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Sulakhani Devi Mahajan Memorial Lectures Structure of and Legal Control Over Public Enterprises in India

Cite as : (1975) 1 SCC (Jour) 25

The Sulakhani Devi Mahajan Memorial Lectures were delivered by the Hon'ble Mr. Justice S. Rangarajan of the High Court of Delhi on December 9, 10 and 11, 1974, and were presided over by the Hon'ble Mr. Justice K. K. Mathew, the Hon'ble Mr. Justice P. N. Bhagwati and Shri T. A. Pai, Minister of Industry and Civil Supplies, Government of India, respectively. On December 9, 1974, the following address of Shri J. M. Shelat, a former Judge of the Supreme Court of India, who is the Chairman of the Sulakhani Devi Mahajan Memorial Lectures was read out by Dr. V. D. Mahajan :

Address of Shri J. M. Shelat :

The Sulakhani Devi Mahajan Trust has once again been fortunate to have Mr. Justice Rangarajan, a distinguished Judge of the High Court of Delhi, to deliver three lectures this year on a topic which must inevitably interest every public-minded person. These lectures are bound to provoke new thoughts as they come from a scholar given to industry and fresh objective thinking.

It is no wonder that the structure of public enterprises and the legal and administrative control over them has so far not inspired any study in depth. The reason simply is that planning has so far been the exclusive concern of a small coterie of men, mostly ministers and the bureaucrats under them, who have not considered it necessary to take men of law, of economics, political science and others in allied professions into their confidence or invite them to participate in their formulations of plans. For that reason alone, if not for any other, the efforts of Mr. Justice Rangarajan in these lectures to provoke fresh thinking on a subject which even to-day perseveres to be a mystery to all of us is particularly welcome.

A democratic form of Government coupled with the ideal of a welfare State inevitably made the concept of a mixed economy as our basic public policy. Mixed economy meant the co-existence of private and public sectors, each so complimentary to the other as to ensure between them the reasonable satisfaction of the essential needs of the nation. But the line distinguishing the two is daily getting so thinner and thinner that State involvement with manufacturing and even trading activities cannot afford to have less rationalisation and efficiency of management than private concerns which in their turn have become much more socially oriented and socially responsive. It is not a circumstance without significance that there is at present serious thinking about the necessity of a joint sector at least in select industries which are held to be of vital interest and of the nature of public utilities.

Public sector enterprises until recently were conceived as merely Government departments. The administrative machinery through which these enterprises were largely controlled was accustomed to the traditional techniques of control over management and expenditure in the purely governmental activities and therefore jealous of autonomy being given to those incharge of these enterprises. It is only recently that it has been realised that adequate autonomy is essential if these enterprises are to be fostered and developed and the traditional techniques of control required replacement or at any rate thorough review, in the light of recent experiences of the new sophisticated management of global and international corporations functioning in the greater part of Western Europe as also elsewhere.

The dilemma, however, faced by public sector enterprises, arising from the Government's growing involvement in industrial and even trading activities is the necessity on the one hand of rigid control by it for ensuring full discharge of its responsibility in the matter of proper utilisation of public funds and granting on the other hand sufficient discretion to the heads of management in the internal affairs of such undertakings, and avoidance of pressures to convert economic issues into political or ideological issues.

The dilemma is acute because conferring such autonomy raises a number of problems, firstly, because new techniques of control have yet to be evolved and secondly because so far a management-trained cadre to man the growing number of public enterprises has yet to be constituted.

Though mixed economy still remains the basic policy, the public sector is daily becoming more and more predominant. Most of these enterprises are run and managed by statutory corporations, yet if their corporate veil were torn, it would be found that each of them is in effect controlled by one or the other ministry. Parliamentary vigilance is provided for but it is at best sporadic and remote. Insurance, mines and mining, banking, railways, post, information and communications, electricity, power and irrigation, steel etc. are more or less controlled by one or the other ministry. The danger of such a system is two-fold ; the first is the total lack of integration and co-operation in the management of these industries and the other is of some of these ministries losing their grip over their traditional functions by reason of their getting too much involved in trading and commercial activities. The consequence of such a rigid compartmental management is that there is hardly any worthwhile co-operation and manoeuverability between one public enterprise and the rest, or the awareness of the needs of one by the rest.

Is it not worthwhile then to think of separating the ministries from the administration of these enterprises and to create instead one integrated agency whose responsibility would be to exercise an overall supervisory control over all of them. Equally, worthwhile would be the need to lay down the revenue yielding criterion as the true test for the survival of an enterprise rather than the oft-trotted out plea that such a criterion would not be apposite to a concern which cannot be commercially profit-motivated. Such a plea is clearly untenable. It is being raised as an apology for failures so far of a large number of these enterprises in which huge amounts of public moneys have been invested. The truth is that these enterprises need technocratic efficiency and sophisticated management as much as private concerns need social orientation.

There is thus need of a fresh thinking over problems concerning the structure of public enterprises, the services to man them and the legal control over them so as to ensure adequate autonomy without the discretion conferred on those managing them not resulting in deviations from norms set down for them or its misuse. The legal community would be deeply interested in these problems, for, their solutions need rethinking over the traditional legal formulas and reconciliation of market rules and regulatory controls. There is no need to believe that it would not respond if its co-operation is properly invited.

It is my privilege as the Chairman of the Sulakhani Devi Mahajan Memorial Lectures Committee to thank Mr. Justice Rangarajan for responding to our invitation to deliver these lectures and all those who are present here.

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