs their respective acts.
Conclusion
Many people are individuals, but not all individuals are citizens. Corporate Entity Implied Powers: The new legal identity of an organisation appears from the moment of incorporation, and from the date the individuals submitting to MOA and other persons entering as members are treated as a body corporate or Business collective, and the new individual starts to exist as an agency, according to the Companies Act.
As a result, The Corporation does not have a physical existence; it is just a “abstraction of statute.” Its duties are commercial, so it cannot be considered one of the Government of India’s agencies.
References:
[1] (1963) INSC 157 (26 July 1963).
[2] (1950) S.C.R. 869.
[3] (1954) S.C.R. 674.
[4] (1955) 2 S.C.R. 603.
[5] (1872) L. R. 8 Ch. App. 152.
[6] (1897) A. C. 22.
[7] (1902) A. C. 484.
