Will A Company Become State Instrumentality Under Article 12 If Its Shares Are Held By PSUs? Supreme Court To Consider

The Supreme Court has agreed to examine the question whether a company in which the shares are held by various Public Sector Undertakings, would be an instrumentality of the State, under Article 12 of the Constitution.

The issue arose in a petition filed by the Kerala Industrial and Technical Consultancy Organisation (KITCO) challenging a judgment of the Kerala High Court that KITCO would come under the definition of "State" under Article 12 of the Constitution as an instrumentality of the State.

The petitioner pointed out that the Kerala High Court relied on a judgment of the Madhya Pradesh High Court in Shanti Construction v. Avantika Gas Limited & Ors. However, the Supreme Court has issued notice on a Special Leave Petition challenging the MP High Court's judgment in Shanti Construction v. Avantika Gas Limited & Ors.

"The basic issue in these cases is whether a company where the shares are held by various Public Sector Undertakings, would be an instrumentality of the State, under Article 12 of the Constitution or not," the bench comprising Justices Hrishikesh Roy and Prashant Kumar Mishra observed.

Issuing notice on the present matter, the Court tagged it along with the SLP in the Avantika Gas Ltd case. The Kerala High Court's judgment was also stayed.

In the impugned judgment, the High Court division bench comprising Justices Anu Sivaraman and C Pratheep Kumar observed that large majority of shares of the company are held by instrumentalities of the Central Government and that even the State government has a "decisive representation" in the Board. Hence, the High Court held that it was a State instrumentality amenable to writ petition under Article 226 of the Constitution.

Case : Kerala Industrial and Technical Consultancy Organisation (KITCO v. Welfare Association of KITCO Employees | Petition(s) for Special Leave to Appeal (C) No(s). 9327/2024

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