Allahabad High Court
Sanjay Srivastava & Others vs Punjab National Bank Thru. M.D., New ... on 23 October, 2019
Bench: Pankaj Kumar Jaiswal, Irshad Ali
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH Court No. - 1 Case :- SPECIAL APPEAL No. - 483 of 2019 Appellant :- Sanjay Srivastava & Others Respondent :- Punjab National Bank Thru. M.D., New Delhi & Others Counsel for Appellant :- Amrendra Nath Tripathi,Ashutosh Shahi Counsel for Respondent :- C.S.C.,Prashant Kumar Hon'ble Pankaj Kumar Jaiswal,J.
Hon'ble Irshad Ali,J.
1. Heard Sri Amrendra Nath Tripathi, learned counsel for the appellants, Sri D.K. Pathak, Senior Advocate, assisted by Sri Mayank Pathak, learned counsel for the respondent no.1, Sri Prashant Kumar, learned counsel for the respondent nos. 2 to 4 and learned Standing Counsel for respondent no.5.
2. This intra court appeal has been filed by the appellants under Chapter VIII Rule 5 of the Allahabad High Court Rules, 1952 against the judgment and order dated 17.10.2019 passed in Writ Petition No. 24558 of 2019 (S/S) : Sanjay Srivastava and others Vs. Punjab National Bank and others, by which the learned Writ Court dismissed the writ petition on the ground of maintainability by holding that the Society does not fall within the ambit of being "Other Authority" as contemplated in Article 12 of the Constitution of India. However, liberty was granted to the writ petitioners to challenge the orders impugned in the writ petition before the appropriate Court in accordance with law.
3. In the writ petition, the writ petitioners/appellants herein have challenged the order dated 3.5.2019, consequential termination notices dated 31.7.2019 and prayed for issuance of writ of mandamus directing the respondents to allow them to work and pay them salary.
4. Before the learned Writ Court, a preliminary objection was raised by the learned counsel for the respondents regarding maintainability of the writ petition on the ground that the Society does not fall within the ambit of being a 'State' or 'Other Authority' as provided under Article 12 of the Constitution of India and prayed for dismissal of the writ petition.d
5. In response to the aforesaid preliminary objection, the argument of the learned counsel for the writ petitioners/appellants was that the respondent No.1, which is a public sector banking company, is governed by the Banking Regulation Act, 1949 and the Government of India has a direct, pervasive and financial control over its affairs and thus is a State within the meaning of Article 12 of the Constitution of India. The respondent No.1/Bank in order to ensure smooth banking business and its functioning and for keeping track with the technological advances in the banking industry has taken decision to set up its own institute of information technology at Lucknow known as Punjab National Bank Institute of Information Technology which was to be governed by the Governing Body and Academic Council to be constituted by its decision dated 4.12.2001. In pursuance of the aforesaid decision of the respondent No.1, a society was formed under the Societies Registration Act, 1860 in the office of the Registrar, Firms and Societies, Lucknow Division, Lucknow on 14.3.2002.
6. It was also contended that the Punjab National Bank has regularly given grant to the Society and as per memorandum of association of the Society, out of fourteen members, thirteen members are officers of Punjab National Bank. The Chairman of the Society is the Chairman/Managing Director of the Punjab National Bank itself.
7. It was also contended that the Society is operating under the control of the Punjab National Bank. Once the Punjab National Bank falls within the ambit of being a State and the Society is controlled by the Punjab National Bank, the Society would be the "other authority" under Article 12 of the Constitution of India and hence the writ petition would be maintainable.
8. The objection of the respondent no.1 before the learned Writ Court was that though no doubt the Punjab National Bank is the promoter Bank yet the Society has been set up with the aims and objective as set forth in the Memorandum of Association in order to promote the Society as a premier institution of international standards, but no grant has been given to the Society. As per law laid down by the Apex Court from time to time, it is only where the entire share capital of the corporation is held by Government it can be said that the Society is an instrumentality or agency of the Government, which is missing here. It was also contended that once the Society is running training programme and issuing tenders, therefore, it is an independent Society, and consequently it cannot be said that there is deep and pervasive control of the Punjab National Bank so as to bring it within the ambit of the Article 12 of the Constitution of India and prayed for dismissal of the writ petition.
9. The objection of the respondent nos. 2 to 4 before the learned Writ Court was that neither there is any deep and pervasive control of the Punjab National Bank in the affairs of the Society nor the financial assistance is so large so as to meet the entire expenditure of the Society. Thus, the Society does not fall within the ambit of being "other authority" so as to bring it within the ambit of Article 12 of the Constitution of India and consequently the writ petition against the Society would not be maintainable.
10. The learned Writ Court, after considering the aforesaid arguments advanced by the learned counsel for the parties and considering the law laid down by the Apex Court in the case of Ajay Hasia and others Vs. Khalid Mujib Sehravardi and others : 1981 (1) SCC 722, Pradeep Kumar Biswas and Ors. vs. Indian Institute of Chemical Biology and Ors : (2002) 5 SCC 111, R.D.Shetty Vs. International Airport Authority of India :(1979) 3 SCC 489, Sabhajit Tewary vs. Union of India (UOI) and Ors : AIR 1975 SC 1329, General Manager, Kisan Sahkari Chini Mills Ltd., Sultanpur Vs. Satrughan Nishad and others : 2003 (8) SCC 639 and Rajbir Surajbhan Singh Vs. The Chairman, Institute of Banking Personnel Selection, Mumbai : 2019 (7) SCALE 23, came to the conclusion that there is no deep and pervasive control of the Punjab National Bank over the Society in question, the corpus cannot be said to be entire share capital contributed by the Punjab National Bank, the grant/financial assistance being given by the Punjab National Bank is not so much as to meet out almost all or substantial portion of the expenses of the Society and, accordingly, allowed the preliminary objection raised by the learned counsel for the respondents while dismissing the writ petition by means of the impugned order. The relevant paras 18 to 35 of the impugned order reads as under :
"18. From a perusal of the pleadings of the parties and the arguments raised on behalf of the contesting parties, it comes out that the Society had been formed with certain aims and objectives as have been set out in the Memorandum of Association. The Memorandum of Association provides for establishment of a governing body. The first members of the governing body have been set out in Clause V of the Memorandum of Association. The amended rules of the Society also indicate about the aims and objectives of the Society which are given in the Memorandum of Association. As per the rules of the Society, the Society comprises of two bodies namely the General Body and the Governing Body.
19. The preliminary objection raised on behalf of the respondents is that the Society does fall within the ambit of being "Other Authority" so as to bring it within the ambit of Article 12 of the Constitution of India and, consequently the present against the Society would not be maintainable.
20. The thrust of arguments of learned counsel for the petitioner in order to bring the Society within the ambit of "Other Authority" so as to bring it under Article 12 of the Constitution of India is the judgment of the Constitution Bench in the case of Ajay Hasia (supra). Para 9 of the Ajay Hasia (supra) lays down the relevant test for determining as to when a Corporation or a Society can be said to be an instrumentality or agency of the Government so as to bring it within the ambit of Article 12 of the Constitution of India for the purpose of maintainability of the petition, which for the sake of convenience is being reproduced below:-
"9. The tests for determining as to when a corporation can be said to be a instrumentality or agency of Government may now be called out from the judgment in the International Airport Authority's case. These tests are not conclusive or clinching, but they are merely indicative indicia which have to be used with care and caution, because while stressing the necessity of a wide meaning to be placed on the expression "other authorities", it must be realised that it should not be stretched so far as to bring in every autonomous body which has some nexus with the Government within the sweep of the expression. A wide enlargement of the meaning must be tempered by a wise limitation. We may summarise the relevant tests gathered from the decision in the International Airport Authority's case as follows (1) "One thing is clear that if the entire share capital of the corporation is held by Government it would go a long way towards indicating that the corporation is an instrumentality or agency of Government."
(2) "Where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with governmental character."
(3) "It may also be a relevant factor.......whether the corporation enjoys monopoly status which is the State conferred or State protected."
(4) "Existence of deep and pervasive State control may afford an indication that the Corporation is a State agency or instrumentality."
(5) "If the functions of the corporation 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 Government."
(6) "Specifically, if a department of Government is transferred to a corporation, it would be a strong factor supportive of this inference of the corporation being an instrumentality or agency of Government."
If on a consideration of these relevant factors it is found that the corporation is an instrumentality or agency of government, it would, as pointed out in the International Airport Authority's case, be an 'authority' and, therefore, 'State' within the meaning of the expression in Article 12."
21. Being armed with the aforesaid, the Court now proceeds to consider as to whether the aforesaid test as laid down in the case of Ajay Hasia (supra) are attracted so far as the present Society is concerned.
22. The first argument of the learned counsel for the petitioner is that the PNB has given a corpus of Rs. 2 Crores for starting the Society. Whether the corpus is the entire share capital of the Society and the entire share capital of the Society is being held by the PNB would be a factor to indicate that the Society is an instrumentality of the PNB.
23. A perusal of the balance sheet as on 31.03.2018 over which reliance has been placed by the learned counsel for the petitioner to contend about the corpus fund of an amount of Rs. 2 Crores indicates that it does not come out that the said corpus fund is the share capital or rather the entire share capital of the Society which is held by the PNB. There is no pleading to the effect that Rs. 2 Crores is the entire share capital of the Society and in absence of any such pleadings, mere argument to the said effect would not bring the said corpus within the ambit of being entire share capital as is being sought to be made out by the learned counsel for the petitioner. Even otherwise, the balance sheet as on 31.03.2018 and for various other years as have been annexed by the respondents no. 2 to 4, would indicate that the Society is having a corpus fund, the general fund, loan account towards the liabilities in the balance sheets of various years and apart from that the Society is also having independent income as would be apparent from a perusal of the Income and Expenditure account of various years. Thus, the said argument is rejected.
24. As regards the grant of financial assistance of the PNB to the Society, based on second criteria laid down in Ajay Hasia (supra), a perusal of the balance sheets for the years starting 2008 onwards, as have been annexed along with the short counter affidavit filed by the respondents no. 2 to 4 would indicate the grant being given by the PNB. Placing reliance on the details of grants received, which is a certificate issued by the Deputy Registrar, Farm Society, Lucknow, a copy of which is annexure 6 to the petition, it has been contended that almost every year the PNB has given a grant to the Society. However, the test laid down in the case of Ajay Hasia (supra) is that the financial assistance of the State should be so much as to meet almost the entire expenditure of the Corporation which would afford some indication of the Corporation being impregnated with Governmental character. A perusal of the balance sheet starting from the year 2008 onwards would indicate that it is not only the grant which has been given by the PNB which goes towards the expenditure but the Society is also generating its own income as would be apparent from a perusal of the income and expenditure account starting from the year 31.03.2008 and onwards which indicates that the Society is generating income from training, interest on FDR, interest on SB Account, Miscellaneous Income, Rent Income and income from Tender Application Money. If only the year 2008 is taking into consideration then the grant from PNB amounts to approximately 16.59 Lacs viz-a-viz the total expenditure of 2.63 Crores and thus it cannot be said that the financial assistance from PNB is so much as to meet the entire expenditure of the Society. Thus, when the financial assistance given by PNB is tested viz-a-viz the total expenditure of the Society as per one of the test laid down in the case of Ajay Hasia (supra) the said test fails to bring the Society within the ambit of the Society to be impregnated with Governmental character. The Court hastens to add that the income and expenditure accounts for the subsequent years indicate a similar position viz-a-viz the grant given by the PNB and the total expenditure of the Society. Thus, the said argument is also rejected.
25. The other thrust of argument of the learned counsel for the petitioner is the deep and pervasive control of the PNB over the affairs of the Society through its governing members, which is another test as laid down in the case Ajay Hasia (supra).
26. A perusal of the Memorandum of Association would indicate that the governing body, as per Clause V of the Memorandum of Association, has been indicated which comprises primarily of the staff of the PNB. However, the said clause of governing body gives the details of the first members of the Society and not for all members for times to come. As per clause 6 of the Rules of the Society, the Society comprises of two bodies namely the General Body and the Governing Body. Rule 7 (vi) spells out that "any person/corporate/organization/institute who wants to be a member of the Society shall apply to the Society and governing body shall take decision in the matter....". A perusal of the said rule would indicate that membership of the Society is not confined to only the staff of the PNB rather any person or corporate or organization or institute who wants to be a member of the Society can apply to the Society and the governing body shall take decision in the matter. Further, Rule 7 (vi) (a) of the Rules also indicates about the terms of the members. So far as the governing body is concerned, Rule 9 (a) (ii) and (iii) (a) indicate that "the signatories to the Memorandum of Association shall be the members of the Governing Body till it is re-constituted by the general body" and " the Governing Body may be re-constituted from time to time by the general body...". A perusal of the aforesaid Rule clearly indicate that signatories to the Memorandum of Association shall be the members of the governing body till it is re-constituted by the general body meaning thereby that first signatory members or the first signatories of the governing body, despite being the staff members of the PNB, can always be re-constituted by the general body and the general body, as already indicated above can also comprise of any person/corporate/organization/ institute who wants to be a member of the Society.
27. Thus, merely because the first signatories of the governing body comprised of the staff of the PNB, the same does not take away the right of the individuals to apply for the membership of the Society who can become of the member of the Society and thereafter re-constitute the governing body. This would also be apparent from the fact that the impugned minutes of the general body meeting dated 03.05.2019 also comprise of four members who are not associated with the PNB in the capacity of being the staff members inasmuch as they comprise of retired Chief General Manager of PNB, of the NPCI, of the State Bank of India and of the CDAC, Pune.
28. Another aspect of the matter is that in terms of Rule 10 of the Rules, the governing body has been given the power to determine the financial and managerial polices, priorities for the Societies different activities, duties and conduct, salary and allowances and other conditions of the service of the officers and other employee of the Society and to appoint staff in accordance with the rules of the society. In terms of Rule 10 (xii) of the Rules, the governing body has also been given the power to make rule and bye-laws for the conduct of the affairs of the Society and to add, amend, vary or rescind Rules from time to time in accordance with the provision of Section 12 of the Societies Registration Act, 1860 (hereinafter referred to as "Act, 1860".). Thus, a perusal of all the said powers as given to the governing body indicates that the said power are being exercised independently by the Society without any interference or control of the PNB which itself is indicative of the fact that the Society is functioning and working independently. Thus, the ground of deep and pervasive control of the PNB over the affairs of the society is rejected.
29. From the aforesaid discussions, it clearly comes out that factors as have been enumerated in the case of Ajay Hasia (supra) and has have been applied to the facts of the present case by the Court all have led to the conclusion that there is no deep and pervasive control of the PNB over the Society in question, the corpus cannot be said to be entire share capital contributed by the PNB, the grant/financial assistance being given by the PNB is not so much as to meet out almost all or substantial portion of the expenses of the Society. Even otherwise, the functions of the Society are not related to any Governmental function and neither the Society seems to be enjoying monopoly status which is State conferred or State protected. So far as the deep and pervasive control is concerned, as already indicated above, there is governing body which also comprises of independent members and further the governing body is to be re-constituted by the general body with the membership of the Society being not confined to only the staff of the PNB rather any person or Corporate or organization or institute can apply to the Society to become a member. The Rules of the society also indicate about its independent functioning the Society the power of framing its rules for the purpose of appointment of its employee and other service conditions of its employees.
30. Thus, none of the criteria as has been laid down in the case of Ajay Hasia (supra) are attracted so as to persuade this Court to hold the Society to be 'Other Authority' as contemplated under Article 12 of the Constitution of India.
31. The Apex Court in the case of Pradeep Kumar Biswas and Ors. vs. Indian Institute of Chemical Biology and Ors reported in (2002) 5 SCC 111 after adverting to various authorities including R.D.Shetty Vs. International Airport Authority of India reported in (1979) 3 SCC 489, Ajay Hasia (supra) as well as Sabhajit Tewary vs. Union of India (UOI) and Ors reported in AIR 1975 SC 1329 has laid down that only where a body is financially, functionally and administratively dominated by or under the control of the Government on established facts alone would be "State" under Article 12 of the Constitution of India.
32. The Apex Court has also considered all the aforesaid aspects of the matter and after considering the parameters as laid down in the case of Ajay Hasia (supra) has held in the case of General Manager, Kisan Sahkari Chini Mills Ltd., Sultanpur Vs. Satrughan Nishad and Ors reported in (2003) 8 SCC 639 as under:-
"8. From the decisions referred to above, it would be clear that the form in which the body is constituted namely, whether it is a society or co-operative society or a company, is not decisive. The real status of the body with respect to the control of government would have to be looked into. The various tests, as indicated above, would have to be applied and considered cumulatively. There can be no hard and fast formula and in different facts/situations, different factors may be found to be overwhelming and indicating that the body is an authority under Article 12 of the Constitution. In this context, Bye Laws of the Mill would have to be seen. In the instant case, in one of the writ applications filed before the High Court, it was asserted that the Government of Uttar Pradesh held 50% shares in the Mill which fact was denied in the counter affidavit filed on behalf of the State and it was averred that majority of the shares were held by cane growers. Of course, it was not said that the Government of Uttar Pradesh did not hold any share. Before this Court, it was stated on behalf of the contesting respondents in the counter affidavit that the Government of Uttar Pradesh held 50% shares in the Mill which was not denied on behalf of the Mill. Therefore, even if it is taken to be admitted due to non traverse, the share of the State Government would be only 50% and not entire. Thus, the first test laid down is not fulfilled by the Mill. It has been stated on behalf of the contesting respondents that the Mill used to receive some financial assistance from the Government. According to the Mill, the Government had advanced some loans to the Mill. It has no where been stated that the State used to meet any expenditure of the Mill much less almost the entire one, but, as a matter of fact, it operates on the basis of self generated finances. There is nothing to show that the Mill enjoys monopoly status in the matter of production of sugar. A perusal of Bye-Laws of the Mill would show that its membership is open to cane growers, other societies, Gram Sabha, State Government, etc. and under Bye-Law 52, a committee of management consisting of 15 members is constituted, out of whom, 5 members are required to be elected by the representatives of individual members, 3 out of co-operative society and other institutions and 2 representatives of financial institutions besides 5 members who are required to be nominated by the State Government which shall be inclusive of the Chairman and Administrator. Thus, the ratio of the nominees of State Government in the committee is only 1/3rd and the management of the committee is dominated by 2/3rd non-government members. Under the Bye-Laws, the State Government can neither issue any direction to the Mill nor determine its policy as it is an autonomous body. The State has no control at all in the functioning of the Mill much less deep and pervasive one. The role of the Federation, which is the apex body and whose ex-officio Chairman-cum-Managing Director is Secretary, Department of Sugar Industry and Cane, Government of Uttar Pradesh, is only advisory and to guide its members. The letter sent by Managing Director of the Federation on 22nd November, 1999 was merely by way of an advice and was in the nature of a suggestion to the Mill in view of its deteriorating financial condition. From the said letter, which is in the advisory capacity, it cannot be inferred that the State had any deep and pervasive control over the Mill. Thus, we find none of the indicia exists in the case of Mill, as such the same being neither instrumentality nor agency of government cannot be said to be an authority and, therefore, it is not State within the meaning of Article 12 of the Constitution."
33. Likewise the Apex Court in the case of Federal bank Vs. Sagar Tomas reported in (2003) 10 SCC 733 has held as under:-
"28. The six factors which have been enumerated in the case of Ajay Hasia (supra) and approved in the later decisions in the case of Ramana (supra) and the seven Judges Bench in the case of Pradeep Kumar Biswas (supra) may be applied to the facts of the present case and see as to those tests apply to the appellant bank or not. As indicated earlier, share capital of the appellant bank is not held at all by the government nor any financial assistance is provided by the State, nothing to say which may meet almost the entire expenditure of the company. The third factor is also not answered since the appellant bank does not enjoy any monopoly status nor it can be said to be an institution having State protection. So far control over the affairs of the appellant bank is concerned, they are managed by the Board of Directors elected by its shareholders. No governmental agency or officer is connected with the affairs of the appellant bank nor anyone of them is a member of the Board of Directors. In the normal functioning of the private banking company there is no participation or interference of the State or its authorities. The statutes have been framed regulating the financial and commercial activities so that fiscal equilibrium may be kept maintained and not get disturbed by the mal-functioning of such companies or institutions involved in the business of banking. These are regulatory measures for the purposes of maintaining the healthy economic atmosphere in the country. Such regulatory measures are provided for other companies also as well as industries manufacturing goods of importance. Otherwise these are purely private commercial activities. It deserves to be noted that it hardly makes any difference that such supervisory vigilance is kept by the Reserve Bank of India under a Statute or the Central Government. Even if it was with the Central Government in place of the Reserve Bank of India it would not have made any difference, therefore, the argument based on the decision of All India Bank Employees' Association (supra) does not advance the case of the respondent. It is only in case of mal-functioning of the company that occasion to exercise such powers arises to protect the interest of the depositors, shareholders or the company itself or to help the company to be out of the woods. In the times of normal functioning such occasions do not arise except for routine inspections etc. with a view to see that things are moved smoothly in keeping with fiscal policies in general."
34. Similarly, the Apex Court in the case of Rajbir Surajbhan Singh (supra) has held has under:-
"8. It is true that the Governor of the Reserve Bank of India and the Chairmen of certain Public Sector Banks along with the Joint Secretary, Banking Division, Ministry of Finance are members of the governing body of the Respondent-Institute. There is no dispute that the Respondent is not constituted under a statute. It is also not disputed that the Respondent does not receive any funds from the Government. The Respondent is not controlled by the Government. The letter dated 20.09.2010 produced by the Appellant along with the rejoinder affidavit does not show deep and pervasive control by the Government of India. The question of whether the Council of Scientific and Industrial Research fell under 'other authorities' within the meaning of Article 12 was referred to a 7 Judge Bench of this Court. [See: Pradeep Kumar Biswas v. Indian Institute of Chemical Biology and Ors. (supra)]. Resolving the dispute, the 7 Judge Bench in Pradeep Kumar Biswas (supra) held that the question as to whether a corporation/society would fall within the meaning of Article 12 should be decided after examining whether the body is financially, functionally and administratively dominated by or under the control of the Government. This Court observed that such control should be particular to the body in question and must be pervasive. A control which is merely regulatory under the statute or otherwise would not make the body 'State' Under Article 12. As there is no control by the Government over the Respondent in the manner mentioned above, we have no doubt in our mind that the Respondent cannot be said to be falling within the expression 'State' Under Article 12 of the Constitution of India."
35. Thus, taking into consideration the aforesaid discussions, it is apparent that the Society does not fall within the ambit of being "Other Authority" as contemplated in Article 12 of the Constitution of India and thus the present petition is dismissed on the ground of maintainability. However, it would be open for the petitioners to challenge the impugned orders before appropriate Court in accordance with law."
11. On due consideration of the aforesaid, we cannot accept the contention of the learned counsel for the appellants that the officers of the Punjab National Bank are ex-officio members of the Society and, therefore, the Society is fall within the definition of 'State' within the meaning of Article 12 of the Constitution of India. The law on the subject has recently been decided by the Apex Court in Rajbir Surajbhan Singh (Supra), wherein the Apex Court has held that the writ petition under Article 226 of the Constitution of India against the Society would not be maintainable as the Society does not fall within the ambit of being "Other Authority" as contemplated in Article 12 of the Constitution of India.
12. With the aforesaid, the special appeal lacks merits and is, accordingly, dismissed.
(Irshad Ali, J.) (Pankaj Kumar Jaiswal, J.)
Order Date :- 23.10.2019
Ajit/-