Som Prakash v Union of India (1981) 1 SCC 449

The case of Som Prakash v Union of India (1981) is a landmark judgement in constitutional law that deals with the interpretation of Article 12 of the Indian Constitution. This article defines the term “State,” expanding its scope to include statutory corporations, public sector undertakings (PSUs), and other government-controlled entities. The judgement also highlights the role of social justice in ensuring equitable treatment of employees, especially regarding post-retirement benefits. The Supreme Court’s ruling clarifies the obligations of government-acquired companies towards their employees and sets a precedent for interpreting constitutional rights in the context of public welfare.

Facts of Som Prakash v Union of India

• Background of the Petitioner: The petitioner, Som Prakash, was employed as a clerk at Burmah Shell Oil Storage Ltd. He opted for a voluntary retirement scheme at the age of 50 and retired on 1st April 1973. Upon retirement, he was entitled to:
  • Pension of Rs. 165.99 per month.
  • Supplementary retirement benefits (ex gratia) of Rs. 86 per month for 13 months.
  • Other benefits, including gratuity and the Employee Provident Fund (EPF).
• Government Takeover: In 1976, the central government enacted the Burmah Shell (Acquisition of Undertakings in India) Act, nationalising the company and making it a subsidiary of Bharat Petroleum Corporation Ltd. (BPCL).
• Dispute: On 25th September 1975, Burmah Shell informed the petitioner of two deductions from his pension:
  • For gratuity payments.
  • For EPF contributions.
  • As a result, his pension was reduced to Rs. 40.05 per month.
  • Additionally, the supplementary retirement benefit of Rs. 86 per month was discontinued.
• Petitioner’s Grievance: Aggrieved by these actions, Som Prakash directly approached the Supreme Court under Article 32 of the Constitution, alleging that the deductions were unjust and violated his fundamental rights.

Issues for Determination

The issues raised in Som Prakash v Union of India were:

• Whether Bharat Petroleum Corporation Ltd. (BPCL), a statutory corporation, qualifies as a “State” under Article 12 of the Constitution?
• Whether the deductions from the petitioner’s pension in the name of EPF and gratuity are justified, either in the public interest or legally?

Contentions of the Parties

Petitioner’s Arguments

• The deductions for gratuity and EPF from the original pension amount were invalid and unjustified.
• The actions of BPCL, as a government-acquired entity, must align with constitutional values and cannot violate fundamental rights.

Respondent’s Arguments

• BPCL is not a “State” under Article 12 and is therefore not subject to writ jurisdiction.
• Pension and gratuity are components of social security measures and must be treated integrally.
• The deductions were legitimate and necessary for the financial management of the corporation.

Som Prakash v Union of India Judgement

The case was heard by a three-judge bench of the Supreme Court, comprising Justice V.R. Krishna Iyer, Justice O. Chinnappa Reddy, and Justice R.S. Pathak. While Justice Krishna Iyer delivered the majority opinion, Justice Pathak dissented on certain points but concurred with the final decision to grant relief to the petitioner.

Key Observations and Ratio Decidendi:

• Applicability of Article 12: The Supreme Court clarified that the definition of “State” under Article 12 includes:
  • Statutory corporations.
  • Government companies.
  • Registered societies or other entities controlled by the government.
  • BPCL, being a government-acquired company performing functions akin to a proxy of the State, qualifies as a “State” under Article 12.
  • The bench emphasised that the term “other authority” in Article 12 must be interpreted broadly to include bodies that have a nexus with the government.
• Criteria for Determining “State”: Justice Krishna Iyer laid down two essential criteria to identify whether an entity qualifies as a “State”:
  • Proxy of the State: The entity must perform functions or conduct business on behalf of the government.
  • Legal Authority: The entity must have the power to affect legal relations due to statutory or government-conferred authority.
• Public Sector Undertakings (PSUs): The court highlighted the importance of PSUs as instruments of the State in achieving economic development and social justice. Even though PSUs are separate legal entities, they are accountable for ensuring compliance with constitutional principles.
• Social Security Benefits: The court observed that gratuity and provident funds serve distinct purposes and must be treated independently. Deducting gratuity payments from the pension amount defeats the purpose of providing comprehensive social security to employees. Any deductions that reduce the total entitlement of employees are unjust and violate the principles of equity and fairness.
• Relief Granted to the Petitioner: The bench ruled in favour of the petitioner, restoring his original pension and supplementary retirement benefits. It was held that the reductions in pension were unjustified, even if they were legally permissible.