"The State Trading Corporation vs. The Commercial Tax Officer 1963 AIR 1811"

 "The State Trading Corporation vs. The Commercial Tax Officer 1963 AIR 1811"

BY: AARUSHI YADAV

Facts of the case-

1. The case of State Trading Corporation of India v. Commercial Tax Officer (1963) deals with the important constitutional question of whether a corporation constituted under the Indian Companies Act, 1956 is a citizen under Article 19 of the Indian Constitution. The entire case revolves around corporate social responsibility.

2. There are two petitioners, one is the private limited company which is named The State Trading Corporation and is registered under the Indian Companies Act, 1956. The other petitioner is a shareholder in the Company. Both the petitioners claims that they the citizens of India because their shareholders were Indian Citizens.

3. The commercial tax officer, the State of Andhra Pradesh, and the deputy Commissioner of Commercial Taxes are the respondents in this case. In this case, charges were initiated against the State Trading Corporation for sales tax assessments, and notices for sales tax payment were sent to them.

4. The petitioners approached the Supreme Court with a writ petition for certiorari under Article 32 of the Indian Constitution, requesting that the respondents' acts be quashed. The state Trading Corporation claims that their fundamental rights, as citizens of India, are being violated per Article 19(f) and (g) of the Indian Constitution.

5. In addition, the court had to decide whether or not a corporation formed under the Indian Companies Act, 1956 is a "citizen" under Part III of the Indian Constitution, as defined by Article 19, or not.

Issues of the case are as follows-

1. The first issue raised in this case was that if The Company, The State Trading Corporation which is registered under the Indian Companies Act 1956 is a citizen of the country or not and can it enjoy the fundamental rights given to citizens as per article 19 of the constitution.

2. Second issue was that If the State Trading Corporation, despite its formal incorporation under the Indian Companies Act, 1956, is in substance a department and organ of the Indian government, with the government contributing the entirety of its capital; and whether it can claim to enforce fundamental rights under Part III of the Constitution against the State as defined in article 12 ?

Judgement of the case

The Supreme Court of India stated in this case that there are two types of Fundamental Rights: those that are available only to Indian citizens and those that are available to any person, which certainly means rights that are available to any person, natural or artificial person. Articles 15, 16, 19, 27, 28, and 31 of the Constitution cover the rights that citizens have in the country. Articles 14, 20, 21, 27, and 31, on the other hand, cover the rights that are available to anyone. Under the Constitution 'all citizens' are persons but 'all persons' are not citizens which can be understood by article 19 of the Indian constitutions which consists of 7 clauses, and they are a) Freedom of Speech and expression, b) Freedom to assemble peacefully without arms, c) Freedom to form associations or unions, d) Freedom to move freely throughout the territory of India, e) Freedom to reside and settle in any territory of India. f) Freedom to acquire and dispose of property and g) Freedom to practice any profession, or to carry any occupation, trade or business. The court further declared that Article 19 clauses (a) to (e) apply only to citizens, while sections (f) and (g) apply to natural persons and artificial/juristic individuals.

Part II of the Indian Constitution, which runs from article 5 through 11, deals with citizenship, though the Indian Constitution does not define citizenship. The Supreme Court concluded that the rights protected by Part II of the Constitution do not extend to artificial/juristic individuals after analysing and stating all relevant provisions in this matter. The term "person" does not include "any corporation, association, or group of individuals, whether incorporator or not," according to section 2(1) (f) of the Companies Act. The court came to the conclusion that while a company or corporation can have nationality, it cannot be regarded a citizen of the country.

• Chief Justice Sinha on behalf of majority

The Supreme Court distinguished between the term’s "citizenship" and "nationality," stating that "a nation is a national," but that "all nationals cannot be voters," and that "nationality is often claimed by a company under the place of its incorporation," but that "because citizenship is bothered, it cannot be inherited just by incorporation at a specific place." The Supreme Court of India has ruled that the distinction between part II (Citizenship) and part III (Fundamental Rights) of the Indian Constitution is meaningless. Furthermore, the court discussed how some fundamental rights apply to “any person,” including voters, aliens, natural or legal persons, and “all citizens.” The Court has also emphasised that a careful reading of Article 19, which advocates the right to freedom, which includes the right to assemble peacefully and without arms, the right to move freely throughout India's territory, and the right to reside and settle in any part of India's territory , leads to the conclusion that these rights cannot be enjoyed by an organization and therefore, it’s can’t be known as a “citizen” below Article 19.

• Das Gupta J

The State Trading Corporation had a fundamental right, according to Justice Das Gupta. He claimed that when the word "citizen" was used in Article 19 of the Constitution, the idea was for a company made up of all Indian citizens to benefit from Fundamental Rights. He argued that Article 19 (f) and (g) would benefit all people, including corporations. The State Trading Corporation, in his opinion, was not a government department.

• Justice J.J Shah

The use of a mechanical approach to reading the Constitution, according to Justice J.J. Shah, is not acceptable. He claimed that a jurist person can exercise civil rights that are normally exercised by natural persons. Its incapacity to exercise additional rights is due to its personality and constitution, not to any limitations imposed on it. The term "citizen" in Article 19 cannot be interpreted in a narrow sense, and therefore cannot be limited to natural individuals. In response to the second issue raised, he noted that determining whether or not a corporation is a state agency is dependent on the facts of the case. He claimed that a corporation providing commercial functions, whether wholly or partially controlled by the government, would not be considered a state agent. A corporation that performs governmental responsibilities but is not a commercial entity, on the other hand, will be deemed to be a government agency. He argued that if the State Trading Corporation is recognised as a "State" under the sense of Article 12, the corporation will be able to enforce Article 19's Fundamental Rights. According to him the initial portion of the second issue should be answered negatively, and the latter half of the second issue should be replied affirmatively.

• Justice Hidayatullah

Justice Hidayatullah differed from the majority in his judgment of the case. He disagreed with the petitioner's argument, claiming that just because a corporation has the nationality of a country does not make it a citizen. The corporation, it was said, does not have a physical existence and is merely a legal abstraction. He looked at the word "citizen" in relation to Article 19 and concluded that the sections (a) to (e) of the Article apply only to natural persons. He studied the citizenship procedures of many countries, including Rome, Europe, and Greece, and came to the conclusion that they were all concerned with natural persons. He said that the Citizenship Act of 1955 included no provision for artificial persons. It was stated that because a corporation is a separate entity from its members , looking behind the veil of incorporation to ascertain the citizenship of its members in order to grant the corporation the benefit of Article 19 would be difficult. As a result, he believes that the State Trading Corporation cannot be considered a citizen for the purposes of implementing Article 19 (f) and (g). In response to the second issue raised, he noted that the Constitution protects corporations in which the states possess all or a majority of the shares. There is enough assurance that there will be no discrimination, no taxation without permission, and so on. He argued that corporations are not at the mercy of state governments and that there is no cause to be concerned.

Conclusion-

The court decided by a majority that the petitioners cannot be considered as ‘citizens' for the purposes of enforcing their Fundamental Rights under Article 19. The court has defined citizenship under our Constitution and answered important problems about the rights of artificial or juristic persons. The court's key conclusion was that corporations or shareholders may not invoke Article 19 of the Constitution for protection. The issue in the case was not even raised in many other cases, and the matter of State Trading Corporation came into a major constitutional issue.

The court distinguishes between "nationality" and "citizenship," stating that nationality is determined by the country of origin. Corporate bodies, on the other hand, are recognised as citizens in the United States. In Bennett Coleman, the Supreme Court used the concept of "lifting the veil" to recognise the rights of its shareholders who had not complied with its judgement in State Trading Corporation, attaining its constitutional aim of becoming the guardian of fundamental rights. In Bennett Coleman, the supreme court took a more liberal attitude than in the case of State Trading Corporation. The court ruled that a corporation could not become a citizen under the Constitution, and that it is just a legal entity. Companies are not recognised as citizens under Part III, Part II, or the Citizenship Act. The Constitution, on the other hand, makes some Fundamental Rights open to "all persons."

Judgement of the case

The Supreme Court of India stated in this case that there are two types of Fundamental Rights: those that are available only to Indian citizens and those that are available to any person, which certainly means rights that are available to any person, natural or artificial person. Articles 15, 16, 19, 27, 28, and 31 of the Constitution cover the rights that citizens have in the country. Articles 14, 20, 21, 27, and 31, on the other hand, cover the rights that are available to anyone. Under the Constitution 'all citizens' are persons but 'all persons' are not citizens which can be understood by article 19 of the Indian constitutions which consists of 7 clauses, and they are a) Freedom of Speech and expression, b) Freedom to assemble peacefully without arms, c) Freedom to form associations or unions, d) Freedom to move freely throughout the territory of India, e) Freedom to reside and settle in any territory of India. f) Freedom to acquire and dispose of property and g) Freedom to practice any profession, or to carry any occupation, trade or business. The court further declared that Article 19 clauses (a) to (e) apply only to citizens, while sections (f) and (g) apply to natural persons and artificial/juristic individuals.

Part II of the Indian Constitution, which runs from article 5 through 11, deals with citizenship, though the Indian Constitution does not define citizenship. The Supreme Court concluded that the rights protected by Part II of the Constitution do not extend to artificial/juristic individuals after analysing and stating all relevant provisions in this matter. The term "person" does not include "any corporation, association, or group of individuals, whether incorporator or not," according to section 2(1) (f) of the Companies Act. The court came to the conclusion that while a company or corporation can have nationality, it cannot be regarded a citizen of the country.

• Chief Justice Sinha on behalf of majority

The Supreme Court distinguished between the term’s "citizenship" and "nationality," stating that "a nation is a national," but that "all nationals cannot be voters," and that "nationality is often claimed by a company under the place of its incorporation," but that "because citizenship is bothered, it cannot be inherited just by incorporation at a specific place." The Supreme Court of India has ruled that the distinction between part II (Citizenship) and part III (Fundamental Rights) of the Indian Constitution is meaningless. Furthermore, the court discussed how some fundamental rights apply to “any person,” including voters, aliens, natural or legal persons, and “all citizens.” The Court has also emphasised that a careful reading of Article 19, which advocates the right to freedom, which includes the right to assemble peacefully and without arms, the right to move freely throughout India's territory, and the right to reside and settle in any part of India's territory , leads to the conclusion that these rights cannot be enjoyed by an organization and therefore, it’s can’t be known as a “citizen” below Article 19.

• Das Gupta J

The State Trading Corporation had a fundamental right, according to Justice Das Gupta. He claimed that when the word "citizen" was used in Article 19 of the Constitution, the idea was for a company made up of all Indian citizens to benefit from Fundamental Rights. He argued that Article 19 (f) and (g) would benefit all people, including corporations. The State Trading Corporation, in his opinion, was not a government department.

• Justice J.J Shah

The use of a mechanical approach to reading the Constitution, according to Justice J.J. Shah, is not acceptable. He claimed that a jurist person can exercise civil rights that are normally exercised by natural persons. Its incapacity to exercise additional rights is due to its personality and constitution, not to any limitations imposed on it. The term "citizen" in Article 19 cannot be interpreted in a narrow sense, and therefore cannot be limited to natural individuals. In response to the second issue raised, he noted that determining whether or not a corporation is a state agency is dependent on the facts of the case. He claimed that a corporation providing commercial functions, whether wholly or partially controlled by the government, would not be considered a state agent. A corporation that performs governmental responsibilities but is not a commercial entity, on the other hand, will be deemed to be a government agency. He argued that if the State Trading Corporation is recognised as a "State" under the sense of Article 12, the corporation will be able to enforce Article 19's Fundamental Rights. According to him the initial portion of the second issue should be answered negatively, and the latter half of the second issue should be replied affirmatively.

• Justice Hidayatullah

Justice Hidayatullah differed from the majority in his judgment of the case. He disagreed with the petitioner's argument, claiming that just because a corporation has the nationality of a country does not make it a citizen. The corporation, it was said, does not have a physical existence and is merely a legal abstraction. He looked at the word "citizen" in relation to Article 19 and concluded that the sections (a) to (e) of the Article apply only to natural persons. He studied the citizenship procedures of many countries, including Rome, Europe, and Greece, and came to the conclusion that they were all concerned with natural persons. He said that the Citizenship Act of 1955 included no provision for artificial persons. It was stated that because a corporation is a separate entity from its members , looking behind the veil of incorporation to ascertain the citizenship of its members in order to grant the corporation the benefit of Article 19 would be difficult. As a result, he believes that the State Trading Corporation cannot be considered a citizen for the purposes of implementing Article 19 (f) and (g). In response to the second issue raised, he noted that the Constitution protects corporations in which the states possess all or a majority of the shares. There is enough assurance that there will be no discrimination, no taxation without permission, and so on. He argued that corporations are not at the mercy of state governments and that there is no cause to be concerned.

Conclusion-

The court decided by a majority that the petitioners cannot be considered as ‘citizens' for the purposes of enforcing their Fundamental Rights under Article 19. The court has defined citizenship under our Constitution and answered important problems about the rights of artificial or juristic persons. The court's key conclusion was that corporations or shareholders may not invoke Article 19 of the Constitution for protection. The issue in the case was not even raised in many other cases, and the matter of State Trading Corporation came into a major constitutional issue.

The court distinguishes between "nationality" and "citizenship," stating that nationality is determined by the country of origin. Corporate bodies, on the other hand, are recognised as citizens in the United States. In Bennett Coleman, the Supreme Court used the concept of "lifting the veil" to recognise the rights of its shareholders who had not complied with its judgement in State Trading Corporation, attaining its constitutional aim of becoming the guardian of fundamental rights. In Bennett Coleman, the supreme court took a more liberal attitude than in the case of State Trading Corporation. The court ruled that a corporation could not become a citizen under the Constitution, and that it is just a legal entity. Companies are not recognised as citizens under Part III, Part II, or the Citizenship Act. The Constitution, on the other hand, makes some Fundamental Rights open to "all persons."