The Chief Justice of India, Shri Chandrachud, observed as follows

“Even though the entire share capital of the appellant companies has been subscribed by the Government of India, it cannot be predicated that the companies themselves are owned by the Government of India. The companies which are incorporated under the Companies Act, have a corporate personality of their own, distinct from that of the Government of India. The land and buildings are vested in and owned by the companies; the Government of India only owns the share capita1.”

A Government company can even sue the Government in its own name as a litigant. But, since protracted litigation between a Government company on the one hand and a Government department on the other, results in waste of public money and other resources including time, such disputes are resolved, as far as possible, outside the juridical process.

However, if a Government company is an authority, it shall be equivalent to a State and then it must also accept the obligations of the State.

How should it be determined as to whether a government company is an instrumentality or agency of the government or not? Justice Bhagwati felt that it was not possible to evolve a straight formula by which corporations could be classified into those which are instrumentalities of government and those which are not.