Judges: S.P. Bharucha, C.J., S.S.M. Quadri, R.C. Lahoti, N. Santosh Hegde, Doraiswamy Raju, Ruma Pal and Dr. Arijit Pasayat, JJ.

Facts:

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 Supreme Court denied him the benefit on ground that the writ application was not maintainable against CSIR as it was not an "authority" within the meaning of Article 12 of the Constitution.

Later on, in another matter, the appellants challenged their termination by the respondent No. 1, which is a unit of CSIR, in Calcutta High Court. The relief was denied on the prima view that the writ application was not maintainable against the respondent No. 1. An appeal filed against said order was also dismissed in view of the decision of Supreme Court in Sabhajit Tewary's case.

Challenging the order of the Calcutta High Court, the appellants filed an appeal by way of special leave before present Court. A Bench of two Judges of present Court has referred the matter to a Constitution Bench being of the view that the decision in Sabhajit Tewary's case required re-consideration. Hence, the matter was placed before present bench.

Issues:

(i) 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?

Law:

Constitution of India - Article 12 - '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.

Analysis:

Justice Ruma Pal (Majority)

(i) In order to determine that whether an authority can be considered as "State" within the meaning Article 12 of the Constitution, 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.

(ii) CSIR was 'created' by the Government to carry on in an organized manner what was being done earlier by the Department of Commerce of the Central Government. The two research bodies which were part of the Department of Commerce have since been subsumed in the CSIR.

(iii) The objects 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.

(iv) Incidentally, the CSIR was and continues to be a non-profit making organization and according to clause (4) of CSIR's Memorandum of Association, all its income and property, however derived shall be applied only 'towards the promotion of those objects subject nevertheless in respect of the expenditure to such limitations as the Government of India may from time to time impose'.

(v) The governing body of CSIR 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.

(vi) 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. The Prime Minister is the ex-officio President of CSIR but the power being exercised by the Prime Minister is as President of the Society.

(vii) 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, 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 or CSIR but only with the sanction of the Government of India.

(viii) 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.

(ix) Further, 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.

Justice R.C. Lahoti and Doraiswamy Raju (Dissenting)

(i) Simply by holding a legal entity to be an instrumentality or agency of the State it does not necessarily become an authority within the meaning of 'other authorities' in Article 12 of the Constitution. To be an authority, the entity should have been created by a statute or under a statute and functioning with liability and obligations to public. Further, the statute creating the entity should have vested that entity with power to make law or issue binding directions amounting to law within the meaning of Article 13(2) of the Constitution governing its relationship with other people or the affairs of other people --their rights, duties, liabilities or other legal relations. If created under a statute, then there must exist some other statute conferring on the entity such powers. In either case, it should have been entrusted with such functions as are governmental or closely associated therewith by being of public importance or being fundamental to the life of the people and hence governmental.

(ii) Such authority would be the State, for, one who enjoys the powers or privileges of the State must also be subjected to limitations and obligations of the State. It is this strong statutory flavour and clear indicia of power -- constitutional or statutory and its potential or capability to act to the detriment of fundamental rights of the people, which makes it an authority; though in a even case, depending on the facts and circumstances, an authority may also be found to be an instrumentality or agency of the State and to that extent they may overlap.

(iii) CSIR is not an 'authority' so as to fall within the meaning of expression 'other authorities' under Article 12 of the Constitution. It has no statutory flavour as 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 are absent. It does not discharge such functions as are governmental or closely associated therewith or being fundamental to the life of the people.

(iv) 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, it can be concluded that the Government does not hold the entire share capital of CSIR. It is not owned by the Government. 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 work, 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.

(v) 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 a hands and voice of the State. There is no provision in the rules or the byelaws that the government can issue such directives as it deems necessary of CSIR and the latter is bound to carry out the same.

(vi) 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 organization. Historically it was not a department 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.

(vii) The membership of the society and the Governing body of the counsel may be terminated by the President not by the Government of India. The governing 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.

(viii) 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 later wishes to see that its money is properly used and not misused. The President is empowered to renew, 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.

(ix) 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 nota 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 over lordship of government.

(ix) For the foregoing reasons, 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.

Conclusion:

(i) CSIR is a State within the meaning of Article 12 of Constitution.

(ii) Sabhajit Tewary's decision must be and is in the circumstances overruled.

(iii) The matter is remitted back to the appropriate Bench to be dealt with in the light of our decision.

Important precedents:

(i) Sabhajit Tewary v. UOI

(ii) Sukhdev Singh and others v. UOI

(iii) Ramana Dayaram Shetty v. The International Airport Authority of India (iv) Ajay Hasia v. Khalid Mujib Sehravardi

(v) Pradeep Kumar Biswas v. Indian Institute of Chemical Biology (vi) Bassi Reddy v. International Crops Research Institute