R.K. Mishra And Ors., Mohan ... vs Krishak Bharati Cooperative ...
2002 Latest Caselaw 28 Del

JUDGMENT

D.K. Jain, J.

1. Whether M/s. Krishak Bharati Co-operative Limited (for short "KRIBHCO') is a "State" or "other" authority" within the meaning of Article 12 of the Constitution of India and is, thus, amenable to writ petition under Article 226 of the Constitution is the question falling for consideration in this batch of writ petitions.

2. Since in all the petitions, the aforenoted common question of law has been raised it would be expedient to dispose of all these matters by this common judgment.

3. According to the petitioners they had been recruited on various dates by KRIBHCO, respondent No. 1 herein, under the KRIBHCO Indo-British Rainfed Farming Project (WEST); had been regularly working for the last so many years and at the time of recruitment they had been assured that their terms of employment will be renewed/extended on the expiry of phase-I of the project. Their main grievance is that despite the fact that all of them have completed more than 240 days of regular employment with KRIBHCO and the project is likely to be completed some time in the year 2006, their services have been illegally terminated in utter violation of the law laid down by the Supreme Court to the effect that services of an employee, who has worked regularly for an employer for more than 240 days, should not be terminated if the project is available. The petitioners, accordingly, seek a direction to KRIBHCO to re-employ/reinstate them in the 2nd phase of the project with full back wages and consequential benefits.

4. In the reply affidavit filed on behalf of KRIBHCO, a preliminary objection has been raised regarding the maintainability of the petitions on the ground that it being not a "State" within the meaning of Article 12 of the Constitution, is not amenable to the writ jurisdiction. It is pointed out that KRIBHCO is a society registered under the Multi-State Cooperative Societies Act, 1984; it is a cooperative society and its general body is the supreme body; the Board of Directors of the society take their own decisions in the interest of the society and the functions being discharged by KRIBHCO are non-governmental in nature and it is akin to another multi-purpose cooperative society, namely, Indian Farmers Fertilizer Cooperative Limited (for short IFFCO) which had initially sponsored KRIBHCO. It is also stated that various other High Courts have held that neither IFFCO nor KRIBHCO are State within the meaning of Article 12 of the Constitution. It is, thus, pleaded that these petitions are liable to be dismissed on this short ground alone.

5. Since the preliminary objection raised goes to the very root of the maintainability of the petitions, I have heard learned counsel for the parties on this issue. It is vehemently submitted by Mr. Krishnamani, learned senior counsel for the petitioners, that KRIBHCO is fully controlled by the Central Government particularly when substantial share capital is subscribed by the Government; out of he total number of 25 directors on the Board of Directors five are the nominees of the Central Government, besides nominees of IFFCO, wherein again the Central Government has its nominees, which shows deep and pervasive control of the Central Government in it; the Central Government provides huge subsidy to KRIBHCO and it also enjoys monopoly status. It is asserted that since the Central government has a deep and pervasive control in the working of the KRIBHCO, it is an instrumentality of the State and, therefore, amenable to writ jurisdiction. To buttress the argument, learned counsel has taken me through the by-laws, as amended up to 6 March 1995 governing KRIBHCO, its annual accounts for the financial year 2000-2001 as also the by-laws of IFFCO, which is stated to have initially sponsored KRIBHCO. Mr. Jagat Arora, learned counsel for KRIBHCO, on the other hand, has submitted that merely because the Central Government nominates certain directors it cannot be said that the Central Government has a deep and pervasive control in moulding the activities of KRIBHCO. Insofar as financial assistance is concerned, learned counsel has pointed out that KRIBHCO only gets price and freight subsidy because of price control on the sale of fertilizers, which subsidy is given to several other companies manufacturing fertilizers and no special subsidy is given to KRIBHCO. It is also urged that the fact that the entire share capital is not held by the Government demonstrates that the company is not fully controlled by the Government. Relying on the decisions of the Supreme Court in Ajay Hasia v. Khalid Mujib Sehravardi learned counsel has contended that the concept of violation of Article 12 should not be unnecessarily stretched so as to bring in all autonomous bodies or Government companies, which may have some direct or indirect nexus with the Government, within the sweep of the expression "State". It is also pointed out that this Court, in CWP No. 2024/90, has already held that IFFCO is neither a State nor an authority under Article 12 and, therefore, not amenable to writ jurisdiction. Similar view has been expressed in two Bench decisions of this Court in the cases of National Cooperative Consumers Federation of India and NAFED Limited (See: J.S. Arneja v. National Co-operative Consumers Federation of India Ltd. and Ors.

January 2001).

6. On the question as to whether a particular body is instrumentality or an agency of the State and hence "other authority" within the meaning of Article 12 of the Constitution, there is a plethora of case law, including Constitution Bench decisions of the Supreme Court. However, I do not propose to burden the judgment with all the authorities on the point except to refer to a few decisions which clearly reflect the view of the Apex Court on the issue. Most of the decisions have given a wide meaning to the expression "other authorities" in Article 12. The theory evolved is that of "instrumentality or agency" of Government, a concept wider than a "department of the Government". It may embrace very public authority exercising statutory powers; every authority created under a Statute and in some cases even a non-statutory body exercising public functions. In the leading case of Ajay Hasia (supra) it has been observed that it is immaterial how a cooperative society or body corporate is formed. Whatever may be genetical origin, it would be an "authority" within the meaning of Article 12 if it is an instrumentality or agency of the Government. The question of instrumentality or agency has to be decided on proper assessment of facts in the light of relevant factors. No decipherable test or significant criteria to identify "other authority" was laid down till the decision in R.D. Shetty v. International Airport Authority of India came, where some tests were evolved. In Som Parkash Rekhi v. Union of India , the Court, besides others, referred and relied on two earlier pronouncements of the Constitution Benches on the amplitude of "other authorities" in Article 12 and came to the conclusion that "other authorities.... under the control of the Government of India in Article 12 is comprehensive enough to take care of Part III without unduly stretching the meaning of "the State" to rope in whatever any autonomous body which has some nexus with Government". In Ajay Hasia (supra) the Supreme Court analysed its earlier decision in Airport Authority's case (supra) and decocted the following tests to decide whether a concern is an instrumentality or agency of the State and, thus, a "State" for the purpose of Article 12:

(i) If the entire share capital of the corporation is held by the Government, it would go a long way towards indicating that the Corporation is an instrumentality or agency of the Government.

(ii) existing of deep and pervasive control of the State may afford an indication that the corporation is a State agency or instrumentality;

(iii) if the financial assistance by the Government is so much as to meet almost entire expenditure of the corporation, it would be some indiction of the same being impregnated with Governmental character;

(iv) monopoly status of a corporation may be another indication of its being a State;

(v) if the functions of the corporation are of public importance and closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of the Government;

(vi) specifically,if a department of Government is transferred to a corporation, it would be a strong factor supportive of its inference of the corporation being an instrumentality or agency of the Government.

7. These tests still hold the field. While reiterating the aforenoted parameters, the Apex Court has also said that there is no straight-jacket formula to find out what is a "State" or "other authority" and it is not necessary that all the tests must be satisfied for reaching a conclusion either for or against holding an institution to be a "State". In a given case, some of the features may emerge so boldly and prominently that a second view may not be possible. There may yet be other cases where the matter would be on the border line and it would be difficult to take one view or the other outright. (See: Tekraj Vasandi @ K.L. Basandhi v. Union of India and Ors. ). It has also been emphasised that it is the cumulative effect of all the relevant factors, which are to be assessed in order to find out the instrumentality or agency of the Government and one or two tests by themselves will not be the determining factor. The tests are neither conclusive nor clinching but are indicative indices to be considered carefully.

8. At this stage it would be useful to refer to the decision of the Supreme Court in the case of C.M. Khanna v. NCERT and Ors. . While holding that NCERT is not a State or instrumentality or agency of the State, the Supreme Court made the following significant observations:

"Article 12 should not be stretched so as to bring in very autonomous body which has some nexus with the government within the sweep of the expression "State". A wide enlargement of the meaning must be tempered by a wise limitation. It must not be lost sight of that in the modern concept of Welfare State, independent institution, corporation and agency are generally subject to State control. The State control does not render such bodies as "State" under Article 12. The State control, however vast and pervasive, is not determinative. The financial contribution by the State is also not conclusive. The combination of State aid coupled with an unusual degree of control over the management and policies of the body, and rendering of an important public service being the obligatory functions of the State may largely point out that the body is "State". If the government operates behind a corporate veil, carrying out governmental activity and governmental functions of vital public importance, there may be little difficulty in identifying the body as "State" within the meaning of Article 12 of the Constitution."

9. The fundamental test as laid down by the Supreme Court in Ajay Hasia's case (supra) relied upon by the Constitution Bench of the Supreme Court in M.C. Mehta v. UOI is - "the enquiry has to be not as to how the juristic person is born but why it has been brought into existence. The corporation may be a statutory corporation created by a statute or it may be a Government company or a company formed under the Companies Act, 1956 or it may be a society registered under the Societies Registration Act, 1860 or any other similar statute" (like a trust under the Trusts Act, 1882). Succinctly stated what really emerges form these decisions is that to determine the question whether a body is or not 'other authority', what is to be seen is

- who created the body and why - what are its aims and objects, how is it running, the extent of Government financial aid or grant to ti and its dependency on the Government and the latter's control over it. In other words, what is material re the facts surrounding the constitution, functions, financial aid, control and management of the concern.

10. In the light of the above exposition and guidelines, the question posed above, namely, whether KRIBHCO falls within the ambit of "other authority", may be examined.

11. KRIBHCO is a society registered under the Multi-State Cooperative Societies Act, 1984, having its own by-laws under which the board of directors or the executive committee are constituted for control and supervision of the business of the society. The object of KRIBHCO is to promote the economic interest of its members by undertaking the business of manufacture of Chemical fertilizers and other allied products, which are conducive and incidental thereto. The membership of KRIBHCO is open to various cooperative societies (Clause 6 of the by-laws), which are primarily engaged in the development of agriculture. The authorised share capital of KRIBHCO is Rs. 500 Crores, which consists of 45000 share of Rs. 1 lakh each, to be subscribed by the Government of India, National Cooperative Development Corporation, Government organisations, IFFCO etc., 16000 shares of Rs. 25,000/- each, to be subscribed by regional district cooperative societies, tribal cooperative federations etc., and 10000 shares of Rs. 10,000/- each to be subscribed by primary cooperative societies. Clause 8 of the by-laws is very significant and authorises KRIBHCO to retire partially or fully the shares held by the Government of India, the National Cooperative Development Corporation, IFFCO etc., at such time of Clause 26 of the by-laws the final authority vests with the general body for proper functioning of KRIBHCO. The powers of the general body are very wide and amongst others, these include the election and removal of the members on board of directors; amendment or repeal of any existing by-laws or enactment of any new by-laws; expulsion of members, distribution of net profits etc. Clause 37 of the by-laws provide for the constitution of board of directors and lays down the mode of their appointment. It is pertinent to note that irrespective of the shares holding, each member is entitled to only one vote including the members nominated by the Government. Even otherwise, a mere majority shareholding is not per se indicative of deep and pervasive government control. From the objects of KRIBHCO and its annual reports it is evident that KRIBHCO is not engaged in any of the activities which are akin to the State activities or any public duties or any public obligations like the one performed by any Government agency. The facts as disclosed in the reply affidavit show that KRIBHCO does not enjoy and monopoly status. Subsidy enjoyed by KRIBHCO is the same as is given to other units engaged in similar manufacturing activities and cannot be treated as grant for running the society. Similarly, as noticed above, none of the business activities carried on by KRIBHCO can be termed to be functions of public importance being closely related to Government functions. Further, no Government department has admittedly been transferred to KRIBHCO and, as such, question of the same being a strong factor, supportive and inference being instrumentality or agency of the Government does not arise. The deep and pervasive control of the Government has a definite connotation. It must mean and imply a control in the actual day to day working of the concern/body. From a reading of the by-laws of KRIBHCO it does not appear to be so. I do not find such pervasive control of the Government in the society so as to regard it as a "State". As noted above the ultimate power to run KRIBHCO vests with the general body, the board of directors and the executive committee constituted in terms of the by-laws.

12. In view of the aforenoted factual background, I am of the view that the preliminary objection raised by KRIBHCO has considerable force and that, applying the aforenoted tests, KRIBHCO cannot be held to the "State" or "other authority" within the meaning of Article 12 of the Constitution of India. As noted above, in similar circumstances, IFFCO, which is stated to be the parent body of KRIBHCO, has been held to be not a "State" within the meaning of Article 12 of the Constitution by a Division Bench of this Court. KRIBHCO having been established almost on similar lines on which IFFCO was established, the ratio of the decision in the case of IFFCO would apply with equal force in the present case. It may also be noted that a similar view in the case of KRIBHCO itself has been taken by a learned Single Judge of the Gujarat High Court in SCA No. 259-260/94.

13. For the foregoing reasons, I am of the opinion that KRIBHCO cannot be held to be "State" or "other authority" within the meaning of Article 12 of the Constitution of India and, therefore, the present writ petitions filed against it are not maintainable. The same are accordingly dismissed on this short point alone. It goes without saying that the petitioners would be at liberty to agitate the issues raised in the petitions on merits before the appropriate forum, if otherwise entitled to do so. There will, however be no order as to costs.