Holding

ICPS is not an agency or instrumentality of the Government and therefore does not constitute a "State" within the meaning of Article 12.

Summary

The appellant, an employee of the Institute of Constitutional and Parliamentary Studies (ICPS), was dismissed in a disciplinary proceeding and challenged the order before the High Court, which held that ICPS was not a "State" within Article 12 and thus not amenable to writ jurisdiction. The Supreme Court was asked to decide whether ICPS, a society registered under the Societies Registration Act and funded largely by the Central Government, qualifies as an "authority" or "State" under Article 12. After analysing the nature, purpose, funding, control and functions of ICPS and applying the tests laid down in earlier cases, the Court held that ICPS is not an agency or instrumentality of the Government and therefore does not fall within the definition of "State". Consequently, the dismissal order was set aside, the appellant was restored to service, his suspension vacated, and he was entitled to back‑pay and a fresh enquiry. The appeal was disposed of.

Issues considered

Whether the Institute of Constitutional and Parliamentary Studies is a "State" or "other authority" within the meaning of Article 12 of the Constitution
Whether the dismissal of the appellant violates Articles 14, 16 and 311 of the Constitution

Legislation cited

Constitution of Indias. Article 12, s. Article 14, s. Article 16, s. Article 311
Societies Registration Act, 1860

Subjects

Article 12State definitionSocietyInstrumentality of GovernmentWrit jurisdictionDismissalFundamental rightsPublic corporationConstitutional law

Judgment

TEKRAJ VASANDI ALIAS K.L. BASANDHI )
A
v.
UNION OF INDIA & OTHERS

DECEMBER 10, 1987

B [RANGANATH MISRA AND S. RANGANATHAN, JJ.]

Service matter-Dismissal from service as a result of disciplinary
action-Institute of Constitutional and Parliamentary Studies-Whe-
ther 'State' within the meaning of Article 12 of the Constitution.

C The appellant, an employee of the Institute of Constitutional and
Parliamentary Studies (l.C.P.S., for short), was dismissed from
service by order dated November 17, 1982, as a result of disciplinary
action. He challenged the dismissal order by a writ petition before the
High Court. The question whether the I.C.P.S. was a 'State' within t-
the meaning of Article 12 of the Constitution arose for consideration
D as a major issue in the matter before the High Court. A Single Judge
of the High Court dismissed the petition, holding that the employer
was neither an agency nor an instrumentality of the government and
did not constitute 'State' as above said, and, therefore, was not sub-
ject to the writ jurisdiction of the High Court. The appeal against that
judgment of the Single Judge was dism.issed by the Division Bench of
E the High Court. Aggrieved by the decision of the High Court, the
appellant moved this Court by special leave.

Disposing of the appeal, the Court,
HELD: In the course of hearing, Dr. Anand Prakash, counsel
F for the I.C.P.S., respondent No. 2, stated that whether the Institute be
'State' or not within the meaning of Article 12 of the Constitution, the
employer was prepared to give a fresh opportunity to the appellant to
meet the charges against him. With that concession, the order of dis-
missal, etc. passed against the appellant should have been set aside
and the matter should have gone before the enquiry officer, but Dr.
Anand Prakash as also counsel for the Union of India invited the
G Court to decide the issue as to whether the I.C.P.S. constituted 'State'
within the constitutional meaning of the term. l263H; 264A-C I
The main question for consideration then was whether I.C.P.S.
was a 'State'. I.C.P.S. could become 'State' only if it was found to be
an authority within the territory of India or under the control of the
H government oflndia. l264D, G]
260
TEKRAJ VASANDI v. U.O.I. 261

I.C.l'.S. is a registered society. The emergence of a new genera- A
tion within less than two decades of independence gave rise to a feeling
that the people's representatives in the Legislatures required the
acquisition of the appropriate democratic bias and spirit. I.C.P.S. was
born as a voluntary organisation to fulfil this requirement. The
Speaker of the Lok Sabha was its first President. Three Ministers, a
B
former Chief Justice of India and a former Attorney General joiaed as
its Vice-Presidents. Some of the public officers were associated in its
Administrative set-up. Services of some employees of Parliament were
lent to it. While Article 12 refers to Parliament as such, a few mem-
bers of Parliament cannot be considered as Parliament so as to consti-
"- tute that body as referred to in Article 12. The Speaker and the
Ministers who joined as Vice-Presidents of the Society were there in c
their personal capacities and not as Ministers, etc. There were many
people in the category of Vice-President, Executive Chairman, Trea-
surer and members, who were not a part of the Government, and
some of them did not belong to Parliament. [28lA-F]
D
The objects of the Society were not governmental business.
Many of the objects of the Society were not confined to the two Houses
of Parliament and were intended to have an impact on Society at
large. [28lG-HI

The Memorandum of the Society permitted acceptance of gifts,
E
donations and subscriptions. No material was placed before the Court
for the stand that the Society was not entitled to receive contributions
from any indigenous source without government sanction. Since gov-
ernment money has been coming, the usual conditions attached to gov-
ernment grants have been applied and enforced. If the Society's
affairs were really intended to be carried on as a part of the Lok
F
Sabha or Parliament as such, the manner of functioning would have
been different. The accounts of the Society are subject to audit as the
affairs of the Societies receiving government grants are. Government
imposes conditions and restrictions when grants are made, and the
Society is also subject to the same, and the mere fact that such restric-
tions are made is not a determinative aspect. [28IH; 282 A-DI
G
There are registered societies which have been treated as 'State',
but in the case of each of them, either governmental business had been
undertaken by the Society or what was expected to be the public obli-
gation of the 'State' had been undertaken to be performed as• part of
the Society's function. [282H; 283A] H
262 SUPREME COURT REPORTS [ 1988) 2 S.C.R.

A Having given anxious consideration to the facts of the case, the
Court is not in a position to hold that I.C.P.S. is either an agency or
an instrumentality of the State so as to come within the purview of
"other authorities"in Article 12 of the Constitution. I.C.P.S. is a case
of its type-typical in many ways and normal tests may, perhaps, not
properly apply to test its character. Even if some i::stitution becomes
B 'State' within the meaning of Article 12, its employees do not become
holders of Civil posts so as to become entitled to the cover of Article
311 of the Constitution. They would, however, be entitled to the
benefits of Part III of the Constitution. It is unnecessary to examine
the appellant's case, keeping Articles 14 and 16 of the Constitution in
view, as, on the concession of counsel for l.C.P.S., the proceedings )'
wonld have to re-open. [283C-E I
c
In the result, the appellant would be entitled to the following
reliefs.

The order of dismissal set aside and the proceedings restored to
D the stage of enquiry. [283F]

The appellant shall be deemed to have been restored to service
and he would become entitled to normal relief available in such a situ-
ation. He should be deemed to be in service and his snspension would
not continue. His suspension, which had merged into dismissal is vac-
E ated. It shall, however, be open to the employer to make any direction
as is deemed appropriate in that behalf in future. [283F-G]

The appellant becomes entitled to salary for the past period sub-
ject to his satisfying the authorities that he had not earned any income
during that period. [283HI
F
The appellant shall be given a reasonable opportunity by the
enquiring officer to meet the charges and the enquiry shall be comp-
leted within four months. [283H; 284A]

The enquiry officer shall allow inspection to the appellant of all
G records relevantto the enquiry. [284B I ~

Rajasthan State Electricity Board, Jaipur v. Mohan Lal and -J
Ors., 11967] 3 SCR 377; Smt. Ujjam Bai v. State of Uttar Pradesh,
[!963] l SCR 778; Sabhajit Tewary v. Union of India & Ors., [1975] 3
SCR 616; Sukhdev Singh & Ors. v. Bhagatram Sardar Singh Rag-
H huvanshi & Anr., [1975) 3 SCR 619; Ramana Dayaram Shetty v. The
TEKRAJ VASANDI v. U.0.1. [MISRA. J.] 263

Internationa: Airport Authority of India & Ors., 11979] 3 SCR 1014; A
Managing Director, Uttar Pradesh WarehousinJ< Corporation & Anr.
v. Vinay Narayan Vajpayee, 11980] 2 SCR 773; Ajay Hasia, etc. v.
Khalid Mujib Sehravardi & Ors. etc., 11981] 2 SCR 79; Som Prakash
Rekhi v Union of India and Anr., [1981] 2 SCR 111; B.S.Minhas v.
Indian Statistical Institute & Ors., 11984] 1 SCR 395 and P.K.
Ramachandra Iyer and Ors. v. Union of India and Ors., 11984] 2 SCR B
200.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4959
of 1984.

From the Judgment and Order dated 1.11.1983 of the Delhi C
High Court in L.P.A. No. 160 of 1983.

P.P. Rao and A. Mariaputham for the Appellant.

Dr. Anand Prakash, D.N. Dwivedi, Mrs. Anil Katiyar, C.V.
Subba Rao, Vineet Kumar and Deepak K. Thakur for the Respondents. D

The Judgment of the Court was delivered by

RANGANATH MISRA, J. This appeal by special leave calls in
question the judgment of a Division Bench of the Delhi High Court
in a Letters Patent Appeal upholding the decision of a learned Single E
Judge rejecting the writ petition of the appellant. The appellant was
an employee of the Institute of Constitutional and Parliamentary
Studies (hereafter referred to as !CPS for short) and in a disciplinary
action he was dismissed from service by order dated 17th November,
1982. When he assailed the order in a writ petition before the High
Court, the question whether !CPS was 'State' within the meaning of F
Article 12 of the Constitution came for consideration as the major
issue arising in the matter. The learned Single Judge dismissed the
writ petition by holding that the employer was neither an agency nor
an instrumentality of the Government and did not constitute 'State'
within the meaning of Article 12 and , therefore, was not subject to
.~ the writ jurisdiction of the High Court. The appeal against the judg, G
ment of the learned Single Judge was dismissed on lst November,
..... 1983.

In course of hearing of the appeal Dr. Anand Prakash appear-
ing for ICPS fairly stated that whether the Institute be 'State' or not
within the meaning of Article 12 of the Constitution, the employer H
264 SUPREME COURT REPORTS [1988] 2 S.C.R.

A was prepared to give a fresh opportunity to the appellant to meet the
charges so as to dispel from his mind the feeling that he has not been
given reasonable opportunity to defend himself. Ordinarily, with that
concession the impugned order entailing the dismissal of the emplo-
yee and the judicial determination against the appellant should have
been set aside and the matter should have gone before the enquiry
B officer for affording reasonable opportunity to the appellant of being
heard against the charges. Dr. Anand Prakash, however, invited us
to enter into the merits of the issue as to whether ICPS constitutes
'State' within the constitutional meaning of the term. The Union of
India which appears before us through counsel also wanted that the
question should be decided. Thereupon we suggested to the appellant J '
C who was till then appearing in person to get represented through
counsel so that the matter could be appropriately argued on his behalf
also. He has been rendered suitable assistance by the Supreme Court
Legal Aid Committee and Mr. P.P.Rao, Senior Counsel, has ap-
peared on his behalf. .-.i--

D The main question for consideration now, therefore, is whether
!CPS is 'State'. For appropriate consideration of this question it is
necessary to look into the constitution of the body, the purpose for
which it has been created, the manner of its functioning including the
mode of its funding and the broad features which have been found by
this Court in several decisions io be relevant in the matter of
E determining a dispute of this type. Article 12 of the Constitution pro-
vides an inclusive definition of the term 'State' by saying:

"In this part, unless the context otherwise requires,
'the State' includes the Government and Parliament of
India and the Government and the State Legislature of
F each of the. States and all local or other authorities within
the territory of India or under the control of the Govern-
ment oflndia."

Obviously !CPS can become 'State' only if it is found to be an author-
ity within the territory of India or under the control of the Govern-
G ment of India. A.

ICPS, respondent No.2, is a society registered under the Socie- j
ties Registration Act, 21 of 1860, and was registered on 9th March,
1965. As would appear from its Memorandum of Association, the
foundation members were 19 in number-13 being members besides
H a President and five Vice-Presidents. The first President of the Soci-
TEKRAJ VASANDI v. U.0.1. (MISRA, J.] 265

ety was the then Speaker of the Lok Sabha. The five Vice-Presidents A
were the then Minister of Railways, Minister of Law and Social Sec-
urity, Minister of Communication and Parliamentary Affairs, a
former Chief Justice of India and a former Attorney General of
India. Dr. L.N. Singhvi, then a member of the Lok Sabha, was its
Executive Chairman. The Public Trustee in the Department of Com-
pany Affairs and Insurance in the Ministry of Finance was the B
Director and a member of the Lok Sabha was the Society's
( Treasurer. The then Minister of Cultural Affairs in the Ministry of
Education along with three members of the Lok Sabha, a Senior
Advocate of the Supreme Court, a member of the Ra jya Sabha, the
then Vice-Chancellor of Rajasthan University, the respective Secre-
taries of the Lok Sabha and the Rajya Sabha Secretariat and the c
Secretary in the Ministry of Law were its Members. The registered
office of the Society was initially located withiu the Parliament House
but was later on shifted to the Vithalbhai Patel House, Rafi Marg,
New Delhi. The objects of the Society inter alia were:

(1) to promote and provide for constitutional and D
Parliamentary studies with special reference to comparative
studies in constitutional systems of various countries and work-
ing of the Indian Constitution and parliamentary and govern-
mental institutions in their various aspects;

(2) to undertake study of courses and fundamental E
research relating to developments in conctitutional law, conven-
tions and practices, parliamentary procedure, legislative draft-
ing, .trends in judicial interpretation and allied matters;

(3) to organise inter alia training programmes in constitu-
tional problems and matters of current parliamentary impor- F
tance;

( 4) to set up a legislative research and reference service
for the benefit of all interested members of the Union Parlia-
ment and State Legislatures irrespective of their party afftlia-
:i.. tions; G

(5) to undertake and provide for the publication of a
journal and of research papers and of books and brochures with
a view to disseminate democratic values and to foster broad
based civic education and awareness, and in particular, to pro-
mote study of constitutional and parliamentary affairs; H
266 SUPREME COURT REPORTS [1988] 2 S.C.R.
)<.
A (6) to establish and maintain libraries and information
services to facilitate the study of constitutional and parliament-
ary subjects and spread information in regard thereto;

(7) to invite as and when feasible, scholars who may or
may not be members of the Society, to take advantage of the
B facilities offered by the Society and to benefit the Society by
their knowledge and experience; and

(8) to institute appropriate fellowships, offer prizes and
arrange scholarships and stipends in furtherance of the objects
of the society. )

c The Memorandum permitted the Society to accept gifts, dona-
tions and subscriptions of cash and securities and of any property
either movable or immovable. The rule classifies the members under
heads like Founder Members, Life Members, Honorary Members,
Ordinary Members, Corporate Members and Associate Members.
D Ordinary membership, according to the Rules, would extend to
Members of Parliament or of any State Legislature or those who have
been or are members of the Judiciary or advocates of the Supreme
Court or the High Courts or persons employed in public service or
persons engaged in teaching of study of social sciences particularly of
Political Science, Law or subjects related thereto. In the category of
E Honorary Members were the President, the Vice-President and the
Prime Minister of India. Though the Memorandum permitted receipt
of gifts and donations from outside, it is not disputed that the main
source of income of the society has been the annual Central Govern-
ment grant.

F We think it appropriate at this stage to turn attention to judicial
precedents to find out as to what should be the test to be applied for 1
determining when on institution like respondent No.2 would be trea-
ted as 'Other authorities' under Article 12 of the Constitution. The
first in point of time is the Constitution Bench judgment in the case
of Rajasthan State Electricity Board, Jaipur v. Mohan Lal & Ors.,
G [ 1967] 3 SCR 377 Bhargava, J. who delivered the main judgment ~
observed:

"the meaning of the word 'authority' given in Web-
ster's Third New International Dictionary; which can be
applicable, is a "public administrative agency or corpora-
H tion having quasi-governmental powers and authorised to
TEKRAJ VASANDI v. U.0.1. [MISRA, J.l 267

administer a revenue-producing public enterprise." This A
dictionary meaning of the word 'authority' is clearly wide
enough to include all bodies created by a statute on which
powers are conferred to carry out governmental or quasi-
governmental functions. The expression "Other authori-
ties" is wide enough to include within it every authority
created by a statute and functioning within the territory of B
India, or under the control of the Government of India;
and we do not see any reason to narrow down this mean-
ing in the context in which the words 'other authorities' are
used in Article 12 of the Constitution."

·In Smr. Ujjam Bai v. State of Uttar Pradesh, [1963] 1 SCR 778 c
Ayyangar, J. had observed:

"Again Article 12 winds up the list of authorities fal-
'-". ling within the definition by referring to 'other authorities'
within the territory of India which cannot obviously be
read as ejusoem generis with either the Government and D
the Legislatures or local authorities. The words are of
wide amplitude and capable of comprehending every
authority created under a statute and functioning within
the territory of India or under the control of the Govern-
ment of India.
E
Shah, J., as he then was, added a note to the leading Judgment of
Bhargava and observed:

"I am unable, however, to agree that every constitu-
tional or statutory authority on whom powers are confer-
red by law is 'other authority' within the meaning of Arti- F
cle 12. The expression 'authority' in its etymological sense
means a body invested with power to command or give an
ultimate decision, or enforce obedience, or having a legal
right to command and be obeyed.

. . . . . . . . . . . . In determir1ing what the expression G
'other authority' in Article 12 connotes, regard must be
had not only to the sweep of fundamental rights over the
power of the authority, but also to the restrictions which
may be imposed upon the exercis~ of certain fundamental
rights (e.g., those declared by Article 19) by the author-
ity. Fundamental rights within their allotted fields trans- H
268 SUPREME COURT REPORTS (1988] 2 S.C.R.

A cend the legislative and executive power of the sovereign
authority. But some of the important fundamental rights
are liable to be circumscribed by the imposition of reason-
able restrictions by the State. The true content of the
expression 'other authority' in Article 12 must be deter-
mined in the light of this dual phase of fundamental
B rights. In considering whether a statutory or constitutional
body is an authority within the meaning of Article 12, it
would be necessary to bear in mind not only whether
against the authority fundamental rights in terms absolute
are intended to be anforced, but also whether it was
intended by the Constitution makers that the authority
/ .
was invested with the sovereign power to impose restric- ·
c tions on very important a.'ld basic fundamental freedoms.

In my judgment, authorities, constitutional or statut-
ory invested with power by law but not sharing the
sovereign power do not fall within the expression 'State' as
D defined in Article 12. Those authorities which are invested
with sovereign power, i.e., power to make rules or regula-
tions and to administer or enforce them to the detriment
of citizens and others fall within the definition of 'State' in
Article 12, and constitutional or statutory bodies which do
not share that sovereign power of the State are not, in my
E judgment, 'State' within the meaning of Article 12 of the
Constitution."

Two cases, the First of Sabhajit Tewary v. Union of India & Ors.,
(1975) 3 SCR 616 and the other of Sukhdev Singh & Ors v.
Bhagatram Sardar Singh Raghuvanshi & Anr., [1975] 3 SCR 619 were
F disposed of by the same Constitution Bench on February 21, 1975. In
both these cases, the true meaning of Article 12 of the Constitution
fell for consideration. Sabhajit Tewary's case was one where the
status of the Council of Scientific and Industrial Research was
examined. This Court took note of the fact that the Council was a
society registered under the Societies Registration Act. Under Rule
G 3, the Prime Minister of India was the ex-officio President of the ~
Society and under Rule 30 the governing body consisted of persons
appointed by the Government of India representing the administra- j
tive min:stry under which the Council of Scientific and Industrial
Research is included and the Ministry of Finance. The Court also
took note of the manner in which the affairs of the Society including
H funding were conducted. Ray, CJ. ,in the brief judgment that the
TEKRAJ VASANDI v. U.O.l. [MISRA. J.J 269

Court delivered in the case observed: A

"Extracting the features as aforesaid, it was con-
tended that these would indicate that the Council of Sci-
entific and Industriai Research was really an agency of the
Government. This contention is unsound. The society B
does not have a statutory character like the Oil and
Natural Gas Commission, or the Life Insurance Corpora-
tion or Industrial Finance Corporation. It is a society
incorporated in accordance with the provisions of the
Societies Registration Act. The fact that the Prime Minis-
ter is the President or that the Government appoints
nominees to the governing body or that the Government c
may terminate the membership will not establish anything
more than the fact that the Government takes special care
that the promotion, guidance and cooperation of scien-
tific and industrial research, the institution and function-
ing of specific researches, establishment or development
D
and assistance to special institutions or departments of the
existing institutions for scientific study of problems affect-
ing 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.
E
This Court has held in Praga Tools Corporation v.
C.A. /manual & Ors., [1969] 3 SCR 773; Heavy Engineer-
ing Mazdoor Union v. The State of Bihar & Ors., [1969] 3
I
.-'( SCR 995 and in $.L. Aggarwal v. General Manager,
Hindustan Steel Ltd., [1970] 3 SCR 363 that the Praga F
Tools Corporation, Heavy Engineering Mazdoor Union
and Hindustan Steel Ltd. are all companies incorporated
under the Companies Act and the employees of these
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
G
in these cases to have independent existence of the Gov-
ernment and by the law related to corporations. These
could not be held to be departments of the Government."

The ratio of this decision has been fully relied upon by the High
Court in dismissing the claim of the appellant. H
270 SUPREME COURT REPORTS [ 1988] 2 S.C.R.

A In Sukhdev Singh's case (supra) the leading judgment was
delivered also by Ray, CJ. Two questions fell for consideration-( I)
whether an order of· removal from service contrary to Regulations
would enable the employee to a declaration against the statutory
corporation of continuance in service or would it end up in claim for
damages only and (2) whether the employee of a statutory corpora-
B
tion is entitled to claim protection of Articles 14 and 16 against the
Corporation. The Court, therefore, straight went into the question as
to whether statutory corporations were authorities within the mean-
ing of Article 12. As a fact, three corporations being the Oil and
Natural Gas Commission, the Life Insurance Corporation and the
)
Industrial Finance Corporation were before the Court and each one
C of them had been set up under a special statute. At page 641 of the '
Reports, the learned Chief Justice pointed out:

"In the background of the provisions of the three
• Acts under consideration, the question arises as to
whether these Corporations can be described to be
D
authorities within the meaning of Article 12 of the
Constitution."

At page 642 of the Reports the conclusion was reached to the effect
that "these statutory bodies are 'authorities' within the meaning of
E Article 12 of the Constitution." We are really concerned with what
Mathew J., added to the judgment. He observed:

"The test propounded by the majority is satisfied so
far as the Oil and Natural Gas Commission is concerned
as section 25 of the Oil and Natural Gas Commission Act
provides for issuing, binding direction to third parties not
F
to prevent the employees of the Commission from enter-
ing upon their property if the Commission so directs. In
other words, as section 25 authorises the Commission to
issue binding directions to third parties not to prevent the
employees of the Commission from entering into their
land and as disobedience of such directions is punishable
G
under the relevant provision of the Indian penal Code
since those employees are deemed .to be pubic servants
under section 2 I of the Indian Penal Code by virtue of
section 27 of the Act, the Commission is an 'authority'
within the meaning of the expression 'other authorities' in
H Article 12.
TEKRAJ VASANDI v. U.O.I. [MISRA, J.] 271

Though this would be sufficient to make the commis- A
sion a 'State' according to the decision of this Court in the
Rajasthan Electricity Board case (supra), there is a larger
question which has a direct bearing so far as the other two
corporations are concerned, viz., whether, despite the fact
that there are no provisions for issuing binding directions
to third parties the disobedience of which would entail B
penal consequences, the corporations set up under statu-
tes to carry on business of public importance of which is
fundamental to the life of the people can be considered as
'State' within the meaning of Article 12."

Mathew, J. referred to the precedents and other authorities from C
· England, France and United States and at page 654 of the Reports
stated:

''The ultimate question which is relevant for
our purpose is whether such a corporation is an agency
or instrumentality of the government for carry- D
ing 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? When it is seen
from the provisions of that Act that on liquidation of the
corporation, its assets should be divided among the share-
holders, namely, the Central and State governments and E
others, if any, the implication is clear that the benefit of
the accumulated income would go to the Central and State
t Governments. Nobody will deny that an agent has a legal
personality different from that of the principal. The fact
~, that the agent is subject to the direction of the principal
does not mean that he has no legal personality of his own F
, , , , , , ..... , , The crux of the matter is that public corpo-
ration is a new type of institution which has sprung from
the new social and economic functions of government and
that it therefore does not neatly fit into old legal
categories, Instead of forcing it into them, the later should
be adapted to the needs of changing times and conditions. G

I do not think there is any basis for the apprehension
expressed that by holding that these public corporations
are 'State' within the meaning of Article 12, the employees
of these corporations would become government servants.
I also wish to make it clear that I express no opinion on H
272 SUPREME COURT REPORTS [1988) 2 S.C.R.

the question whether private corporations or other like
A
organisations, though they exercise power over their em.-
ployees which might violate their fundamental rights,
would be 'State' within the meaning of Article 12."

Then comes the case of Ramana Dayaram Shetty v. The International
B Airport Authority of India & Ors., [ 1979) 3 SCR 1014. The question
before the Court was whether the International Airport Authority of
India was 'State' within the meaning of Article 12 so as to be sub-
jected to enforcement of fundamental rights against it. Examining
this aspect, Bhagwati, J., as he then was spoke for the three-Judge
Bench thus: /
c "Now it is obvious that the government which repre-
sents the executive authority of the· state, may act through
the instrumentality or agency of natural persons or it may
employ the instrumentality or agency of judicial persons
to carry out its functions. In the early days, when the Gov-
D ernment 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
E frame work of civil service was not sufficient to handle the
new tasks which were often of specialised and highly tech-
nical character. The inadequacy of the civil service to deal
with these new problems came to be realised and it ·-t·
became necessary to force a new instrumentality or
adminfatrative device for handling these new problems. It
F 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. As early
as 1819 the Supreme Court of the United States in Mac
Cullough v. Maryland, (4 Wheat 315) held that the
Congress has power to charter corporations as incidental
G to or in aid of governmental functions and, as pointed out
by Mathew J., in Sukhdev v. Bhagat Ram, (supra) such
federal corporations would ex-hypothesi be agencies of
the Government. In Great Britain too, the policy of public +
administration through separate corporations was gradual-
ly evovled and the conduct of basic industries through
H giant corporations has now become a permanent feature
TEKRAJ VASANDI v. U.0.1. !MISRA. J.l 273

of public life. So far as India is concerned, the genesis of A
the emergence of corporations as instrumentalities or
agencies of Government is to be found in the Government
of India Resolution on Industrial Policy dated with April,
1948 where it was stated inter alia that 'management of
state enterprises will as a rule be through the medium of
B
public corporation under the statutory control of the
Central Government who will assume such powers as may
be necessary to ensure this.' It was in pursuance of the
policy envisaged in this and subsequent resolutions on
Industrial policy that corporations were created by Gov-
ernment for setting up and management of public enter-
prises and carrying out other public functions. Ordinarily, c
these functions could have been carried out by Govern-
ment departmentally through service personnel, but the
instrumentality or agency of the corporations was resorted
to in these cases having regard to the nature of the task to
be performed. The corporations acting as instrumentality
D
or agency of Government would obviously be subject to
the same limitations in the field of constitutional and
administrative law as Government itself, though in the eye
of the law, they would be distinct and independent legal
entities. If the Government acting through its officers is
subject to certain constitutional and public law limitations,
E
it must follow a fortiori that Government acting through
the instrumentality or agency of corporations should
equally be subject to the same limitations. But the ques-
tion is how to determine whether a corporation is acting as
instrumentality or agency of Government. It is a question
not entirely free from difficulty."
F
"1- It was again pointed out in the same case that:

"A corporation may be created in one of two ways.
It may be either established by statute or incorporated
under a law such as the Companies Act, 1956 or the
G
Societies Registration Act, 1860. Where a corporation is
wholly controlled by Government not only in its policy
making but also in carrying out the functions entrusted to
it by the law establishing it or by the Charter of its
incorporation, there can be no doubt that it would be an
instrumentality or agency of Government .......... " H
274 SUPREME COURT REPORTS [ 19881 2 S.C.R.

A The Court further stated:

"But the public nature of the function, if
impregnated with governmental character or 'tied or ent-
wined with government' or fortified by some other addi-
tional factor may render the corporation an instrumental-
B ity or agency of Government. Specifically, if a department
of Government is transferred to a corporation, it would be
a strong factor supportive of this inference.

It will thus be seen that there are several factors
which may have to be considered in determining whether . )
a corporation is an agency or instrumentality of Govern-
c ment. We have referred to some of these factors and they
may be summarised as under: whether there is any finan-
cial assistance given by the State, and if so, what is the
magnitude of such assistance whether there is any other
form of assistance, given by the State, and if so whether it
D is of the usual kind or it is extraordinary, whether there is
any control of the management and policies of the corpo-
ration by the State and what is the nature and extent of
such control, whether the corporation enjoys State confer-
red or State protected monopoly status and whether the
functions carried out by the corporation are public func-
E tions closely related to governmental functions. This
particularisation of relevant factors is however not exhaus-
tive and by its very nature it cannot be, because with
increasing assumption of new tasks growing complexities
of management and administration and the necessity of -~--
continuing adjustment in relations between the corpora-
F tions and Government calling for flexibility, adapt ability
and innovative skills, it is not possible to make an exhaus-
tive enumeration of the tests which would invariably and
in all cases provide an unfailing answer to the question
whether a corporation is governmental instrumentality or
agency."
G
At page 1052 of the Reports, the Court proceeded to consider
whether International Airport Authority of India could be said to be -+
an 'authority' falling within the meaning of 'State' in Article 12. The
constitution of the body, the manner of filling it up, Government's
power of control in the matter of appointment of members and termi-
H nation of membership were utilised as tests for examining whether
TEKRAJ VASAND! v. U.O.l. [MISRA, J.] 275

the Airport authority was 'State'. After referring to the special A
aspects, the Court observed:

"It will be seen from these provisions that there are
certain features of the respondent which are eloquent and
throw considerable light on the true nature of the first
respondent. In the first place, the Chairman and Members B
of the first respondent are all persons nominated by the
Central Government and the Central Government has
also the power to terminate their appointment as also to
• review them in certain specified circumstances. The Cent-
ral Government is also vested with the power to take away
the management of any airport from the first respondent c
and to entrust it to any other person or authority and for
certain specified reasons, the Central Government can
also supersede the first respondent. The Central Govern-
ment has also power to give directions in writing from
time to time on questoions of policy and these directions
are declared binding on the first respondent." D

Reference was made to the case of Sabhajit Tewary (supra). Bhag-
wati, J. referring thereto stated:-

"This decision does not lay down any principle or
test for the purpose of determining when a corporation E
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."

~· and ultimately it was held that the Authority was 'State' under Article
12. F

This case clearly approves the treatment of the matter by Mathew, J.
in Sukhdev Singh's case (supra). The two-Judge Bench in the case of
Managing Director, Uttar Pradesh Warehousing Corporation & Anr.
V, Vinay Narayan Vajpayee, [!980] 2 SCR 773 was cited but we do
not consider it necessary to refer to the same. On the other hand G
reference to the two later decisions of this Court may be more useful.
Those are Ajay Hasia etc. v. Khalid Mujib Sehravardi & Ors. etc.,
[ 1981] 2 SCR 79 of a Constitution Bench and the other is Som
Prakash Rekhi v, Union of India & Anr,, [ 198 ll 2 SCR 111 being a
three-Judge Bench decision, It is pertinent to indicate that both the
H
judgments were delivered on November 13, 1980,
276 SUPREME COURT REPORTS [1988] 2 S.C.R.

A In Ajay Hasia's case an Engineering College was also a Society
registered under the Jammu & Kashmir Registration of Societies Act,
1898, and the question that fell for consideration was whether it was
an authority within the meaning of Article 12. The Court found
that the Memorandum of Association of the Society in clause (3)
set out the objects for which the Society was incorporated and
B they included among other things establishment of the college
with a view to providing instructions and research in such branches
of engineering and technology as the college may think fit and for
the advancement of learning and knowledge in such branches.
Reference was made to the Memorandum of Association, the ) .
objects and the powers of the State Government to make appoint- c'
C ments and to the fact that the State government with the approval of
the Central Government had the power to take such action and to
issue such directions as are necessary in respect of all matters relating
to the functioning of the college as noticed in the review of the
activities. the Court also took note of the fact that the founding mem-
bers of the society were enumerated in clause (9) of the memoran-
0 dum and they were the Chairmen to be appointed by the State Gov-
ernment with the approval of the Central Government, two represen-
tatives of the State Government, one representative of the Central
Government, two representatives of the All India Council for Techni-
cal Education to be nominated by the Northern Regional Committee,

1
one representative of the University of Jammu & Kashmir, one non-
E official representative of each of the Punjab, Rajasthan, Uttar
Pradesh and Jammu & Kashmir States and to be appointed by the
)
respective Governments in consultation with the Central Government
and the principal who shall also be the ex-officio Secretary. The rules
of the Society were referred to with a view to finding out the details
of functioning. Sabhajit Tewary's case was referred to and distinguis-
F hed and the tests laid down in the International Airport Authority's
case (supra) were approved. Ultimately the Court summarised the
position as under:

"The tests for determining as to when a corporation
can be said to be an instrumentality or agency of Govern-
G ment may now be culled out from the judgment in the
International Airport Authority's case. These tests ate not
conclusive or clinching, but they are merely indicative
indicia which have to be used with care and caution
because while stressing the necessity of a wide meaning to
be placed on the expression 'other authorities', it must be
H realised that it should not stretched so far as to bring in
TEKRAJ VASAND! v. U.O.l. [MISRA, J.J 277

every autonomous body which has some nexus with the A
Government within the sweep of the expression. A wide.
enlargment of the meaning must be tempered by a wise
limitation. We may summarise the relevant tests gathered
from the decision in the International Airport Authority's
case as follows:
B
(1) "One thing is clear that if the entire share capi-
tal 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
c
much as to meet ahnost entire expenditure of the
corporation, it would afford some indication of the
corporation being inpregnated with governmental
character."
D
(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 E
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 F
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." G

, ~ The Court thereafter proceeded to say:

"We may point out that it is immaterial for this
purpose whether the corporation is created by a statute or
under a statute. The test is whether it is an instrumentality H
278 SUPREME COURT REPORTS [1988] 2 S.C.R.

A or agency of the Government and not as to how it is
created. The inquiry has to be not as to how the juristic
person is born but why it has been brought into existence.
The corporation may be a statutory corporation created
by a statute or it may be a Government Company or a
B company formed under the Companies Act. 1956 or it
may be a society registered under the Societies Registra-
tion Act, 1860 or any other similar statute. Whatever be
its genetical origin, it would be an 'authority' within the
meaning of Article 12 if it is an instrumentality or agency
of the Government and that would have to be decided on
a proper assessment of the facts in the light d the relevant
c factors. 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 con-
sideration of the relevant factors, whether the company or
D society is an instrumentality or agency of the Government
so as to come within the meaning of the expression 'au-
thority' in Article 12."

At pages 99 and 100 of the Reports, the Constitution Bench referred
to the facts of the particular case and came to hold that the society
E was an instrumentality or agency of the State. In Som Prakash
Rekhi's case (supra) at page 137 of the Reports, Krishna Iyer, J.
referred to the five tests and concluded by saying that:

"The finale is reached when the cumulative effect of
all the relevant factors above set out is assessed and once
')A.
F the body is found to be an instrument or agency of Gov-
ernment, the further couclusion emerges that it is 'State'
and is subject to the same constitutional limitations as
Government.''

At page 138 the criticism against the conclusions reached in the
G Airport Authority's case was taken note of and the learned Judge
observed: ..

"There is no doubt that Bhagwati, J. broadened the scope -j
of State under Article 12 and according to Shri G .B. Pai
the observations spill over beyond the requirements of the
H case and must be dismissed as obiter."
TEKRAJ VASANDI v. U.O.I. [MISRA. J.] 279

Pathak, J., as he then was, added a brief note to the judgment by A
saying:

"l must confess to some hesitation in accepting the propos-
ition that the Bharat Petroleum Corporation Limited is a
'State' within the meaning of Article 12 of the Constitu-
tion. But in view of the direction taken by the law in this B
Court since Ramana Dayarama Shelly v. International
Airport Authority I find I must lean in favo\lr of that con-

- clusion. I would have welcomed a wider range of debate
before us on the fundamental principles involved in the.
issue and on the implications flowing from the definition
in the Companies Act, 1956 of a 'Government Company', C
but perhaps a future case may provide that."

We have thus the tests available in the two decisions to be applied to
the facts of the case in hand for determination as to whether !CPS is
'State' within the meaning of Article 12.
D
There are two more cases to which brief reference may now be
made-B.S. Minhas v. Indian Statistical Institute & Ors., [1984] I
SCR 395 and P.K. Ramachandra Iyer & Ors. v. Union of India &
Ors., I 1984] 2 SCR 200. The case of the Indian Statistical Institute is
also of a society registered under the Societies Registration Act. The
Court found that the entire money required for funding the Institute E
was provided by the Central Government and even if any other
money was to be received by the Institute it could be done only with
the approval of the Central Government and the accounts of the
Institute were to be submitted to the Central Government for its
scrutiny and satisfaction. The Society had to comply with all directions
as may be issued by the Central Government. The control of the F
Central Government was deep and pervasive and, therefore, it was
an instrumentality of the Central Government and as such was an
authority within the meaning of Article 12 of the Constitution. In
coming to this conclusion, the Court relied upon the tests indicated in
the International Airport Authority's case as also in the case of Ajay
Hasia. G

In Ramchandra Jyer's case, the question for consideration was
whether the Indian Council of Agricultural Research (!CAR) was a
set up within the meaning of Article 12 of the Constitution. !CAR is
also a Society registered under the Societies Registration Act. The
Court found that when it was set up, it was an attached office of the H
280 SUPREME COURT REPORTS [1988] 2 S.C.R.
A_.
Government of India and had not undergone any change when it got
A
transfered into a Society. Applying the tests indicated in International
Airport Authority's case as also the case of A jay Hasia, the Court
came to the conclusion that there was little doubt that it was an in-
strumentality or agency of the State. It further stated:

B "ICAR came into existence as an integral depart-
ment of the Government of India and later on became an
attached office of the Central Government. The composi-
tion of the ICAR as evidenced by Rule 3 could not have
been more governmental in character than any depart-
ment of the Government." )
.....
'
c It is time to turn to the facts of the present case to find out as to
what the conclusion should be when the tests formulated by the sev-
eral cases of this Court referred to above are applied. There cannot
indeed be a strait jacket formula. It is not necessary that all the tests
should be satisfied for reaching the conclusion either for or against
D holding an institution to be 'State'. In a given case some of the fea-
tures may emerge so boldly and prominently that a second view may
not be possible. There may yet be other cases where the matter would
be on the border line and it would be difficult to take one view or the
other outright.

E Our struggle for independence which spread over a century bore
fruit in 1947. During the long period of struggle, the British Govern-
ment following the pattern of the democratic system prevailing in
their own country had patronised the evolution of a process of self.
--
government. The Government of India Act of 1935 which was a posi-
tive improvement on the previous Acts had introduced provincial
F autonomy and the Indian Independence Act, 1947, adopted that pat-
tern of Government. Even the Constitution which the people of India
gave unto themselves in 1949 and which came into force from the
26th of January, 1950, followed that pattern, of course, with consid-
erable modifications. Thus when we became independent a democra-
tic pattern had evolved in this country through more or less an histor-
G ical process. Soon the princely States disappeared by a process of
merger and the Constitution ultimately came to have a federal base-
the federating States as the units and the federation at the Centre.

Democracy pre-supposes certain conditions for its successful
working. It is necessary that there must be a deep sense of under-
H standing, mutual confidence and tolerance and regard and acceptance
TEKRAJ VASANDI v. U.0.1. [MISRA, J.] 281

of the views of others. In the early years of freedom, the spirit of A
sacrifice and a sense of obligation to the leadership that had helped
the dream of freedom to materialise had been accepted. The emerg-
ence of a new generation within less than two decades of independ-
ence gave rise to a feeling that the people's representatives in the
Legislatures required the acquisition of the appropriate democratic
bias and spirit. ICPS was born as a voluntary organisation to fulfil B
this requirement. At the inception it was certainly not a governmen-
tal organisation and it has not been the case of the parties in their
pleadings nor have we been told at the bar during the long arguments
that had been advanced that the objects of ICPS are those which are
a State obligation to fulfil. The Society was thus born out of a feeling
that there should be a voluntary association mostly consisting of c
Members of the two Houses of Parliament with some external sup-
port to fulfil the objects which were adopted by the Society.

To Start with, the Society was accommodated in the Parliament
House but in due course it shifted out. The President of India inau-
gurated the Society. Very appropriately the Speaker of the Lok Sabha D
became its first President and three Ministers, a former Chief Justice
of India and a former Attorney General joined as its Vice-Presidents.
Some of the public officers were also associated in the administrative
set-up of the Society. Individual Members of Parliament and the
corporate body known as Parliament are certainly two different con-
cepts. Services of some of the employees of Parliament were lent to E
the Society. While Article 12 refers to Parliament as such, a few
Members of Parliament cannot be considered as Parliament so as to
constitute that body as referred to in Article 12. The Speaker and the
Ministers who joined as Vice-Presidents of the Society were there in
their individual capacities and not as Ministers, though designations
were indicated. In the category of Vice-Presidents, Executive F
Chairman, Treasurer and members, there were many people who
were really not a part of Government as such and some of them did
not belong to Parliament.

The objects of the Society were not governmental business but
were certainly the aspects which were expected to equip Members of G
Parliament and the State Legislatures with the requisite knowledge
and experience for better functioning. Many of the objects adopted
by the Society were not confined to the two Houses of Parliament
and were intended to have an impact on society at large.

The Memorandum of the Society permitted acceptance of gifts, H
282 SUPREME COURT REPORTS [1988] 2 S.C.R.
)..
A donations and subscriptions. There is material to show that the Ford
Foundation, a US based Trust, had extended support for some time.
Undoubtedly, the annual contribution from the Government has '>-
been substantial and it would not be wrong to say that they perhaps
constitute the main source of funding, Yet some money has been
coming from other sources. In later years, foreign funding came to be
B regulated and, therefore, it became necessary to provide that without
Government clearance like any other institution, ICPS was not to
receive foreign donations. No material has been placed before us for
the stand that the Society was not entitled to receive Contributions
from any indigenous source without Government sanction. Since
1
Government money has been coming, the usual conditions attached ,/'.
C to Government grants have been applied and enforced. If the soci-
ety's affairs were really intended to be carrier on as a part of the Lok
Sabha or Parliament as such, the manner of functioning would have
been different. The accounts of the Society are separately maintained
and subject to audit in the same way as the affairs of societies receiv- /¥
ing Government grants are to be audited. Government usually
D impose certain conditions and restrictions when grants are made. No
exception has been made in respect of the Society and the mere fact
that such restrictions are made is not a determinative aspect.

Considerable attempt has been made by Mr. Rao, learned
counsel for the appellant, to show that in the functioning of the Soci-
E ety there is deep and pervasive control of government. We have
examined meticulously the correspondence and the instances where
control was attempted to be exercised or has, as a fact, been exer-
'"'!.
cised but these again are features which appear to have been ex-
plained away. ~

F We were taken through the report submitted by the Tripathi
Committee which had been set up to suggest changes in the set up r
and affairs of the Society. The report and the steps taken on the basis
of the report are also not material which can be taken to be indisput-
able features for reaching the conclusion one way or the other. We
were shown the correspondence by the Minister of Law with the
G Executive Chairman of the Society. Undoubtedly the Minister has ~
tried to exercise his authority as the controlling department of Gov-
ernment in the matter of making the grant. As we have already -.{
pointed that itself may not be a conclusive feature.

We have several cases of societies registered under Societies
H Registration Act which have been treated as 'State' but in each of
TEKRAJ VASANDI. v. U.0.1. [MISRA, J.[ 283

those cases it would appear on analysis that either governmental A
business had been undertaken by the Society or what was expected to
-Y: be the public obligation of the 'State' had been undertaken to be
performed as a part of the Society's function. In a Welfare State, as
has been pointed out on more than one occasion by this Court, Gov-
ernmental control is very pervasive and in fact touches all aspects of
social existence. In the absence of a fair application of the tests to be B
made, there is possibility of turning every non-governmental society
into an agency or instrumentality of the State. That obviously would
not serve the purpose and may be far from reality. A broad picture: of
_ , the matter has to be taken and a discerning mind has to be applied
t-. keeping the realities and human experiences in view so as to reach a
"'reasonable conclusion. Having given our anxious consideration to the c
facts of this case, we are not in a position to hold that !CPS 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. We
~, must say that !CPS is a case of its type-typical in many ways and the
normal tests may perhaps not properly apply to test its character.
D
While we were referring to the cases in an earlier part of our
judgment, we have noticed the caution indicated by this Court that
even if some institution becomes ·state' within the meaning of Article
12, its employees do not become holders of civil posts so as to
''-.. become entitled to the cover of Article 311. They would, however, be
r entitled to the benefits of Part III of the Constitution. It is unneces- E
sary to examine the appellant's case keeping Articles 14 and 16 of the
'- Constitution in view as on the concession of Dr. Anand Prakash the
-,, proceedings will have to reopen.

Before we part with this case, we must indicate what reiiefs the
appellant would be entitled to. Now that the order of the dismissal is F
set aside and the proceedings have been restored to the stage of
enquiry, the appellant shall be deemed to have been restored to
service. The appellant would have become entitled to the normal
relief available in such a situation. He should be deemed to be in
service and we do not agree with Dr. Anand Prakash that his suspen-
sion should continue. His suspension which had merged into dismissal G
has been vacated. It shall, however, be open for the employer to
make any direction as is deemed appropriate in that behalf in future.
The appellant, therefore, becomes entitled to the salary for the past
period subject to his satisfying the authorities that he has not earned
any other income during that period. The appellant shall be given
reasonable opportunity by the enquiring officer to meet the charges H
284 SUPREME COURT REPORTS [1988] 2 S.C.R. •
A and the enquiry shall be completed with in four months. The appel-
lant has personally assured us in Court that he will fully cooperate in
the enquiry. The enquiry officer shall allow inspection to the appellant
of all records relevant to the enquiry.

We make no order as to costs.
B
S.L. Appeal disposed of.

f

r