PETITIONER:
GURUGOBINDA BASU
Vs.
RESPONDENT:
SANKARI PRASAD GHOSAL and ORS.
DATE OF JUDGMENT:
14/08/1963
BENCH:
DAS, S.K.
BENCH:
DAS, S.K.
SUBBARAO, K.
DAYAL, RAGHUBAR
AYYANGAR, N. RAJAGOPALA
MUDHOLKAR, J.R.
CITATION:
1964 AIR 254 1964 SCR (4) 311
CITATOR INFO :
D 1969 SC 744 (7,10)
R 1975 SC 575 (4)
R 1976 SC2283 (37,39,40)
R 1981 SC 658 (9)
C 1984 SC 161 (27)
E 1984 SC 385 (8,9)
R 1984 SC 399 (12)
R 1985 SC 211 (15,18)
R 1986 SC1571 (67)
RF 1992 SC1959 (8,13,16)
ACT:
Elections-Appellant a chartered accountant and a partner of
a firm of auditors-The firm appointed as auditors of two
Government owned companies-Appellant elected to Lok Sabha-
Whether he holds an office of profit under the Union
GovernmentTests to be applied-Constitution of India, Art.
102(1)(a)-Indian Companies Act, 1956 (I of 1956) ss. 224,
227, 619-Representation of the People Act, 1950 (43 of
1950). s. 116.
HEADNOTE:
The appellant was a chartered accountant and a partner of a
firm of auditors. This firm acted as auditors of two
companies, among others, registered under the Indian
Companies Act, 1956, the entirety of the shares of one of
which are owned by the Union Government and the entirety of
the shares of the other by the West Bengal Government. The
appellant was declared elected to the Lok Sabha. His
election was challenged by two voters of the constituency by
means of an election petition. The main ground raised was
that the appellant was at the relevant period the holder of
an office of profit under the Government of India as well as
the State Government and hence he was disqualified from
standing for election under Art. 102(1)(a) of the
Constitution. The Election Tribunal accepted this
contention and declared the election of the appellant void.
The appellant filed an appeal before the High Court in which
he did not succeed. The present appeal was by virtue of a
certificate granted by the High Court under Art. 133(1)(c)
of the Constitution.
It was contended before this Court that on a true
construction of the expression “under the Government of
India or the Government of any State” occurring in cl. (a)
of Art. 102 (I.) of the Constitution the appellant could not
be said to hold an office of profit under the Government of
India or the Government of West Bengal. It was argued that
the various tests, namely, who has the power to appoint, who
has the right to remove, who pays the remuneration, what are
the functions and who exercises the control should all co-
exist and each must show subordination to the Government.
The fulfillment of some of the tests alone, would not be
sufficient to determine that a person holds an office of
profit under the Government. It was contented on behalf of
the respondent that the tests were not cumulative and that
the court should look to the substance rather than to the
form.
Held :
(i)For holding an office of profit, under the Government a
person need not be in the service of the Government and
there need not be any relationship of master and servant
between them.
312
(ii)The examination of the various provisions of the Com-
panies Act, 1956 (ss. 224, 227, 618 and 619) showed that so
far as the two companies in question were concerned the
appellant was appointed as an auditor by the Central
Government, was removable by the Central Government, that
the Comptroller and the Auditor General of India exercised
full control over him and that his remuneration was fixed by
the Central Government under sub-s. (8) of s. 224 of the
Companies Act though it was paid by the companies concerned.
(iii)Where the several elements, the power to appoint,
the power to dismiss, the power to control and give
directions as to the manner in which the duties of the
office are to be performed and the power to determine the
question of remuneration are all present in a given case
then the officer in question holds the office under the
authority so empowered. It is not necessary that all these
must co-exist nor is the fact that the source from which the
remuneration is paid is not from public revenue decisive.
(iv)The appellant held an office of profit under the
Government of India within the meaning of Art. 102(1)(a) of
the Constitution of India and as such he was disqualified
for being chosen as a member of Parliament.
Maulana Abdul Shakur v. Rikhab Chand, [1958] S.C.R. 387,
distinguished.
Ramappa v. Sangappa, [1959] S. C. R. 1167, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 486 of 1963.
Appeal from the judgment and order dated September 27, 1962,
of the Calcutta High Court in Appeal from Original Decree
No. 424 of 1962.
S.Chaudhuri, R. C. Deb and S. S. Shukla, for the
appellant.
Hari’ Prosonna Mukherjee, K. G. Hazra Chaudhari and D. N.
Mukherjee, for the respondents Nos. 1 and 2.
August 14, 1963. The Judgment of the Court was delivered by
S.K. DAS, Acting Chief Justice.-This is an appeal on a
certificate granted by the High Court of Calcutta under Art.
133(1)(c) of the Constitution. No preliminary objection
having been taken as to the competency of the certificate,
we have heard the appeal on merits.
The short facts giving rise to the appeal are these The
appellant before us is Gurugobinda Basu who is a chartered
accountant and a partner of the firm. of auditors carrying
on business under the name and style of G. Basu and Company.
This firm acted as the auditor of certain
313
companies and corporations, such as the Life Insurance
Corporation of India, the Durgapur Projects Ltd., and the
Hindustan Steel Ltd., on payment of certain remuneration.
The appellant was also a Director of the West Bengal Fi-
nancial Corporation having been appointed or nominated as
such by the State Government of West Bengal. The
appointment carried with it the right to receive fees or
remuneration as director of the said corporation.
In February-March, 1962, the appellant was elected to the
House of the People from Constituency No. 34 (Burdwan
Parliamentary Constituency) which is a single member
constituency. The election was held in February, 1962.
There were two candidates, namely, the appellant and
respondent No. 3 to this appeal. The appellant was declared
elected on March 1, 1962, he having secured 1,55,485 votes
as against his rival who secured 1,23,015 votes. This
election was challenged by two voters of the said
constituency by means of an election petition dated April
10, 1962. The challenge was founded on two grounds : (1)
that the appellant was, at the relevant time, the holder of
offices of profit both under the Government of India and the
Government of West Bengal and this disqualified him from
standing for election under Art. 102 (1)(a) of the
Constitution; and (2) that he was guilty of certain corrupt
practices which vitiated his election. The second ground
was abandoned at the trial, and we are no longer concerned
with it.
The election Tribunal held that the appellant was a holder
of offices of profit both under the Government of India and
the Government of West Bengal and was therefore disqualified
from standing for election under Art. 102(1)(a) of the
Constitution. The Election Tribunal accordingly allowed the
election petition and declared that the election of the
appellant to the House of the People was void. There was an
appeal to the High Court under s. 116-A of the
Representation of the People Act, 1951. The High Court
dismissed the appeal, but granted a certificate of fitness
under Art. 133(1) (c) of the Constitution.
The only question before us is whether the appellant was
disqualified from being chosen as, and for being, a member
of the House of the People under Art. 102(1)(A) of the
Constitution. The answer to the question depends
21-2 S C India/6
314
on whether the appellant held any offices of profit under
the Government of India or the Government of any State other
than such offices as had been declared by Parliament by law
not to disqualify their holder. It has not been seriously
disputed before us that the office of auditor which the
appellant held as partner of the firm of G. Basu and Company
was an office of profit. It has not been contended by the
appellant before us that the office of profit which he held
had been declared by Parliament by law not to disqualify the
holder. Therefore the arguments before us have proceeded
entirely on the question as to the true scope and meaning of
the expression “under the Government of India or the
Government of any State” occurring in cl. (a) of Art. 102(1)
of the Constitution. The contention on behalf of the
appellant has been that on a true construction of the
aforesaid expression, the appellant cannot be said to hold
an office of profit under the Government of India or the
Government of West Bengal. On behalf of the respondents the
contention is that the office of auditor which the appellant
holds is an office of profit under the Government of India
in respect of the Life Insurance Corporation of India, the
Durgapur Projects Ltd. and the Hindustan Steel Ltd., and in
respect of the West Bengal Financial Corporation of which
the appellant is a Director appointed by the Government of
West Bengal, he holds an office of profit under the
Government of West Bengal. These are the respective
contentions which fall for consideration in the present
appeal.
It is necessary to state here that if in respect of any of
the four companies or corporations it be held that the
appellant holds an office of profit under the Government, be
it under the Government of India or the Government of West
Bengal, then the appeal must be dismissed. It would be
unnecessary then to consider whether the office of profit
which the appellant holds in respect of the other companies
is an office of profit under the Government or not. We
would therefore take up first the two companies, namely, the
Durgapur Projects Ltd., and the Hindustan Steel Ltd., which
are 100% Government companies and consider the respective
contentions of the parties before us in respect of the
office of auditor which the appellant holds in these two
companies. If we hold that in
315
respect of any of these two companies the appellant holds an
office of profit under the Government of India, then it
would be unnecessary to consider the position of the
appellant in any of the other companies.
It is not disputed that the Hindustan Steel Ltd., and the
Durgapur Projects Ltd. are Government companies within the
meaning of s. 2(18) read with s. 617 of tile Indian
Companies Act, 1956. It has been stated before us that 100%
of the shares of the Durgapur Projects Ltd. are held by the
Government of West Bengal and 100% of the shares of the
Hindustan Steel Ltd. are held by the Union Government. We
may now read s. 619 of the Indian Companies Act, 1956.
“(1) In the case of a Government company, the
following provisions shall apply,
notwithstanding any thing contained in
sections 224 to 233.
(2)The auditor of a Government company
shall be appointed or re-appointed by the
Central Government ,on the advice of the
Comptroller and Auditor-General of India.
(3)The Comptroller and Auditor-General of In-
dia shall have power-
(a)to direct the manner in which the
company’s accounts shall be audited by the
auditor appointed in pursuance of sub-section
(2) and to give such auditor instructions in
regard to any matters relating to the
performance of his functions as such :
(b) to conduct a supplementary or test audit
of the company’s accounts by such person or
persons as he may authorise in this behalf;
and for the purposes of such audit, to require
information or additional information to be
furnished to any person or persons so
authorised, on such matters, by such person or
persons, and in such form, as the Comptroller
and Auditor-General may, by general or special
order, direct.
(4) The auditor aforesaid shall submit a copy
of his audit report to the Comptroller and
Auditor-General of India who shall have the
right to comment upon, or supplement, the
audit report in such manner ,as he may think
fit.
(5) Any such comments upon, or supplement
316
the audit report shall be placed before the
annual general meeting of the company at the
same time and in the same manner as the audit
report.”
It is clear from the aforesaid provisions that not with
standing s. 224 of the Act which empowers every company to
appoint an auditor or auditors at each annual general
meetings, the appointment of an auditor of a Government
company rests solely with the Central Government and in
making such appointment the Central Government takes the
advice of the Comptroller and Auditor-General of India.
Under s. 224(7) of the Act an auditor appointed under s. 224
may be removed from office before the expiry of his term
only by the company in general meeting, after obtaining the
previous approval of the Central Government in that behalf.
The remuneration of the auditors of a company is to be fixed
in accordance with the provisions of sub-s. (8) of s. 224.
It is clear however that sub-s. (7) of s. 224 does not apply
to a Government company because the auditor of a Government
company is not appointed under s. 224 of the Act, but is
appointed under sub-s. (2) of s. 619 of the Act. It is
clear therefore that the appointment of an auditor in a
Government company rests solely with the Central Government
and so also his removal from office. Under sub-s. (3) of s.
619 the Comptroller and Auditor-General of India exercises
control over the auditor of a Government company in respect
of various matters including the manner in which the
company’s accounts shall be audited. The Auditor-General
has also the right to give such auditor instructions in
regard to any matter relating to the performance of his
functions as such. The Auditor-General may conduct a
supplementary or test audit of the company’s accounts. by
such person or persons as he may authorise in this behalf.
In other words, the Comptroller and Auditor-General of India
exercises full control over the auditors of a Government
company. The powers and duties of auditors in respect of
companies other than Government companies are laid down in
s. 227 of the Act but by virtue of sub-s. (1) of s. 619 of
the Act, the provisions in s. 227 of the Act do not apply to
a Government company because a Government company is subject
to the provisions ,of s. 619 of the Act. Under s. 619-A of
the Act, where the
317
Central Government is a member of a Government company, an
annual report of the working and affairs of the company has
to be prepared and laid before both Houses of Parliament
with a copy of the audit report and the comments made by the
Comptroller and Auditor General. Under s. 620 of the Act
the Central Government .may by notification direct that any
of the provisions of the Act, other than ss. 618, 619 and
639, shall not apply. to any Government company.
The net result of the aforesaid provisions is that so far as
the Durgapur Projects Ltd. and the Hindustan Steel Ltd. are
concerned, the appellant was appointed an auditor by the
Central Government; he is removable by the Central Gov-
ernment and the Comptroller and Auditor-General of India
exercises full control over him. His remuneration is fixed
by the Central Government under sub-s. (8) of s. 224 of the
Act though it is paid by the company.
In these circumstances the question is, does the appellant
hold an office of profit under the Central Government? We
may now read Art. 102(1) of the Constitution.
102. (1) A person shall be disqualified for
being chosen as, and for being, a member of
either House of Parliament-
(a) if he holds any office of profit under the
Government of India or the Government of any
State, other than an office declared by
Parliament by law not to disqualify its holder
(b)
(c)
(d)
We have stated earlier that the sole question before us is
whether the office of profit which the appellant undoubtedly
holds as auditor of the Durgapur Projects Ltd., and the
Hindustan Steel Ltd. is or is not under the Government of
India. According to Mr. Chaudhuri who has argued the appeal
on behalf of the appellant, the expression “under the
Government, occurring in Art. 102(1)(a) implies sub-
ordination to Government. His argument is that ordinarily
there are five tests of such subordination, namely, (1) whe-
ther Government make-, the appointment to the office;
(2) whether Government has the right to remove or dis-
318
miss the holder of office; (3) whether Government pays the
remuneration; (4) what are the functions which the holder of
the office performs and does he perform them for Government;
and (5) does Government exercise any control over the
performance of those functions. His argument further is
that the tests must all co-exist and each must show
subordination to -Government so that the fulfillment of only
some of the tests is not enough to bring the holder of the
office under the Government. According to him all the tests
must be fulfilled before it can be said that the holder of
the office is under the Government. His contention is that
the Election Tribunal and the High Court were in error in
holding that the appellant was a holder of office under the
Government, because they misconstrued the scope and effect
of the expression “under the Government” in Art. 102(1)(a)
of the Constitution. He has contended that tests (3), (4)
and (5) adverted to above are not fulfilled in the present
case. The appellant gets his remuneration from the company
though fixed by Government; he performs functions for the
company and he is controlled by the Comptroller and Auditor-
General who is different from the Government.
On behalf of the respondents it is argued that the tests are
not cumulative in the sense contended for by the appellant,
and what has to be considered is the substance of the matter
which must be determined by a consideration of all the
factors present in a case, and whether stress will be laid
on one factor or the other will depend on the circumstances
of each particular case. According to the respondents, the
tests of appointment and dismissal are important tests in
the present case, and in the matter of a company which is a
100% Government company, the payment of remuneration fixed
by Government, the performance of the functions for the
company and the exercise of control by the Comptroller and
Auditor-General, looked at from the point of view of
substance and taken in conjunction with the power of
appointment and dismissal, really bring the holder of the
office under the Government which appoints him.
One point may be cleared up at this stage. On behalf of the
respondents no question has been raised that the Durgapur
Projects, Limited, or the Hindustan Steel, Limi-
319
ted, is a department of Government or an emanation ‘of
Governments question Which was considered at some length in
Narayanaswamy v. Krishnamurthi(1). Learned counsel for the
respondents has been content to argue before us on the basis
that the two companies having been incorporated under the
Indian Companies Act, 1956 are separate legal entities
distinct from Government. Even on that footing he has
contended that in view of the provisions of s. 619 and other
provisions of the Indian Companies Act, 1956, an auditor
appointed by the Central Government and liable to be removed
from office by the same Government, is a holder of an office
of profit under the Government in respect of a company which
is really a hundred per cent Government company.
We think that this contention is correct. We agree with the
High Court that for holding an office of profit under the
Government, one need not be in the service of Government and
there need be no relationship of master and servant between
them., 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
Arts. 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
Government’; see Art. 58(2) and 66(4). In Maulana Abdul
Shakur v. Rikhab Chand and another(1) the appellant was the
manager of a school run. by a committee of management formed
under,the provisions of the Durgah Khwaja, Saheb Act, 1955.
He was appointed by the administrator of the Durgah and was
paid Rs. 100 per month. The question arose whether he was
disqualified to be chosen as a member of Parliament in view
of Art. 102(1)(a) of the Constitution. It was contended for
the respondent in that case that under ss. 5 and 9 of the
Durgah Khwaja Saheb Act, 1955 the Government of India had
the power of, appointment and removal of members of the
committee of management as also the power to appoint the
administrator in consultation with the committee; therefore
the appellant was under the control and super-
(1) I.L.R. [1958] Mad-513.
(2) [1958] S.C.R. 387
320
vision of the Government and that therefore he was holding
an office of profit under the Government of India. This
contention was repelled and this court pointed out the
distinction between ‘the holder of an office of profit under
the Government’ and ‘the holder of an office of profit under
some other authority subject to the control of Government’.
Mr. Chaudhuri has contended before us that the decision is
in his favour. He has argued that the appellant in the
present case holds an office of profit under the Durgapur
Projects Ltd. and the Hindustan Steel Ltd. which are
incorporated under the Indian Companies Act; the fact that
the Comptroller and Auditor-General or even the Government
of India exercises some control does not make the appellant
any the less a holder of office under the two companies. We
do not think that this line of argument is correct. It has
to be noted that in Maulana Abdul Shakur’s case(2) the
appointment of the appellant in that case was not made by
the Government nor was he liable to be dismissed by the
Government. The appointment was made by the administrator
of a committee and he was liable to be dismissed by the same
body. In these circumstances this Court observed:
“No doubt the Committee of the Durgah
Endowment is to be appointed by the Government
of India but it is a body corporate with
perpetual succession acting, within the four
corners of the Act. Merely because the
Committee or the members of the Committee are
removable by the Government of India or the
Committee can make bye-laws prescribing the
duties and powers of its employees cannot in
our opinion convert the servants of the
Committee into holders of office of profit
under the Government of India. The appellant
is neither appointed by the Government of
India nor is removable by the Government of
India nor is he paid out of the revenues of
India. The power of the Government to appoint
a person to an office of profit or to continue
him in that office ‘or revoke his appointment
at their discretion and payment from out of
Government revenues are important factors in
determining whether that person is holding an
office of profit under the Government though
pay-
[1958] S.C.R. 387.
321
ment from a source other than Government revenue is not
always a decisive factor. But the appointment of the
appellant does not come within this test.
” It is clear from the aforesaid observations
that in Maulana Abdul Shakur’s case(1) the
factors which were held to be ,,decisive were
(a) the power of the Government to appoint a
person to an office of profit or to continue
him in that ,office or revoke his appointment
at their discretion, and (b) payment from out
of Government revenues, though it was pointed
out that payment from a source other than
Government revenues was not always a decisive
factor. In the case before us the appointment
of the appellant :as also his continuance in
office rests solely with the Government of
India in respect of the two companies. His
remuneration is also fixed by Government. We
assume for the purpose of this appeal, that
the two companies are statutory bodies
distinct from Government but we must remember
at the same time that they are Government com-
panies within the meaning of the Indian
Companies Act, 1956 and 1000% of the shares
are held by the Government. We must also
remember that in the performance of his
functions the appellant is controlled by the
Comptroller and Auditor-General who himself is
undoubtedly holder -of an office of profit
under the Government, though there are
safeguards in the Constitution as to his
tenure of office -and removability therefrom.
Under Art. 148 of the Constitution the
Comptroller and Auditor-General of India is
appointed by the President and he can be
removed from office in like manner and on the
like grounds as a judge ,of the Supreme Court.
The salary and other conditions of service of
the Comptroller and Auditor-General shall be
such as may be determined by Parliament by law
and until they are so determined shall be as
specified in the Second Schedule to the
Constitution. Under cl. (4) of Art.
148 the
Comptroller and Auditor-General is not
eligible for further office either under the
Government of India or under the Government of
any ‘State after he has ceased to hold his
office. Cl. (5) of the said Article lays down
that subject to the provisions of the
‘Constitution and of any law made by
Parliament, the administrative powers of the
Comptroller and Auditor-
(1)[1958] S.C.R. 387.
322
General shall be such as may be prescribed by rules made by
the President after consultation with the Comptroller and
Auditor-General. Under Art. 149 of the Constitution the
Comptroller and Auditor-General shall perform such duties
and exercise such powers in relation to the accounts of the
Union and of the States and of any other authority or body
as may be prescribed by or under any law made by Parliament
and, until provision in that behalf is so made, shall
perform such duties and exercise such powers in relation to
the accounts of the Union and of the States as were
conferred on or exercisable by the Auditor General of India
immediately before the commencement of the Constitution in
relation to the accounts of the Dominion of India and of the
Provinces respectively. The reports of the Comptroller and
Auditor-General of India relating to the accounts of the
Union have to be submitted to the President and the reports
of the Comptroller and Auditor General relating to the
accounts of 2 State have to be submitted to the Governor.
From the aforesaid provisions it appears to us that the
Comptroller and Auditor-General is himself a holder of an
office of profit under the Government of India, being
appointed by the President and his administrative powers arc
such as may be prescribed by rules made by the President,
subject to the provisions of the Constitution and of any law
made by Parliament. Therefore if we look at the matter from
the point of view of substance rather than of form, it
appears to us that the appellant as the holder of an office
of profit in the two Government companies, the Durgapur
Projects Ltd. and the Hindustan Steel Ltd., is really under
the Government of India; he is appointed by the Government
of India, lie is removable from office by the Government of
India; he performs functions for two Government companies
under the control of the Comptroller and Auditor-General who
himself is appointed by the President and whose
administrative powers may be controlled by rules made by the
President.
In Ramappa v. Sangappa(1) the question arose as to whether
the holder of a village office who has a hereditary right to
it is disqualified under Art. 191 of the’ Constitution,
which is the counterpart of Art. 102, in the matter
(1) [1959]1 S.C.R. 1167.
323
of membership of the State Legislature. It was observed
therein:
“The Government makes the appointment to the
office though it may be that it has under the
statute no option but to appoint the heir to
the office if he has fulfilled the statutory
requirements. The office is, therefore, held
by reason of the appointment by the Government
and not simply because of a hereditary right
to it. The fact that the Government cannot
refuse to make the appointment does not alter
the situation.”
There again the decisive test was held to be the test of
appointment. In view of these decisions we cannot accede to
the submission of Mr. Chaudhury that the several factors
which enter into the determination of this question-the
appointing authority, the authority vested with power to
terminate the appointment, the authority which determines
the remuneration, the source from which the remuneration is
paid, and the authority vested with power to control the
manner in which the duties of the office are discharged and
to give directions in that behalf-must all co-exist and each
must show subordination to Government and that it must
necessarily follow that if one of the elements is, absent,
the test of a person holding an office under the Government,
Central or State, is not satisfied. The cases we have
referred to specifically point out that the circumstance
that the source from which the remuneration is paid is not
from public revenue is a neutral factor-not decisive of the
question. As we have said earlier whether stress will be
laid on one factor or the other will depend on the facts of
each case. However, we have no hesitation in saying that
where the several elements, the power to appoint, the power
to dismiss, the power to control and give directions as to
the manner in which the duties of the office are to be
performed, and the power to determine the question of
remuneration are all present in a given case, then the
officer in question holds the office under the authority so
empowered.
For the reasons given above we have come to the conclusion
that the Election Tribunal and the High Court were right in
coming to the’ conclusion that the appellant as an auditor
‘of the two Government companies’ held an
324
office of profit under the Government of India within the
meaning of Art. 102(1)(a) of the Constitution. As such he
was disqualified for being chosen as, and for being, a
member of either House of Parliament. It is unnecessary to
consider the further question whether he was a holder of an
office of profit either under the Government of India or the
Government of West Bengal by reason of being an auditor for
the Life Insurance Corporation of India or a Director of the
West Bengal Financial Corporation.
The appeal accordingly fails and is dismissed with costs.
Appeal dismissed.