Tata Engineering & Locomotive Co Ltd v State of Bihar

Facts

• Tata Engineering & Locomotive Co Ltd challenged the constitutional validity of certain provisions of the Bihar Finance Act, 1961
• The company contended that the tax provisions violated its fundamental rights under Articles 14 and 19 of the Constitution
• The State of Bihar argued that a company, not being a natural person or citizen, cannot invoke fundamental rights
• The matter was referred to a Constitution Bench

Issues

1. Whether a company incorporated under the Companies Act is a "person" entitled to fundamental rights under Part III of the Constitution
2. Whether a company can invoke Article 19(1)(f) and (g) as a "citizen"

Held

• The Supreme Court held that a company is a juristic person capable of holding property and carrying on business. It can claim the protection of Article 14 (right to equality) which applies to all "persons." Regarding Article 19, the Court held that shareholders who are citizens can invoke Article 19 rights through the corporate vehicle, as a restriction on the company's right to carry on trade effectively restricts the shareholders' fundamental rights.
• The Court recognized that while a company is not a "citizen" in the natural sense, the fundamental rights of the citizen-shareholders should not be rendered illusory merely because they chose to associate in corporate form.

Ratio Decidendi

A company as a separate legal entity is entitled to the protection of fundamental rights under Part III of the Constitution. While Article 19 rights technically belong to citizens, shareholders acting through a company can claim those rights because denying them would render the right of citizens to form associations and carry on trade meaningless.