SMT. LEELABAI GAJANAN PANSARE & ORS. v. THE ORIENTAL INSURANCE CO. LTD. & ORS.

A PSUs. In the present matter, the High Court has taken a view that Government companies stands excluded from PSU under Section 3(1)(b) as Government companies are separate and distinct entities from PS Us and since Government Company is not in the enumerated item~ in Section 3(1 )(b) one cannot in- 8 elude the said entity within the meaning of the word PSU. This view of the High Court is erroneous for the simple reason that the word PSU is not defined under any Act. "the word PSU is indicated in various Parliamentary Committees on Administra- tive Reforms so that in financial, employment and in policy mat- e ters, the Central/ State Government could evolve norms/stan- dards. It is no doubttrue that the public character of the func- tions performed by the Undertaking determine the character of that undertaking. It is the public charac:;ter of the functions of the undertaking which makes it a PSU. However, there is no con- D elusive test for determining the status of an undertaking ~s a PSU. In judging the character of an entity, the court has to keep in mind the context in which the word PSU is used in a given enactment. There are a number of tests which could be applied in judging the character of an entity, namely, the test of origin, the tes·t of agency or instrumentality of the State, the functional test, the monopolistic status of an entity, test concerning areas of operations, the test of economies of scale, the test of control, the role of the entity in the priority sector etc. Therefore, there is no one conclusive test applicable to decide the character of an entlty. For example, nationalized banks have been held to fall within State by this, Court on an application of the test of control. Similarly, the test of "agency or instrumentality" that came to be laid down brought the Government companies, as defined un- der Section 617 of the 1956 Act. to be included within the con- cept of. State for the purposes of Article 12 of the Constitution G (see: Som Prakash Rekhi v. UOI and anr. [1981]1SCC449). Therefore, none of the above tests is conclusive in itself. Suf- fice it to state that Government companies under Section 617 are understoog by the Legislature to be a part of PSUs.. There- fore, even on the web site of Central Government; Undertak~ . H ings under the caption of PSUsiPSEs, we find Government

SMT. LEELABAI GAJANAN PANSARE & ORS. v. 297 THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.] \,. ,, companies, State owned Government companies being listed A under the caption of PSUs/PSEs. These items have been enu- merated on the basis of Legislative Understanding. According to the book titled "Growth of Trade, Commerce and PS Us" Writ- ten by Shri Suresh Prasad Padhy, the PS Us may be in. the form of departmental units, corporations, Government companies, B

... -i autonomous bodies or authorities. Corporate governance, ac- cording to Geeta Gouri; is one of the major process for putting PS Es and PS Us on the right track. In the list of PS Us published on the web site of the Central Govern met, BPCL is shown as a PSU. Similarly, MTNL and BSNL are Government companies c which are also shown as PSUs. According to Bishwa Nath Singh, author of "Public Enterprise in Theory and Practice" for "efficient working of public enterprises a combination of economy and accountability is essential. The corporate form of undertaking has an advantageous position because it has nee- D essary flexibility and operational freedom. The statutory corpo- rations are set up under specific Statute of Parliament which statute indicates the extent of their accountability and the na- ture of Parliamentary control. On the other hand, a Government ·I company is possessed with the merits of easy formation, flex- ibility in administration, wider source of resources mobilization, freedom from accounting and audit laws and procedures appli- cable to Government departments as well as providing a bal- ance between autonomy and control. For its formation, there is no need of a separate enactment. Under the Indian Campa- nies Act, 1956, a company may be established by issue of ex- F )-~ ecutive order by a Gazette notification or on a formal registra- tion by a Memorandum and Articles of Association. This form of organization is free from day-to-day Government Interference. Thus, all the important forms of organization for the PS Us have certain advantages and certain limitations. A majority of PSU"s G in India are in the company form and the idea behind bringing more PS Us in this form has been mainly that of autonomy. Simi- lar is the case of statutory corporations which are also created to mitigate the drawbacks of departmental administration" (see ·page 91). H

298 SUPREME COURT REPORTS [2008] 12 S.C.R.

A · · -· 43. In :the Elev·enth Report o{ the Gommitfee on Public Undertakings (2005-2006) orie ofthe topics related to Health Care ln-su_r~nce. ·1n .the introduction, the committee has referred to health insurance schemes issued by four,'Public sectors gen~ eraf'insurance com-pani~s. namely, National Insurance Com- 8 pan'y Ltd., New India Assurance Company Ltd., OICLand UICL. In the ·saldintroduCtion; there is.also referen·ce to LIC, a sta.tu- tory· corporation, which also offers health covers. This Report \- ... indicates that companies under Section 617 of the Companies Act, 1956, ·including OICL and UICL, are all classified under c one category, namely· PS Us. The Committee ·was headed by the Chairman, Rupchand Pal; it~'members consisted ofMPs from~ Lok ·s-~t>ha and Rajya Sabha'. The Report also refe'rs to .. - . -- the opening up of the insu'rance indu~try in the year 20.00 for competitibn from private players including· banks and it also refers to the cohstitutioh of a regulatory authority, namely, lnsur- 0 a_nce "Regulatory and Development Authority Act,• 1999_ · ' • ,/ ' r ' I

44.-A similar Committee on Public Undertakings had cQn- ducted studies on OICL and National Insurance Company Ltd. in- 2001-2002 consisting of MPs from Lok Sabha and.R.ajya E Sabha. This Report.also indicates that the Legislature has taken into accqunt the impactof privatization on the insurance sector. In. the Report, public s~ctor undertakings cover public sector companies. The Report inc;licates that in the insurance sector, the. players consist of public sectqr companies, LIC (statutory corporation) as well as Government companies under Section 617 .of the. 1956 Act. In the Report, the history of OIC is set out (see: ·para 2). The point to be noted is that all. Parliamentary Committees on public undertakings have proceeded pn the basis that OIC and UICL are companies under Section 617 of G · the.--1956 Act; that they are public sector-insurance companies and accordingly they are all treated as body corporates falling under PSUs., · 1

45. Therefore, the above discussion indicates clearly that statutOrY. cbrporatfons, public sector companies ar.d Govern- H ment companies are merely corporate forms. India's PS Us may

SMT. LEELABAI GAJANAN PANSARE & ORS. v. 299 THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

-- ., be in the corporate forms or in the form of statutory corpora- tions or in the form of public sector companies. This is the leg- islative understanding indicated by various Parliamentary Com- A

mittees like Estimates Committee, Administrative Reforms Commission and Study Team on PSUs constituted by Admin- istrative Reforms Commission. The insurance industry in India B has private players in it like Bajaj Allianz Life. It also has SBI I

-4 Life as one of the players. It also has UC in the said sector/ ~ industry besides OIC, UIC etc. This aspect is important.

46. According to the respondents, the words 'PSUs' in Section 3(1 )(b) has to be read with the words any corporation c established by or under Central or State Act. In other words, according to the respondents, only those PSUs which are es- tablished by or under any Central or State Act alone stand ex- eluded from the protection of the Rent Act According to the re- spondents, PSUs which are Government companies incorpo- D rated under Section 617 of the 1956 Act are entitled to the pro- tection as they are not expressly excluded under Section 3(1)(b). ~ We do not find merit in this submission. Firstly, it may be noted that several entities have been enumerated in Section 3(1 )(b), namely, banks, PSUs or statutory corporations, foreign mis- E sions, international agencies, multinational companies and pri- vate limited and public limited companies having a paid up share capital of Rs. 1,00,00,000 or more. As stated above, the said Rent Act, 1999 has brought about structural changes in the leg-

-- islation. In this case, it was open to the legislature to opt for any F of the tests, namely, test of origin, test of public character of the ~ functions performed by each of these entities, test of public char- acter of each of the undertakings, test of agency or instrumen- tality, test of monopolistic status, test of mobilization of resources etc. In the present case, we find that the legislature has opted for an economic criteria, namely, entities which are in a posi- G tion to pay rent at market rates are to stand excluded from Rent Act protection. This is the test of Financial Capability. This is the golden thread which runs through Section 3(1 )(a). Be it banks, PS Us. Statutory corporations, multinational companies, foreign H

300 SUPREME COURT REPORTS [2008] 12 S.C.R.

A missions, international agencies and public and private limited companies having a paid up share capital of Rs. 1,00,00,000 or more stand excluded from the Rent Act protection. This crite- ria has been s.elected by the legislature knowing fully well that each of these entities including PS Us can afford to pay rent at B the market rates. Secondly, we have given in-depth consider- ation to the contention advanced on behalf of the respondents on the interpretation of Section 3(1 )(b). We are of the view that to accept the contention of the respondents, namely, that only PSUs which are established by or under the Central or State c Acts will not get protection whereas PSUs which are Govern- ment companies incorporated under the 1956 Act would con- tinue to get protection would make the Section 3(1 )(b) vulner- able to challenge as violative of Article 14 of the Constitution. In this regard, it may be noted thaUn the insurance industry, we have LIC, banks, private sector companies and Government 0 companies. To say that LIC being a statutory corporation stands excluded from the provisions of the Rent Act whereas Govern- ment companies incorporated under the Companies Act, 1956 would continue to get protection would lead to arbitrary discrimi- nation under Article 14 to the Constitution. In the case cited by E Mr. Soli J. Sorabjee, learned counsel for the appellants, namely, Shah and Co. v. State of Maharashtra (1967) 3 SCR 466 this Court held that to place such a construction as will save the statute from constitutional challenge is a well settled principle of interpretation. In the said Judgment, it has been held as fol- F lows: "to place such a construction as will save the statute from constitutional challenge ... having special regard for the principle of constitutional adjudication "which makes it decisive in the. choice of fair alternatives that one G construction may raise serious constitutional questions avoided by another. ... ". (emphasis supplied)

47. Moreover, if we are to hold that PSUs do not include H

SMT. LEELABAI GAJANAN PANSARE & ORS. v. 301 THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

>' ') Government companies, as held by the High Court, we would A be disturbing the package offered by the Legislature of allow- ing increase of rent annually at 5%, allowing the landlords to accept premium and exclusion of certain entities from the pro- tection of the Rent Act under Section 3(1 )(b). On the other hand, acceptance of the arguments advanced on behalf of the respon- B dents on the interpretation of Section 3(1 )(b) would make the Act vulnerable to challenge as violative of Article 14 of the Con- stitution. Therefore, we are of the view that on a plain meaning of the words 'PS Us' as understood by the Legislature, it is clear that, India's PSUs are in the form of statutory corporations, public c sector companies, Government companies and companies in which the public are substantially interested (see: Income tax Act, 1961). Whentheword PSU is mentioned in Section 3(1)(b), the State Legislature is presumed to know the recommenda- tions of the various Parliamentary Committees on PS Us. These D entities are basically cash-rich entities. They have positive net asset value. They have positive net worths. They can afford to pay rents at the market rate. Thirdly, we are. of the view that, in this case, the principle of noscittur a sociisis clearly applicable. According to this principle, when two or more words which are susceptible to analogous meaning are coupled together, the words can take their colour from each other. Applying this test, we hold that Section 3(1 )(b) clearly applies to different catego- ries of tenants all of whom are capable of paying rent at the market rates. Multinational companies, international agencies, statutory corporations, Government companies, public sector companies can certainly afford to pay rent at the market rates. ~ This thought is further highlighted by the last category in Sec"'. tion 3(1)(b). Private limited companies and public limited com- panies having paid up share capital of more than Rs. 1,00,00,000 are excluded from the protection of the Rent Act. G This further supports the view which we have taken that each ) and every entities mentioned in Section 3(1 )(b) can afford to pay rent at the market rates. We may note that to meet the chal- lenge of discrimination under Article 14 it is not sufficient to state that there is an intelligible differentia but it is further essential H

302 SUPREME COURT REPORTS [2008] 12 S.C.R.

A requirement to show that the differentia has a rational nexus to ~ ,._,, the object sought to be achieved by the Statute in question. (see: State of Rajasthan v. Mukanchand and ors. (1964) 6 SCR 903.) As stated above, Section 3(1)(b) strikes a balance between the interest of the landlords and the tenants; it is neither pro- 8 landlords nor anti-tenants. It is pro-public interest. In this con- nection, one must keep in mind the fact that the said Rent Act, 1999 involves a structural change vis-a-vis the Bombay Rent .... Act, 1947. As stated above, with the passage of time, the 1947 Act became vulnerable to challenge as violative of Article 14. c As stated above, the legislature has strike to balance the twin objectives of Rent Act protection and rent restriction for those who cannot afford to pay rents at the market rates. To accept the interpretation advanced on behalf of the respondents for excluding Government companies from the meaning of the words "PSUs" in Section 3(1)(b) would amount to disturbing the neat balance struck by the Legislature. OIC and UIC are Government companies. They have paid up capital of more than Rs. 100 crores. They can easily afford to pay rents at the mar- ... I,_ ket rates. The legislature in its wisdom has kept PSUs, includ- ing Government companies, outside the Rent Act. We have to proceed on the basis that the State Legislature was aware of ~-

the meaning of the words PSUs as understood by the various f Parliamentary Committees. If Government companies are to t be excluded from Section 3( 1)(b) then the test of intelligible differentia having rational nexus to the objects sought to be F ··achieved by the said Rent Act would stand defeated. We can- not exclude such PSUs from Section 3(1)(b) as is sought to _be contended on behalf of the respondents. PSUs including Gov- .,.. ~ t

ernment Companies are independent companies/corporations. They cannot be equated to the "Government" in Section 3(1 )(a). G We have to read Section 3(1 )(b) in its entirety. We have to read the said section keeping in mind the reasons for its enactment. Lastly, we are of the view that the High Court judgment is erro- ~1 neous when it adds words to Section 3(1)(b), namely, "which is \ not a Government company". In other words, the High Court states that OIC/UIC and BPCL are public undertakings, how- \ H

SMT. LEELABAI GAJANAN PANSARE & ORS. v. 303 THE ORIENTAL INSU. CO. LTD. & ORS. [S. H. KAPADIA, J.]

ever, they are Government companies incorporated under Sec- A tion 617 of the 1956 Act and, therefore, stand excluded from Section 3(1 )(b). In this connection it may be stated that High Court has relied upon the definition of Gbvernment Company under Section 617 of the Companies Act. In the case of Union of India and others v. R. C. Jain and others - 1981 (2) SCC B 308 this Court has enunciated the principle that "the definition of an expression in one Act must not be imported into another. It would be a new terror in the construction of Acts if we were required to limit a word to an unnatural sense because in some Act which is not incorporated or referred to such an interpreta- C tion is given to it for the purposes of that Act alone." Lastly, the interpretation placed by the High Court on the word "PSUs" in Section 3(1 )(b) amounts to judicial legislation and further it de- feats the very object of Section 3(1 )(b).

48. Before concluding, we may note that we have inter- 0 preted the words 'PS Us' in Section 3(1 )(b) purely in the context of the provisions of the Maharashtr~ Rent Control Act, 1999. Our judgment is, therefore, confined strictly to the said provi- sions of the Rent Act.

49. For the aforestated reasons, we hold that OIC, UIC E and BPCL and such other Government companies as defined under Section 617 of the Companies Act are not entitled to pro- tection of the Maharashtra Rent Control Act, 1999 in view of the provisions of Section 3( 1)(b). F

50. Accordingly, civil appeals arising out of SLP(C) No. 5855/07 and 16237/08 filed by Smt. Leelabai Gajanan Pansare & Ors. and Hongkong & Shanghai Banking Corporation Ltd. respectively are allowed with no order as to costs. Civil Appeals arising out of SLP(C) Nos. 24789-247901 G 07:

-- [Bharat Petroleum Corporation Ltd. v. Sunil Niranjan Jhaveri] '

51. Leave granted. H

304 SUPREME COURT REPORTS [2008] 12 S.C.R.

A 52. A decree for possession was passed by the Small Causes Court at Mumbai against the appellant herein - Mis Bharat Petroleum Corporation Ltd. (BPCL). It was confirmed by the Appellate Bench of the Small Causes Court.

53. The decree was challenged by BPCL by filing Civil Re- B vision Application No ..173/07 in Bombay High Court. The said -~ CRA No. 173/07 stood rejected by the impugned order dated ).....

·4.5.2007. That decision was given on the merits of the case and not on the interpretation of Section 3(1)(b) of the Maharashtra Rent Control Act, 1999 ("Rent Act"). However, thereafter a review c petition was moved by BPCL vide CRA No. 173/07 in which one of the grounds taken by BPCL was that in view of the decision of the Division Bench of the Bombay High Court in the case of Smt. Leela Gajanan Pansare v. Oriental Insurance Co. Ltd. and ors. dated 20.12.2006 in First Appeal No. 1245/04 the Revision Pe- D tition of BPCL needs to be made absolute and the decree of the Small Causes Court was required to be set aside. ·The review petition was dismissed by the High Court for lack of factual foun- dation. Hence, these civil appeals.

54. Today, vide civil appeal arising out of SLP(C) No. 5855/ .L E 07 we have set aside the Division Bench judgment of the Bombay High Court dated 20.12.2006 in the case of Smt. Leela Gajanan Pansare v. Oriental Insurance Co. Ltd ..

55. Accordingly, we dismiss these civil appeals filed by F BPCL for the reasons contained in our judgment in the case of Smt. Leela Gajanan Pansare v. Oriental Insurance Co. Ltd. (su- . pra) with no order as to costs.

56. Since Oriental Insurance Company Ltd., United India Insurance Company Ltd. and Bharat Petroleum Corporation Ltd. G are liable to be evicted, decree against them for eviction shall not be executed for a period of one year commencing from the

- date of this judgment on their giving undertaking in the usual form within a period of four weeks. I..

H K.K.T. Appeals disposed of.