"Analyzing the Relationship Between Corporate Rights and Human Rights"

Sourashmi Basu Roy,

XAVIER LAW SCHOOL, XIM UNIVERSITY, BHUBANESHWAR.

INTRODUCTION

Corporate entities are distinct legal entities with the ability to possess property, make agreements, file lawsuits or be sued[1]. However, because these corporate organizations are artificial and not natural beings, important problems about whether corporations have the same rights as natural entities under the Constitution or other conventions frequently come up. There are also questions about the ideas surrounding corporate personality and its nature. In general, it is evident that certain rights are reserved for citizens alone, as in the cases of Indian Constitution Articles 15, 16, 19, and so on. Therefore, it's crucial to comprehend the ideas of citizenship and nationality in order to comprehend why the Indian constitution forbids corporations from exercising certain rights.

There are four main sections to this research. In order to determine the philosophical foundation for basic rights for corporations, it is first necessary to examine the jurisprudential background of firms in the context of the most widely accepted conceptions of corporate identity. Second, the concept of Indian citizenship draws attention to the distinctions within the fundamental liberties safeguarded by the Indian Constitution. Thirdly, a historical discussion of the legal precedents established by Indian courts on the interpretation of the constitution and the rights of a business formed in India is presented. Fourth, a comparison analysis is conducted between the United States and Europe about the situation of companies with regards to the availability of basic rights for them. Thus, the purpose of the article is to critically examine, using a case study approach, the fundamental rights that apply to businesses.

LEGAL FOUNDATION OF THE COMPANY AND BASIS OF FUNDAMENTAL RIGHTS.

Legal theorists were forced to reconsider corporate theory in the context of the degree to which the firms' growing political and economic clout in the late 19th and early 20th centuries would allow the government to exert control over these organizations. Several concepts evolved as a result of this setting.

According to the "grant theory," "concession theory," or "artificial entity theory"[2], a company is an artificial firm that was established under a charter, and as such, the scope of its authority is set down in the incorporation document. Therefore, the state that authorizes a company's incorporation document is legally the source of that company's formation. Therefore, the state that authorizes a company's incorporation charter is legally the source of that company's existence. This notion is applicable to businesses such as the East India Company, which was founded in Europe under a royal charter. Additionally, it dominated American society until the end of the 19th century,  as seen by the rulings rendered by judges during that era. According to Chief Justice Marshall, a company is an artificial entity that is indivisible, intangible, and only existing in the legal mind. Being only the product of law, it simply has the characteristics that its creation charter bestows upon it.”[3]

However, the privilege of a company's formation ended after 1850 when the state began awarding charters to other organizations.[4] As a result, the "grant theory," which saw corporations as artificial entities, lost their relevance. Corporations were therefore seen as legitimate entities in the framework of the "free incorporation" movement, and pertinent issues surfaced about the state's real capacity to manage corporations in the case where incorporation ceased to be a right. According to the real entity theory's supporters, companies stopped to be unique creatures of state and began to claim the same rights as all other people and organizations as they could be formed at will, perform business as they want, and windup at will as well. Judgements, common law concepts, and contemporary corporation rules all bear the imprint of "real entity theory."

According to M. Hager: “The idea that companies had "natural rights," particularly property rights, that were unaffected by governmental deprivation and hence exempt from regulation, could be explained more readily by the real entity thesis.”[5] 

Other views of corporate personality exist, such as the "aggregate theory," which holds that the business is a made-up character that really reflects the interest of directors, stakeholders etc constituting natural person. The claim was a natural continuation of the emphasis on contract freedom. It supports the notion that, as economic transactions is mostly private, the government should play a limited role and corporate structures should be left subject to market conditions. The basis for the real entity doctrine is what allowed corporations to subsequently assert rights under the 14th Amendment. Due to this proponents of real entity theory all across the world argue that corporations should have access to fundamental rights.

Alternative theories exist about corporate personality. One such theory is the "aggregate theory," which posits that a business is a made-up character that represents the interests of the company's shareholders, directors, and other natural company. The theory developed naturally from the emphasis on contract freedom and promoted the idea that, as economic activity is mostly private, the government should play a limited role and corporate structures should be left vulnerable to the forces of the market.

It's interesting to note that legal realist school philosopher John Dewey made the argument in his work[6] that all of the ideas about corporates are really malleable and have been utilized in the past to both restrict and broaden the reach of corporate authority.

COMPANIES' POSITION FROM A CONSTITUTIONAL PERSPECTIVE

The Indian Constitution's Third Part addresses fundamental rights.  The rights listed in Part III are separated by a very narrow margin. Certain rights are exclusive to citizens, whereas others are open to all people. “Articles 14 and 20 relate to equality before the law, Articles 21 to 22 protect life and individual freedom; Article 25 guarantees the right to practice your religion; Article 27 permits the payment of taxes for the advancement of any religion; and Article 28 grants the right to religious instruction in specific educational institutions.”, and so on. These are just a few examples of the provisions that specifically address rights pertaining to individuals.

On the other hand, the remaining articles, such as Article 15 (which forbid discrimination on the grounds of religion, race, caste, sex, or place of birth), Article 16 (which guarantees equal opportunities in public employment), Article 19 (which guarantees the right to freedom), Article 29 (which protects minority interests), and Article 30 (which safeguard the interests of minorities) and the rights of minorities to create and oversee educational institutions are all specifically focused on citizens. Hence, the words "any citizen" or "all citizens" are used in the Constitution when it grants a particular right to a citizen that conflicts with those possessed by everyone. In this regard, the distinction between a person and a citizen becomes crucial in figuring out whether fundamental rights apply to Indian corporations. The Indian Constitution's Citizenship Part II grants citizenship to anybody born in India, to those whose parents were born there, or to those who have lived there for at least five years prior to the Constitution's adoption. It also discusses the citizenship rights of those people who immigrated to India from Pakistan. Thus, Part II does not consider corporate organizations to be citizens; rather, it solely discusses natural beings who are eligible to become citizens of India.

The five kinds of citizenship are citizenship via naturalization, citizenship by the time of their birth citizenship by lineage, citizenship by the registration process, and citizenship by incorporation of territory that are essentially covered by the Citizenship Act of 1955. It's important to notice that this statute also limits citizenship to those who are not natural persons. Companies are thus not Indian citizens. However, the question of whether the corporation is still not entitled to the basic rights that Indian people who may own shares in the firm may enjoy is one that can only be answered by the country's legal system.

INDIA'S LEGAL EVOLUTION OF COMPANY FUNDAMENTAL RIGHTS

As soon as India gained independence in 1947, a dispute over the nature of corporate groups and the rights they have emerged. Indian courts began rendering decisions on the question of whether corporations had a claim to basic rights as early as 1950. The very first case Sholapur Spinning and Weaving Company[7], a stakeholder contested the Sholapur Spinning and Weaving Company (Emergency Provisions) Act, 1950, arguing it violated fundamental rights entitled to him as protected by Article 19 (1) (f), Article 31 and Article 14 of the Constitution. Hence it was invalid because it was outside the Parliament's legislative authority. Individual shareholders and the firm are independent entities, the court declared, restating the age old idea of separate legal entity. Because of this, a shareholder cannot accuse the corporation of violating basic rights unless it also violates his rights. Judges Mukherjea and Das noted that only individuals whose rights are directly impacted by a statute may raise the question of a law's legality and seek remedy under Article 39, unless the situation involves writs in the manner of habeas corpus. Recognizing the distinction in human being and legal persons, it was decided that corporations may file a lawsuit to have their fundamental rights upheld, until the language of the lawsuit or the nature of the right suggests that the lawsuit is limited to natural persons.

In Jupiter General Insurance Company v. Rajagopalan and Others[8], the Court restated its earlier opinion that businesses only have access to a small number of fundamental rights.  The petition was submitted by Jupiter General Insurance Company, Ltd. and other insurance firms, but the court denied it. According to the finding, a company cannot claim that the law it is reviewing has infringed or taken away its rights under Article 19(1)(f) and (g) of the Indian Constitution since it is not a citizen.

It was granted by the representative petition brought by a preference shareholder on behalf of himself and other similar preference owners in the second Sholapur Spinning and Weaving Company case[9]. The petition is denied on the grounds that the contested Ordinance in issue violates the Company's basic right as stated in Article 31(2) of the Constitution, according to the court's reasoning. The fact that the Company's property, as defined by Article 31, was taken away from it without compensation really put preference shareholders in a position where they could legally on behalf of the shareholders who were obligated to pay the remaining amount on their shares, contest the legality of the Sholapur Spinning and Weaving Company (Emergency Provisions) Act, 1950. The court emphasized the clear distinction between the concepts of person by a shareholder may seek enforcement of his rights under Article 19 while the firm is still in business, according to Article 31 and citizens as defined by Article 19.may file a challenge to the contested Act under Article 31. As a result, the two Articles' scopes span distinct fields.

In contrast, the Bombay High Court took a different stand, ruling that a corporation has the same legal claim to a right as an individual citizen "when the nature of the right is so unique that it could not be merely restricted merely to natural persons.”[10].  As a result, the court granted the firm R.M.D. Chamarbaugwalla's suit alleging violation of basic rights under Article 19 (1) (g), finding that the corporation is an Indian citizen with the right to engage in commerce and business within India. The Bombay High Court's ruling was a significant departure from the previous stance adopted by Indian courts, which maintained that a business was only considered a person and was thus entitled to the same fundamental rights as individuals.

Regarding the question of whether a business can exercise its right to free speech and expression, another significant case is Bennett Coleman and Company.[11] The newspaper company in this case challenged the conditions of the Newsprint Import Control Policy for 1972–1973 and Subclauses (3) and (3A) of Clause 3 of the Newsprint Control Order, 1962, which was implemented by the Government of India u/s 3 of the Essential Commodities Act, 1955, on grounds that their fundamental rights are violated under Article 14 and 19(1) (a) of the Constitution.

It was held by Supreme Court in this case held that, “As citizens, shareholders retain their fundamental rights even if they band together to create a firm.”. This was argued that the court took a few steps backwards when it decided that denying relief to a non-citizen newspaper company would ultimately deny relief to the company's shareholders because editors, directors, and stakeholder all express their rights to freedom regarding speech and expression through their newspapers.[12]

Similar reasoning has been used in other recent instances, such as Star India Private Ltd. v. The Telecom Regulatory Authority of India[41] and others, to rule that as corporations aren’t people. They cannot claim fundamental rights that are granted to persons. Hence, a company cannot now claim citizenship and, as a result, it cannot claim any rights under Articles that deal particularly with citizens. Although a company's shareholders may contest a law's constitutionality on the grounds that it violates any of the protections provided by Articles 19, 16, 30, and so forth, only in case own rights are violated. Considering these situations, the point that the company's rights are also infringed will not prevent the petition from being denied.

CONCLUSION

Corporate entities are crucial to the economy of a country. They serve as job creators in addition to being crucial for the advancement of industry. A significant portion of our everyday lives are impacted by business activities. It is imperative to acknowledge that corporate entities, when found culpable for failing to fulfil their obligations, may face legal consequences under multiple statutes, including the Companies Act, the Indian Penal Code, and tort law. Furthermore, these entities are entitled to fundamental rights that are essential to their efficient operation. Corporate entities' rights and interests should be safeguarded if they are to carry out their legal obligations in the best interests of others.

Given that other countries, such as the United States and Europe, have safeguarded the basic rights of corporate organizations, India ought to do the same. The advancement of society depends on the protection of business entities' fundamental rights. Therefore, in order for these manufactured people to be granted these fundamental rights, they ought to be treated like citizens. The difference in juristic and natural persons can’t be entirely eliminated, but at least these fundamental rights which are necessary in case of these business entities to progress and develop—should be allowed. Since artificial entities were not granted access to Article 19(f) and Article 31, there was a significant dispute about these provisions earlier. However, as of right now, they are available to them in the form of constitutional rights. In a manner similar to this, corporate bodies should either be awarded the fundamental rights required of them by considering them as citizens, or they should be accorded the rights guaranteed by the constitution.

REFERENCES

[1] Majumdar, A.K. and Kapoor, G.K. (1998). Company law. New Delhi: Taxmann Publication.

[2] Virginia Harper Ho, Theories of Corporate Group: Corporate Identity Reconceived, Seton Hall Law Review, Volume 42 [2012] Issue 3 Article 2. 

[3] Trustees of Dartmouth College v. Woodward 17 U.S. 518 (1819).

[4] Dale Rubin, Corporate Personhood: How the courts have employed bogus jurisprudence to grant corporations constitutional rights intended for individuals, 28 QLR 523 2009-2010

[5] Mark M. Hager, Bodies Politics: The Progressive History of Organizational ‘Real Entity’ Theory, 50 U. Pitt. L. Rev. 575

[6]  John Dewey, The Historical Background of Corporate Legal Personality, 35 Yale L.J. 655 1925-1926.

[7] Chitranjit Lal Chowduri v. The Union Of India And Others 1951 AIR 41

[8] AIR 1952 P H 9

[9] Dwarkadas Shrinivas Of Bombay v. The Sholapur Spinning & Weaving Company 1954 AIR 119

[10] State of Bombay vs. R.M.D. Chamarbaugwalla 1957 AIR 699

[11]Bennett Coleman & Company & Others v. Union Of India and Others 1973 AIR 106

[12] Ibid