There has been a catena of cases right from Solomon Vs. Solomon & Co. Ltd. which has established that a company brought into being under the Companies Act has a separate existence and the law recognises a company as a juristic person separate and distinct from its members. This personification emerges from the moment of its incorporation, and from that date, the persons subscribing to its Memorandum of Association and others joining it as members are regarded as a body incorporated or a corporate aggregate and the new person begins to function as an entity. The rights and obligations of a company are distinct from those of its shareholders. Therefore, the legal status of a government company is not affected just because the share capital of the company is contributed by the Central Government and all its shares are held by the President of India or the Governor of a State and certain nominated officers of the Government [Heavy Engineering Mazdoor Union Vs. State of Bihar (1969) 39 Compo Cas. 905 (SC)]. The observations reproduced below of Justice P.L. Mukherjee In re River Steam Navigation Co. Ltd [1967] 2 Compo L.J. 106, bring out clearly the legal position of a Government company.
“Government today is a competitor with public/private companies and corporations, and doing trade or business or commerce. In doing so the Government is not
doing it as Government. It joins the field of competition in these diverse spheres and fields as Government companies, as state trading corporations and in many other forms under particular statutes.”
