Full Judgment Text
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CASE NO.:
Appeal (civil) 992 of 2002
PETITIONER:
PRADEEP KUMAR BISWAS
Vs.
RESPONDENT:
IBNIDOILAONGYIN&STOIRTSU.TE OF CHEMICAL
DATE OF JUDGMENT: 16/04/2002
BENCH:
CJI, Syed Shah Mohammed Quadri, N. Santosh Hegde, Ruma Pal & Arijit Pasayat
JUDGMENT:
J U D G M EN T
RUMA PAL,J
In 1972 Sabhajit Tewary, a Junior Stenographer with the
Council of Scientific and Industrial Research (CSIR) filed a writ
petition under Article 32 of the Constitution claiming parity of
remuneration with the stenographers who were newly recruited to
the CSIR. His claim was based on Article 14 of the Constitution.
A Bench of five judges of this Court denied him the benefit of that
Article because they held in Sabhajit Tewari V. Union of India
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.1 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.1. The appeal was also
dismissed in view of the decision of this Court 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 of two Judges of this Court
referred the matter to a Constitution Bench being of the 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 Court reverse a decision which has stood for over a
quarter of a century?
The Constitution has to an extent defined the word ’State’ in
Article 12 itself as including:
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"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".
That an ’inclusive’ definition is generally not exhaustive is
a statement of the obvious and as far as Article 12 is concerned,
has been so held by this Court . The words ’State’ and
’Authority’ used in Article 12 therefore remain, to use the words
of Cardozo , among "the great generalities of the Constitution"
the content of which has been and continues to be supplied by
Courts from time to time.
It would be a practical impossibility and an unnecessary
exercise to note each of the multitude of decisions on the point. It
is enough for our present purposes to merely note that the
decisions may be categorized broadly into those which express a
narrow and those that express a more liberal view and to consider
some decisions of this Court as illustrative of this apparent
divergence. In the ultimate analysis the difference may perhaps
be attributable to different stages in the history of the development
of the law by judicial decisions on the subject.
But before considering the decisions it must be emphasized
that the significance of Article 12 lies in the fact that it occurs in
Part III of the Constitution which deals with fundamental rights.
The various Articles in Part-III have placed responsibilities and
obligations on the ’State’ viz-a-vis the individual to ensure
constitutional protection of the individual’s rights against the
State, including the right to equality under Article 14 and equality
of opportunity in matters of public employment under Article 16
and most importantly the right to enforce all or any of these
fundamental rights against the ’State’ as defined in Article 12
either under Article 32 by this Court or under Article 226 by the
High Courts by issuance of writs or directions or orders.
The range and scope of Article 14 and consequently Article
16 have been widened by a process of judicial interpretation so
that the right to equality now not only means the right not to be
discriminated against but also protection against any arbitrary or
irrational act of the State. It has been said that:
"Articles 14 and 16 strike at
arbitrariness in State action and ensure
fairness and equality of treatment".
Keeping pace with this broad approach to the concept of
equality under Articles 14 and 16, Courts have whenever
possible, sought to curb an arbitrary exercise of power against
individuals by ’centres of power’, and there was correspondingly
an expansion in the judicial definition of ’State’ in Article 12.
Initially the definition of State was treated as exhaustive and
confined to the authorities or those which could be read ejusdem
generis with the authorities mentioned in the definition of Article
12 itself. The next stage was reached when the definition of
’State’ came to be understood with reference to the remedies
available against it. For example, historically, a writ of mandamus
was available for enforcement of statutory duties or duties of a
public nature . Thus a statutory corporation, with regulations
framed by such Corporation pursuant to statutory powers was
considered a State, and the public duty was limited to those which
were created by statute.
The decision of the Constitution Bench of this Court in
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Rajasthan Electricity Board vs. Mohan Lal & Ors. (1967) 3
SCR 377 is illustrative of this. The question there was whether
the Electricity Board - which was a Corporation constituted under
a statute primarily for the purpose of carrying on commercial
activities could come within the definition of ’State’ in Article 12.
After considering earlier decisions, it was said:
"These decisions of the Court support
our view that the expression "other
authorities" in Article 12 will include
all constitutional or statutory
authorities on whom powers are
conferred by law. It is not at all
material that some of the powers
conferred may be for the purpose of
carrying on commercial activities".
It followed that since a Company incorporated under the
Companies Act is not formed statutorily and is not subject to any
statutory duty vis a vis an individual, it was excluded from the
purview of ’State’ In Praga Tools Corporation V. Shri C.A.
Imanual & 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 & Ors. v.
Bhagatram Sardar Singh Raghuvanshi & 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 definition of State 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
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scrutinised the history of the formation of the 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 the Corporations showed that the three Corporations
represented the ’voice and hands’ of the Central Government.
The Court came to the conclusion that although the employees of
the three Corporations were not servants of the Union or the State,
"these statutory bodies are ’authorities’ within the meaning of
Article 12 of the Constitution".
Mathew J in his concurring judgment went further and
propounded a view which presaged the subsequent developments
in the law. He said:
"A state is an abstract entity. It can only act
through the instrumentality or agency of
natural or juridical persons. Therefore,
there is nothing strange in the notion of the
state acting through a corporation and
making it an agency or instrumentality of
the State.."
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."
(3) "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
a governmental functions as to be classified
as a government 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."
(4) "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?"
Sabhajit Tewary was decided by the same Bench on the
same day as Sukhdev Singh (supra). The contentions of the
employee was that CSIR is an agency of the Central Government
on the basis of the CSIR Rules which, it was argued, showed that
the Government controlled the functioning of CSIR in all its
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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 co-operation 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 for scientific study of problems
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 of the
Society’s Registration Act", and
ii) "This Court has held in Praga Tools
Corporation V. Shri C.A. Imanual & Ors.
[1969] 3 SCR 773, Heavy Engineering
Mazdoor Union v. The State of Bihar &
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 of these
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 311 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 Constitution Bench later in this context:
"Merely because a juristic entity may be an
"authority" and therefore "State" within the
meaning of Article 12, it may not be elevated to
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the position of "State" for the purpose of Articles
309, 310 and 311 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
India is limited in its application only to Part III
and by virtue of Article 36, to Part IV: it does not
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
of Article 311 have no relevance to the issue
before us".
Normally, 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 unquestioned, without its
reasoning being ’distinguished’ out of all 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 changes’ in the perception of ’State’ heralded in
Sukhdev Singh by Mathew, J and the tests formulated by him
were affirmed and amplified in Ramana v. International
Airport Authority of India . Although the International Airport
Authority of India 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 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 of the
Corporation, nor its ostensible autonomy would take away from
its character as ’State’ and its constitutional accountability under
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Part III 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 Ramana saying:
"The Court no doubt took the 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 find any discussion
in this case as to what are the features which
must be present before a corporation can be
regarded as an ’authority’ within the meaning
of Art.12. This decision does not lay down any
principle or test for the purpose of determining
when a corporation can be said to be an
’authority’. If at 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 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 the ratio decidendi of Ajay 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 1898. 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:
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" The concept of instrumentality or
agency of the 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 of the 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 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.
(2) 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.
(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 of this 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
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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 Tewari :
" 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 of the 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 facts that the Society in Ajay Hasia was an
authority falling within the definition of "State" in Article 12.
On the same day that the decision in Ajay Hasia was
pronounced came the decision of Som Prakash Rekhi v. Union
of India . Here too, the reasoning in Ramana 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 Ramana 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 Others V. Union of India
and Others 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
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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."
B. S. Minhas v. Indian Statistical Institute & 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 of the Constitution.
The basis was that the composition of respondent No.1 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 Ganguli held that the
appellant company was covered by Article 12 because it is
financed entirely by three Governments and is completely under
the control of the 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 Others 1988 (1) SCC 237, where the Institute of
Constitutional and Parliamentary Studies (ICPS), 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 of the 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 "ICPS 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 Minister-cum-Chairman Board of Governors,
Sainik Schools Society, New Delhi and Others 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 of the
broad limits set by Ajay Hasia may have persuaded this Court to
curb the tendency in Chander Mohan Khanna v. National
Council of Educational Research and Training and Others
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 merely indicative
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indicia and are by no means conclusive or clinching in any case".
In that case, the question arose whether the National Council of
Educational 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
of NCERT, 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 of
the 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
of India (supra) However, as far as the decision in Sabhajit
Tewary v. Union of India (supra) was concerned, it was noted
that "the decision has been distinguished and watered down in the
subsequent decisions".
Fresh off the judicial anvil is the decision in the Mysore
Paper Mills Ltd. vs. 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 of the
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 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.
Coming now to the facts relating to CSIR, we have no doubt
that 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 of CSIR
On 27th April 1940 the Board of Scientific and Industrial
Research and on 1st 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
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period of five years."
For the purpose of coordinating and exercising
administrative control over the working of the two research bodies
already set up by the Department of Commerce, and to oversee the
proper utilisation of the 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 of the 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:
(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
Assembly on the 14th Nov’ 1941 and
accepted by the Government of India.
(quoted 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, workshops,
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 Indian
Industries;
(g) the collection and dissemination or
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information in regard not only to
research but to industrial matters
generally;
(h) publication of scientific papers and a
journal of industrial research and
development, and
(i) any other activities to promote generally
the objects of the 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 of this 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
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:
(1) The Honourable Member of the Council of
His Excellency the Governor General in
charge of the portfolio of Commerce (Ex-
officio).
(2) A representative of the Commerce
Department of the 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.
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(6) The Director of Scientific and Industrial
Research.
(7) One or more members to be nominated by
the Government of India to represent
interests not otherwise represented.
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.
(b) The Minister-in-Charge of the Ministry or
Deptt. dealing with the Council of
Scientific & Industrial Research shall be
the ex-officio Vice President of the
Society.
Provided that during any period when the
Prime 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) Director General,
(b) Member Finance,
(c) Directors of two National Laboratories,
(d) Two eminent Scientists/ Technologists, one
of whom shall be from Academia;
(e) Heads of two 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 of the learned Attorney General that the
Governing Body consisted of members, the majority of
whom 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 of the Society but the power being exercised by
the Prime Minister is as President of the Society. This is also
the reasoning in Sabhajit Tewary . With respect, the
reasoning was and the submission is erroneous. An ex-
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officio appointment means that the appointment is by virtue
of the office; without any other warrant or appointment than
that resulting 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 of the 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 of the Society subject nevertheless in respect of
expenditure to such limitations as the Government of India
may from time to time impose’. The aspect of 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 repeal 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-laws 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 communicated to the Chairman of the
Governing Body within a month of the
decision of the 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’ and ’Government Servant’ in the Conduct Rules
would be construed as ’President of the Society’ and
’Officer & establishments in the service of the 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 India 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 of India
regarding 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
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the bye-laws can be carried out only with the approval of
Government of India. (Bye Law 20).
Financial Aid
The initial capital of the CSIR was Rs. 10 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 of India 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 of Scientific and Industrial Research
will exercise full powers in regard to the
expenditure to be met out of the 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 of the 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. 10 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 of CSIR 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 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 of CSIR, funds of the 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 (1)
as it stands at present, the budget estimates of the 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
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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 payment 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 though nominally owned by the Society are
in the ultimate analysis owned by the Government.
From whichever perspective the facts 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 distinctions reduce it
to a shadow".
In the assessment of the facts, the Court had assumed
certain principles, and sought precedential support from
decisions which were irrelevant and had "followed a groove
chased amidst a context which has long since 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 if we are convinced of
its error and its baneful effect on the general interests of the
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 of the 1985 Act would apply to CSIR ’being the
Society owned and controlled by Government’.
The learned Attorney General contended that the
notification was not conclusive of the fact that the CSIR was
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a State within the meaning of Article 12 and that even if an
entity is not a State within the meaning of Article 12, it is
open to the Government to issue a notification for the
purpose of ensuring the benefits of the provisions of the Act
to its employees.
We cannot accept this. Reading Art. 323 (A) of the
Constitution and Section 14 of the 1985 Act it is clear that
no notification under section 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 any State or of any local or
other authority within the territory of India or under the
control of the Government of India or of any corporation
owned or controlled by the Government. Once such a
notification has been issued in respect of CSIR, the
consequence will be that an application would lie at the
instance of the appellants at least before the Administrative
Tribunal. 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 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.
Therefore, the notification issued in 1986 by the Central
Government under Article 14 (2) of the Administrative Tribunals
Act, 1985 serves in removing any residual doubt as to the nature
of CSIR and decisively concludes the issues before us against it.
Sabhajit Tewary’s decision must be and is in the
circumstances overruled. Accordingly the matter is remitted back
to the appropriate Bench to be dealt with in the light of our
decision. There will be no order as to costs.
.CJI
J
(Syed Shah Mohammad Quadri)
..J
( N. Santosh Hegde)
..J
( Ruma Pal )
...J
(Arijit Pasayat)
April 16, 2002