'No Private Shareholding': High Court Holds Kerala Industrial & Technical Consultancy Organisation Is 'State' Under Article 12
In a recent decision, the Kerala High Court has held that KITCO (Kerala Industrial & Technical Consultancy Organisation) qualifies as 'State' under Article 12 of the Constitution and therefore, is amenable to writ jurisdiction under Article 226 of the Constitution.A division bench of Justice Anu Sivaraman and Justice C Pratheep Kumar observed that large majority of shares of the company...
In a recent decision, the Kerala High Court has held that KITCO (Kerala Industrial & Technical Consultancy Organisation) qualifies as 'State' under Article 12 of the Constitution and therefore, is amenable to writ jurisdiction under Article 226 of the Constitution.
A division bench of Justice Anu Sivaraman and Justice C Pratheep Kumar observed that large majority of shares of the company are held by instrumentalities of the Central Government. Even the State government has a "decisive representation" in the Board, it noted.
"It is clear from a reading of the Articles of Association and the documents produced in the writ petition and in this writ appeal that the State and Central Governments themselves specifically consider the 1st respondent [KITCO] as a Central Government company. It is also discernible that the accounts of the 1st respondent are audited by the Comptroller and Auditor General of India treating it as a deemed Government company. It is recognised as an accredited Government agency for the purpose of public works in the State," the bench added.
The petitioners had moved an appeal against single judge's order refusing to consider a writ petition against KITCO holding that is not maintainable since KITCO is not State under Article 12 of the Constitution. The single judge had cited KJ Johnson v. Kerala Industrial and Technical Consultancy and ors.
The appellants argued that the decision in KJ Johnson only considered the shareholding by the State of Kerala and the control exercised by the State, as opposed to the deep and pervasive control exercised by the State through its instrumentalities on KITCO.
The appellants submitted that KITCO is a public sector undertaking established under the Industrial Development Bank of India and the Government of Kerala along with other public sector banks and statutory corporations, arguing that about 95 percent of the shares in KITCO are either held by the government or statutory companies. Additionally, KITCO is listed as a union government company on the portal of the Ministry of Corporate Affairs, along with the GST registration certification categorizing it as a public sector undertaking. KITCO is also annually audited by the Comptroller and Auditor General of India. The appellants also noted Section 2(45) of the Companies Act, 2013 which defines a government company, it was submitted.
The court examined the submissions, stating that “the Memorandum and Articles of Association of the 1st respondent company would make it clear that it is a company incorporated with public entities, including the SIDBI, IFCI, ICICI Public Sector Banks and Government of Kerala as its shareholders. There is, admittedly, no private shareholding in the company.”
The court went on to add that the “company is recognised as a public sector enterprise by the Central Government and the Government of Kerala and is listed as a Central Government company” noting that the affairs of the company are decided by the shareholders who are public sector undertakings.
The court rejected the argument in KJ Johnson which concluded that KITCO cannot be construed as a State as per Article 12 because only 3% of its shares are held by the Government of Kerala. The court pointed out that considering that a large majority of the shares are held by instrumentalities of the government, it has a decisive representation in the board.
The bench allowed the petition and held that the respondent company is an instrumentality of the Union of India under Article 12 of the Constitution.
Counsel for Appellants: Advocates Abraham Joseph Markos, V Abraham Markos, Isaac Thomas, PG Chandapillai Abraham, Alexander Joseph Markos, Sharad Joseph Kodanthara, John Vithayathil and Aibel Mathew Siby
Counsel for Respondents: Advocates Gopikrishnan Nambiar, B Ashok Shenoy, K John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C Abraham, Raja Kannan, Pooja Menon, PS Gireesh, Arjun R Naik, Thejalakshmi RS, Aaron Zacharias Benny and EK Nandakumar
Case Title: Welfare Association of Kitco Employees (Wake) & ors v. Kerala Industrial and Technical Consultancy Organization (Kitco) & ors.
Case Number: WA No. 691 of 2023
Citation: 2024 LiveLaw (Ker) 74