Control over Public Undertakings — Administrative Law Notes

Control over Public Undertakings

Give a corporation public money and business freedom, and you create a tension the whole topic turns on: autonomy versus accountability. Too much control and it cannot run like a business; too little and it wastes public funds with no one answerable. The controls below are the compromise — and the exam angle is always their weakness.

How are public undertakings controlled?

Because public undertakings wield public money and public power, four kinds of control keep them accountable:

A. Parliamentary control

Questions and debates — members question the responsible Minister; the annual reports and accounts of undertakings are laid before Parliament.
The Committee on Public Undertakings (COPU) — a parliamentary committee that examines the reports, accounts and working of public undertakings and reports to Parliament; the chief instrument of legislative scrutiny.
Budget and audit — grants and the CAG’s audit reports come before Parliament.

B. Governmental (executive) control

Appointment and removal of the board of directors/chairman by the Government.
Directions — the parent Act usually lets the Government issue policy directions binding on the corporation.
Financial control — sanction of capital, approval of budgets, and audit by the Comptroller and Auditor-General (CAG).

C. Judicial control

Where the undertaking is “State” under Article 12 (Topic 1), it is subject to writ jurisdiction (Arts 32/226) for violation of fundamental rights or arbitrary action.
It is otherwise liable in ordinary suits in tort and contract.

D. Public control

Consumers, the press and public opinion, consumer forums, and the Right to Information Act, 2005, which lets citizens demand information from these public authorities.

⚠️ Do NOT present these controls as effective. The recurring exam point is the autonomy-vs-accountability tension: parliamentary committees have limited time and expertise; ministerial directions can blur responsibility (the corporation blames the Government and vice-versa); and excessive control defeats the very commercial autonomy for which corporations were created. Say this to earn the “critically examine” marks.

The core tension, stated plainly: “The public corporation must be autonomous enough to function efficiently on business lines, yet accountable enough to answer for its use of public funds and power — the difficulty of the law is to hold these two in balance.”

In Simple Terms: Public undertakings are controlled four ways — parliamentary (questions, debates, the Committee on Public Undertakings, CAG audit before Parliament), governmental (appointing directors, giving directions, financial and audit control), judicial (writs where the body is “State”; suits otherwise), and public (consumers, press, RTI). The deep problem is balancing autonomy against accountability, and in practice the controls are often weak.

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    ROOT --> P["Parliamentary<br/>questions · debates · COPU · CAG"]:::leaf
    ROOT --> G["Governmental<br/>appoint board · directions · budget/audit"]:::leaf
    ROOT --> J["Judicial<br/>writs (if 'State') · suits"]:::leaf
    ROOT --> U["Public<br/>consumers · press · RTI"]:::leaf
    ROOT --> T["Tension: autonomy vs accountability"]:::mid
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🧩 WORKED EXAMPLE — Which control applies?

Facts. A government company incurs huge losses through mismanagement; a citizen wants the working of the undertaking scrutinised, and an employee wants an arbitrary transfer set aside.

Rule. Scrutiny of an undertaking’s working is a matter for parliamentary control (COPU) and governmental audit; an employee’s challenge to arbitrary action lies through judicial control if the body is “State”.

Apply. The losses/mismanagement invite examination by the Committee on Public Undertakings and the CAG (parliamentary/governmental control). The employee’s grievance, if the company is an instrumentality of the State, is met by a writ (judicial control).

Conclusion. Different wrongs invoke different controls — financial mismanagement through parliamentary/governmental scrutiny; arbitrary personnel action through the writ jurisdiction.

Case Laws

Sukhdev Singh v Bhagatram (1975) — statutory corporations are “State”; their action is subject to judicial control.
R.D. Shetty v International Airport Authority (1979) — instrumentalities of the State are answerable to the writ jurisdiction.
Ajay Hasia v Khalid Mujib (1981) — arbitrary action by a State instrumentality is subject to Article 14 and judicial review.

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