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Full Case Details
S.B. SINHA, J. – The short question which arises for consideration herein is as to whether the
Uttar Pradesh Ganna Kishan Sansthan (“the Sansthan”), a society registered under the
Societies Registration Act is a ‘State’ within the meaning of Article 12 of the Constitution of
Indio.
- Indisputably, before constituting the Sansthan, its functions, viz., imparting of
knowledge and training to the cane-growers and connected persons so as to effect
increase in the production of sugar in the State was being performed by the Cane
Development Department. The Sansthan was established by a Government Order dated
4.08.1975. The State had established training centers at Shahjahanpur, Muzaffarnagar and
Gorakhpur. These training centers, as noticed hereinbefore, were being run by the Cane
Development Department of the Government of Uttar Pradesh. Management of the said
training centers was transferred to the Sansthan. The expenses thereof were to be met
from U.P. Sahkari Ganna Sam iti Sangh and Sakkar Vishesh Nidhi. - Respondent was appointed in the post of Computer Officer/Data Processing Officer.
The Governing Council of the Sansthan in its meeting held on 28.04.1997 resolved to abolish
the posts created and to cancel the appointments made, pursuant whereto the services of the
respondent, were dispensed with by an order dated 17.05-199777.
Feeling aggrieved by the said order dated 17.05.1997, he filed a writ petition before the
Lucknow Bench of the High Court of Judicature at Allahabad being Writ Petition No. 869 of
1998 wherein one of the issues raised was whether the Sansthan is a ‘State’ within the
meaning of Article 12 of the Constitution of India. - The writ petition filed by the respondent came up for consideration before a Division
Bench of the High Court. It noticed an earlier decision of another Division Bench of the
said Court wherein it was opined that the appellant No. 2 is not a ‘State’ within the
meaning of Article 12 of the Constitution of India. However, a different view was taken.
The question as to whether the Sansthan would answer the description of a ‘State’ within
tile meaning of Article 12 of the Constitution of India was, therefore, referred to a Full Bench
of the High Court.
The Full Bench held that the Sansthan being an authority would come within the purview
of definition of ‘State’ within the meaning of Article 12 of the Constitution of India. - Article 12 of the Constitution of India reads as under:
“12. Definition.- In this part, unless the context otherwise requires, ‘the State’ includes
the Government and Parliament of India and the Government and the legislature of each of
the States and all local or other authorities within the territory of India or under the control of
the Government of India.” - Law in this behalf has developed a lot. With the changing societal conditions, a large
number of bodies exercising public functions have been brought within the purview of the
definition of “State”. In Mysore Paper Mills Ltd v. Mysore Paper Mills Officers’
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Association [(2002) 2 SCC 167] Mysore Paper Mills Ltd. Was held to be a ‘State’ within
the meaning of Article 12 of the Constitution of India as it was substantially financed and
controlled by the Government, managed by the Board of Directors nominated and
removable at the instance of the Government and carrying on functions of public interest
under its control. - In Pradeep Kumar Biswas, the following tests for the purpose of determining the
nature of activities which would make the body come within the definition of ‘State’ have
been laid down by a Seven-Judge Bench of this Court:
(i) Formation of the body
(ii) Objects and functions
(iii) Management and control
(iv) Financial aid, etc.
The dicta of Mathew, J. in Sukhdev Singh v. Bhagatram Sardar SinghRaghuvanshi
[(1975 ) 1 SCC 421] was quoted with approval in Pradeep Kuniar Biswas which is in the
following terms:
“17. For identifying such an agency or instrumentality he propounded four
indicia:
(1) “A finding of the State financial support plus an unusual degree of control
over the management and policies might lead one to characterize an operation as
State action.”
(2) “Another factor which might be considered is whether the operation is an
important public function.”
“The combination of State aid and the furnishing of an important public service
may result in a conclusion that the operation should be classified as a State agency. If
a given function is of such public importance and so closely related to governmental
functions as to be classified as a governmental agency, then even the presence or
absence of State financial aid might be irrelevant in making a finding of State action.
If the function does not fall within such a description, then mere addition of State
money would not influence the conclusion.”
(3) “The ultimate question which is relevant for our purpose is whether such a
corporation is an agency or instrumentality of the Government for carrying on a
business for the benefit of the public. In other words, the question is, for whose
benefit was the corporation carrying on the business?”
(4) This Court referred to Ajay Hasia wherein the tests gathered from the
decision of this Court in Ramana Dayaram Shetty v. International Airport
Authority of India [(1979) 3 SCC 489] were stated in the following terms:
“(1) One thing is clear that if the entire share capital of the corporation is held by
Government, it would go a long way towards indicating that the corporation is an
instrumentality or agency of Government.
Where the financial assistance of the State is so much as to meet almost entire
expenditure of the corporation, it would afford some indication of the corporation
being impregnated with Governmental character.
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(2) It may also be a relevant factor whether the corporation enjoys monopoly
status which is State conferred or State protected.
(3) Existence of deep and pervasive State control may afford an indication that
the corporation is a State agency or instrumentality.
(4) 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.
(5) 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.”
(6) It was held in Pradeep Kumar Biswas:
“40. 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
must ex hypothesi be considered within the meaning of Article 12. The question in
each case would be whether in the light of the cumulative facts as was established,
the body is financially, and administratively 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.” - The question as to whether the Board of Control for Cricket .in India (BCCI) which is
a private body but had a control over the sport of cricket in India is a ‘State’ within the
meaning of Article 12 of the Constitution of India came up for consideration before a
Constitution Bench of this Court in Zee Telefilms Ltd. v. Union of India [(2005) 4 SCC 649]
wherein the majority felt itself bound by the dicta laid down in Pradeep Kumar Biswas
(supra) to opine that it was not a ‘State’ within the meaning of Article 12 of the Constitution
of India.
However, the minority view was as under:
“10. Broadly, there are three different concepts which exist for determining the
questions which fall within the expression “other authorities”:
(i) The corporations and the societies created by the State for carrying on its
trading activities in terms of Article 298 of the Constitution wherefor the capital,
infrastructure, initial investment and financial aid, provided by the State and it also
exercises regulation and control thereover.
(ii) Bodies created, for research and other developmental works which are
otherwise governmental functions but may or may not be a part of the sovereign
function.
(iii)A private body is allowed to discharge public duty or positive obligation of
public nature and furthermore is allowed to perform regulatory and controlling
functions and activities which were otherwise the job of the Government. - There cannot be same standard or yardstick for judging different bodies for
49
the purpose se of ascertaining as to whether any of them fulfils the requirements of
law therefor or not. - The concept that-all public sector undertakings incorporated under the
Companies Act or the Societies Registration Act or any other Act for answering the
description of State must be financed by the Central Government and be under its
deep and pervasive control has in the past three decades undergone a sea change. The
thrust now is not upon the composition of the body but the duties and functions
performed by it. The primary question which is required to be posed is whether the
body in question exercises public function. - Tests evolved by the courts have, thus, been expanded from time to time and
applied having regard to the factual matrix obtaining in each case. Development in
this branch of law as in others has always found differences. Development of law had
never been an easy task and probably would never be.”
The majority despite holding that BCCI is not a ‘State’ within the meaning of Article
12 of the Constitution of India opined that a writ petition under Article 226 of the
Constitution of India against it would be maintainable. - Keeping in view the aforementioned principles, we may consider the fact of the
present matter.
10 For the purpose of determining the question as to whether a society registered under
the Societies Registration Act would be a “State’ within the meaning of Article 12 of the
Constitution of India or not, the history of its constitution plays an important role. The
functions which are being performed by the Sansthan were used to be performed by the
Government directly. The main purpose and object for which the training institutes were
established at different places in the State of Uttar Pradesh admittedly was to provide
scientific ways of sugarcane cultivation and management so as to improve the production of
cane with a view to achieve better production of sugar. Such a function indisputably is a State
function. The State established the ‘Sansthan’ so as to take over its own functions. It even
transferred the entire management relating to imparting of training in various institutes in its
favour. All the assets held by it for the aforementioned purpose including the infrastructural
facilities stood transferred in favour of the Sansthan. It was created under a Government
charter contained in the, Government Order dated 4.08.1975 issued in the name bf the
Governor of Uttar Pradesh. A budget of Rs. 6.00 lakhs was sanctioned in the year 1975-76,
50% of which was made by the Government and the remaining 50% by the Mills run by the
State Sugar Corporation, Indian Mill Association, U. P. Sugarcane Cooperative Federation
and Cane Development Societies. A sum of Rs. 2 lakhs was released immediately from the
Contingent Fund of the State and the remaining amount was released on acceptance of
supplementary demands and passing of Appropriation Bill by the Legislature. Some of the
objectives stated in the Memorandum of Association are:
(i) To establish, run and maintain training institute for the benefit of cane growers and
the personnel in the Cane Development Department;
(ii) To purchase land or building, etc. for establishing the institute, auditorium, etc.
(iii) To diffuse practical and scientific ways of sugar cane cultivation and
management through sugar cane research workers.
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It started with eight members of the Governing Council; all of whom were public
servants including the Cane Commissioner, Uttar Pradesh or were nominated by the State.
The Sansthan framed rules called the Rules of Association of Sansathan, some of which
are as under:
(I) Co-opted Members not exceeding two (Rule-4)
(II) Donors Members with right to elect two of them to be members of Sansthan..
(III) The Governing Council (having 12 members) headed by Minister, In charge of
the Cane Department of the Government of U.P., with majority of the members, by
virtue of their respective offices under the State Government (Rule-9)
(IV) Chairman of the Governing Council, to be the Chief Executive Authority of
Sansthan (Rule-25)
(V) Vice-Chairman who shall be Pramukh Sachiv, Sugar industry and Cane
Development of the Government and will preside the meetings in absence of
Chairman (Rule – 26).
(VI) The affairs of Sansthan shall be carried on and managed by the Governing
Council, which shall have also power to appoint officers, employees of Sansthan and
to fix their pay scales and remuneration (Rule-29).
(VII) The Director of Sansthan, to be the ex-officio Secretary of the Governing Council
and he shall be officers, of the Government of U.P., on deputation (Rule-30).
(VIII) Account Officer of Sansthan, to be taken on deputation from amongst, servants of
the State Government. He shall be responsible for maintenance of the accounts etc.
(Rule – 32).
(IX) The Governor of Uttar Pradesh may from time to time issue directives to the
society as to the exercise and performance of its functions in matters involving the
security of the State or substantial public interest and such other directives as he
considers necessary in regard to the finances and conduct of business and affairs of
the society and in the like manner may vary and annul any such directives and the
society shall give immediate effect to the directives so issued (Rule -41(a)).
(X) The Governor of Uttar Pradesh may call for such returns, accounts and other
information with respect to the properties and activities of the society as may be
required by him from time to time (Rule-41 (b). - The Government had constituted and re-constituted a Committee consisting of
officers of the 6overnment and other holders of the public office with the Cane Commissioner
to streamline curriculum of training courses to be undertaken by it. The provisions of the
Uttar Pradesh Sugar Cane (Purchase Tax) Act, 1961 provided for appropriation of 50% of the
amount of tax from the Consolidated Fund of the State and credited to and vested in ‘Sakkar
Vishesh Nidhi’ which was to be administered by a committee headed bythe Secretary to the
Government in the sugar industry. The Government withdrew a huge amount from the said
fund for making it available to the Sansthan in the financial year 1988-89. - The documents. produced before the High Court reveal that 80 to 90% of the
expenditure of Sansthan was met out of the funds made available to it by the Government.
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The majority of the office bearers of the -Governing Council were holders of various offices
of the Government. It had, thus, a dominance of the holders of the office in the Government
of Uttar Pradesh; the Minister Incharge of Cane Department being its ex-officio Chairman of
the Governing Council. He is the Chief Executive Authority. The Director and Accounts
Officer are also the government servants and the Sansthan is not free to appoint anybody on
those posts who is not a government servant. This itself clearly shows that the composition
and constitution of Sansthan and its Governing Council was nothing but a show of the
Government and only a cover of the Society was given. Rule 41 of the Rules of Sansthan
provides that the Governor shall have power to issue any directives to the Sansthan
concerning any matter of public importance and the Sansthan shall give immediate effect to
the directives so issued. Furthermore, Rule 41(b) of the Rules of Sansthan reads as under:.
“The Governor of Uttar Pradesh may call for such returns, accounts and other
information with respect to, the properties and activities of the society as maybe
required by him from time to time.”
The functions of the Sansthan are public functions. - From the materials placed before the court there cannot be any doubt whatsoever that
the State exercises a deep and pervasive control over the affairs of the Sansthan, the Cane
Commissioner being at the helm of the affairs. The Accounts Officer is the officer of the State
Government and, is also sent, on deputation. The Majority of members of the Governing
Council, as noticed hereinbefore, are holders of different offices of the State Government.
They play a vital role in carrying out the affairs of the Sansthan. They alone have power to
appoint anybody of their choice on the post. It is required to obey all the directions issued by
the State Governor froth time totime. We therefore, are of the opinion that the Full Bench of
the High Court has “rightly held the Sansthan `State’ within the meaning of Article 12 of the
Constitution of India. - For the reasons aforementioned, appeal is dismissed with costs.
