Kerala High Court rules that KITCO is a 'State' under Article 12 of Indian Constitution

Kerala High Court rules that KITCO is a 'State' under Article 12 of Indian Constitution

It was amenable to writ jurisdiction under Article 226

The Kerala High Court has held that the Kerala Industrial & Technical Consultancy Organization (KITCO) qualifies as a 'State' under Article 12 of the Constitution of India.

The Division Bench of Justice Anu Sivaraman and Justice C Pratheep Kumar observed that most shares of the company were held by instrumentalities of the Central government and the State government had a ‘decisive representation’ on the Board.

The Court held, "It is clear from a reading of the Articles of Association and the documents produced in the writ petition and in the writ appeal that the State and the Central governments 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 recognized as an accredited government agency for public works in the State.”

The petitioners had moved an appeal against the order of the single judge, refusing to consider a writ petition against KITCO. The judge had held that it was not maintainable since KITCO was not a State under Article 12. He had cited the KJ Johnson vs. Kerala Industrial and Technical Consultancy and ors case.

The appellants argued that the decision in the KJ Johnson matter considered only the shareholding by the State of Kerala and the control exercised by it, as opposed to the deep and pervasive control exercised by the State through its instrumentalities on KITCO.

The appellants submitted that KITCO was a public sector undertaking (PSU) established under the Industrial Development Bank of India and the Government of Kerala, along with other public sector banks and statutory corporations.

They argued that about 95 percent of KITCO shares were either held by the government or statutory companies. KITCO was listed as a Union government company on the portal of the Ministry of Corporate Affairs, along with the Goods and Services Tax (GST) registration certification, categorizing it as a PSU. KITCO was also annually audited by the Comptroller and Auditor General of India. The appellants also cited Section 2(45) of the Companies Act, 2013, which defines a government company.

The High Court thus held, “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 the Government of Kerala as its shareholders. There is no private shareholding in the company.”

The Court added, “The company is recognized as a public sector enterprise by the Central government and the Government of Kerala and is listed as a Central government company.” The affairs of the company were decided by the shareholders, who were public sector undertakings.

The judges rejected the KJ Johnson decision in the present context, which would mean that KITCO could not be construed as a State as per Article 12. That was because only 3 percent of its shares were held by the Government of Kerala.

The Court pointed out that considering that most of the shares were held by instrumentalities of the government, it had a decisive representation on the Board.

The bench thus allowed the petition and held that the respondent company was an instrumentality of the Union of India under Article 12 of the Constitution of India.