Legislative Control of Public Undertakings
📘 Legislative Control of Public Undertakings
🏛️ What are Public Undertakings?
Public undertakings, also known as Public Sector Undertakings (PSUs) or State-owned enterprises, are corporations owned or controlled by the government, engaged in commercial or industrial activities. Examples include nationalized banks, power corporations, oil companies, and transportation services.
📌 Why is Legislative Control Necessary?
Even though public undertakings operate commercially, they use public funds and affect public interest, so they must be accountable. Legislative control ensures that:
Public funds are properly used,
Enterprises act transparently and legally,
There is accountability to Parliament or Legislature,
Government policy objectives are met without corruption or inefficiency.
🧭 Modes of Legislative Control
| Control Mechanism | Description |
|---|---|
| Parliamentary Questions | MPs can question Ministers about the functioning of PSUs |
| Annual Reports and Audits | PSUs must submit annual reports to Parliament for scrutiny |
| Public Accounts Committee (PAC) | Examines CAG audit reports of PSUs |
| Committee on Public Undertakings (COPU) | Examines the reports, functioning, and efficiency of PSUs |
| Budgetary Control | Parliament sanctions and monitors financial outlays to PSUs |
| Legislative Debates | PSUs' performance can be debated in Parliament |
| Ministerial Responsibility | Ministers are accountable to Parliament for PSUs under their departments |
⚖️ Detailed Case Law Analysis on Legislative Control of Public Undertakings
1. Ajay Hasia v. Khalid Mujib Sehravardi (1981) 1 SCC 722
Facts:
A college set up as a registered society was being treated as an autonomous body. Petitioners challenged admissions and procedures as arbitrary.
Issue:
Is an entity that receives substantial government funding and control a "State" under Article 12?
Holding:
Yes, the Court held that even though it is not created by statute, if the government exercises deep and pervasive control, the body is considered an instrumentality of the State.
Significance:
Even autonomous public undertakings are subject to constitutional obligations.
Reinforces that legislative accountability applies even to societies/companies substantially funded and controlled by the State.
2. R.D. Shetty v. International Airport Authority of India (1979) 3 SCC 489
Facts:
A private party was denied a contract by the Airport Authority, which was a PSU.
Issue:
Does a public undertaking need to follow fairness and reasonableness under Article 14?
Holding:
Yes, PSUs must act fairly, transparently, and without arbitrariness.
Significance:
Public undertakings are subject to constitutional scrutiny.
Legislative control includes ensuring that PSU rules align with constitutional guarantees.
3. Pradeep Kumar Biswas v. Indian Institute of Chemical Biology (2002) 5 SCC 111
Facts:
The question was whether the CSIR (Council for Scientific and Industrial Research) was a "State" under Article 12.
Issue:
Can a scientific research body with autonomy be held accountable under constitutional and legislative scrutiny?
Holding:
Yes. If the government exercises functional, financial, and administrative control, it qualifies as "State".
Significance:
Extended legislative and judicial control to non-statutory bodies significantly controlled by government.
Reinforces that public accountability mechanisms apply to such entities.
4. Balco Employees’ Union v. Union of India (2002) 2 SCC 333
Facts:
Employees challenged disinvestment of a PSU (BALCO), alleging lack of transparency.
Issue:
Can courts review the government’s policy decision to disinvest a PSU?
Holding:
The Supreme Court ruled that policy decisions (like disinvestment) fall within the executive's domain and are not subject to judicial review unless arbitrary or unconstitutional.
Significance:
While legislative control over public undertakings is essential, courts avoid interfering in policy matters unless rights are violated.
Showed the limits of judicial and legislative scrutiny over economic policy decisions.
5. Zee Telefilms Ltd. v. Union of India (2005) 4 SCC 649
Facts:
The petitioner questioned BCCI’s exclusion of a player, arguing it was a public authority.
Issue:
Was BCCI (a private body) subject to legislative or constitutional control?
Holding:
No, BCCI was held not to be "State" under Article 12, since it lacked pervasive governmental control.
Significance:
Clarified that not all large or influential bodies are public undertakings.
Legislative control applies only when government involvement is deep and pervasive.
🔍 Summary Table of Case Laws
| Case Name | Year | Core Issue | Principle Established |
|---|---|---|---|
| Ajay Hasia v. Khalid Mujib | 1981 | Status of registered societies as State | Government-controlled entities are subject to constitutional norms |
| R.D. Shetty v. IAAI | 1979 | Contract fairness by PSU | PSUs must act fairly and transparently |
| Pradeep Kumar Biswas v. CSIR | 2002 | Government control over autonomous body | Functional and financial control brings entity under Article 12 |
| BALCO Employees Union v. UOI | 2002 | Disinvestment policy | Legislative control exists, but policy choices are with executive |
| Zee Telefilms Ltd. v. UOI | 2005 | Is a private body a "State"? | Pervasive control is essential for legislative accountability |
🧠 Key Principles on Legislative Control from Case Law
Deep and Pervasive Control Test:
Courts assess whether the government has financial, administrative, and functional control.
If yes, the entity is accountable to the legislature.
Public Funding and Function:
If an entity performs public functions using public funds, legislative oversight is required.
Fairness and Transparency:
PSUs must follow constitutional standards, especially under Articles 14 and 21.
Autonomy ≠ Immunity:
Even autonomous public undertakings can be legislatively accountable if public interest is involved.
✅ Conclusion
The legislative control of public undertakings is an essential aspect of modern democratic governance. Through tools like question hours, audits, committees, and constitutional doctrines, legislatures ensure that public money and power are not misused.
Case law further clarifies that:
Not all bodies receiving public funds are automatically under legislative control.
The extent of government control determines accountability.
PSUs must align with constitutional values and public accountability, even if operating commercially.
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