Is company a citizen ?

Is company a citizen ?

Although a company is regarded as a legal person (though artificial), it is not a citizen either under the Constitution of India or the Citizenship Act, 1955 – Heavy Engineering Mazdoor Union v. State of Bihar [1969] 39 Comp. Cas. 905 (SC).

The Supreme Court of India in State Trading Corporation of India Ltd. v. CTO [1963] 33 Comp. Cas. 1057 held that a Corporation (including a Company) cannot have the status of a citizen under the Constitution of India. Thus, under the Constitution, a company has no fundamental rights which are expressly available to citizens only. It can, however, claim the protection of those fundamental rights which are available to all persons, whether citizens or not, for example, the right to own property.

In Narasaraopeta Electric Corpn. Ltd. v. State of Madras [1951] 21 Comp. Cas. 297 (Mad.), the High Court observed that a company incorporated under the Indian Companies Act does not satisfy the requirements of the definition of ‘citizen’ in Article 5 of the Constitution and therefore is not a citizen.

Is company a citizen?
Similar view was upheld by the Supreme Court in the case of State Trading Corporation of India Ltd. v. CTO [1963] 33 Comp. Cas. 1057. The Supreme Court, in this case, observed that the rights of citizenship and the rights flowing from the nationality or domicile of a Corporation are not co-terminus.

It would thus appear that the makers of the Constitution had altogether left out the consideration of juristic persons when they enacted Part II of the Constitution relating to citizens and made a clear distinction between ‘persons’ and ‘citizen’ in Part III of the Constitution.

Part III, which proclaims fundamental rights was very accurately drafted, delimiting those rights like freedom of speech and expression, the right to assemble peacefully, the right to practice a profession, etc., as belonging to citizens only and those more general rights like the right to equality before the law, as belonging to all persons.

Corporation may have nationality in accordance with the country of their incorporation; but that does not necessarily confer citizenship on them. There is also no doubt that Part II of the Constitution when dealing with citizenship refers to natural persons only. This is further made absolutely clear by the Citizenship Act which confines citizenship to natural persons only.

A company is also not allowed to lay claim to fundamental rights on the basis of its being an aggregation of citizens. Once a company or a corporation is formed, the business of the company or corporation is not the business of the citizens but that of the company or corporation formed as an incorporated body, and the rights of the incorporated body must be judged on that footing and cannot be judged on the assumption that they are the rights attributable to the business of individual citizens – Telco Ltd. v. State of Bihar [1964] 34 Comp. Cas. 458 (SC).

It should, however, be noted that certain fundamental rights enshrined in the Constitution are for protection of any person, for example, right to equality, etc. (Article 14) are available to a company.

In Chiranjilal Chaudhari v. Union of India [1951] 21 Comp. Cas. 33, the Supreme Court held that the fundamental rights guaranteed by the Constitution are available not merely to individual citizens but to corporate bodies as well except where the language of the provision or the nature of the right compels the inference that they are applicable only to natural persons.

Similarly in Bennet Coleman Co. v. Union of India [1972] S.C.C. 788, 806, the Supreme Court extended the rule by stating “it is now clear that the fundamental rights of shareholders as citizens are not lost when they associate to form the company. When their fundamental rights as shareholders are impaired by State action, their rights as shareholders are protected. The reason is that the shareholders’ rights are equally and necessarily affected if the rights of the company are affected.

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