STATE UNDER ARTICLE 12

Article 12 State

Most of the Fundamental Rights are claimed against the state and its instrumentalities and not against private bodies. Art. 13(2), bars the ‘state’ from making any ‘law’ infringing a Fundamental Right. Art. 12 gives an extended significance to the term ‘state’. Art. 12 clarifies that the term ‘state’ occurring in Art. 13(2), or any other provision concerning Fundamental Rights, has an expansive meaning.

Article 12. : In this part, unless the context otherwise requires, “the State” includes the Government and Parliament of India and the Government and the Legislature of each of the State and all local or other authorities within the territory of India or under the control of the Government of India.

According to Article 12, the term ‘State’ includes:

(i) The Government and Parliament of India;

(ii) The Government and the Legislature of a State;

(iii) All local authorities; and

(iv) Other authorities within the territory of India; or under the control of the Central Government.

The action of the any of the bodies comprised within the term ‘state’ as defined in Art. 12 can be challenged before the courts under Art. 13(2) on the ground of violating Fundamental Rights.

The first two categories include the legislative and executive wings of the Union and the State in all their possible varieties. They are quite specific and self-explanatory. The latter two categories, particularly the last, are not so specific and require some explanation.

Local Authorities: The expression ‘local authority’ in Art. 12 refers to a unit of local self-government like a municipal committee or a village panchayat.

The Supreme Court has ruled that to be characterized as a ‘local authority’ the authority concerned must have separate legal existence as a corporate body, it must not be a mere government agency but must be legally an independent entity; it must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. It must also enjoy a certain degree of autonomy either complete or partial, must be entrusted by statute with such governmental functions and duties as are usually entrusted to locally like health and education, water and sewerage, town planning and development roads, markets, transportation, social welfare services, etc. Finally, such body must have the power to raise funds for furtherance of its activities and fulfillment of its objectives by levying taxes, rates, charges or fees.

In Calcutta State Transport Corporation V. Commissioner of Income-tax, West Bengal, the Supreme Court refused to characterize the Corporation as a ‘local authority’. The corporation is meant only for the purpose of providing road transport services and has no element of popular representation in its constitution. Its powers and functions bear no relation to the powers and functions of a municipal committee. It is more in the nature of a trading corporation.

Other Authorities.: The interpretation of the term ‘other authorities’ in Art. 12 has caused a good deal of difficulty, and judicial opinion has undergone changes over time.

Today’s government performs a large number of functions because of the prevailing philosophy of a social welfare state. The government acts through natural persons as well as juridical persons. Some functions are discharged through the traditional governmental departments and officials while some functions are discharged through autonomous bodies existing outside the departmental structure, such as, companies, corporations etc.

Some High Courts held that since the expression ‘other authorities’ is used after mentioning a few of them, namely, the Government and Parliament of India, the Government and the Legislature of each of the State, and local authorities, it would be reasonable to construe this expression ejusdem generis with government or legislature. So construed, it could only mean authorities exercising governmental or sovereign powers and functions. On this interpretation, the expression, ‘other authorities; would only include such bodies as are functioning for or on behalf the Central or State Government. This restricted interpretation of the expression ‘other authorities’ was, however, rejected by the Supreme Court. It held that the doctrine of ejusdem generis was inapplicable to the interpretation of the expression ‘other authorities.

Laying down these propositions in Electricity Board, Rajasthan V. Mohan Lal, Supreme Court held that ‘other authorities’ would includes all authorities created by the constitutional or statute on whom powers are conferred by law. It was not necessary that the statutory authority should be engaged in performing government or sovereign functions. The court emphasized that it is not material that some of the power conferred on the concerned authority are of commercial nature. This is because under Art. 298 the government is empowered to carry on any trade or commerce. Thus, the court observed : “ The circumstances that the Board under the Electricity Supply Act is required to carry on some activities of the nature of trade or commerce does not, therefore give any indication that the ‘Board” must be excluded from the scope of the word ‘State’ is used in Article 12.

In the next important case on the subject, Sukhdev Singh V. Bhagatram, Three statutory bodies viz., LIC, ONCG & FCI were held to be ‘authorities’ and thus fall within the term ‘State’ in Article 12. These corporations were created by the statutes, had the statutory power to make binding rules & regulations and were subject to the pervasive governmental control. These corporations do have independent personalities in the eyes of law, but that does not mean that “they are not subject to the control of the government or they are not instrumentalities of the government. Public Corporations is a new type of institution which sprang from the new social and economic functions of the government, and instead of classifying it into old legal category, it should be adopted to the changing time and conditions. Statutory corporations are agencies or instrumentalities of the state for carrying on trade or business which otherwise would have been carried out by the state departmentally. Therefore it has to be seen whether a body is acting as an agency or instrumentality of the state.

The approach in Sukhdev Singh case, was reiterated with approval in R D Shetty V. International Airport Authority. Bhagwati, J., speaking for the Court, pointed out the corporations acting as instrumentality or agency of government would obviously be subject to the same limitation in the field of constitutional or administrative as the 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, it must follow a fortiori, that government acting through the instrumentality or agency of corporations should equally be subject to the same limitations.

Bhagwati, J., discussed in detail various factors relevant for determining whether a body is an instrumentality or agency of the state. These factors as they were finally summarized by him in Ajay Hasia V. Khalid Mujib, are:

1. If they entire share capital of the corporation is held by the government, it would go a long way towards indicating that the corporation is an instrumentality or authority of the 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 government character.

3. 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 of that the corporation is a state agency or instrumentality.

5. If the functions of the corporation are of public importance and closely related to government functions it would be relevant factor in classifying a corporation as an instrumentality or agency of government.

6. If a department of the government is transferred to corporation it would be a strong factor supporting the inference of the corporation being an instrumentality or agency of government.

The Supreme Court ruled in the instant case that where a corporation in an instrumentality or agency of the government, it must be held to be an authority under Article 12. “The concept of the instrumentality or agency of the government is not limited to a corporation created by statute but is equally applicable to a company or society.”

This line of approach to the meaning of other authorities has been finally confirmed in Som Prakash Rekhi V. Union of India. Applying the criteria laid down in the International Airport Authority case, the Supreme Court reached the conclusion that there is enough material to hold that the Bharat Petroleum Corporation registered as a company under the Companies Act, is State within the enlarged meaning of Art. 12. Consequent upon takeover of Burmah Shell the right, title and interest of the company stood transferred and vested in the Government of India. Thereafter, the Central Government took necessary steps for vesting the undertaking in the BPC Ltd. which became the statutory successor of the petitioner employer. Krishna Iyer, J., speaking for himself have transformed the corporation into an instrumentality of the Central Government with a strong statutory flavour super-added are clear indica of power to make it an ‘authority. Although registered as a company under the Companies Act, the BPC is clearly a creature of the statute, a limb of government, an agency of the State and is recognized and clothed with rights and duties by the Statute.

If there is an instrumentality or agency of the state which has assumed the grab of a government company as defined in Section 617 of the Companies Act it does not follow that it thereby ceases to be an instrumentality or agency of the state.

Not only a body sponsored or created by the government may be treated as an ‘authority’ but even a private body (One sponsored and formed by private persons) may be so treated if – (i) It is supported by the extraordinary assistance given by the state, or (ii) if the state funding is not very large, state financial support coupled with an unusual degree of control over its management and policies may lead to the same result.

In this expansive trend, there have been some discordant notes as well. One such example is furnished by Tekraj V. U.O.I., where the Supreme Court held the Institute of Constitutional and Parliamentary Studies as not being an ‘authority’ under Article 12, The Institute is a registered society receiving grants from the Central Government and having the President of India, Vice-President and the Prime Minister among its honorary members. The Central Government exercises a good deal of control over the Institute. Inspite of the government funding and control, the court has refused to hold it as an authority.

On the same basis, NCERT, has been held to be outside the scope of Article 12. NCERT is a society registered under Societies Registration Act. It is largely an autonomous body; its activities are not wholly related to governmental functions; governmental control is confined mostly to ensuring that its funds are properly utilized; its funding is not entirely from government sources.

Another example of the expansive interpretation of the expression ‘other authorities’ in Art. 12 is furnished by the recent decision of the Supreme Court in Pradeep Kr. Biswas V. Indian Institute of Chemical Biology. In this case, the Supreme Court held that the Council of Scientific and Industrial Research (CSIR) is an authority under Art. 12. and was bound by Art. 14. The Court has ruled that the “Control of the Government in CSIR is ubiquitous. The court has now laid down the following proposition for identification of ‘authority’ within Art. 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 control is merely regulatory whether under statute or otherwise it would not serve to make the body a state.