Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, (SC) BS4728
SUPREME COURT OF INDIA

(Large Bench)

Before:- S.P. Bharucha, CJI., Syed Shah Mohammed Quadri, R.C. Lahoti, N. Santosh Hegde, Doraiswamy Raju, Ruma Pal and Arijit Pasayat, JJ.

Civil Appeal No. 992 of 2002. D/d. 16.4.2002

Pradeep Kumar Biswas - Appellants

Versus

Indian Institute of Chemical Biology - Respondents

For the Appearing Parties :- Soli J. Sorabjee, Attorney General, Mukul Rohtagi, R.N. Trivedi, Additional Solicitor Generals, Sanjoy Kumar Ghosh, Deba Prasad Mukherjeee, B.D. Sharma, Narottam Vyas, S.N. Tiwari, Ms. Deepshikha Bharti, Mrs. Madhu Sikri, V.K. Rao, Ms. Piyush Sharma, Ravi Sikri, Ajay Verma, Ms. Anuradha Priyadarshni, Prateek Jalan, Manish Singhvi and S.N. Terdol, Advocates.

Majority View of Five Judges :-

A. Constitution of India, Articles 12 and 226 - State - Instrumentality of State - Tests of - Significance of Article 12 lies in the fact that it occurs in Part-III of the Constitution which deals with fundamental rights and places responsibilities and obligations on the 'State' vis-a-vis the individual to ensure constitutional protection of individual rights against the 'State'.

[Para 8]

The range and scope of Articles 14 and 16 have been widened by process of judicial interpretations so that the same are protected from the arbitrariness of the 'State'.

[Para 9]

To hold an agency or an instrumentality to be an instrumentality or authority of State, the tests have been elaborately laid down by various pronouncements which can precisely be :-

1. Extent of State financial aid;

2. Public importance of its function;

3. Extent of control and governance of State;

4. Nature of its function related to state duty towards the same;

5. Importance of function and its utility for the State/Nation;

6. Monopoly status given to the agency;

7. Share capital of State.

Council for Scientific and Industrial Research (CSIR) fulfills all the tests of being an agency and instrumentality of 'State' under Article 12 to be amenable to writ jurisdiction of the Court under Articles 32 and 226 - Sabhajit Tewary's case overruled.

[Paras 27, 30, 39, 55 57 58 and 61]

Dissenting view by minority (two Judges)

B. Constitution of India, Article 12 - Administrative Tribunals Act, 1985, Section 14(2) - Issuance of Notification under Section 14(2) of the Administrative Tribunals Act is a conclusive proof that the instrumentality covered by the notification under the Act is an agency and instrumentality of State under Article 12 of the Constitution.

[Paras 60 and 61]

Cases Referred :-

Sabhajit Tewari v. Union of India, 1975(3) SCR 616.

Smt. Ujjan Bai v. State of Uttar Pradesh, 1961(1) SCR 778.

E.P. Royappa v. State of Tamil Nadu, 1974(2) SCR 348 : 1974(4) SCC 3 .

Maneka Gandhi v. Union of India, 1978(1) SCC 248.

Praga Tools Corporation v. Imanual, 1969(3) SCR 773.

Rajasthan Electricity Board v. Mohan Lal, 1967(3) SCR 377.

Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, 1975(3) SCR 619.

Heavy Engineering Mazdoor Union v. State of Bihar, 1969(3) SCR 995.

S.L. Agarwal v. General Manager Hindustan Steel Ltd., 1970(3) SCR 363.

Ajay Hasia v. Khalid Mujib Sehravardi, 1981(1) SCC 722.

Ramana v. International Airport Authority of India, AIR 1979 Supreme Court 1628.

Som Prakash Rekhi v. Union of India, AIR 1981 Supreme Court 212.

P.K. Ramachandra Iyer v. Union of India, 1984(2) SCC 141.

B.S. Minhas v. Indian Statistical Institute, 1984(1) SCR 395.

Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguli, AIR 1986 Supreme Court 1571.

Tekraj Vasandi alias K.S. Basandhi v. Union of India, 1988(1) SCC 236.

All Indian Sainik Schools Employees' Association v. Defence Minister-cum-Chairman Board of Governors, Sainik Schools Society, New Delhi, 1989 Supp.(1) SCC 205.

Chander Mohan Khanna v. National Council of Educational Research and Training, 1992(1) SCT 100 (SC).

Mysore Paper Mills Ltd. v. Mysore Paper Mills Officers Association, 2002(1) SCT 836 (SC).

Union of India v. Raghubir Singh (dead) by LRs. etc., 1989(2) SCC 754.

Maganlal Chhaganlal (P) Ltd. v. Municipal Corporation of Greater Bombay etc., 1974(2) SCC 402.

Bengal Immunity Co. Ltd. v. State of Bihar, AIR 1955 Supreme Court 661, 672.

S.P.S. Kumar v. Union of India, AIR 1987 Supreme Court 386.

L. Chandra Kumar v. Union of India, 1995(2) SCT 674 (SC).

N. Masthan Sahib v. Chief Commissioner, Pondicherry, 1962 Supp.(1) SCR 981.

K.S. Ramamurthy Reddiar v. Chief Commissioner, Pondicherry, 1964(1) SCR 656.

Praga Tools Corporation v. C.V. Imanual, 1969(1) SCC 585.

JUDGMENT

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, 1975(3) SCR 616 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.

2. 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 (supra).

3. 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."

4. 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 ?

5. The Constitution has to an extent defined the word 'State' in Article 12 itself as including :

6. 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 Smt. Ujjan Bai v. State of Uttar Pradesh, 1961(1) SCR 778 at 968. The words 'State' and 'Authority' used in Article 12 therefore remain, to use the words of Cardozo [Benjamin Cardozo : The Nature of the Judicial Process], among "the great generalities of the Constitution" the content of which has been and continues to be supplied by Courts from time to time.

7. 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.

8. But before considering the decisions it must be emphasised 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' vis-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.

9. 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 :-

10. 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.

11. 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. [See Prga Tools Corporation v. Imanual, 1969(3) SCR 773.] 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 crated by statute.

12. The decision of the Constitution Bench of this Court in Rajasthan Electricity Board v. Mohan Lal and others, 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 :-

13. 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 and others (supra) 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:

14. By 1975 Mathew, J. in Sukhdev Singh and others v. Bhagatram Sardar Singh Raghuvanshi and another, 1975(3) SCR 619 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 :

15. The use of the alternative is significant. The Court scrutinised the history of the formation of the three Corporations, the financial support given by the Central Government, the utilisation 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".

16. Mathew, J. in his concurring judgment went further and propounded a view which presaged the subsequent developments in the law. He said :-

17. For identifying such an agency or instrumentality he propounded four indicia :

18. 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 function of CSIR in all its aspects. The submission was somewhat cursorily negatived by this Court on the ground that all this :

19. 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 :

20. 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 of decisions pertaining to Article 311 which is contained in Part XIV of the Constitution was inapposite. What was under consideration was Article 12 which by definition is limited to Part III and by virtue of Article 36 to Part IV of the Constitution. As said by another Constitution Bench later in this context : [Ajay Hasia v. Khali Mujib Sehravardi, 1981(1) SCC 722.]

21. 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.

22. 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, AIR 1979 Supreme Court 1628. 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 :

23. 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 Part III vis-a-vis the individual if it were in fact acting as an instrumentality or agency of Government.

24. As far as Sabhajit Tewary was concerned it was 'explained' and distinguished in Ramana saying :

25. The tests propounded by Mathew, J. in Sukhdev Singh were elaborated in Ramana and were reformulated two years later by a Constitution Bench in Ajay Hasia v. Khalid Mujib Sehravardi (supra). 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 Jammu and Kashmir Registration of Society 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 administration in violation of Article 14, nevertheless Article 14 was not available to the petitioners because the Society was not a State within Article 12.

The Court recognised that :

26. It was made clear that the genesis of the Corporation was immaterial and that :

27. 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 :-

28. 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 implicitly assenting to the proposition that CSIR could have been an instrumentality or 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 :

29. 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.

30. On the same day that the decision in Ajay Hasia was pronounced came the decision of Som Prakash Rekhi v. Union of India, AIR 1981 Supreme Court 212. Here too, the reasoning in Ramana was followed and Bharat Petroleum Corporation was held to be a 'State' within the "enlarged meaning of Article 12". Sabhajit Tewary was criticised and distinguished as being limited to the facts of the case. It was said :

31. 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.

32. 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 :

33. B.S. Minhas v. Indian Statistical Institute and others, 1984(1) SCR 395 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.

34. The decision in Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguli, AIR 1986 Supreme Court 1571 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 236, 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 :

35. 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."

36. All Indian Sainik Schools Employees' Association v. Defence Minister-cum-Chairman Board of Governors, Sainik Schools Society, New Delhi and others, 1989 Supp.(1) SCC 205 helped applying the tests indicated in Ajay Hasia that the Sanik School Society is a 'State'.

37. 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, 1992(1) SCT 100 (SC) : 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 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."

38. Fresh off the judicial anvil is the decision in the Mysore Paper Mills Ltd. v. The Mysore Paper Mills Officers Association, 2002(1) SCT 836 (SC) : 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 Article 12.

39. 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-hypothesis, 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.

40. 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

41. 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 board 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 :

42. 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 organised 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.

Objections and Functions :

43. 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 :-

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.

44. Incidentally, the CSIR was and continues to be a non-profit making organisation 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

45. When the Government of India resolved to set up the CSIR on 26th February, 1942 it also decided that the Government Body would consist of the following members :

46. The present Rules and Regulations, 1999 of CSIR provided that :

47. 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 officio appointments 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 cas the Prime Minister, which are not specially conferred upon him, but are necessarily implied in his office (as Prime Minister), these are ex officio. (Black's Law Dictionary).

48. 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 provided that :

49. 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.

50. As far as the employees of the CSIR are concerned the Central Civil Services (Classification, Control and 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 and 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 Government of India and such other rules and orders issued by the Government 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 the bye-laws can be carried out only with the approval of Government of India. (Bye-Law 20).

Financial Aid

51. 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 :

52. 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 oil-seeds 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-laws 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.

53. 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 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).

54. 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 controlly of the Government of India. The assets and funds of CSIR though nominal owned by the Society are in the ultimate analysis owned by the Government.

55. 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". Benjamin N. Cardozo - The Nature of the Judicial Process 1921.

56. 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". Union of India and others v. Raghubir Singh (dead) by LRs. etc., 1989(2) SCC 754 at 768, 769; Maganlal Chhaganlal (P) Ltd. v. Municipal Corporation of Greater Bombay etc., 1974(2) SCC 402. 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 Article

57. 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 Article 12 and a consequential denial of the benefits of fundamental rights to individuals who would otherwise by 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". Bengal Immunity Co. Ltd. v. State of Bihar and others, AIR 1955 Supreme Court 661, 672. 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.

58. 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'.

59. The learned Attorney General contended that the notification was not conclusive of the fact that the CSIR was 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.

60. We cannot accept this. Reading Article 323A 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 services 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. S.P.S. Kumar v. Union of India, AIR 1987 Supreme Court 386; L. Chandra Kumar v. Union of India; 1995(2) SCT 674 (SC) : 1997(3) SCC 261.

61. 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.

R.C. Lahoti, J. - (For self and on behalf of Doraiswamy Raju, J.)

62. We have had the advantage of reading the judgment proposed by our learned sister Ruma Pal, J. With greatest respect to her, we find ourselves not persuaded to subscribe to her view overruling Sabhajit Tewary's case and holding Council for Scientific and Industrial Research (CSIR) 'the State' within the meaning of Article 12 of the Constitution. The development of law has travelled through apparently a zig-zag track of judicial pronounements, rhythmically traced by Ruma Pal, J. in her judgment. Of necessity, we shall have to retread the track, for, we find that though the fundamentas and basic principles for determining whether a particular body is 'the State' or not may substnatially remain the same but we differ in distributing the emphasis within the principles in their applicability to the facts found. We also feel that a distinction has to be borne in mind between an instrumentality or agency of 'the State' and an authority ineludible in 'other authorities'. The distinction cannot be obliterated.

Article 12 of the Constitution reads as under :-

63. This definition is for the purpose of attracting applicability of the provisions contained in Part II of the Constitution dealing with fundamental rights. It is well-settled that the definition of 'the State' in Article 12 has nothing to do with Articles 309, 310 and 311 of the Constitution which find place in Part XIV. Merely because an entity is held to be the State within the meaning of Article 12, its employees do not ipso facto become entitled to protection of Part XIV of the Constitution.

64. Dr. B.R. Ambedkar explaining the scope of Article 12 and reason why this Article was placed in the Chapter on Fundamental Rights so spoke in the Constituent Assembly :

65. Thus the framers of the Constitution used the word "the State" in a wider sense than what is understood in the ordinary or narrower sense. So far as 'other authorities' are concerned they were included subject to their satisfying the test of being 'within the territory of India' or being 'under the control of the Government of India'. It is settled that the expression 'under the control of the Government of India' in Article 12 does not qualify the word 'territory', it qualifies 'other authorities'.

66. The terms - 'instrumentality' or 'agency' of the Stte - are not to be found mentioned in Article 12. It is by the process of judicial interpretation - nay, expansion - keeping in view the sweep of Article 12 that they have been included as falling within the net of Aritlce 12 subject to satisfying certain tests. While defining, the use of 'inlcudes' suggest - what follows is not exhaustive. The definition is expansive of the meaning of the term defined. However, we feel that expanding dimension of 'the State' doctrine through judicial wisdom ought to be accompanied by wise limitations else the expansion may go much beyond what even the framers of Article 12 may have thought of.

Instrumentaltiy, Agency, Authority - meaning of

67. It will be useful to understand what the terms - instrumentality, agency and authorities mean before embarking upon a review of judicial decisions dealing with the principal issue which arises for our consideration.

68. Black's Law Dictionary (Seventh Edition) defines 'instrumentality' to mean "a means or agency through which a function of another entity is accomplished, such as a branch of a governing body". 'Agency' is defined as "a fiduciary relationship created by express or implied contract or by law, in which one party (the agent) may act on behalf of another party (the principal) and bind that other party by words or actions". Thus instrumentality and agency are the two terms which to some extent overlap in their meaning; 'instrumentality' includes 'means' also, which 'agency' does not, in its meaning. 'Quasi-Governmental agency' is "a government-sponsored enterprise or Corporation (sometimes called a Government-controlled corporation)". Authority, as Webster Comprehensive Dictionary (International Edition) defines, is "the person or persons in whom Government or command is vested; often in the plural". The applicable meaning of the word "authority" given in Webster's Third New International Dictionary, is 'a public administrative agency or corporation having quasi-Governmental powers and authorised to administer a revenue-producing public enterprise'. This was quoted with approval by Constitution Bench in RSEB's case (infra) wherein the Bench held - "This dictionary meaning of the word "authority" is clearly wide enough to include all bodies created by a statute on which powers are conferred to carry out Governmental or quasi-Governmental functions. The expression 'other authorities is wide enough to include within it every authority created by a statute and functioning within the territory of India, or under the control of the Government of India; and we do not see any reason to narrow down this meaning in the context in which the words "other authorities" are used in Article 12 of the Constitution". (Emphasis supplied)

69. With the pronouncements in N. Masthan Sahib v. The Chief Commissioner, Pondicherry and another, 1962 Supp.(1) SCR 981 and K.S. Ramamurthy Reddiar v. Chief Commissioner, Pondicherry and another, 1964(1) SCR 656 it is settled that Article 12 of the Constitution has to be so read :

The definition of the State as contained in Article 12 is inclusive and not conclusive. The net of Article 12 has been expanded by 'progressive' judicial thinking, so as to include within its ken several instrumentalities and agencies performing State function or entrusted with State action. To answer the principal question in the context in which it has arisen, incidental but inseparable issues do arise : Wide expansion but how far wide ? Should such wide expansion be not subject to certain wise limitations ? True, the width of expansion and the wisdom of limitations both have to be spelled out from Article 12 itself and the fundamentals of constitutional jurisprudence.

We now deal with a series of decisions wherein tests were propounded, followed (also expanded) and applied to different entities so as to find out whether they satisfied the test of being 'the State'.

A review of judicial opinion

70. Though judge-made law is legend on the issue, we need not peep too much deep in the past unless it becomes necessary to have a glimpse of a few illuminating points thereat. It would serve our purpose to keep ourselves confined, to begin with, to discerning the principles laid down in Rajasthan State Electricity Board, Jaipur v. Mohal Lal and others, 1967(3) SCR 377, Sukhdev Singh and others v. Bhagatram Sardar Singh Raghuvanshi and another, 1975(1) SCC 421, Ramana Dayaram Shetty v. The International Airport Authority of India and others, 1979(3) SCC 489, Ajay Hasia etc. v. Khalid Mujib Sehraverdi and others etc., 1981(1) SCC 722 and Som Prakash Rekhi v. Union of India and another, 1981(1) SCC 449 which have come to be known as landmarks on the State conceptualization. Out of these five decisions, R.D. Shetty and Som Prakash are three-Judges Bench decisions; the other 3 are each by Constitution Bench of five-Judges.

71. The Constitution Bench decision in Rajasthan State Electricity Board (RSEB)'s case was delivered by a majority of 4:1. V. Bhargava, J. spoke for himself and K. Subba Rao, C.J. and M. Shelat and G.K. Mitter, JJ. J.C. Shah, J. delivered his dissenting opinion. We will refer to majority opinion only. The Court quoted the interpretation placed by Ayyangar, J. from the pronouncement of seven-Judge Bench of this court in Ujjan Bai v. State of Uttar Pradesh (supra) that the words 'other authorities' employed in Article 12 are of wide amplitude and capable of comprehending every authority created under a statute and though there is no characterisation of the nature of the "authority" in the residuary clause of Article 12 it must include every authority set up under a statute for the purpose of administering laws enacted by the Parliament or by the State including those vested with the duties to make decisions in order to implement those laws. The Court refused to apply the doctrine of ejusdem generis for interpretation of the 'other authorities' in Article 12. "Other authorities" in Article 12 include, held the Court, "all constitutional or statutory authorities on whom powers are conferred by law" without regard to the fact that some of the powers conferred may be for the purpose of carrying on commercial activities or promoting the educational and economic interests of the people. Regard must be had (i) not only to the sweep of fundamental rights over the power of the authority; (ii) but also to the restrictions which may be imposed upon the exercise of certain fundamental rights by the authority. This dual phase of fundamental rights would determine "authority". Applying the test formulated by it to Rajasthan State Electricity Board, the Court found that the Board though it was required to carry on some activities of the nature of trade or commerce under the Electricity Supply Act, yet the statutory powers conferred by the Electricity Supply Act on the Board included power to give directions, the disobedience of which is punishable as a criminal office and, therefore, the Board was an authority for the purpose of Part II of the Constitution.

72. Praga Tools Corporation v. C.V. Imanual and others, 1969(1) SCC 585 may not be of much relevance. The question posed before the Court was not one referable to Article 12 of the Constitution. The question was whether a prayer seeking issuance of a mandamus or an order in the nature of mandamus could lie against a company incorporated under the Companies Act where the Central and the State Governments held respectively 56 and 32 per cent shares. The two-Judge Bench of this Court held that the Company was a separate legal entity and could not be said to be either a Government Corporation or an industry run by or under the authority of the Union Government. A mandamus lies to secure the performance of a public or statutory duty in the performance of which the petitioner has a sufficient legal interest. A mandamus can issue to an official or a society to compel him to carry out the terms of the statute under or by which the society is constituted or governed and also to companies or Corporations to carry out duties placed on them by the Statute authorising their undertaking. A mandamus would also lie against a company constituted by a Statute for the purpose of fulfilling public responsibilities. The Court held that the company being a non-statutory body with neither a statutory nor a public duty imposed on it by a Statute, a writ petition for mandamus did not lie against it. The limited value of this decision, relevant for our purpose, is that because a writ of mandamus can issue against a body solely by this test it does not become 'State' within the meaning of Article 12.

73. In Sukhdev Singh and others v. Bhagatram Sardar Singh Raghuvanshi and another (supra), question arose whether Oil and Natural Gas Commission, the Industrial Finance Corporation and Life Insurance Corporation are 'authorities' within the meaning of Article 12. The case was decided by a majority of 4:1. A.N. Ray, CJ speaking for himself and on behalf of Y.V. Chandrachud and A.C. Gupta, JJ., held that all the three were statutory Corporations, i.e., given birth by Statutes. The circumstances that these statutory bodies were required to carry on some activities of the nature of trade or commerce did not make any difference. The Life Insurance Corporation is (i) an agency of the Government (ii) carrying on the exclusive business of Life Insurance (i.e. in monopoly); and (iii) each and every provision of the Statute creating it showed in no uncertain terms that the Corporation is the voice and the hands of the Central Government. The Industrial Financial Corporation is in effect managed and controlled by the Central Government, citizens cannot be its shareholder. ONGC (i) is owned by the Government; (ii) is a statutory body and not a company; and (iii) has the exclusive privilege of extracting petroleum. Each of the three, respectively under the three Acts under which they are created, enjoy power to do certain acts and to issue directions obstruction in or breach whereof is punishable as an offence. These distinguish them from a mere company incorporated under the Indian Companies Act. The common features of the three are : (i) rules and regulations framed by them have the force of law; (ii) the employees have a statutory status; and (iii) they are entitled to declaration of being in employment when the dismissal or removal is in contravention of statutory provisions. The learned Chief Justice added, by way of abundant caution, that these provisions did not however make the employees are servants of the Union or the State though the three statutory bodies are authorities within the meaning of Article 12 of the Constitution.

74. Mathew, J. recorded his separate concurring opinion. As to ONGC he hastened to arrive at a conclusion that the Commission was invested with sovereign power of the State and could issue binding directions to owners of land and premises, not to prevent employees of the Commission from entering upon their property if the Commission so directs. Disobedience of its directions is punishable under the relevant provisions of the Indian Penal Code as the employees are deemed to be public servants. Hence the Commission is an authority. As to the other two Corporations, viz., LIC and IFC, Mathew, J. entered into a short question and began by observing that in recent years the concept of State has undergone drastic change "Today State cannot be conceived of simply as a coercive machinery wielding the thunderbolt of authority". Having reviewed some decisions of United States and English decisions and some other authorities, he laid down certain principles with which we will deal with a little later and at appropriate place. He observed that institutions engaged in matters of high public interest or performing public functions are, by virtue of the nature of the function performanced by them, governmental agencies. He noticed the difficulty in separating vital Government functions from non-Governmental functions in view of the contrast between Governmental activities which are private and private activities which are Governmental. For holding Life Insurance Corporation "the State" he relied on the following features : (i) the Central Government has contributed the original capital of the Corporation, (ii) part of the profit of the Corporation goes to Central Government, (iii) the Central Government exercises control over the policy of the Corporation, (iv) the Corporation carries on a business having great public importance, and (v) it enjoys a monopoly in the business. As to Industrial Financial Corporation he relied on the circumstances cataloged in the judgment of A.N. Ray, J. The common feature of the two Corporations was that they were instrumentalities or agencies of the State for carrying on business which otherwise would have been run by the State departmentally and if the State had chosen to carry on these businesses through the medium of Government departments, there would have been no question that actions of these departments would be "state actions". At the end Mathew, J. made it clear that he was expressing no opinion on the question whether private Corporations or other like organizations though they exercise power over their employees which might violate their fundamental rights would be the statute within the meaning of Article 12. What is 'state action' and how far the concept of 'state action' can be expanded, positing the question, Mathew J. answered - ".....it is against State action that fundamental rights are guaranteed. Wrongful individual acts unsupported by State authority in the shape of laws, customs, or judicial or executive proceeding are not prohibited. Articles 17, 23 and 24 postulate that fundamental rights can be violated by private individuals and that the remedy under Article 32 may be available against them. But by and large, unless an act is sanctioned in some way by the State, the action would not be State action. In other words, until some law is passed or some action is taken through officers or agents of the State, there is no action by the State". So also commenting on the relevance of 'state help' and 'state control' as determinative tests, Mathew, J. said - "It may be stated generally that State financial aid alone does not render the institution receiving such aid a state agency. Financial aid plus some additional factor might lead to a different conclusion. A mere finding of state control also is not determinate of the question, since a state has considerable measure of control under its police power over all types of business operations."

75. Alagiriswami, J. recorded a dissenting opinion which however we propose to skip over. It is pertinent to note that the dispute in Sukhdev Singh v. Bhagat Ram was a service dispute and the employees were held entitled to a declaration of being in employment when their dismissal or removal was in contravention of statutory provisions; the rules and regulations framed by corporations or commission were found having the force of law, being delegated legislation and these statutory bodies were held to be 'authorities' within the meaning of Article 12.

76. In Ramana Dayaram Shetty v. The International Airport Authority of India and others (supra), the dispute related to trends within the domain of administrative law. A question arose whether International Airport Authority of India (IA, for short) was within the scope of 'other authorities' in Article 12 so as to be amenable to Article 14 of the Constitution. P.N. Bhagwati, J. who delivered the judgment for the three-Judge Bench stated the ratio of Rajasthan State Electricity Board's case, in these words :-

77. He then referred to what he termed as a 'broader test' laid down by Mathew, J. in Sukhdev Singh's case and said that judgment by Mathew, J. provided 'one more test and perhaps a more satisfactory one' for determining whether a statutory corporation, body or other authority falls within the definition of 'the State' and the test is - "If a statutory corporation, body or other authority is an instrumentality or agency of Government, it would be an authority and, therefore, 'the State' within the meaning of the expression in Article 12." Having minutely examined the provisions of the International Airport Authority Act, 1971 he found out the following features of IA :- (i) The Chairman and Members are all persons nominated by the Central Government and Central Government has power to terminate the appointment or remove them; (ii) The Central Government is vested with the power to take away the management of any airport from the IA; (iii) The Central Government has power to give binding directions in writing on questions of policy; (iv) The capital of IA needed for carrying out its functions is wholly provided by Central Government; (v) The balance of net profit made by IA, after making certain necessary provisions, does not remain with the IA and is required to be taken over to the Central Government; (vi) the financial estimates, expenditure and programme of activities can only be such as approved by Central Government; (vii) The Audit Accounts and the Audit Report of IA, forwarded to the Central Government, are required to be laid before both Houses of Parliament; (viii) It was a department of the Central Government along with its properties, assets, debts, obligations, liabilities, contracts, cause of action and pending litigation taken over by the IA; (ix) IA was charged with carrying out the same functions which were being carrying out by the Central Government; (x) The employees and officials of IA are public servants and enjoy immunity for anything done or intended to be done, in good faith, in pursuance of the Act or any rules or regulations made by it; (xi) IA is given (delegated) power to legislate and contravention of certain specified regulations entails penal consequences. Thus, in sum, the IA was held to be an instrumentality or agency of the Central Government falling within the definition of the State both on the narrower view propounded in the judgment of A.N. Ray, C.J. and broader view propounded by Mathew, J. in Sukhdev Singh's case.

78. Ajay Hasia etc. v. Khalid Mujib Sehravardi and other etc. (supra), is a Constitution Bench judgment wherein P.N. Bhagwati, J. spoke for the Court. The test which he had laid down in Ramanna's case were summarised by him as six in number and as under :

79. In Ajay Hasia, the 'authority' under consideration was a society registered under the Jammu and Kashmir Registration of Societies Act, 1898, administering and managing the Regional Engineering College, Srinagar. The College was sponsored by the Government of India. The prominent features of the society indicated complete financing and financial control of the Government, complete administrative control over conducting of the affairs of the society and administration and assets of the College being taken over by the State Government with the prior approval of the Central Government. These are some of the material features. Some of the observations made by the Court during the course of its judgment are pertinent and we proceed to notice them quickly. The society could not be equated with the Government of India or the Government of any State nor could it be said to be 'local authority' and, therefore, should have come within the expression of 'other authorities' to be 'the State'. The Government may act through the instrumentality or agency of natural persons or it may employ the instrumentality or agency of judicial persons to carry out its functions. With the enlargement of Governmental activities, specially those in the field of trade and commerce and welfare, corporation is most resourceful legal contrivance resorted to frequently by the Government. Though a distinct juristic entity came into existence because of its certain advantages in the field of functioning over a department of the Government but behind the formal ownership cast in the corporate mould, the reality is very much the deeply pervasive presence of the Government. It is really the Government which acts through the instrumentality or agency of the Corporation and the juristic veil of corporate personality is worn for the purpose of convenience of management and administration which cannot be allowed to obliterate the true nature of the reality behind which is the Government. Dealing at length with the corporate contrivance, the Court summed up its conclusion by saying that if a Corporation is found to be a mere agency or surrogate of the Government, 3 tests being satisfied viz., (i) in fact, owned by the Government; (ii) in truth, control by the Government; and (ii) in effect, an incarnation of the Government, then the Court would hold the Corporation to be Government, and therefore, subject to constitutional limitations including for enforcement of fundamental rights. The Court went on to say that where a Corporation is an instrumentality or agency of the Government, it must be held to be an 'authority' for Article 12.

80. Here itself we have few comments to offer. Firstly, the distinction between 'instrumentality and agency' on the one hand, and 'authority' (for the purpose of 'other authorities') on the other, was totally obliterated. In our opinion, it is one thing to say that if an entity veiled or disguised as a Corporation or a society or in any other form is found to be an instrumentality or agency of the State then in that case it will be the state itself in narrower sense acting through its instrumentality or agency and, therefore, included in 'the State' in the wider sense for the purpose of Article 12. Having found an entity whether juristic or natural to be an instrumentality or agency of the State, it is not necessary to call it an 'authority'. It would make a substantial difference to find whether an entity is an instrumentality or agency or an authority. Secondly, Ajay Hasia was the case of a registered society, it was not an appropriate occasion for dealing with corporations or entities other than society. On the inferences drawn by reading of the Memorandum of Association of the society and rules framed thereunder, and subjecting such inferences to the tests laid down in the decision itself, it was found that the society was an instrumentality or agency of the State and on tearing the veil of society what was to be seen was the State itself though in disguise. It was not thereafter necessary to hold the society an 'authority' and proceed to record "that the society is an instrumentality or the agency of the State and the Central Government and it is an 'authority' within the meaning of Article 12", entirely obliterating, the dividing line between 'instrumentality or agency of the State' and 'other authorities'. This has been a source of confusion and misdirection in thought process as we propose to explain a little later. Thirdly, though six tests are laid down but there is no clear indication in the judgment whether in order to hold a legal entity the State, all the tests must be answered positively and it is the cumulative effect of such positive answers which will solve the riddle or positive answer to one or two or more tests would be enough to find out a solution. It appears what the court wished was reaching a final decision on an overall view of the result of the tests. Compare this with what was said by Bhagwati, J. in Ramanna's case. We have already noticed that in Ajay Hasia. Bhagwati, J. has in his own words summarised the test laid down by him in Ramanna's case. In Ramanna's case he had said that the question whether a corporation is governmental instrumentality or agency would depend on a variety of factors which defy exhaustive enumeration and moreover even amongst these factors described in Ramanna's case "the Court will have to consider the cumulative effect of these various factors and arrive at its decision." "It is the aggregate or cumulative effect of all the relevant factors that is controlling."

81. Criticism of too broad a view taken of the scope of the State under Article 12 in Ramanna's case invited some criticism which was noticed in Som Prakash Rekhi's case (infra). It was pointed out that the observations in Ramanna's case spill over beyond the requirements of the case and must be dismissed as obiter; that IA is a Corporation created by a statute and there was no occasion to go beyond the narrow needs of the situation and expand the theme of the State in Article 12 vis-a-vis Government companies, registered society, and what not, and that there was contradiction between Sukhdev Singh's case and Ramanna's case.

82. On 13.11.1980, the Constitution Bench presided over by Y.V. Chandrachud, C.J. and consisting of P.N. Bhagwati, V.R. Krishna Iyer, S. Murtaza Fazl Ali and A.D. Koshal, JJ. delivered the judgment in Ajay Hasia's case, speaking through P.N. Bhagwati, J. It is interesting to note that on the same day another three-Judges Bench consisting V.R. Krishna Iyer, O. Chinnappa Reddy and R.S. Pathak, JJ. delivered judgment in Som Prakash Rekhi v. Union of India and another (supra). V.R. Krishna Iyer, J. speaking for himself and O. Chinnappa Reddy, J. delivered the majority opinion. R.S. Pathak, J. delivered a separate opinion.

83. The Court in Som Parkash Rekhi v. Union of India and another (supra), was posed with the question - whether Bharat Petroleum Corporation Ltd., a statutory corporation, was an 'authority', and, therefore, 'the State' under Article 12. Certain observations made by Krishna Iyer, J. are pertinent. To begin with, he said, "any authority under control of the Government of India comes within the definition". While dealing with the corporate personality, it has to be remembered that "while the formal ownership is cast in the corporate mould, the reality reaches down to State control". The core fact is that the Central Government chooses to make over, for better management, its own property to its own offspring. A Government Company is a mini-incarnation of Government itself, made up of its blood and bones and given corporate shape and statues for defined objectives and not beyond. The device is too obvious for deception. A Government Company though, is but the alter ego of the Central Government and tearing of the juristic veil worn, would bring out the true character of the entity being 'the State'. Krishna Iyer, J. held to it be immaterial whether the Corporation is formed by a statute or under a statute, the true test is functional. "Not how the legal person is born but why it is created." He further held that both the things are essential : (i) discharging functions or doing business as the proxy of the State by wearing the corporate mask, and (ii) an element of ability to affect legal relations by virtue of power vested in it by law. These tests, if answered in positive, would entail the Corporation being an instrumentality or agency of the State. What is an 'authority' ? Krishna Iyer, J. defined 'authority' as one which in law belongs to the province of power and the search here must be to se whether the Act vests authority, as agent or instrumentality of the State, to affect the legal relations of oneself or others. He quoted the definition of 'authority' from the Law Lexicon by P. Ramnath Iyer to say "Authority is a body having jurisdiction in certain matters of a public nature" and from Salmond's Jurisprudence, to say that the "ability conferred upon a person by the law to alter, by his own will directed to that end, the rights, duties, liabilities or other legal relations, either of himself or of other persons', must be present ab extra to make a person an 'authority'." He held BPL to be "a limb of Government and agency of the State, a vicarious creature of statute", because of these characteristics, which he found from the provisions of the Act which created it and other circumstances, viz., (i) it is not a mere company but much more than that, (ii) it has a statutory flavour in its operations and functions, in its powers and duties and in its personality itself, (iii) it is functionally and administratively under the thumb of Government : and (iv) the Company had stepped into the shoes of the executive power of the State and had unique protection, immunity and powers. In conclusion Krishna Iyer, J. held that the case of BPL was a close parallel to the Airport Authority's case (Ramanna's case) excepting that Airport Authority is created by a statute while BPL is recognised by and clothed with rights and duties by the statute. Krishna Iyer, J. having culled out the several tests from Ramanna's case added a clinching footnote - the finally is reached when the cumulative effect of all the relevant factors above set out is assessed and once the body is found to be an instrumentality or agency of Government, the further conclusion emerges that it is 'the State' and is subject to the same constitutional limitations as Government and it is this divagation which explains the ratio of Ramanna's case.

84. The three-Judges Bench in The Workmen, Food Corporation of India v. Food Corporation of India, 1985(2) SCC 136, held Food Corporation of India to be an instrumentality of the State covered by the expression 'other authority' in Article 12. It was found : (i) FCI was set up under the Food Corporation Act, 1964; (ii) initial capital was provided by Central Government and capital could be increased in such manner as the Government may determine; (iii) the Board of Directors in whom the management of the Corporation is to vest shall act according to instructions on question of policy given by the Central Government; (iv) the annual net profit of FCI is to be paid to the Central Government; (v) annual report of its work and affairs is to be laid before the Houses of Parliament; (vi) statutory power conferred to make rules and regulations for giving effect to the provisions of the parent act as also to provide for service matters relating to officers and employees.

The Mysore Paper Mills Ltd. has been held by a two-Judges Bench in Mysore Paper Mills Ltd. v. The Mysore Paper Mills Officers Association (supra), to be an instrumentality and agency of the State Government, the physical form of company being a mere cloak or cover for the Government. What is significant in this decision is that the conclusion whether an independent entity satisfies the test of instrumentality or agency of the Government is not whether it owes its origin to any particular Statute or Order but really depends upon a combination of one or more of the relevant factors, depending upon the essentiality and overwhelming nature of such factors in identifying the real source of governing power, if need be, by piercing the corporate veil of the entity concerned.

85. We have, in the earlier part of this judgment, referred to the dictionary meaning of 'authority', often used as plural, as in Article 12 viz. 'other authorities'. Now is the time to find out the meaning to be assigned to the term as used in Article 12 of the Constitution.

86. A reference to Article 13(2) of the Constitution is apposite. It provides - "The State shall not make any law which takes away or abridges the right conferred by this part and any law made in contravention of this clause shall, to the extent of the contravention, be void". Clause (3) of Article 13 defines 'law' as including any Ordinance, order, bye-law, rule, regulation, notification, custom or uses having in the territory of India the force of law. We have also referred to the speech of Dr. B.R. Ambedkar in Constituent Assembly explaining the purpose sought to be achieved by Article 12. In RSEB's case, the majority adopted the test that a statutory authority "would be within the meaning of 'other authorities' if it has been invested with statutory power to issue binding directions to the parties, disobedience of which would entail penal consequences or it has the sovereign power to make rules and regulations having the force of law." In Sukhdev Singh's case, the principal reason which prevailed with A.N. Ray, CJ. for holding ONGC, LIC and IFC as authorities and hence 'the State' was that rules and regulations framed by them have the force of law. In Sukhdev Singh's case, Mathew J. held that the test laid down in RSEB's case was satisfied so far as ONGC is concerned but the same was not satisfied in the case of LIC and IFC and, therefore, he added to the list of tests laid down in RSEB's case, by observing that though there are no statutory provisions, so far as LIC and IFC are concerned, for issuing binding directions to third parties, the disobedience of which would entail penal consequences, yet these corporations (i) set up under statutes, (ii) to carry on business of public importance or which is fundamental to the life of the people - can be considered as the State within the meaning of Article 12. Thus, it is the functional test which was devised and utilised by Mathew, J. and there he said, "the question for consideration is whether a public corporation set up under a special statute to carry on a business or service which Parliament thinks necessary to be carried on in the interest of the nation is an agency or instrumentality of the State and would be subject to the limitations expressed in Article 13(2) of the Constitution. The State is an abstract entity. It can only act through the instrumentality or agency of natural or judicial 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". It is pertinent to note that functional tests became necessary because of the State having chosen to entrust its own functions to an instrumentality or agency in absence whereof that function would have been a State activity on account of its public importance and being fundamental to the life of the people.

87. The philosophy underlying the expansion of Article 12 of the Constitution so as to embrace within its ken such entities which would not otherwise be the State within the meaning of Article 12 of the Constitution has been pointed out by the eminent jurist H.M. Seervai in Constitutional Law of India (Silver Jubilee Edition, Vol. 1). "The Constitutions should be so interpreted that the governing power, wherever located, must be subjected to fundamental constitutional limitations........ Under Article 13(2) it is State action of a particular kind that is prohibited. Individual invasion of individual rights is not, generally speaking, covered by Article 13(2). For, although Articles 17, 23 and 24 show that fundamental rights can be violated by private individuals and relief against them would be available under Article 32, still, by and large, Article 13(2) is directed against State action. A public corporation being the creation of the State, is subject to the same constitutional limitations as the State itself. Two conditions are necessary, namely, that the Corporation must be created by the State and it must invade the constitutional rights of individuals" (Para 7.54). "The line of reasoning developed by Mathew J. prevents a large-scale evasion of fundamental rights by transferring work done in Government Departments to statutory Corporations, whilst reataining Government control. Company legislation in India permits tearing of the corporate veil in certain cases and to look behind the real legal personality. But Mathew, J. achieved the same result by a different route, namely, by drawing out the implications of Article 13(2)" (Para 7.57 ibid).

88. The terms instrumentality or agency of the State are not to be found mentioned in Article 12 of the Constitution. Nevertheless they fall within the ken of Article 12 of the Constitution for the simple reason that if the State chooses to set up an instrumentality or agency and entrust it with the same power, function or action which would otherwise have been exercised or undertaken by itself, there is no reason why such instrumentality or agency should not be subject to same constitutional and public law limitations as the State would have been. In different judicial pronouncements, some of which we have reviewed, any company, corporation, society or any other entity having a juridical existence if in has been held to be an instrumentality or agency of the State, it has been so held only on having found to be an alter ego, a double or a proxy or a limit or an off-spring or a mini-incarnation or a vicarious creature or a surrogate and so on - by whatever name called - of the State. In short, the material available must justify holding of the entity wearing a mask or a veil worn only legally and outwardly which on piercing fails to obliterate the true character of the State in disguise. Then it is an instrumentality or agency of the State.

89. It is this basic and essential distinction between an 'instrumentality or agency' of the State and 'other authorities' which has to be borne in mind. An authority must be an authority sui juris to fall within the meaning of the expression 'other authorities' under Article 12. A judicial entity, though an authority, may also satisfy the test of being an instrumentality or agency of the State in which event such authority may be held to be an instrumentality or agency of the State but not the vice versa.

90. We sum up our conclusions as under :-

91. Applying the tests formulated hereinabove, we are clearly of the opinion that CSIR is not an 'authority' so as to fall within the meaning of expression 'other authorities' under Article 12. It has no statutory flavour - neither it owes its birth to a statute nor is there any other statute conferring it with such powers as would enable it being branded an authority. The indicia of power is absent. It does not discharge such functions as are governmental or closely associated therewith or being fundamental to the life of the people.

92. We may now examine the characteristics of CSIR. On a careful examination of the material available consisting of the memorandum of association, rules and regulations and bye-laws of the society and its budget and statement of receipts and outgoings, we proceed to record our conclusions. The Government does not hold the entire share capital of CSIR. It is not owned by the Government. Presently, the Government funding is about 70% and grant by Government of India is one out of five categories of avenues to derive its funds. Receipts from other sources such as research, development, consultation activities, monies received for specific projects and job works, assets of the society, gifts and donations are permissible sources of funding of CSIR without any prior permission/consent/sanction from the Government of India. Financial assistance from the Government does not meet almost all expenditure of the CSIR and apparently it fluctuates too depending upon variation from its own sources of income. It does not enjoy any monopoly status, much less conferred or protected by Government. The governing body does not consist entirely of Government nominees. The membership of the society and the manning of its governing body - both consist substantially of private individuals of eminence and independence who cannot be regarded as hands and voice of the State. There is no provision in the rules or the bylaws that the Government can issue such directives as it deems necessary to CSIR and the latter is bound to carry out the same. The functions of the CSIR cannot be regarded as Governmental or of essential public importance or as closely related to Governmental functions or being fundamental to the life of the people or duties and obligations to public at large. The functions entrusted to CSIR can as well be carried out by any private person or organization. Historically it was not a departmental of Government which was transferred to CSIR. There was a Board of Scientific and Industrial Research and an Industrial Research Utilisation Committee. The CSIR was set up as a society registered under the Societies Registration Act, 1860 to coordinate and generally exercise administrative control over the two organizations which would tender their advice only to CSIR. The membership of the society and the governing body of the council may be terminated by the President not by the Government of India. The Government body is headed by the Director General of CSIR and not by the President of Society (i.e. the Prime Minister). Certainly the board and the committee, taken over by CSIR, did not discharge any regal, governmental or sovereign functions. The CSIR is not the offspring or the blood and bones or the voice and hands of the Government. The CSIR does not and cannot make law.

93. However, the Prime Minister of India is the President of the society. Some of the members of the society and of the governing body are persons appointed ex-officio by virtue of their holding some office under the Government also. There is some element of control exercised by the Government in matters of expenditure such as on the quantum and extent of expenditure more for the reason that financial assistance is also granted by the Government of India and the latter wishes to see that its money is properly used and not misused. The President is empowered to review, amend and vary any of the decisions of the governing body which is in the nature of residual power for taking corrective measures vesting in the President but then the power is in the President in that capacity and not as Prime Minister of India. On winding up or dissolution of CSIR any remaining property is not available to members but 'shall be dealt with in such manner as Government of India may determine'. There is nothing special about such a provision in Memorandum of Association of CSIR as such a provision is a general one applicable to all societies under Section 14 of the Societies Registration Act, 1860. True that there is some element of control of the Government but not a deep and pervasive control. To some extent, it may be said that Government's presence or participation is felt in the society but such presence cannot be called a brooding presence or the overlordship of Government. We are satisfied that the tests in Ajay Hasia's case are not substantially or on essential aspects even satisfied to call CSIR an instrumentality or agency of the State. A mere Governmental patronage, encouragement, push or recognition would not make an entity 'the State'.

94. On comparison, we find that in substance CSIR stands on a footing almost similar to the Institute of Constitutional and Parliamentary Studies (in Tekraj Vasandi @ K.L. Basandhi v. Union of India and others, 1988(1) SCC 236) and National Council of Educational Research and Training (in Chander Mohan Khanna v. NCERT, 1991(4) SCC 578), and those cases were correctly decided.

95. Strong reliance was placed by the learned Counsel for that appellants on a notification dated 31.10.1986 issued in exercise of the powers conferred by sub-section (2) of Section 14 of the Administrative Tribunal Act, 1985 whereby the provisions of sub-section (3) of Section 14 of the said Act have been made applicable to the Council of Scientific and Industrial Research, "being the society owned or controlled by Government". On point of fact we may state that this notification, though of the year 1986, was not relied on or referred to in the pleadings of the appellants. We do not find it mentioned anywhere in the proceedings before the High Court and not even in the SLP filed in this Court. Just during that course of hearing this notification was taken out from his brief by the learned Counsel and shown to the Court and the opposite counsel. It was almost sprung as a surprise without affording the opposite party an opportunity of giving an explanation. The learned Attorney General pointed out that the notification was issued by Ministry of Personnel, Public Grievances and Pensions (Department of Personnel and Training) and he appealed to the Court not to overlook the practical side in the working of the Government where at times one department does not know what the other department is doing. We do not propose to enter into a deeper scrutiny of the notification. For our purpose, it would suffice to say that Section 14 of the Administrative Tribunals Act, 1985, and Article 323A of the Constitution to which the Act owes its origin, do not apparently contemplate a society being brought within the ambit of the Act by a notification of Central Government. Though, we guardedly abstain from expressing any opinion on this issue as the present one cannot be an occasion for entering into that exercise. Moreover, on the material available, we have recorded a positive finding that CSIR is not a society "owned or controlled by Government". We cannot ignore that finding solely by relying on the contents of the notification wherein we find the user of relevant expression having been mechanically copied but factually unsupportable.

96. For the foregoing reasons, we are of the opinion that Council for Scientific and Industrial Research (CSIR) is not the State within the meaning of Article 12 of the Constitution. Sabhajit Tewary's case was correctly decided and must hold the field. The High Court has rightly followed the decision of this Court in Sabhajit Tewary. The appeal is liable to be dismissed.

Appeal dismissed.