PRADEEP KUMAR BISWAS AND ORS. v. INDIAN INSTITUTE OF CHEMICAL BIOLOGY AND ORS

Citation: [2002] 3 S.C.R. 100

Court: Supreme Court of India

Bench: S.P. BHARUCHA, S.S.M. QUADRI, R.C. LAHOTI, N. SANTOSH HEGDE, DORAISWAMY RAJU, RUMA PAL, ARIJIT PASAYAT

Judgment text

PRADEEP KUMAR BISWAS AND ORS. v. INDIAN INSTITUTE OF CHEMICAL BIOLOGY AND ORS. APRIL 16, 2002 [S. P. BHARUCHA, CJ. , SYED SHAH MOHAMMED QUADRI, R. C. LAHOTI; N. SANTOSH HEGDE, DORAISWAMY RAJU, RUMA PAL AND ARIJIT PASAYAT, JJ. ] Constitution of India, I950-Article I2-Council of Scientific and Industrial Research (CSIR)-Whether a 'State '-Held, it is 'State'falling within the range ofthe Article as per the t~ts judicially evolvedfor the purpose- Notification bringing CSIR within purview ofSection 14(2) ofAdministrative Tribunals Act, I985 is conclusive ofthe fact that CSIR is a state within the meaning ofArticle I2. Precedent-Normally a precedent which has stoodfor a length oftime should not be reversed however erroneous the reasoning is, if it has stood unquestioned-But in the facts . of the case, Sabhajit Tewary' case cannot stand as an authority since the decision was plainly erroneous-It is Court's duty not to perpetuate its mistake.

Appellants-employees of a Unit of Council of Scientific and Industrial Research (CSIR) had filed Writ Petition challenging their termination from service. High Court dismissed the same in view of Sabhajit Tewary 's case wherein it was held that writ petition against CSIR was not maintainable as it was not an authority within the meaning of Article 12 of the Constitution of India. In appeal to this Court, the matter was refered to the Constitution Bench for reconsideration of Sabhajit Tewary's case having regard to the pronouncement of this Court in several subsequent decisions in respect of several other institutes of similar nature set up by Union of India. Thus the question for consideration was whether CSIR is a State within the meaning of Article 12 of the Constitution. Answering the question, the Court . 4'. PRADEEP KUMARBISWAS "'· INDIAN INSTITUTEOFCHEMICAL BIOLOGY 10} HELD: Per Ruma Pal, J. (For herself. CJ/, Quadri, Hedge and Pasayat, JJ. ) 1. 1.

In view of the facts relating the CSIR, it Is well within the range of Article 12, a conclusion which is sustainable when judged according to the tests judicially evolved for the purpose. The tests formulated in Ajay Basia's case are not a rigid set of principles so that if a body falls within any one of them it must, ex hypothesi, be considered to be a State within the meaning of Article 12. The question in each case would be-whether in the light of the 1 cumulative facts as established, th~ body is financially, functionally and administratively dominated by or under the control ofthe Government Such control must be particular to the body in question and must be pervasive. If this is found then the body is a State within Article 12. On the other hand, . when the control is merely regulatory whether under statute or otherwise, it would not serve to make the body a State. [119-A, 118-F, G, H] Sabhajit Tewary v. Union ofIndia, [1975] 3 SCR 616, overrnled. Rqiasthan Electricity Board v.

Mohan Lal and Ors. , [1967] 3 SCR 377; " Sukhdev Singh andOrs. v. Bhagatram Sardar Singh Raghuvanshi andOrs. , (1975] 3 SCR 619; Ramana v. InternationalAirportAuthority ofIndia, (1979) SC 1628; Ajay Basia v. Khalid Mujib Sebravardi, (1981] l SCC 722; Som Prakash Rekhi v. Union ofIndia, AIR (1981) SC 212; P. K. Ramachandra Iyer andOrs. v. Union ofIndia and Ors. , [1984] 2 SCC 141; B. S. Minhas v. Indian Statistical Institute and Ors. , (1984] 1 SCR 395; CenJral Inland Water Transport Corporation ltd v. Brojo Nath Ganguli, AIR (1986) SC 1571; AllIndia Sainik&hoo/s Employees' Association v. Defence Minister-cum-Chairman Board of Governors, Sainik &hoo/s Society, New Delhi andOrs. , [1989] Supp. 1 SCC 205 and Mysore Paper ~ Mills ltd v. The Mysore Paper Mills Officers Association, JT (2000) 1 SC 61, relied on. Tekraj Vasandi alias K. S. Basandhi v. Union ofIndia and Ors. , [1988] 1 SCC 237; Chander Mohan Khanna v. National Council ofEducational research and Training andOrs.

, [1991 [ 4 SCC 578; E. P. Royappa v. State ofTamil Nadu, [1974] 2 SCR 348; Maneka Gandhi v. Union ofIndia, [1978[ 1 SCC 248 and Praga Tools Corporation v. Shri C. A. /manual and Ors. , [1969) 3 SCR 773, ·,_ referred to. 1. 2. Normally, a precedent which has stood for a length of time should not be reversed, however erroneous the reasoning ifit bas stood unquestioned, without its reasoning being distinguished' out ofaU recognition by subsequent decisions and if the principles enunciated in the earlier decision can stand consistently and be reconciled with subsequent decisions of this Court, some equally authoritative. Sabhajit Tewary 's case cannot still stand as an authority even on the facts merely because it has stood for 25 years. Parallels may be drawn even on the facts leading to an untenable interpretation of Article 12 and a consequential denial ofthe benefits offundamental rights to individuals who would otherwise be entitled to them.

Since on a re-examination of the question, it is concluded that the decisions was plainly erroneous, it is the Court's duty to say so and not perpetuate its mistake. [112-D-E; 126-B-D] Bengal Immunity Co Ltd v, State ofBihar and Ors. , AIR (1955) SC 661, relied on. 1. 3. That 'inclusive' definition is generally not exhaustive, is a statement of the obvious and is so as far as Article 12 of the Constitution is concerned. The words 'State' and 'Authority' used in Article 12, therefore, remain, among "the great generalities of the Constitution", the contents of which have been and continue to be supplied by Courts from time to time. [107-C] Smt. Ujjain Bai v. State ofUttar Pradesh, [1963] 1 SCR 778, referred to. 'The Nature ofthe Judicial Process' by Benjamin Cardozo, referred to. 2. The Notification bringing CSIR within perview of S. 14(2) of Administrative Tribunals Act, 1985 was conclusive of the fact that CSIR was State within the meaning of Article 12.

Reading Article 323 A of the Constitution and Section 14ofthe 1985 Act, it is clear that no notification under S. 14(2) of the Administrative Tribunals Act could have been issued by the Central Government unless the employees of the CSIR were either appointed ·. to public services and posts in connection with the affairs of the Union or of 'f' any State or of any local or other authority within the territory of India or under the control ofthe Government oflndia or ofany corporation owned or . controlled by the Government. Once such a notification has been issued in respect of CS/R, the consequence will be that an application would lie at the instance ofthe appellants at least before the Administrative Tribunals.

No new jurisdiction was created in the Administrative Tribunal The notification which was issued by the Central Government merely served to shift the service· disputes of the employees of CSIR from the constitutional jurisdiction of the -1 High Court under Article 226 to the Administrative Tribunals on the factual basis that CSIR was amenable to the writ jurisdiction as a State or other authority under Article 12 of the Constitution. [126-F, G; 127-A, B, C] PRADEEPKUMAR BISWAS v. INDIAN INSTITUTE OF CHEMICAL BIOLOGY 1QJ SRS Kumar v. Union of India, AIR (1987) SC 386 and L. Chandra A- Kumar v. Union ofIndia, (1997( 3 SCC 261, referred to. Per Lahoti, J. (For himselfand Raju, J. )-(Dissenting): 1. 1. Council for Scientific and Industrial Research (CSIR) is not a State within the meaning of Article 12 of the Constitution. It is not an 'authority' so as to fall within the meaning of expression 'other authorities' under Article 12.

It bas no statutory flavour-neither it owes its birth to a statute nor is there any other statute conferring it with such powers as would enable it being branded an authority. The indicia of power is absent. It does not discharge such functions as are governmental or closely associated therewith or being fundamental to the life of the people. (148-C; 145-E] 1. 2. Though the fundamental and basic principles for determining whether a particular body is 'the State' or not, substantially remain the same I but the emphasis on their applicability to the facts found is diferred from. A distinction bas to be home in mind between an instrumentality or agency . of 'the State' and an authority includible in 'other authorities'. The distinction cannot be obliterated. (127-G, H; 128-A] 1. 3. An authority must be an authority sui Juris to fall within the meaning of the expression 'other authorities' under Article 12.

A juridicial entity, though an authority, may also satisfy the test of being an instrumentality or agency of the State in which event such authority may be held to be an instrumentality or agency of the State but not vice versa. (144-A] 1. 4. Simply by holding a legal entity to be an instrumentality or agency of the State it does not necessarily become an authority within the meaning of 'other authorities' in Article 12. To be an authority, the entity should have been created by a statute or under a statute and functioning with liability and obligations to public. Further the statute creating the entity should have vested that entity with power to make law or issue binding directions amounting to law within the meaning of Article 13(2) governing its relationship with other people or the affairs ofother people-their rights, duties, liabilities or other legal relations. Ifcreated under a statute, then there must exist some other statute conferring on the entity such powers.

In either case, it should have been entrusted with such functions as are governmental or closely associated therewith by being of public importance or being fundamental to the life of the people and hence governmental Such authority would be the State, for one who enjoys the powers or privileges of the State f04 - must also be subjected to limitations and obligations of the State. It is this strong statutory flavour and clear indicia of power-constitutionally or -. r statutol"Y,, and its potential or capability to act to the detriment offundamental rights of the people, which makes it an authority; though in a given case, depending on the facts and circumstances, an authority may also be found to be an instrumentality or agency c>f the State and to that extent they may overlap. [144-B-FJ 1. 5. In view of the meaning which 'authority' carries, the question whether an entity is an 'authority' cannot be answered by applying Ajay Hasia tests.

The tests laid down in Ajay Hasia 's case are relevant for the purpose of -~ determining whether an entity is an instrumentality or agency of the State. Neither all the tests are required to be answered in positive nor a positive answer to one or two tests would suffice. It will depend upon a combination of one or more of the relevant factors depending upon the essentiality and overwhelming nature of such factors in identifying the real source of governing power, if need be by removing the mask or piercing the veil disguising the entity concerned. When an entity has an independent legal existence, before it is held to be State, the person alleging it to be so must satisfy the Court of brooding presence ofgovernment or deep and pervasive control of the government so as to hold it to be an instrumentality or agency of the State. (145-A-D] 1. 6. Framers of the Constitution used the word "the State" in a wider sense than what is understood in the ordinary or narrower sense.

So far as 'other authorities' are concerned they were included subject to their satisfying the test of being 'within the territory of India' or being 'under the control of the Government of India'. The expression 'under the control of the p Government of India' in Article 12 does not qualify the word 'territory', it qualifies 'other authorities'. (129-C, D] 1. 7. Expanding dimension of 'the State' doctrine through judicial wisdom ought to be accompanied by wise limitations else the expansion may go much beyond what even the framers of Article 12 may have thought of. (129-E, F] 1. 8. The definition of the State as contained in Article 12 is inclusive and not conclusive. The net of Article 12 has been expanded by 'progressive' __. judicial thinking, so as to include within its ken several instrumentalities and -1 agencies performing State functions or entrusted with State action.

The width ofexpansion and the wisdom of limitations both have to be spelled out from ·, PRADEEP KUMAR BISWAS v. INDIAN INSTITUTEOF CHEMICAL BIOLOGY }05 Article 12 itself and the fundamentals of constitutional jurisprudence. (130-G, H; 131-AI 1. 9. The terms instrumentality or. 'agency' of the State are not to be . found mentioned in Article 12 ofthe Constitution. Nevertheless they fall within the ken of Article 12 of the Constitution for the simple reason that if the State chooses. 'to set up an instrumentality or agency and entrust it with the same power, function or action which would otherwise have been exercised or undertaken by itself there is no reason why such instrumentality or agency should not be subject to same constitutional and public law limitations as the State would have been.

Any company, corporation, society or any other entity having a juridical existence if it has been held to be an instrumentality or agency of the State, it has been so held only on having found to be an alter ego, a double or a proxy or a limb or an off-spring or a mini-incarnation or a vicarious creature· or a surrogate and so on-by whatever name called-of the State. In short, the material available must justify holding of the entity wearing a mask or a veil worn only legally and outwardly which on piercing fails to obliterate the true character of the State in disguise. Then it is an instrumentality or agency of the State. (143-E-GI Sahhajit Tiwary v. Union ofIndia. [1975] 3 SCR 616, affirmed. ~ Tekraj Vasandi@K. L. Basandhiv. UnionoflndiaandOrs. , (198811 sec __, 236 and Chander Mohan Khanna v. NCERT. (1991) 4 sec 578, relied on. N. Masthan Sahib v. The ChiefCommissioner, Pondicherry andAnr. , [1962) Supp. 1 SCR 981; KS. Ramamurthy Reddiar v. ChiefCommissioner, Pondicherry and Anr.

, (1964) l SCR 656; Rajasthan State Electricity Board Jaipur v. Mohan ,.. Black's law Dictionary (Seventh Edition); Webster Comprehensive Dictionary (International &Jition); Webster's ThirdNew International Dictionary, referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 992 of ' 2002. ~ From the Judgment and Order dated 12. 2. 86 of~e Kolkata High Court in F. M. A. T. No. 314 of 1986. Soli J. Sorabjee, Attorney General, Mukul Rohtagi, R. N. Trivedi, Additional Solicitor General, Sanjoy Kumar Ghosh, Deba Prasad Mukherjee, B. D. Sharma, Narottam Vyas, S. N. Tiwari, Ms. Deepshikha Bharti, Mrs. Madhu Sikri, V. K. Rao, Ms. Piyush Sharma, Ravi Sikri, Ajay Verma, Ms. Anuradha Priyadarshni, Prateek Jalan, Manish Singhvi and S. N. Terdol for -;. the appearing parties. The Judgment of the Court were delivered by RUMA PAL, J.

In 1972 Sabhajit Tewary, a Junio~ Stenographer with the Council of Scientific and Industrial Research (CSIR) filed a writ petition under Article 32 ofthe Constitution claiming parity of remuneration with th_e stenographers who were newly recruited to the C. SIR. His claim was based on Article 14 ofthe Constitution. A Bench of five judges ofthis Court denied him the benefit of that Article because they held in Sabhajit Tewary v. Union ofIndia that the writ application was not maintainable against CSIR as it was not an "authority" within the meaning of Article 12 of the Constitution. The ~ correctness of the decision is before . us for re-consideration. The immediate • cause for such re-consideration is a writ application filed by the appellants in the Calcutta High Court challenging the termination of their services by the respondent No. I which is a unit of CSIR. They prayed for an interim order before the learned Single Judge.

That was refused by the Court on the prima _, view that the writ application was itself not maintainable against the respondent No. l. The appeal was also dismissed in view of the decision of this Court 2 in Sabhajit Tewary's case. Challenging the order of the Calcutta High Court, the appellants filed an appeal by way of special leave before this Court. On 5th August, 1986 a Bench oftwo Judges of this Court referred the matter to a Constitution Bench being ofthe view that the decision in Sabhajit Tewary required re-consideration "having regard to the pronouncement of this Court in several subsequent decisions in respect of several other institutes of similar nature set up by the Union of India". The questions therefore before us are - is the CSIR a State ~ within the meaning of Article 12 of the Constitution and if it is should this -1 I. [1975] 3 S an individual, it was excluded from the purview of 'State' In Praga Tools 7 Corporation V. Shri C. A. /manual and Ors.

where the question was whether an application under Article 226 for issuance of a writ of mandamus would lie impugning an agreement arrived at between a Company and its workmen, the Court held that: "there was neither a statutory nor a public duty imposed on it by a statute in respect of which enforcement could be sought by means of a mandamus, nor was there in its workmen any corresponding legal right for enforcement of any such statutory or public duty. The High Court, therefore, was right in holding that no writ petition for a . mandamus or an order in the nature of mandamus could lie against the company". By 1975 Mathew, J. in Sukhdev Singh and Ors. v. Bhagatram Sardar Singh Raghuvanshi and Ors. • noted that the concept of"State" in Article 12 had undergone "drastic changes in recent years".

The question in that case was whether the Oil and Natural Gas Commission, the Industrial Finance Corporation and the Life Insurance Corporation each of which were public corporations set up by statutes were authorities and therefore within the ~ . ' defmition ofState in Article 12. The Court affirmed the decision in Rajasthan ... State Electricity Board v. Mohan Lal (supra) and held that the Court could compel compliance of statutory rules. But the majority view expressed by A. N. Ray, CJ also indicated that the concept would include a public authority which: "is a body which has public or statutory duties to perform and which performs those duties and carries out its transactions for the benefit of the public and. not for private profit. Such an authority is not precluded from making a profit for the public benefit". (emphasis added) The use of the alternative is significant.

The Court scrutinised the history ofthe formation ofthe three Corporations, the financial support given by the Central Government, the utilization of the finances so provided, the nature of service rendered and noted that despite the fact that each of the ' Corporations ran on profits earned by it nevertheless the structure of each of )-- 7. [1969] 3 SCR 773. 8. [1975] 3 SCR 619. the Corporations showed that the three Corporations represented the 'voice - was argued, showed that the Government controlled the functioning of CSIR in all its aspects. The submission was somewhat cursorily negatived by this Court on the ground that all this ~~ ............

"will not establish anything more than the fact that the Government takes special care that the promotion, guidance and cooperation of scientific and industrial research, the institution and financing of specific researches, establishment or development and assistance to special institutions or departments of the existing institutions fur scientific study ofproblems affecting particular industry " in a trade, the utilisation of the result of the researches conducted under the auspices of the Council towards the development of • industries in the country are carried out in a responsible manner. " Although the Court noted that it was the Government which was taking the "special care" nevertheless the writ petition was dismissed ostensibly because the Court factored into its decision two premises: (i) "The society does not have a statutory character like the Oil and Natural Gas Commission or the Life Insurance Corporation or ... Industrial Finance Corporation.

It is a Society incorporated in ~ accordance with the provisions ofthe Society's Registration Act", and (ii) "This Court has held in Praga Tools Corporation v. Shri C. A. _. , /manual and Ors. , [1969] 3 SCR 773, Heavy Engineering Mazdoor Union v. The State ofBihar and Ors. , [1969] 3 SCR 995 and in S. L. Agarwal v. General Manager Hindustan Steel Ltd. , [1970] 3 SCR 363 that the Praga Tools Corporation, Heavy Engineering Mazdoor Union and Hindustan Steel Ltd. are all companies incorporated under the Companies Act and the employees ofthese companies do not enjoy the protection available to Government servants as contemplated in Article 311. The companies were held in these cases to have independent existence of the Government and by the law relating to corporations. These could not be held to be departments of the Government". With respect, we are of the view that both the premises were not really ... relevant and in fact contrary to the 'voice' and 'hands' approach in Sukhdev Singh.

Besides reliance by the Court on decisions pertaining to Article 3JJ which is contained in Part XIV of the Constitution was inapposite. What was under consideration was Art. 12 which by definition is limited to Part III and ---(' by virtue of Art. 36 to Part IV of the Constitution. As said ·by another 9 Constitution Bench later in this context: ~ "Merely because a juristic entity may be an "authority" and therefore . ,_t. ~ "State" within the meaning of Article 12, it may not be elevated to the position of "State" for the purpose of Articles 309, 310 and 3ll which find a place in Part XIV.

The definition of "State" in Article 12 which includes an "authority" within the territory of India or under the control of the Government of Indfa is limited in its application only to Part III and by virtue of Article 36, to Part N: it " does no~ extend to the other provisions of the Constitution and hence a juristic entity which may be "State" for the purpose of Parts III and }:;:::: IV would not be so for the purpose of Part XIV or any other provision of the Constitution. This is why the decisions of this Court in S. L. ,.... Aggarwal v. Hindustan Steel Ltd, and other cases involving the applicability ofArticle 31 l have no relevance to the issue before us". Nonnally, a precedent like Sabhajit Tewary which has stood for a length of time should.

not be reversed, however erroneous the reasoning if it has stood unqqestioned, without its reasoning being 'distinguished' out ofall ~ ,---recognition by subsequent decisions and if the principles enunciated in the ~~ earlier decision can stand consistently and be reconciled with subsequent decisions of this Court, some equally authoritative. In our view Sabhajit Tewary fulfills both conditions. ' Side-stepping the majority approach in Sabhajit Tewary, the 'drastic ! om changes' in the perception of 'State' heralded in Sukhdev Singh by Mathew, J and the tests fonnulated by him were affinned and amplified in Ramana v. 0 International Airport Authority ofIndia. "' Although the International Airport Authority oflndia is a statutory corporation·and therefore within the accepted connotation of State, the Bench of three Judges developed the concept of State. The rationale for the approach was the one adopted by Mathew J in Sukhdev Singh: ...............

"In the early days, when the Government had limited functions, it could operate effectively through natural persons constituting its civil service and they were found adequate to discharge governmental functions, which were of traditional vintage. But as the .. -i 9. Ajay Hasia v. Khalid Mujib Sehravardi, [1981] I SCR 722'. 10. AIR (1979) SC 1628. ' PRADEEPKUMAR BlSWAS "· INDIAN INSTITUTEOf CHEMICAL BIOLOGY[RUMAPAL, I. ) ) ] J ,, tasks of the Government multiplied with the advent of the welfare State, it began to be increasingly felt that the frame work of civil service was not sufficient to handle the new tasks which were often of specialised and highly technical character. The inadequacy of the civil service to deal with these new problems came to be realised and it became necessary to forge a new instrumentality or administrative device for handling these new problems.

It was in these circumstances and with a view to supplying this administrative need that the public corporation came into being as the third arm of the Government". , From this perspective, the logical sequitur is that it really does not matter what guise the State adopts for this purpose, whether by a Corporation established by statute or incorporated under a law such as the Companies Act or formed under the Societies Registration Act, 1860. Neither the form ofthe Corporation, nor its ostensible autonomy would take away from its character as 'State' and its constitutional accountability under Part II! vis-a-vis the individual if it were in fact acting as an instrumentality or agency of Government.

As far as Sabhajit Tewary was concerned it was 'explained' and distinguished in Romana saying: "The Court no doubt took ihe view on the basis of facts relevant to the constitution and functioning of the Council that it was not an 'authority', but we do not fmd any discussion in this case as to what are the feanires which must be present before a corporation can be regarded as an 'authority' within the meaning ofArt. 12. This decision does not lay down any principle or test for the purpose ofdetermining when a corporation can be said to be an 'authority'. ! fat all any test can be gleaned from the decision, it is whether the Corporation is 'really an agency of the Government'. The Court seemed to hold on the facts that the Council was not an agency of the Government and was, therefore, not an 'authority' ". The tests propounded by Mathew, J in Sukhdev Singh were elaborated in Ramana and were re-formulated two years later by a Constitution Bench 11 in Ajay Hasia v.

Khalid Mujib Sehravardi. What may have been technically characterised as 'obiter dicta' in Sukhdev Singh and Ramana (since in both cases the "authority" in fact involved was a statutory corporation), formed 11. 119s111sec122, the ratio decidendi ofAjay Hasia. The case itself dealt with a challenge under Article 32 to admissions made to a college established and administered by a Society registered under the Jammu & Kashmir Registration of Societies Act 189'8. The contention of the Society was that even if there were an arbitrary procedure followed for selecting candidates for admission, and that this may have resulted in denial of equality to the petitioners in the matter of admission in violation of Article 14, nevertheless Article 14 was not available to the petitioners because the Society was not a State within Art. 12. The Court recognised that: ...........

"Obviously the Society cannot be equated with the Government of India or the Government of any State nor can it be said to be a local authority and therefore, it must come within the expression "other authorities" if it is to fall within the definition of 'State' ". But it said that: "The courts should be anxious to enlarge the scope and width of the Fundamental Rights by bringing within their sweep every authority which is an instrumentality or agency of the government or through the corporate personality of which the government is acting, so as to subject the government in all its myriad activities, whether through ·" natural persons or through corporate entities, to the basic obligation of the Fundamental Rights". It was made clear that the genesis of the corporation was immaterial and that: ..............

"The concept of instrumentality or agency ofthe government is not limited to a corporation created by a statute but is equally applicable to a company or society and in a given case it would have to be decided, on a consideration of the relevant factors, whether the company or society is an instrumentality or agency ofthe government so as to come within the meaning of the expression "authority" in Article 12". Ramana was noted and quoted with approval in extenso and the tests propounded for determining as to when a corporation can be said to be an instrumentality or agency of the Government therein were culled out and summarised as follows: (1) One thing is clear that ifthe entire share capital ofthe corporation PRADEEPKUMAR BlSWAS"· INDIAN INSTITUTE OFCHEMICAL BIOLOGY [RUMA PAL, J. J ) } 5 is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency ofGovernment.

(2) Where the fmancial assistance of the State is so much as to meet almost entire expenditure ofthe corporation, it would afford some indication ofthe corporation being impregnated with governmental character. (3) It may also be a relevant factor........ whether the corporation enjoys monopoly status which is State conferred or State protected , (4) Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality. (5) If the functions of the corporation are of public importance and closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government. (6) Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive ofthis inference of the corporation being an instrumentality or agency of Government.

In dealing with Sabhajit Tewary the Court in Ajay Hasia noted that since Sabhajit Tewary was a decision given by a Bench of Five Judges of this Court it was undoubtedly binding. The Court read Sabhajit Tewary as implicity assenting to the proposition that CSIR could have been an instrumentality of agency of the Government even though it was a Registered Society and limited the decision to the facts of the case. It held that the Court in Sabhajit Tewary: "did not rest its conclusion on the ground that the council was a society registered under the Societies Registration Act, 1860, but proceeded to consider various other features ofthe council for arriving at the conclusion that it was not an agency of the government and therefore not an 'authority"'. The conclusion was then reached applying the tests formulated to the r facts that the Society in Ajay Hasia was an authority falling within the defmition of "State" in Article 12.

On the same day that the decision in Ajay Hasia was pronounced came ? the decision ofSom Prakash Rekhi v. Union ofIndia. Here too, the reasoning "( .. " in Ramona was followed and Bharat Petroleum Corporation was held to be a 'State' within the "enlarged meaning of Art. 12". Sabhajit Tewary was criticised and distinguished as being limited to the facts of the case. It was said: ~ "The rulings relied on are, unfortunately, in the province of Art. 311 and it is clear that a body may be 'State' under Part III but not under Part XIV. Ray, C. J. , rejected the argument that merely because the Prime Minister was the President or that the other members were appointed and removed by Government did not make· the Society a 'State'. With great respect, we agree that in the absence of the other features elaborated in Airport Authority case [1979] 3 SCC 489: (AIR 1979 SC 1628) the composition of the Government Body alone may not be decisive.

The laconic discussion and the limited ratio in Tewary [1975] 3 SCR 616 : (AIR 1975 SC 1329) hardly help either side here. " The tests to determine whether a body falls within the definition of 'State' in Article 12 laid down in Romana with the Constitution Bench imprimatur in Ajay Hasia form the keystone of the subsequent jurisprudential -~ superstructure judicially crafted on the subject which is apparent from a chronological consideration of the authorities cited. In P. K Ramachandra Iyer and Ors. v. Union ofIndia and Ors. , [1984] 2 SCC 141, it was held that both the Indian Council of Agricultural Research (ICAR) and its affiliate Indian Veterinary Research Institute were bodies as would be comprehended in the expression 'other authority' in Article 12 of the Constitution.

Yet another judicial blow was dealt to the decision in Sabhajit Tewary when it was said: "Much water has flown down the Jamuna since the dicta in Sabhajit Tewary case and conceding that it is not specifically overruled in later decision, its ratio is considerably watered down so as to be a decision confined to its own facts. " 13 B. S. Minhas v. Indian Statistical Institute and Ors. held that the Indian Statistical Institute, a registered Society is an instrumentality of the Central Government and as such is an 'authority' within the meaning of Article 12 .. 1 12. AIR (1981) SC 212. 13. (1984) 1 SCR 395. PRADEEPKUMAR BlSWAS v. INDIAN INSTITUTE OF CHEMICAL BIOLOGY [RUMA PAL, J. ] 117 of the Constituiion. The basis was that the composition of respondent No. I is dominated by the representatives appointed by the Central Government. The money required for running the Institute is provided entirely.

by the Central Government and even if any other moneys are to be received by the Institute it can be done only with the approval of the Central Government, and the accounts of the Institute have also to be submitted to the Central Government for its scrutiny and satisfaction. The Society has to comply with all such directions as may be issued by the Central Government. It was held that the control of the Central Government is deep and pervasive. The decision in Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguliu held that the appellant company was covered by Article 12 because it is financed entirely by three Governments and is completely under the control ofthe Central Government and is managed by the Chairman and Board of Directors appointed by the Central Government and removable by it and also that the activities carried on by the Corporation are of vital national importance. However, the tests propounded in Ajay Hasia were not applied in Tekraj Vasandi alias K.

S. Basandhi v. Union of India and Ors. [1988) 1 SCC 237, where the Institute of Constitutional and Parliamentary Studies (JCPS), a society registered under the Societies Registration Act, ' 1860 was held not to be an "other authority" within the meaning of Article 12. The reasoning is not very clear. All that was said was : "Having given our anxious consideration to the facts of this case, we are not in a position to hold that ICPS is either an agency or instrumentality orthe State so as to come within the purview of 'other authorities' in Article 12 of the Constitution" However, the Court was careful to say that "JCPS is a case of its type typical in many ways and the normal tests may perhaps not properly apply to test its character". All India Sainik Schools Employees' Association v. Defence Ministercum-Chairman Board ofGovernors, Sainik Schools Society, New Delhi and Ors. [1989) Supp.

1 SCC 205 held applying the tests indicated in Ajay Hasia that the Sainik School Society is a 'State'. • Perhaps this rather over - enthusiastic application ofthe broad limits set by Ajay Rasia may have persuaded this Court to curb the tendency in Chander 14. AIR (1986) SC 1571. Mohan Khanna v. National Council of Educational Research and Training and Ors. , (1991] 4 SCC 578. The Court referred to the tests formulated in Sukhdev Singh, Ramana, Ajay Hasia, and Som Prakash Rekhi but striking a note of caution said that "these are merelr indicative indicia and are by no means conclusive or clinching in any case". In that case, the question arose whether the National Council ofEducational Research (NCERT) was a 'State' as defined under Article 12 of the Constitution. The NCERT is a society registered under the Societies Registration Act.

After considering the provisions of its Memorandum of Association as well as the rules ofNCERT, this Court came to the conclusion that since NCERT was largely an autonomous body "\ and the activities of the NCERT were not wholly related to governmental functions and that the Government control was confined only to the proper utilisation ofthe grant and since its funding was not entirely from Government resources, the case did not satisfy the requirements of the State under Article 12 of the Constitution. The Court relied principally on the decision in Tekraj Vasandi@ K. L. Basandhi v. Union ofIndia (supra) However, as far as the decision in Sabhajit Tewary v. Union ofIndia (supra) was concerned, it was noted that "the decision has been distinguished and watered down in the subsequent decisions". . t- Fresh off the judi_cial anvil is· the decision in the Mysore Paper Mills Ltd v.

The Mysore Paper Mills Officers Association, JT (2002) 1 SC 61 which fairly represents what we have seen as a continuity of thought commencing from the decision in Rajasthan Electricity Board in 1967 upto the present time. It held that a company substantially financed and financially controlled by the Government, managed by a Board of Directors nominated and removable at the instance ofthe Government and carrying on important functions of public interest under the control of the Government is 'an authority' within the meaning of Art. 12. The picture that ultimately emerges is that the tests formulated in Ajay Hasia are not a rigid set of principles so that if a body falls within any one of them it must, ex hypothesi, be considered to be a State within the meaning of Article 12. The question in each case would be whether in the light of the cumulative facts as established, the body is financially, functionally and admir:iistratively dominated by or under the control of the Government.

Such control must be particular to the body in question and must be pervasive. If this is found then the body is a State within Article 12. On the other hand,·· when the control is merely regulatory whether under statute or otherwise, it would not serve to make the body a State. PRADEEP KUMAR BISWAS \'. INDIAN INSTITUTE OFCHEMICALBIOLOGY [RUMA PAL, J. ] 119 "' Coming now to the facts relating to CSIR, we have no doubt t! Jat it is well within the range of Article 12, a conclusion which is sustainable when judged according to the tests judicially evolved for the purpose. The Formation ofCSIR On 27th April 1940 the Board of Scientific and Industrial Research and on ! st February 1941, the Industrial Research Utilisation Committee were set up by the Department of Commerce, Government of India with the broad , objective of promoting industrial growth in this country. On 14th November 1941, a resolution was passed by the Legislative Assembly and accepted.

by the Government of India to the following effect: "This Assembly recommends to the Governor General in Council that a fund called the Industrial Research Fund be constituted, for the purpose of fostering industrial development in this country and that provision be made in the Budget for an annual grant of rupees ten lakhs to the fund for a period of five years. " For the purpose of coordinating and exercising administrative control over the working ofthe two research bodies already set up by the Department of Commerce, and to oversee the proper utilisation ofthe Industrial Research Fund, by a further resolution dated 26th September 1942, the Government of India decided to set up a Council of Industrial Research on a permanent footing which would be a registered society under the Registration of Societies Act, 1860. Pursuant to the resolution, on 12th March, 1942 the CSIR was duly registered.

Bye-laws and Rules were framed by the Governing Body of the Society in 1942 which have been subsequently revised and amended. Unquestionably this shows that the CSIR was 'created' by the Government to carry on in an organized manner what was being done earlier by the Department of Commerce ofthe Central Government. In fact the two research bodies which were part of the Department of Commerce have since been subsumed in the CSIR. Objects and Functions: The 26th September 1942 Resolution had provided that the functions of the CSIR would be: i (a) to implement and give effect to the following resolution moved by the Hon'ble Dewan Bahadur Sir A. R. Mudaliar and passed by the Legislative Assem. bly on the 14th Nov' 1941 and accepted by 120 SUPREME COURT RE~ORTS [2002] 3 S. C. R. -A the Government of India........

(quote~ earlier in this Judgment) (b) the promotion, guidance and co-ordination of scientific and industrial research in India including the institution and the financing of specific researches; (c) the establishment or development and assistance to special institutions or Department of existing institutions for scientific study of problems affecting particular industries and trade; (d) the establishment and award of research student-ships and fellowships; (e) the utilisation of the results of the researches conducted under the auspices of the Council towards the development of industries in the country and the payment of a share of royalties arising out of the development of the results of researches to those who are considered as having contributed towards the pursuit of such researches; (f) the establishment, maintenance and management of laboratories, ". Vorkshops, institutes, and organisation to further scientific and industrial research and utilise and exploit for purposes .

of experiment or otherwise any discovery or invention likely to be of use of Indian Industries; (g) the collection and dissemination or information in regard not only to research but to industrial matters generally; ·(h) publication ofscientific papers and a journal ofindustrial research and development, and (i) any other activities to promote generally the objects of the y resolution mentioned in (a) above. These objects which have been incorporated in the Memorandum of 'Association of CSIR manifestly demonstrate that CSIR was set up in the national interest to further the economic welfare of the society by fostering planned industrial development in the country. That such a function is fundamental to the governance of the country has already been held by a Constitution Bench ofthis Court as far back as in 1967 in Rajasthan Electricity Board v. Mohan Lal, (Supra) where it was said: "The State, as defined in Art.

12, is thus comprehended to include bodies created for the purpose of promoting the educational and • ,.. PRADEEPKUMAR BlSWAS "· INDIAN INSTITUTE OfCHEMICAL BIOLOGY {RVMA PAL. J. ] 121 .. T •. economic interests of the people". We are in respectful agreement with this statement of the law. The observations to the contrary in Chander Mohan Khanna v. NCERT (supra) relied on by the Learned Attorney General in this context, do not represent the correct legal position. Incidentally; the CSIR was and continues to be a non-profit making organization and according to clause (4) of CSIR's Memorandum of , Association, all its income and property, however derived shall be applied only 'towards the promotion of those objects subject nevertheless in respect of the expenditure to such limitations as the Government of India may from -time to time impose'.

Management and Control: When the Government of India resolved to set up the CSIR on 26th February, 1942 it also decided that the Governing Body would consist of the following members: . , (I) The Honourable Member of the Council of His Excellency the J Governor General in charge of the portfolio of Commerce (Exofficio). (2) A representative ofthe Commerce Department ofthe Government . - of India, appointed by the Government of India. (3) A representative of the Finance Department of the Government of India, appointed by the Government of India. (4) Two members of the Board of Scientific and Industrial Research elected by the said Board. (5) Two members of the Industrial Research Utilisation committee elected by the said Committee. (6) The Director of Scientific and Industrial Research. (7) One or more members to be nominated by the Government of 4 India to represent interests not otherwise represented. r The present Rules and Regulations 1999 of CSIR provide that : ....

(a) The Prime Minister of India shall be the ex-officio President of the Society. 'f \. (b) The Minister-in-Charge of the Ministry or Deptt. dealing with the Council ofScientific & Industrial Research shall be the ex-officio Vice President of the Society. Provided that during any period when the P~ime Minister is also such Minister, any person nominated in this behalf by the Prime Minister shall be the Vice-President. _, (c) Ministers Incharge of Finance and Industry (ex-officio). --~ (d) The members of the Governing Body. (e) Chairman, Advisory Board. ... &·~ (f) Any other person or persons appointed by the President, CSIR. " The Governing Body of the Society is constituted by the: (a) Di~ector General, (b) Member Finance, 't- (c) Directors of two National Laboratories, .... (d) Two eminent Scientists/ Technologists, one of whom shall be from Academia; (e) Heads oftwo Scientific Departments/Agencies of the Government of India.

-- The dominant role played by the Government of India in the Governing Body of CSIR is evident. The Director-General who is ex-officio Secretary of the Society is appointed by the Government of India [Rule 2. (iii) ]. The submission ofthe learned Attorney General that the Governing Body consisted ofmembers, the majority ofwhom were non-governmental members is, having regard to the facts on record, unacceptable. Furthermore, the members of the Governing Body who are not there ex officio are nominated by the President and their membership can also be terminated by him and the Prime Minister is the ex-officio President of CSIR. It was then said that although the Prime Minister was ex-officio President ofthe Society but the power being exercised .. by the Prime Minister is as President ofthe Society. This is also the reasoning 1 in Sabhajit Tewary. With respect, the reasoning was and the submission is erroneous.

An ex-officio appointment means that the appointment is by virtue of the office; without any other warrant or appointment than that resulting PRADEEP KUMAR BISWAS v. INDIAN INSTITUTE OF CHEMICALBIOLOGY [RUMA PAL, J. } 123 · - from the holding of a particular office. Powers may be exercised by an . ~ officer, in this case the Prime Minister, which are not specifically conferred . upon him, but are necessarily implied in his office (as Prime Minister), these are ex-officio. " The control ofthe Government in the CSIR is ubiquitous. The Governing Body is required to administer, direct and control the affairs and funds of the Society and shall, under Rule 43, have authority 'to exercise all the powers ofthe Society subject nevertheless in respect of expenditure to such limitations .. as. the Government of India may from time to time impose'. The aspect of i financial control by the Government is not limited to this and is considered -- separately.

The Governing Body also has the power to frame, amend or rellf'al the bye-laws of CSIR but only with the sanction of the Government of India. Bye-law 44 of the 1942 Bye-laws had provided 'any alteration in the bye-Jaws shall require the prior approval of the Governor General in Council'. Rule 41 of the present Rules provide that: "The President may review/amend/vary any of the decisions of the Governing Body and pass such orders as considered necessary to be 1 communicated to the Chairman ofthe Governing Body within a month ofthe decision ofthe Governing Body and such order shall be binding on the Governing Body. The Chairman may also refer any question which in his opinion is of sufficient importance to justify such a reference for decision of the President, which shall be binding on the "- Governing Body.

" (emphasis added) ' Given the fact that the President of CSIR is the Prime Minister, under this Rule the subjugation of the Governing Body to the will of the Central Government is complete. As far as the employees of the CSIR are concerned the Central Civil Services (Classification, Control & Appeal) Rules and the Central Civil Services (Conduct) Rules, for the time being in force, are from the outset applicable to them subject to the modification that references to the 'President' r and 'Government Servant' in the Conduct Rules would be construed as 'President of the Society' and 'Officer & establishments in the service of the 15. Black's Law Dictionary Society' respectively. (Bye Law 12).

The scales of pay applicable to all the employees of CSIR are those prescribed by the Government of India for similar personnel, save in the case of specialists (Bye Law 14) and in regard to all matters concerning service conditions of employees of the CSIR, the Fundamental and Supplementary Rules. framed by the Govt. of India and such other rules and orders issued by the Govt. of Indi~ from time to time are also, under Bye Law 15 applicable to the employees of the CSIR. Apart from this, the rules/Orders issued by Government ofIndia regardirig reservation of posts for SC/ST apply in regard to appointments to posts to be made in CSIR. (Bye Law 19) The CSIR cannot lay down or change the terms and conditions of service of its employees and any alteration in the bye-laws can be carried out only with the approval of Government of India. (Bye Law 20). Financial Aid The initial capital ofthe CSIR was Rs.

I0 lakhs, made available pursuant to the Resolution of the Legislative Assembly on 14th November, 1941. Paragraph 5 of the 26th September, 1942 Resolution of the Government of India pursuant to which CSIR was formed reads: "The Government ofIndia have decided that a fund, viz. , the Industrial Research Fund, should be constituted by grants from the Central Revenues to which additions are to be made from time to time as moneys flow in from other sources. These 'other sources' will comprise grants, if any, by Provincial Governments by industrialists for special or general purposes, contributions from Universities or local bodies, donations or benefactions, royalties, etc. , received from the development of the results of industrial research, and miscellaneous receipts.

The Council ofScientific and Industrial Research will exercise full powers in regard to the expenditure to be met out ofthe Industrial Research Fund subject to its observing the Bye-laws framed by the Governing Body of the Council, from time to time, with the approval ofthe Governor General-in-Council, and to its annual budget being approved by the Governor General-in-Council. " As already noted, the initial capital of Rs. I0 lakhs was made available by the Central Government. According to the statement handed up to the Court on behalf of CSIR the present financial position ofCSIR is that at least 70% of the funds of CSIR are available from grants made by the Government of India. For example out of the total funds available to CSIR for the years 1998-99, 1999-2000, 2000-01 of Rs. 1023. 68 crores, Rs. 1136. 69 crores and I- - I' PRADEEP KUMAR BISWAS "· INDIAN INSTITUTEOfCHEMICALBIOLOGY {RUMAPAL, J. ) } 25 Rs. 1219. 04 crores respectively, the Government of India has contributed Rs.

713. 32 crores, Rs. 798. 74 crores and Rs. 877. 88 crores. A major portion of the balance of the funds available is generated from charges for rendering research and development works by CSIR for projects such as the Rajiv Gandhi Drinking Water Mission Technology Mission on oilseeds and pulses and maize or grant in aid projects from other Government Departments. Funds are also received by CSIR from sale proceeds of its products, publications, royalties etc. Funds are also received from investments but under Bye-Law 6 ofCSIR, funds ofthe Society may be invested only in such manner as prescribed by the Government of India. Some contributions are made by the State Governments and to a small extent by 'individuals, institutions and other agencies'. The non-governmental contributions are a pittance compared to the massive governmental input.

As far as expenditure is concerned, under Bye-law (I) as it stands at present, the budget estimates ofthe Society are to be prepared by the Governing Body 'keeping in view the instructions issued by the Government of India from time to time in this regard'. Apart from an internal audit, the accounts of the CSIR are required to be audited by the Controller and Auditor General · and placed before the table. of both Houses of Parliament (Rule 69). In the event of dissolution, unlike other registered societies which are governed by Section 14 of the Societies Registration Act, 1860, the members of CSIR have no say in the distribution of its assets and under clause (5) of the Memorandum of Association of CSIR, on the winding up or dissolution of CSIR any property remaining after payd\ent of all debts shall have to be dealt with "in such manner as the Government of India may determine".

CSIR is therefore both historically and in its present operation subject to the financial control of the Government of India. The assets and funds of CSIR r though nominally owned by the Society are in the ultimate analysis owned by the Government. From whichever perspective the filcts are considered there can be no doubt that the conclusion reached in Sabhajit Tewary was erroneous. If the decision of Sabhajit Tewary had sought to lay down as a legal principle that a society registered under the Societies Act or a company incorporated under the Companies Act is, by that reason alone, excluded from the concept of State under Article 12, it is a principle which has long since been discredited. "Judges have made worthy, if shamefaced, efforts, while giving lip service to the rule, to riddle it with exceptions and by 16 distinctions reduce it to a shadow". 16. Benjamin Cardozo: 'The Nature ofthe Judicial Process 1921.

In the assessment ofthe facts, the Courti had assumed certain principles, -r and sought precedential support from decisions which were irrelevant and had "followed a groove chased amidst a context which has long since 17 crumbled". Had the facts been closely scrutinised in the proper perspective, it could have led and can only lead to the conclusion that CSIR is a State within the meaning of Art. 12. Should Sabhajit Tewary still stand as an authority even on the facts merely because it has stood for 25 years? We think not. Parallels may be drawn even on the facts leading to an untenable interpretation of Art. 12 and ... a consequential denial of the benefits of fundamental rights to individuals who would otherwise be entitled to them and "there is nothing in our Constitution which prevents us from departing from a previous decision ifwe are convinced of its error and its baneful effect on the general interests of the 18 public.

" Since on a re-examination of the question we have come to the conclusion that the decision was plainly erroneous, it is our duty to say so and not perpetuate our mistake. Besides a new fact relating to CSIR has come to light since the decision in Sabhajit Tewary which unequivocally vindicates the conclusion reached by us and fortifies us in delivering the coup de grace to the already attenuated ~ decision in Sabhajit Tewary. On 31st October 1986 in exercise of the powers conferred by sub-section (2) of Section 14 of the Administrative Tribunals Act, 1985, the Central Government specified 17th November 1986 as the date on and from which the provisions of sub-section (3) of Section 14 ofthe . ~ 1985 Act would apply to CSIR 'being the Society owned and controlled by r\ '" PRADEEPKUMAR BISWAS v. INDIAN INSTITUTE OF CHEMICAL BIOLOGY [R. C. LA. HOT! , J.

] ~ have done in article 7; or, to keep on repeating every time, "the Central Government, the Provincial Government, the State Government, the Municipality, the Local Board, the Port Trust, or any other authority". It seems to me not only most cumbersome but stupid to keep on repeating this phraseology every time we have to make a reference to some authority. The wisest course is to have this comprehensive phrase and to economise in words". (1948 (Vol. VII) CAD 610) [emphasis supplied] • ' Thus the framers of the Constitution used the word "the State" in wider sense than what is understood in the ordinary or narrower sense. So far as 'other authorities' are concerned they were included subject to their satisfying the test of being 'within the territory of India' or being 'under the control of the Government of India'. It is settled that the expression 'under the control of the Government of India' in Article 12 does not qualify the word 'territory'; it qualifies 'other authorities'.

I .. The terms - 'instrumentality' or 'agency' of the State are not to be - found mentioned in Article 12. It is by the process ofjudicial interpretationnay, expansion - keeping in view the sweep ofArticle 12 that they have been included as falling within the net of Article 12 subject to satisfying certain tests. While defining, the use of 'includes' suggest what follows is not exhaustive. The definition is expansive of the meaning of the term defined. However, we feel that expanding dimension of 'the State' doctrine through judicial wisdom ought to be accompanied by wise limitations else the expansion may go much beyond what even the framers of Article 12 may have thought of. Instrumentality, Agency, Authority - meaning of It will be useful to understand what the terms - instrumentality, agency and authorities mean before embarking upon a review of judicial decisions dealing with the principal issue which arises for our consideration.

Black's Law Dictionary (Seventh Edition) defines 'instrumentality' to mean "a means or agency through which a function of another entity is accomplished, such as a branch of a governing body. " 'Agency' is defined as "a fiduciary relationship created by express or implied contract or by law, in which one party (the agent) may act on behalf ofanother party (the principal) ~ and bind that other party by words or actions. " Thus instrumentality and agency are the tw~ terms which to some extent overlap in their meaning; .. 'instrumentality' includes 'means' also, which 'agency' does not, in its } meaning. 'Quasi- governmental agency' is "a government - sponsored enterprise or Corporation (sometimes called a government-controlled corporation)". Authority, as Webster Comprehensive Dictionary (International Edition) defines, is "the person. or persons in whom government or command is vested; often in the plural". The applicable meaning ofthe word "authority" given in Webster's.

Third New International Dictionary, is 'a public 'Y administrative agency or corporation having quasi-governmental powers and authoriied to administer a revenue-producing public enterprise'. This was ,_ quoted with approval by Constitution Bench in RSEB's case (infra) wherein ) the Bench held - "This dictionary meaning of the word "authority" is clearly wide enough to include all bodies created by astatute on which powers are conferred to carry out governmental or quasi-governmental functions. The expression "other authorities" is wide enough to include within it every authority created by a statute and functioning within the territory of India, or under the control of the Government of India; and we do not see any reason to narrow down this meaning in the context in which the words "other 1 ,.. i authorities" are used in Art. 12 of the Constitution". (emphasis added) With the pronouncements in N. Masthan Sahib v. The Chief { Commissioner, Pondicherry and Anr. , (1962] Supp.

1 SCR 981 and KS. )~ Ramamurthy Reddiar v. ChiefCommissioner, Pondicherry and Anr. , (1964] 1 SCR 656 it is settled that Article 12 of the Constitution has to be so read: "12. In this part, unless the context otherwise requires, the 'State' includes ~ (i) the Government and Parliament of India, (ii) the Government and the Legislature of each State, (iii) (a) all local or other authorities within the territory of India, (b) all local or other authorities under the control of the Government of India. " The definition of the State as contained in Article 12 is inclusive and not 1 conclusive. The net of Article 12 has been expanded by 'progressive' judicial thinking, so as to include within its ken several instrumentalities and agencies performing State function or entrusted with State action. To answer the l~ PRADEEP KUMAR BISWAS v. INDIAN INSTITUTEOF CHEMICAL BIOLOGY [R. C.

LAHOTI,J] 131 principal question in the context in which it has arisen, incidental but inseparable issues do arise: Wide expansion but how far wide? Should such wide expansion be not subject to certain wise limitations? True, the width of expansion and the wisdom of limitations both have to be spelled out from Article 12 itself and the fundamentals of constitutional jurisprudence. We now deal with a series of decisions wherein tests were propounded, followed (also expanded) and applied to different entities so as to find out whether they satisfied the test of being 'the State'. ' A review ofjudicial opinion Though judge-made law is legend on the issue, we need not peep too much deep in the past unless it becomes necessary to have a glimpse of a few illuminating points thereat. It would serve our purpose to keep ourselves confined, to begin with, to discerning the principles laid down in Rajasthan State Electricity Board, Jaipur v. Mahal Lal and Ors. , (1967] 3 SCR 377, ..

Sukhdev Singh and Ors. v. Bhagatram Sardar Singh Raghuvanshi and Anr. , [1975] 1 SCC 421, Ramana Dayaram Shetty v. The International Airport Authority of India and Ors. , (1979] 3 SCC 489, Ajay Hasia etc. v. Khalid Mujib Sehravardi and Ors. etc. , [1981] I SCC 722 and Som Prakash Rekhi v. Union ofIndia and Anr. , (1981] I SCC 449 which have come to be known as landmarks on the State conceptualisation. Out of these five decisions, RD. Shetty and Som Prakash are three-Judges Bench decisions; the other 3 are each by Constitution Bench of five-Judges. The Constitution Bench decision in Rajasthan State Electricity Board (RSEB) 's case was delivered by a majority of 4: I. V. Bhargava, J. spoke for himself and K. Subba Rao, C. J. and M. Shela! and G. K. Mitter, JJ. , J. C. Shah, J. delivered his dissenting opinion. We will refer to majority opinion only. The Court quoted the interpretation placed by Ayyangar, J. from the pronouncement of seven-Judges Bench of this Court in Smt. Ujjam Bai v.

State of Uttar Pradesh and Anr. , (1963] 1 SCR 778 that the words 'other authorities' employed in Article 12 are of wide amplitude and capable of comprehending every authority created under a statute and though there is no characterisation of the nature of the "authority" in the residuary clause of Article 12 it must include every authority set up under a statute for the ). purpose of administering laws enacted by the Parliament or by the State including those vested with the duties to make decisions in order to implement those laws. The Court refused to apply the doctrine of ejusdem generis for interpretation of the 'other authorities' in Article 12. "Other authorities" in Article 12 include, held the Court, "all constitutional or statutory authorities on whom powers are conferred by. law" without regard to the fact that some of the powers conferred may be for the purpose of carrying on commercial activities or promoting the educational and economic interests of the people.

Regard must be had (i) not only to the sweep of fundamental rights over the power of the authority, (ii) but also to the restrictions which may be imposed upon the exercise of certain fundamental rights by the authority. This dual phase of fundamental rights would determine "authority". Applying the test formulated by it to Rajasthan State Electricity Board, the Court found that the Board though it was required to carry on some activities of the nature of ' trade or commerce under the Electricity Supply Act, yet the statutory powers conferred by the Electricity Supply Act on the Board included power to give directions, the disobedience of which is punishable as a criminal office and therefore the Board was an authority for the purpose of Part III of the Constitution. Praga Tools Corporation v. C. V. /manual and Ors. , [1969] l SCC 585 may not be of much relevance. The question posed before the Court was not one referable to Article 12 of the Constitution.

The question was whether a prayer seeking issuance ofa mandamus or an order in the nature of mandamus could lie against a company incorporated under the Companies Act wherein the Central and the State Governments held respectively 56 and 32 per cent shares. The two-Judge Bench of this Court held that the company was a separate legal entity and could not be said to be either a government Corporation or an industry run by or under the authority of the Union Government. A mandamus lies to secure the performance of a public or statutory duty in the performance of which the petitioner has a sufficient legal interest. A mandamus can issue to an official or a society to compel him to carry out the terms ofthe Statute under or by which the society is constituted or governed and also to companies or Corporations to carry out duties placed on them by the Statute authorizing their undertaking.

A mandamus would also lie against a company constituted by a Statute for the purpose offulfilling public responsibilities. The Comt held that the company being a non-statutory body with neither a statutory nor a public duty imposed on it by a Statute, a writ petition for mandamus did not lie against it. The limited value of this decision, relevant for our purpose, is that because a writ of mandamus can issue against a body solely by this test it does not become 'State' within the meaning of Article 12. In Sukhdev Singh and Ors. v. Bhagatram Sardar Singh Raghuvanshi PRADEEP KUMAR BISWAS v. INDIAN INSTITUTE OF CHEMICAL BIOLOGY [R. C. LAHOTI, J. ] 133 and Anr. , (supra), question arose whether Oil and Natural Gas Commission, the Industrial Finance Corporation and Life Insurance Corporation are 'authorities' within the meaning of Article 12. The case was decided by a majority of 4:1. A. N. Ray, CJ speaking for himself and on behalf of Y. V. Chandrachud and A. C. Gupta, JJ.

held that all the three were statutory Corporations, i. e. , given birth by Statutes. The circumstance that these statutory • bodies were required to carry on some activities of the nature of trade or commerce did not make any difference. The Life Insurance Corporation is (i) an agency of the Government (ii) carrying on the exclusive business of Life Insurance (i. e. in monopoly), and (iii) each and every provision of the Statute creating it showed in no uncertain terms that the Corporation is the voice and the hands of the Central Government. The Industrial Financial Corporation is in effect managed and controlled by the Central Government, citizens cannot be its shareholder. ONGC (i) is owned by the Government, (ii) is a statutory body and not a company and (iii) has the exclusive privilege of extracting petroleum. Each of the three, respectively under the !

hree Acts under which they are created, enjoy power to do certain acts and to issue directions obstruction in or breach whereofis punishable as an offence. These distinguish them from a mere company incorporated under the Indian Companies Act. The common features of the three are (i) rules and regulations framed by them have the force of law, (ii) the employees have a statutory status, and (iii) they are entitled to declaration ofbeing in employment when the dismissal or re! Iloval is in contravention of statutory provisions. The learned Chief' Justice added, by way of abundant caution, that these provisions did not however make the employees as servants of the Union or the State though the three statutory bodie~ are authorities within the meaning of Article 12 of the Constitution. Mathew, J. recorded his separate concurring opinion.

As to ONGC he > hastened to arrive at a conclusion that the Commission was invested with sovereign power of the State and could issue binding directions to owners of land and premises, not to prevent employees ofthe Commission from entering upon their property ifthe Commission so directs. Disobedience of its directions is punishable under the relevant provisions of the Indian Penal Code as the employees are deemed to be public servants. Hence the Commission i~ an authority. As to the other two Corporations, viz. , LIC and IFC, Mathew, J. entered into a short question and began by observing that in recent years the concept of State has undergone drastic change. "Today State cannot be conceived of simply as a coercive machinery wielding the thunderbolt of authority". Having reviewed some decisions of United States and English i decisions and· some other authorities, he laid down certain principles with--~· which we will deal with a little later and at appropriate place.

He observed that institutions engaged in matters of high public interest or performing public functions are, by virtue of the nature of the function performed by them, governmental agencies. He noticed the difficulty in separating vital government functions from non-governmental functions in view ofthe contrast between governmental activities which are private and private activities which are governmental. For holding Life Insurance Corporation "the State" he relied on the following features : (i) the Central Government has contributed the original capital ofthe Corporation, (ii) part ofthe profit ofthe Corporation goes to Central Government, (iii) the Central Government exercises control over the policy of the Corporation, (iv) the Corporation carries on a business having great public importance, and (v) it enjoys a monopoly in the business. As to Industrial Financial Corporation he relied on the circumstances catalogued in the judgment of A. N. Ray, J.

The common feature of the two Corporations was that they were instrumentalities or agencies of the State for carrying on business which otherwise would have been run by the State departmentally and ifthe State had chosen to carry on these businesses through the medium of government departments, there would have been no question that actions ofthese departments would be "state actions". At the end Mathew, J. made it clear that he was expressing no opinion on the question whether private Corporations or other like organizations though they exercise power over their employees which might violate their fundamental rights would be the State within the meaning of Article 12. What is 'state action' and how far the concept of 'state action' can be expanded, posing the question, Mathew J. answered". it is against State action that fundamental rights are guaranteed.

Wrongful individual acts unsupported by State authority in the shape of laws, customs, or judicial or executive proceeding are not prohibited. Articles 17, 23 and 24 postulate that fundamental rights can be violated by private individuals and that the remedy under Article 32 may be available against them. But by and large, unless an act is sanctioned in some way by the State, the action would not be State action. In other words, until some law is passed or some action is taken through officers or agents of the State, there is no action by the State. " So also commenting on the relevance of 'state help' and 'state control' as determinative tests, Mathew, J. said "It may be stated generally that State financial aid alone does not render the institution receiving s. uch aid a state agency. Financial aid plus some additional factor might lead to a different conclusion.

A mere finding of state control also is not determinative ofthe question, since a state has considerable measure ofcontrol under its police power over all types of business operations. " PRADEEP KUMAR BISWAS 11. INDIAN INSTITUTEOF CHEMICAL BIOLOGY (R. C. LAHOTI, J. ) } J5 Alagiriswam~ J. recorded a dissenting opinion which however we propose to skip over. It is pertinent to note that the dispute in Sukhdev Singh v. Bhagat Ram was a service dispute and the employees were held entitled to a declaration of being in employment when their dismissal or removill was in contravention of statutory provisions; the rules and regulations framed by corporations or commission were found having the force of law, being delegated legislation and these statutory bodies were held to be 'authorities' within the meaning of Article 12. In Ramanna Dayaram Shetty v. The International Airport Authority of India and Ors. , (supra), the dispute related to trends within the domain of • administrative law.

A question arose whether International Airport Authority of India (IA, for short) was within the scope of 'other authorities' in Article .. 12 so as to be amenable to Article 14 of the Constitution. P. N. Bhagwati, J. who delivered the judgment for the three-Judge Bench stated the ratio of Raj0$_than State Electricity Board's case, in these words : "The ratio of this decision may thus be stated to be that a constitutional or statutory authority would be within the meaning of the expression 'other authorities', ifit has been invested with statutory power to issue binding directions to third parties, the disobedience of which would entail penal consequence or it has the sovereign power to make rules and regulations having the force of law". He then referred to what he termed as a 'broader test' laid down by Mathew, J. in Sukhdev Singh 's case and said that judgment by Mathew, J.

provided 'one more test and perhaps a more satisfactory one' for determining whether a statutory corporation, body or other authority falls within the definition of 'the State' and the test is-"If a statutory corporation, body or other authority is an instrumentality or agency of government, it would be an authority and therefore 'the State' within the meaning of the expression in Article 12.

" Having minutely examined the provisions of the International Airport Authority Act, 1971 he found out the following features of IA :- (i) The Chairman and Members are all persons nominated by the Central Government and Central Government has power to terminate the appointment or remove them; (ii) The Central Government is vested with the power to take away the management of any airport from the IA; (iii) The Central Government has power to give binding directio(IS in writing on ques\ions of policy; (iv) The capital of IA needed for carrying out its functions is wholly provided by Central Government; (v) The balance of net profit made by IA, ~· after making certain necessary provisions, does not remain with the IA and ~ is required to be taken over to the Central Government; (vi) The financial estimates, expenditure and programme of activities can only be such as approved by Central Government; (vii) The Audit Accounts and the Audit ......

' Report of IA, forwarded to the Central Government, are required to be laid before both· Houses of Parliament; (viii) It was a department ofthe Central Government along with its properties, assets, debts, obligations, liabilities, contracts, cause ofaction and pending litigation taken oyer by the IA; (ix) IA was charged with carrying out the same functions which were being carrying out by the Central Government; (x) The employees and officials of IA are public servants and enjoy immunity for anything done or intended to be done, in good faith, in pursuance of the Act or any rules or regulations made by it; (xi) IA is given (delegated) power to legislate and contravention ofcertain ~ specified regulations entails penal consequences. Thus, in sum, the IA was held to be an instrumentality or agency of the Central Government falling within the definition of the State both on the narrower view propounded in the judgment of A. N. Ray, CJ and broader view propounded by Mathew, J.

in Sudhdev Singh 's case. Ajay Hasia etc. v. Khalid Mujib Sehravardi and Ors. etc. , (supra), is a " Constitution Bench judgment wherein P. N. Bhagwati, J. spoke for the Court. The test which he had laid down in Ramanna's case were summarized by him as six in number and as under: "I. One thing is clear that ifthe entire. share capital ofthe Corporation is held by Government it would go a long way towards indicating that the Corporation is an instrumentality or agency of Government. 2. Where the financial assistance of the State is so much as to meet almost entire expenditure ofthe corporation, it would afford some indication ofthe corporation being impregnated with governmental character. 3. It may also be a relevant factor whether the corporation enjoys monopoly status which is the State conferred or State protected. 4. Existence of "deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality". ~ 5.

Ifthe functions ofthe Corporation ofpublic importance and closely related to government functions, it wouJd be a relevant factor in -+ PRADEEP KUMAR BISWAS v. INDIAN INSTITUTE OFCHEMICAL BIOLOGY [R. C. LAHOTI, J. ) 137 classifying the ·corporation as an instrumentality or agency of -' ~ Gpvernment. 6. "Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference" of the corporation being an instrumentality or agency - of Government. " The footnote to the tests, as put by him, is "if on a consideration of all these relevant factors it is found that the corporation is an instrumentality or agency ofgovernment, it would.......... be an authority, and therefore, 'the State' within • the meaning of Article 12. Bhagwati, J.

placed a prologue to the above said tests emphasizing the need to use care and caution, "because while stressing the necessity of a wide meaning to be placed on the expression "other authorities", it must be realized that it should not ~e stretched so far as to bring in every autonomous body which has some nexus with the Government within the sweep of the expression. A wide enlargement of the meaning must . be tempered by a wise limitation. " In Ajay Rasia, the 'authority' under consideration was a society registered under the Jammu & Kashmir Registration of Societies Act, 1898, .... administering and managing the Regional Engineering College, Srinagar. The College was sponsored by th. e Government of India.

The prominent features of the society indicated complete financing and financial control of the Government, complete administrative control over conducting of the affairs of the society and administration and assets of the College being taken aver by the State Government with the prior approval of the Central Government. These are some of the material features. Some of the observations made by the Court during the course of its judgment are pertinent and we proceed to notice them quickly. The society could not be equated with the Government of India or the Government of any State nor could it be said to be 'local authority', and therefore, should have come within the expression of 'other authorities' to be 'the State'. The Government may act through the instrumentality or agency of natural persons or it may employ the instrumentality or agency ofjuridical persons to carry out its functions.

With the enlargement of governmental activities, specially those in the field of trade and commerce and welfare, corporation is most resourceful legal contrivance resorted to frequently by the Government. Though a distinct ,.. juristic entity came into existence because of its certain advantages in the field of functioning over a department of the Government but behind the formal ownership cast in the corporate mould, the reality is very much the *-- deeply pervasive presence of the Government. It is really the Government . ,,. which acts threugh the instrumentality or agency of the Corporation an~ the ... juristic veil of corporate personality is worn for the purpose of convenience of management and administration which cannot be allowed to obliterate the true nature