The Food Corporation of India vs The Thikkod Panchayat and Others

Pareed Pillay, J.—The common question that arises for consideration in the writ appeals and the original petition is whether the property tax/building tax levied under Kerala Municipalities Act, 1960 (Act 14 of 1961) and the Kerala Panchayat Act 32 of 1960 on the buildings belonging to the Food Corporation of India is validly enforceable. The original petitions were dismissed by the learned Single Judge holding that the properties of the Food Corporation of India are not immune from tax under Article 285(1) of the Constitution of India.

O.P. 16545 of 1993 filed by the Food Corporation of India was heard along with the writ appeals in view of the common question of law involved.

Food Corporation of India is a body corporate established under the Food Corporations Act (Act 37 of 1964).The buildings mentioned in the writ appeals and the original petition were constructed by the Food Corporation (hereinafter referred to as ''the Appellant'') for carrying out its activities. Admittedly the buildings and the land in which they stand belong to the Appellant. It is also the admitted case that the Appellant had paid the property tax due to the local authorities when the demand was made. But Appellant has taken a contention that the local authorities cannot impose any tax on the Appellant in view of the embargo contained in Article 285 of the Constitution of India. Appellant contended that it is a part of the Union Government and that its properties are the properties of the Union and therefore beyond the purview of taxation by the State or any other authority within the State in view of Article 285(1) of the Constitution.

Article 285(1) confers immunity from tax imposed by the State or by any authority within a State. It is the case of the Appellant that it being an instrumentality of the State it is totally exempted from building tax/property tax imposed by the local bodies in the State. Respondents, on the other hand, contended that immunity from tax under Article 285(1) is available only to the property of the Union and not to the property of its instrumentalities or entities which have a separate juristic personality of their own.

To resolve the controversy, we have to consider the preamble of the Food Corporations Act. The preamble states that the Act has been intended to provide for the establishment of Food Corporations for the purpose of trading in foodgrains and other foodstuffs and for matters connected therewith and incidental thereto. In the Statement of Objects and Reasons of the Act it is stated that the Corporation would be engaged to function generally as an autonomous organisation working on commercial lines. Further it is stated that the Corporation will engage itself primarily in the purchase, storage, movement, transport, distribution and sale of foodgrains. Section 3 of the Act sheds sufficient light with regard to the nature of the Food Corporation. Section 3(2) provides that the Corporation shall be a body corporate having perpetual succession and a common seal with power, subject to the provisions of the Act, to acquire, hold and dispose of property and to contract, and may by that name sue and be sued. Section 5 deals with the capital of the Corporation. Section 5(2) states that the Central Government may from time to time increase the capital of the Corporation to such extent and in such manner as that Government may determine. Section 6 deals with the management of the Corporation. Section 6(2) postulates that the Board of Directors, in discharging its functions, shall act on business principles having regard to the interests of the producer and consumer and shall be guided by such instructions on questions of policy as may be given to it by the Central Government. Section 7 deals with the constitution of the Board of Directors, the members of which except one, shall all be appointed by the Central Government.

Learned Counsel for the Appellant relying on the above sections as well as the other sections in the Act contended that in view of the functions of the Appellant as envisaged under the various provisions of the Act the only conclusion possible is that it has no independent characteristics or autonomy and so it should be considered as part of the Union Government. Learned Counsel for the Respondents pointed out that in view of the fact that the Appellant is a body corporate with a soul of its own, with power to acquire, hold and dispose of the property, with a management policy of its own, based on commercial principles it cannot be considered as part of the Union Government, but can only be considered as a separate entity. As Section 3(2) provides that the Food Corporation of India shall be a body corporate with the perpetual succession and a common seal with the power to acquire, hold and dispose of property and as it may sue and be used by that name, contention of the Appellant does not deserve acceptancc.

In State of Punjab and Others Vs. Raja Ram and Others, the question considered was whether the Food Corporation was a Government department as contended by it. After surveying various provisions of the Food Corporations Act, the Supreme Court held that the Food Corporation was not a Government department. Contention of the Food Corporation was not accepted in the cited case by the Supreme Court holding that it is an autonomous body capable of acquiring or holding or disposing of property and having the power to contract. It is not possible to accept the contention of the Appellant that it is a Government department merely because its original capital was provided by the Central Government and majority of the directors are appointed by that Government. At the most Appellant is an agency or instrumentality of the Central Government coming within the purview of Article 12 of the Constitution of India. 1 Merely because of that, individuality of the Corporation is not lost. From a proper construction of the Act, it can be discerned that the Appellant has an individuality apart from that of the Union Government.

In Western Coalfields Limited Vs. Special Area Development Authority, Korba and Another, the question that arose for consideration before the Supreme Court was whether property tax was leviable by a local authority on the lands and buildings belonging to the companies incorporated. under the Companies Act; but the share capital of which was wholly contributed by the Government of India. The Supreme Court held that as the companies incorporated under the Companies Act has a separate personality of their own distinct from Government of India, their property is their own and not immune from municipal taxation. Hence, merely because the original capital of the Food Corporation came from the Union Government and on account of the fact that the Union Government increased the capital of the Corporation from time to time and that the capital was provided by the Union Government after due appropriation made by the Parliament by law as determined by that Government, a conclusion that it has no distinct personality of its own is not possible.

It is apposite to refer to Administrator, Municipal Council, Durg v. Additional Property Tax Commissioner, Madhya Pradesh 1980 Jubbalpur Law Journal 202 where a Division Bench of the Madhya Pradesh High Court held that though the Food Corporation being a statutory Corporation is an authority within the meaning of Article 12, Constitution of India, its employees are not servants of the Union Government and its properties are not properties of the Union. In the above decision, Section 3 and other sections of the Food Corporations Act were considered and the Court held that Food Corporation of India being a body corporate with power to acquire, hold and dispose of property it has a different legal entity from Union Government. Merely on account of the fact that the entire capital of the Corporation is contributed by the Central Government, that it is managed by Board of Directors nominated by the Central Government, that the surplus profits are payable to the Central Government and that the Corporation can be dissolved by the orders of the Central Government, its properties cannot be considered as properties of the Union Government so long as the Corporation is in existence as a separate legal entity and as it can sue and be sued and as it can acquire, hold and dispose of property as well as enter into contractual obligations. That being the position, Appellant''s properties are not immune from tax under Article 285(1) of the Constitution.

The learned Single Judge was justified in dismissing the Original Petitiosn. We see no reason to interfere. The writ appeals and the Original Petition are dismissed.